Hi. Can everyone hear me? Hi, I'm Kelly O'Brien. I work as the head of Investor Relations for SQM, and we're really happy to have everybody who's joining virtually and to have a room full of people here, finally, after two years of no travel and COVID, so we're really excited to be here in New York today. Just a little bit about the agenda. We are going to be hearing from three people, and we're gonna be hearing about Chile's constitutional reform. We're gonna hear about our financial situation, and we're gonna hear from our CEO about the future of SQM and where we're going from here.
The speakers are Ricardo Ramos, our CEO, Gerardo Illanes, our CFO, and we have Patricio Navia here, who is a Professor at NYU, and he's going to be speaking about the Chilean political scene, which is always evolving. So we're going to start with Ricardo Ramos. He has been. I know he's very familiar for most of you. He's been with the company for over thirty years, and he's been CEO since two thousand and nineteen. Since he became CEO, I feel like, among other things, he's really been leading the charge for our sustainable operation efforts. In 2022 , underneath Ricardo's lead, we announced our sustainable development plan, and then just a few days ago, we put out an announcement related to our Salar Futuro, or our future Salar plans.
So, Ricardo, with that, I would like to invite you to the podium to give your thoughts on SQM.
First, thank you for being here. I had a presentation that used to be short, but I tried to put some slides about Salar Futuro that was informed two days ago, or just one day ago. That is very important in our long-term plan, and I really want to review some issues regarding this great, great project we have. First, we are really proud in SQM of the clear link between our products and their effects in a better life. That's something very, very important in the company, and we're really proud about it. As you can see, first, the specialty plant nutrition, water soluble, increased productivity of our fertilizer, improved quality. At the end, reduce the consumption of water in the fertilization process. That's very important because that's not contaminate ground, groundwater, lakes, and rivers. Means it's a product oriented to a better quality life.
Second, this is a very nice picture of a project close to our facilities in the north. It's a beautiful project using our Solar Salts technology. Solar Salts technology is efficient in thermal storage, very, very efficient, and the power generation, you can have this power generation day and night. This means it's an answer to have using the sun energy in order to produce electricity the full day. That's a very good project we have. We kind of products we develop in SQM. Finally, you have the other two is iodine and lithium. In the iodine, we're very proud to be the most important supplier of iodine to the X-ray contrast media.
Just so you know, X-ray contrast media today is the most important tool in the early detection of cancer, and they have been developed, this technology, all around the world, and we're working with the big supplier of the technology. You need to have the iodine for this new technology. We're working very hard. It's today, 30% of the demand of iodine worldwide goes to X-ray contrast media, and it's the demand that is growing more than 6% per year, and we're working very hard with the supplier. Again, very oriented to the better life of the people. Finally, you know the story, electric vehicles, it means zero pollution, it means this is gonna be the standard of the electric mobility in the future.
In Salar de Atacama, we have a very good resource, but, one thing is the resource, and second thing is the process. That is something special that have been developed in-house in SQM. That is make the difference compared with other company.
My name is Julio Mundaca. Today I have been here for thirty-seven years. There was nothing here. There were no roads, so we had to walk over the coast, and there, making lines so that a bulldozer could come in and make the road. Once the roads were done, platforms for the drilling. Today, you yourself are seeing it, everything has changed. You can see, let's say, the evolution of this company quite a lot. I am quite calm, proud. Here we are at the pre-concentration ponds. In these ponds, which are 300 meters wide by 1 kilometer long, the brine enters from the wells. The objective in these ponds is to concentrate both the lithium and the potassium in the brine. We are doing this sustainable operation, reducing freshwater use by 50% by the year 2030.
... Everything is produced here with our technology, developed in our company. At the same time that we are increasing the production, we are improving the quality, we want to be the producer with the lowest carbon footprint and water footprint. In general, what we want is to produce more with less.
[Foreign language]
At SQM, we have a very ambitious plan to produce more. If we see just three years ago, we produced around 50,000 metric ton of lithium, and we expect next year to expand our capacity to close to 210,000 metric ton of lithium carbonate and 40,000 metric tons of lithium hydroxide. This year, we expect to a growth close to thirty-five, forty percent of the demand of lithium carbonate.
[Foreign language]
I am very proud to be part of this company and would like to be here for many years more.
The video was much better than my presentation. Let me go to the SQM commitment. This, our, we, it is very new for us. It means no more than two years, but probably will change in the near future, because we say the reduction of continental water consumption, 40% by 2030, 65% by 2040. You will see my presentation, probably will change the numbers. It will be 65% in 2030. It means we are working very aggressive in order to be much better than that. Reduction of brine extraction from the salar. We are moving in that direction, but we are doing much more the salar, as you will see, due to the Salar Futuro projects. We are very proud about that. That's when it's going to change in the real near future. Finally, emission reduction, carbon neutral.
We want to be in lithium, potassium, and chloride, iodine by 2030, and in all our products, 2040, and waste reduction, 50% by 2025. Okay, you know, you know the numbers better than I know. It means that, that this is the quarter revenues, quarter net income, last two quarters, net income of the company in excess of $800 million. Second quarter better than first quarter. I think the most important question today, most of you you know already details, why the results in the first and second quarter is moving forward. What we think is the short-term outlook. The short-term outlook, first, I think it's important to consider what's going on in Europe. I think what's going on in Europe is important, is going to be important in the short term and could be important in the medium and long term.
First, you have many effects because the war in Ukraine. Let me try to focus in the effects in SQM business. The first one is the production of fertilizer in Europe has been affected a lot. You know that most of the fertilizer production in Europe, that is not is, it is a big important production in Norway and other countries. They use the gas, and natural gas is being today one of the most difficult product to get in Europe. That's why the production of fertilizer being affected in Europe in the short term and continue to be affected. Second one, of course, Belarus and Russia are very important in the potash production worldwide. They are like 40%. Russia is just a little bit bigger than Belarus, but both are very important.
Today, for Belarus to export to different countries, is very, very complicated. Russia is starting to export in the last two months, but again, if you have 40% affected in their business, of course, affecting the supply of potash. Finally, and I think it's affecting today, but it will be an important risk for next year, is the economy in Europe. Means all this issue will probably affect the economic situation of Europe. At the end, bottom line, in our business, second half, especially plant nutrients, we think that prices that are better than last year will continue to be relatively stable. That's our best guess today. Sales volume, similar to the first half of this year, it means lower volumes than last year if you compare, but similar to the first half.
It means fertilizer consumption in Europe and the rest of the world is lower this year because the price effect. Because pricing being higher, people reduce the consumption of fertilizer. That's something we observe in the specialty plant nutrient business. But the most important effect being in the potash, we see a significant increase in potash prices. We have seen that in the first half of the year, this negatively affect the demand of potash. We, today, even though we are not very big in the potash industry, but we follow the industry in detail, we think that the total demand of potash in the world will be just a little bit lower than 60 million tons.
Last year was probably 71 million tons, means a huge reduction in demand, mainly due to the fact of the high pricing, and everything is connected with the situation of the war, the war in Ukraine. We think that the prices should fall during second half. It means prices from the first half were very, very high. We think that prices are gonna be good, higher than last year, but not as good as the first half of the year, and I think that our volumes during second half will be slightly higher than the volumes of the first half, but prices lower as compared to the first half in the potash business. Anyway, in the specialty plant nutrients, I think that even considering a stable volume and a stable price environment, we foresee that probably margins is gonna be slightly better second half than first half.
We're very positive about that. Finally, in the iodine and lithium. Iodine, things are going in the right way. We think prices are gonna be better second half. We expect higher volumes. We think volumes will be close to 6% higher second half, as compared to the first half of the year. That's important. Increase in iodine demand and sales. If you remember, and you have the numbers of the second half last year, second half last year was just a little bit low in terms of volumes of iodine. We're gonna have a strong volume sales during second half this year. It means that the total year in iodine will be higher than last year. That's a very good news.
The second good news is that we think that prices during the second half will be quite stable, but higher than the average of the first half. We think that as an average will be between 10, maybe 15% higher, the price environment of iodine during second half this year as compared to the first half, with better volumes in the range of 6%, okay? If you put together better margins of iodine second half this year as compared to first half. Very good news coming from iodine. Lithium, we expect good news, that's for sure. Third quarter, we are almost ready. It means third quarter finish in the next two weeks. We think that the prices third quarter will be very similar to second quarter, just a slightly higher, but very similar.
That's good news, because it was a very good quarter, second quarter in pricing. And fourth quarter prices is... Lithium is difficult to predict, huh? But considering what we know today, considering what is the trend today of the demand, what is the trend today of the supply and the situation of the market, we think that it's today reasonable to expect similar prices fourth quarter as compared to the third quarter and second quarter. It means a very good price environment fourth quarter. Now, we review our numbers, and we are trying to push our production, and we think that we can expect to sell just a little bit more than one month ago. It means we're looking forward for the 150,000 metric tons of lithium carbonate equivalent.
It means we sell, as you know, lithium hydroxide plus lithium carbonate, but as lithium carbonate equivalent, we are thinking about the 150,000 metric tons. That's the new target. That's a positive one. It means that if you consider sales of the first half of the year as a lithium carbonate equivalent, we expect an increase between 7%- 9% in volumes second half this year as compared to first half. Considering the first quarter, prices were lower than second quarter, and you put the volumes, you put the pricing, of course, lithium second half will be better than lithium first half. But anyway, keep in mind that fourth quarter prices is still a pending issue. We don't know. It's a volatile market. You don't know exactly what's gonna happen, but as today information, it seems reasonable to be stable price environment.
Let me go to the nitrates and iodine, what's our plan? It's important to remember that it's a very important business unit for us. Here, you have a map of the north of Chile. Our most important project is Orcoma. This is a greenfield project that is north of Iquique. This project, we expect to start producing 2,500 metric tons of iodine. That's a lot of iodine. And we expect that in the second stage of the project, we will reach the 5,000 metric tons. As a nitrates equivalent, because we are gonna produce nitrate salts, we will transport the salts to our facilities in María Elena and Coya Sur.
But as final nitrates, we expect to start with 200,000 metric tons per year, moving to 500,000 metric tons per year when we reach the 5,000 metric tons of iodine. We expect today to start production, the first production in the first stage during second quarter 2025, probably 1,800 metric tons in 2025 is a reasonable goal we have in the production of this Orcoma project. It's a big project, it's a very important project for us. We're using full seawater, means we get the seawater. We use all the water, we don't need the desalination process. We don't care if the water is with salt, because we use it in the leaching of our caliche piles.
That's why, for us, and from an environmental point of view, it's a very, very good project, and we have a very good mine there, and we will be. We are putting a lot of efforts, and we are working very hard in order to have ready this project. The second important project we're facing today is Nueva Victoria. Nueva Victoria is where we produce most of our iodine today, and we use continental water, and we decided to move from continental water to seawater. Now, we are starting with the project. It's gonna be, at the beginning, 700 liters per second. That's more than the water we consume from the continental water today. It will allow us to increase the yields, and will allow us to increase some production. We are working on it as we speak.
Within second half 2025, this new pipeline from seawater will be ready in Nueva Victoria. Means we will fully replace continental water in our production of nitrates and iodine in Nueva Victoria in 2025. That's why my goals about continental water, it's gonna be more, more strong in the future. Finally, you have Pampa Blanca, and there's some link between Pampa Blanca and the Salar Futuro. I will show you why it's some link here. We will. This is an old facility we had in the past. There is a very big one in terms of nitrates and iodine, that is very close to the south of María Elena and Coya Sur. It's relatively close to Antofagasta. We will start producing next year, second half, at a level of 1.3 thousand metric tons of iodine.
We are buying the water in the first stage, and we are gonna use seawater in the second stage, so probably the production will be much, much higher. It means, if you ask me, where you have the next step? We move from 2500 to 50 00 to 500,000 here. Our today production will be here, just a little bit more because the seawater, because the yields, and third, fourth stage will be here. Here, we can go to probably 5,000, 6,000 or 7,000 metric tons of iodine. It means it's a huge resources, and with the seawater, we'll have the opportunity to do growth a lot in iodine and nitrates in what we call Pampa Blanca project. It's not all the projects we have, of course, in the nitrates.
We have in order, because we are gonna have all these nitrates, we have to prepare nitrate salts, we have to prepare the capacity to have the crystallization, these big facilities to transform the solar salts into the final high-quality products, oriented with solar salts to the high-quality potassium nitrate. We need to develop a lot of logistics improvements in order to move more products, and so on. Finally, we think that the CapEx in three years, always talking about three years, 2022, 2023, 2024, in this business line will be very close to $1 billion, including the maintenance CapEx for the three years. That's our target we have in the iodine and nitrates business.
In lithium business, I will try to get into the detail of our plan, but before the plan of the lithium, I think it's very important to have a focus what's going on in the demands, in order to have an idea where we think things are moving in the lithium business today. These are SQM. There's nothing in the bottom, a third-party estimate. This is SQM estimates. We have our own estimates, we work with our numbers, and we have a lot of scenarios where we play with it. First, we think that for sure, this year is gonna be a huge increase in demand. Now, we are expecting 750,000 metric tons of lithium equivalent demand, chemical demand this year. That is close to 40% increases compared to last year. That's huge.
We think the electric vehicles' penetration of the total vehicles will be higher than 10%. That was an original idea, but it's gonna be 14%. It's very, very strong. That's why 2022 is a very strong position, as you can see in the graph. But 2023, we think that we have been conservative all the time. We have been wrong all the time about what's going on in the lithium. Lithium, better than expected all the time. But we are putting our best numbers, and we think that it's gonna be 20%-23% increase, but it's starting from a very high numbers. It means 750,000 metric tons, 20% is 150,000 metric tons. Means we have to deliver in the world 150,000 metric tons of additional lithium from the 750.
That's huge, because it's in mining, it means natural resources. A lot of people will have to invest a lot of money in order to maintain their production. Means in order to maintain the seven hundred and fifty thousand, most of the people have been putting a lot of efforts to produce. They need to maintain their production, and in excess of the maintaining production, we need hundred and fifty thousand of additional lithium. Hundred and fifty thousand is a lot. It's not one project, it's not two projects, it's many new projects, because it's, it's a lot of lithium we need for the next year. Of course, SQM, we are trying to do our best, as we did in the past, to provide more lithium to the market, but it's a very important increase in two thousand twenty-three, at least hundred and fifty thousand.
Of course, the green lights here, the green lines, are our most negative and most positive scenarios, where we put our numbers, we put different penetrations of the electric cars, what's going on with the demand of cars in the world, what's happening with some other technologies or the economy, whatever. We have these two alternatives. Of course, if you start moving away from two thousand twenty-two, it's very difficult to have a real prediction. That's why two thousand and twenty-five, we think the total demand. I remember being here a couple of years ago and saying, "I hope I will reach the nine hundred, eight hundred thousand metric tons." Now, we think it's gonna be between 1.2-1.6 million tons.
Expected value at the middle of the 1.2-1.6 million tons, that's 2025. If you go to the 2030, it's huge. I know the range is very, very big, but it's between 23-33. You put in the middle is what we do expect. It's a reasonable expectation, maybe 27-28 million tons of lithium carbonate equivalent demand during this year. At the end, one key element that we play with it every year is that we think as an average, we expect a penetration of the total electric to total cars in the world, close to 47%, 2030.
If you have someone that say the penetration will be, I don't know, 70%, because most of the cars are gonna be produced electric, 2030, yes, numbers are completely different. But that's, that's our estimates, that's our best numbers we have today. What it means, we have also, we work very hard in the supply. We have a lot of different people announcing lithium, as you may know. There's a lot of people, it's a good business. People wants to produce lithium. They announce all the time, either, brownfield or greenfield of lithium. In different countries, you have China, you have Australia, probably the most important one, different projects, projects in Australia, some projects in Africa, some projects in Canada, in Argentina, a lot of small projects.
It's very, very difficult to have a prediction, because if you review the past, most of the predictions fail because people promise to deliver something, they didn't deliver at time, they didn't deliver at all. It failed to deliver. They learned, I think, it's more likely that they would produce because they you learn from your failure. That's something that happens. From the other side, most of the today producers are trying to increase their production as much as they can in 2022, 2023, and they're using spodumene resources in terms of increasing capacity, means that it will be more difficult for them having high quality spodumene available for the future.
But all my models, everything that we have, keeping in mind that predicting supply is much, much more difficult than predicted demand in this market, every single scenario that I have, and we have internal SQM, always demand divided by supplies, is likely to be more than 90%. It means it's reasonable to expect a very tight market supply and demand. Because it's, first thing is trying to produce the lithium, second thing is trying to get the qualification from the customer, from battery customers, and they accept your lithium, start buying lithium, you supporting the quality and so on. That's why 90% at least is the what we expect every single year, the relation between demand and supply.
Very tight market in the future, that's what we expect today, considering this huge increase in the demand in the last two years and the expected demand in the future. Sorry. This is what we expect for next year in lithium. This picture is very interesting because it's a picture they sent to me, I think, one month ago from Australia. This is the spodumene facility that they are advancing very, very fast, and it's much more ready than this picture. And that's why we say that we will start producing concentrated spodumene in Australia, in our mine, in fourth quarter 2023. We will produce close to 300,000 metric tons of spodumene per year. We will start producing at the end of next year. That's very important. It's something we're very proud about it. It's advancing very fast.
First, next year. Next year, we think that, as Carlos explained in the video, that he's the number one in the lithium business in SQM. He said that we can produce 2,010. What's the way we produce the 2,010? We will produce, expect to produce 180,000 metric tons in Chile using lithium chloride. That is our raw material coming from the salar. But as you may know, we have a second raw material. That is a lithium sulfate. We invested in the last two years, and we continue to invest in order to produce this lithium sulfate. And this lithium sulfate, we export the lithium sulfate to China, and we transform this lithium sulfate into lithium hydroxide.
That's why we expect to have next year 180,000 metric tons available in Chile, and we're trying to do our best to have at least 30,000 metric tons in China of lithium hydroxide from our lithium sulfate. In Chile, we are going to increase lithium yields. And first, let me go to the last point, because it's something new I want to inform today, that we, we bought a plant in China, a chemical facility, a big chemical facility that is located in Sichuan. We started negotiation with them. They are buying, they are building a new plant, and we're helping them, the technology of the new plant, and we feel comfortable, and we bought that. And we are gonna have this plant in China in order to produce 20,000 metric tons of lithium hydroxide from lithium sulfate. This plant is already...
It's close to be ready. That's why we expect to start producing second quarter next year. We are working with them. We send our people. We know the technology in order to transform lithium sulfate. We have been working the last three years in the technology in China, testing the way to do it, and we feel very comfortable that this plan will be a very good idea for us in order to transform. We pay $140 million for the total investment, and this plan is gonna be ready during second quarter next year. The other 10,000 metric tons, we are not gonna produce 20,000 because it's second quarter. The other tonnage probably gonna be in the range of 15,000 metric tons coming from here. The other 15,000, we're looking for Taylor, what's your name?...
Tolling agreement with different Chinese, and we expect to finish the toll agreement in the next two months. But I do expect, and we're pushing very hard, to have at least 30,000 metric tons coming from this, lithium sulfate. Finally, we have lithium hydroxide in Chile. We have today 22,000 metric tons. We have been working very hard in the capacity increase. We think that during next year, third quarter, it's gonna be available, the new expansion, and the new expansion will allow us to produce at least 37. We're working very hard to be close to 40, but the number we have now is 37,000 metric tons of lithium hydroxide that we can produce in Chile with our lithium carbonate from the 180.
Plus, this 30,000 that will be lithium hydroxide means next year we are gonna have close to 70,000 metric tons of lithium hydroxide. One of our key ideas is having both products and having the flexibility, depending the market conditions. That's something very important we're working today. We will start, as we said there, the production of concentrated spodumene in Australia, fourth quarter 2023. And the final facility, the chemical facility located at the port in Australia, will be ready one year after that, means we will have one full year of production of spodumene. We're working with our partner in Australia in order to see a potential tolling or selling of this spodumene into China in order to convert this one to lithium carbonate.
That's why it's very important, because we are gonna have this, this is equivalent to 50,000 metric tons of lithium hydroxide, more or less, 50,000. Means we will have available this potential lithium of 50,000 metric tons per year, up from 2023, 2024 onward, because we will have the spodumene. That's why we are working in order to allocate and try to have this toll agreement using this spodumene. Moving to 2024. 2024, we think that in Chile, using our lithium chloride solution, we can move from 180,000 to 210,000 metric tons in Chile, maintaining at least 30,000 metric tons from lithium sulfate. Could be much, could be something more than 30, but today we're using the 30. Means that the total capacity, those are capacity, no sales.
It's important to consider that we will announce our sales expectation in the near future. We need to have some inventory. We are increasing our sales very high, and you need to have inventories all around the world. That's why we cannot sell all the production. Some of the production will go to inventory. That's why when you say two hundred and ten thousand metric tons in the previous one, probably my sales will be just slightly lower than two hundred thousand metric tons. The same for 2024, when you're increasing capacity. We are very proud about it. This is the facility, the chemical facility in Kwinana, the port, that is being under construction. And this is the most important event, because we have the dryer, that is huge equipment.
It's the most important equipment for the for the chemical facility arriving in Australia. Arrived one month ago, and we are ready to go to the facility, to start putting the new dryer and putting all the other equipments. That's why we feel comfortable that it's gonna be ready for production during fourth quarter two thousand and twenty-four. The COVID affected a lot the production in Australia, affected everyone in Australia trying to produce lithium. And we tried to advance as fast as we can, but of course, we have in some way been affected by this delay due to the restrictions in Australia. We are working very hard in geology work in Australia. We have a big team, a very good team, looking for new alternatives in Australia. We think that we will not stop with this project.
We will look for new spodumene in Australia. We're looking as we speak. We think that we will try to get something new. We think that Australia is a very interesting spodumene alternative for us. We have the experience, the know-how, we have very good geologists, and of course, we are looking forward for potential M&A, especially in natural resources in Australia. Finally, total CapEx in Chile. Considering everything I already explained, I think in Chile, we are gonna put, again, close to $1 billion, including maintenance CapEx, in 2022-2024, in three years. Plus, in Australia, in order to finish all our investment in the project we have today, it's a 50% joint venture we have with Wesfarmers.
Plus, the investment in China we are doing today, the one of the new facility in order to convert lithium sulfate into lithium hydroxide, will be close to $700 million both, means $1.7 billion in the lithium business. Let me go, try to go to what we announced two days ago, or one day ago, that is the Salar Futuro. We have been producing in the salar for 25 years. That's a long period, and we have a lot of experience about trying to produce lithium in the Salar de Atacama. First, we think that it is one of the economic activities that contribute most in Chile as a percentage terms, and it is, we are sure that it is the best example of a successful public-private partnership.
We operate the salar, the salar belongs to Corfo, and we have a public-private partnership that has been very good for both. Contribution for lithium, just the first half of the year, was $2.3 billion to the government as a total in this year. We are an integrated producer of high-quality lithium worldwide. In our country of origin, no one produce more high-quality products, finer probably, in its own country, where they produce the natural, of the natural resources. We have increased our capacity from 45,000 to 150,000 in the last three years, and we are the fastest growing producer worldwide....
We announce a sustainability plan and among other aspects include the voluntary commitment, as you know, to lower brine extraction in the Salar de Atacama, close to 50% in 2030 of the authorization we have. That is, 1,700 liters per second. It means we voluntarily wants to go to 122 instead of the 1.7 that was approved. We estimate that today, as Carlos said in the video, we are a lithium-producing company with a lower carbon and water footprint. Today, what we are doing today. The current production process, and the projections in time, even if we continue as we are doing today, are fully compatible with the water balances of the Salar de Atacama and the surrounding area, and the environmental permit we have.
We have been working very hard at being involved in the project with a lot of people inside SQM, and we have been working very hard in the technology development, in the process development, and it's a lot of time we have been working on it, and today, we think that we're in a point that we can, where we can go into an extraordinary environmental contribution. First, we're in a position to have four main technological advances. We test all of them, and we're ready to go. It's a long process, but we're ready to start with engineering because we test all the previous from process and technology, technological part. Which is a significant part of the brines of the salar will be under this new technology.
First, we expect to use mechanical evaporation equipment for a significant part of the brines of the salar. I have a scheme in the next page in order to show you the way to do it. But you have an idea what is an advanced evaporation technologies. It's a big, big equipment, where you put some energy inside, you put the brines, and on the top of the equipment, you get fresh water. You capture the fresh water. In the middle, you get solutions that are more concentrated in lithium, and at the bottom, we are gonna get in our equipment, MOP, it means potash. This is a very interesting idea. It's a lot of investment, a lot of energy you need to consume, but you get all the water, you consume the water, and you get the potash, you get the concentrated solution. But that's not enough.
You have this advanced evaporation technology, and you use linked to a direct lithium extraction technology. DLE is trying to get lithium, concentrate lithium from solution with many different salts inside, and there's probably five different technologies around the world that are testing, not really proven. We have been. Probably, we are the company with the most extensive experience testing these new technologies. And we test all of them, from solvent extraction, resin adsorption, resin ion exchange, nanofiltration membranes, that are very important, or reverse osmosis at the end in order to recover water. We're testing all of them. We have been testing all of them for a long period of time.
We have some recommendations, and we know some of them are very good in some points, some of them are very good in other points, and they have pros and cons. Our salar is very unique. You need to have a tailor-made process because you have a very unique salar with some high contents of sulfate. You need to have high concentration of lithium at the end of the process, because it's the process we have in our chemical capacity. You need to be careful about the water consumption of all of these. DLE needs a lot of water to work, fresh water. That's why you need to be careful what kind of water it's gonna be the consumption. You need to be careful about the chemical raw materials you are gonna use in the process.
Some of them use chemical raw materials that, at the end, will go to the salar, and we need to, from environmental point of view, be very careful about that. At the end, of course, the OpEx and CapEx, you need to invest. We have a recommendation. After a lot of technology testing, we feel very comfortable with our testing and recommendation, and we are in a moment to work together with Corfo in order to decide what is the final recommendation. This is a step. We think it's reasonable to expect that we do it together with Corfo. It's gonna be a long-term decision, and it's a private, public-owned partnership. We think it's the moment to work together, to sit together, to review. I submitted all the documents we have to Corfo three weeks ago.
We expect to start having conversation with them as soon as we can, in order to review all these alternatives, what is the best one, why we think some are better than the others, and having also received all the tests, all the different companies that are selling the technology. But just so you have an idea, when we're talking about using direct lithium extraction in Salar Futuro, we have different scenarios that we are working on. But our total investment in DLE, which will be at least between four to eight times higher in terms of volumes and capacity, than any other projects of DLE investments operating in the world or in a study to be operated. Means it's gonna be, by far, the most important implementation of this new technology.
And that's why we know that it's serious, and know that it's a very complex decision. We have been working very hard in order to have the final decision, because it's gonna be huge, it's gonna be big. SQM is big in terms of production of lithium. Every single project is big. Finally, we are working in every single step of our chemical facility, close to Antofagasta, and we know that there's a lot of opportunities to increase the yields at the end of the process, where when you receive this high-concentrated lithium chloride solutions, we think that we can increase at least 5% in our yields there, and we want to implement all these initiatives in the number three stage. And four, we are gonna have seawater in the Orcoma. We are gonna have seawater in the Antofagasta Nueva Victoria.
We have the—we know that. We have been working on the technology of the seawater. In Chile, there's a lot of examples, and we think that we have a very good alternative. Let me go backward in order to show you in the graph. I will be back here. Here. We can—Salar de Atacama is something here, and we can bring the water from the sea and use all the salty water, because you have this process in order to have fresh water and very salty water. We don't need to send the salty water to the sea. We use the salty water in our nitrates production. We will use it here in nitrates production, in our increase in Pampa Blanca, as I mentioned to you before, and we'll send the fresh water 270 kilometers to the Salar de Atacama.
That's a very good idea that is linked to our current operation. Why the seawater? Because the seawater will allow us to have all the equilibriums we are gonna have in our process, in order to provide enough water, fresh water, to the environment, in order to maintain what is our goal from the beginning of Salar Futuro. That is zero, means the amount of water we evaporate with the amount of water we recover from in the Salar de Atacama. This is the scheme. Let me go to the next page. This one. As you can see, we want to be total neutral, long-term water balance. That's the total whole idea. This is the basin, that is environment of the salar. This is the core of the salar. We get the brines.
The first ponds are the ponds where you get the sodium chloride. Here, we are gonna have some evaporation, no more than 190 liters per second, very small compared to the total evaporation. We'll have two alternatives here, moving to the new technology, and probably will be very big and very small here, but you need to have both in order for technology from an engineering point of view. But this is gonna be very big. Meaning with the mechanical evaporation here, plus DLE, we are gonna get excess of water, fresh water. We are gonna put this water inside the salar, and we are gonna get this evaporation, the evaporation coming from here, and some evaporation coming from here. We have a lot of reinjection and solutions inside the salar.
We have the MOP, the potash, as a production, as I already explained, and some water will be inside the trucks, where we send this lithium chloride solution at 6%. There's some water, and we account this water as a water coming out of the salar. If you put the water here, plus the evaporation, we will recover all the water with fresh water. What it's gonna do with the fresh water? Our first idea is replace some of the wells of the communities. They have wells for the human consumption and agricultural uses, and replace the water they get from the rivers for consumption and for agricultural process. This is gonna be difficult.
We are working on the technology, but it's gonna be between 300-400 liters per second in order to have a total, stable, zero total neutral, long-term water balance. 300-400 liters is less than 50% of the total water consumption of the small towns that are very, very close to our facility. It's not a huge amount of water, the ones that we want to provide to the towns in order to replace the wells and replace the water they're getting from the river. You put everything together, we are in a position to offer a completely neutral water balance in the Salar de Atacama operation. Finally, that's very important.
We have this first draft, but it's a long time working in this first draft. Means that, of course, we can work in different drafts in the near future, but the first one consider, and we maintain, because the first thing people can ask me, "Why you are keeping the 822? If you are gonna replace the water, you can move to more than 100, eight hundred and twenty-two." Maybe you're right. That's why I say in the first stage, we say we maintain the 822. With the 822, that is 50% of the approved, we can produce our numbers between close to 250,000 metric tons of lithium carbonate equivalent coming from the Salar de Atacama.
Of course, if we deliver, and believe me, we are gonna deliver, and we are gonna do it right, if we do it right and we deliver, there's no reason why not to review from a geological point of view, environmental point of view, hydrogeological stability of the basin and the salar, moving something better than eight hundred and twenty-two. Just an idea, moving up of eight hundred and twenty-two. If you ask me, "Is this a potential dream to be in the three hundred?" Yes, it is a potential dream to be in the 300 or 350 , but it will depends on the balance, on the geological studies, and the hydrogeological equilibrium between the basin and the salar. That's something we are working. But the first, the first initial analysis is using the same restriction that we have today.
SQM, we have started the engineering a lot of time ago, and we're working very hard on it. We need to move forward in order to have better numbers, and we have just a preliminary estimate of the investment. We think that the project we are working, as we speak today, is close to $1.5 billion, plus some investment in energy, that we expect to buy the energy, but someone has to invest in order to provide us the energy. But the investment already explained to you, that is the new technology and evaporation, DLA, all the changes in the facility, plus the seawater, is close to $1.5 billion. And finally, this is the last one.
We are very, not only we want to stop there, we think that it's very important to add value to the region, to add value to Chile. We have a plan today to put more than $700 million together with as part of Salar Futuro in value-added initiatives. Even we think that we can produce battery components in the future. We're in conversation with many different battery producers. There are possibility to produce battery components in Chile, and it's a real possibility. But for sure, we want to increase capacity for lithium hydroxide. We are gonna produce lithium metal. Lithium metal is very important because, in the future, maybe you have heard about solid-state batteries, and solid-state batteries, that is gonna be an important future and better consumption of lithium, anyway, a better battery.
Use lithium metal, that's why we need to transform our lithium to lithium metal. I think it's a very good idea to do it, and we will do it in Chile. And we are gonna produce the best lithium carbonate. We have a new technology we're developing in-house in order to have a huge, high-quality lithium carbonate for some specific uses, and we're gonna build some facilities for that. Something very unique, we want to produce our own soda ash. Soda ash, that is important for lithium carbonate. It's a lot of consumption, 500,000 metric tons you need for 250,000 metric tons production. That's why we think that it's a huge opportunity in Chile to produce our own soda ash. We have the project. We're going to move forward with the project.
A very interesting project in terms of cost, very interesting project in order to reduce the footprint in carbon footprint. The soda ash produced in the United States is a very high footprint in carbon. We have, we have the ability in Chile to reduce it, that's very important, and also reduce the cost. And, and we have many other initiatives in order, but they are, we call the $700 million value-added initiatives in the north of Chile. Salar Futuro definitely is assuming challenges. It means there's no doubt that we are trying to move a lot of things together. Are complicated projects, are big projects. But we are optimistic. We have been doing the test. We have the people, we have the experience, we have the know-how. We have the proven track record of doing right, of delivering.
We think that today we are more than ready to take the risk as SQM. We have no doubts that we will be able to achieve the proposed objectives, and that's why we are in a moment, the right moment, to inform that we want to move forward about that. Of course, we have to do it together with the government. We are facing what we call a unique opportunity. We are proposing disruptive alternatives. We think that we can further increase our competitive advantage in the environmental situation, something we cannot stop today. We can move. We need to move forward as soon as we can. We believe it is essential to start early and to take the initiative now, not to wait.
The current terms, and as you know, the contract between Corfo and SQM, and that's right, it's okay, impose certain limitations. That's okay, and that's why we need to sit together. We sit together four, five years ago with Corfo because the lithium market was better, and we tried to find a solution, and we did find something that was very good for the country and was good for us. I have no single doubt that if we put together Corfo and SQM and evaluate different options, we can generate value for Antofagasta, the region, the communities, Chile and SQM. That's something we need to do it. I hope we will do it. We expect to start as soon as we can in order to have conversation with Corfo. We're not in a huge hurry, just you to know. Why?
Because we will continue to advance in the technology, in the engineering, in preparing everything to the environmental permit. We have at least one year to have everything ready. But before going with environmental permit to the government, we need to have the approval of Corfo, because, of course, are very long-term projects, and we need to be together with our partnership. This is a partnership. We need to go together. We will continue to advance, and in the middle of the process, we have negotiation or conversation with Corfo in order to have what we think, and that's very important for me. Salar Futuro must become, and again, let me repeat, public-private cooperation project. It's the most important one in Chile. It will continue to be, and I think it's gonna be an example of long-term sustainability development.
We will continue to work in technology during the next year, and I hope we can find a way that creates value for everyone. I'm sure we can, and that's exactly what we want. Most of the government in Chile have been informed about our initiatives. They have our proposal. Of course, we have no agreements. We need to start the conversation with them, but we think that we have a unique opportunity today to move forward in the right direction. Thank you.
Thank you. Thank you, Ricardo. I'm going to go quickly over a couple of slides, and then Patricio Navia is going to talk to us a little bit about the political situation in Chile and what has happened in the year past. First, a little bit about the contract that we have with Corfo. As Ricardo said, we renegotiated a contract in 2018, and this renegotiated contract basically stipulate that we pay to Corfo up to 40% of our sales price of everything in excess of $10,000. Not long ago, prices were in the neighborhood of $5,000, but today, prices are well above $10,000. That's why we have been paying a lot of money to Corfo.
Then on top of that, we pay 1.7% of the revenues at SQM Salar, which is an entity that extracts, produce, and sells lithium and potassium chloride to the local governments and local municipalities. On top of that, the contract stipulates that we have to make contribution to the local communities between $10-15 million per year. And on top of that, we have to fund certain R&D initiatives in the amount of approximately $19 million. So it's a contract that's quite a complex contract that considers several variables under which this contract generates revenues for Corfo. But here I wanted to have on a very simple illustration. Basically, what happens?
We produce a product in Chile after a long process, and Ricardo explained in quite some detail what we do there. Then we export the product from Chile to the different markets, mainly in Asia. But at the moment we export the product, we make the lease payments, the local government payments, community payments, and R&D payments are made or actually accrue. Then approximately two months after that, the product is imported in China, let's say, in this example. Then the product is distributed and sold to the customer approximately two months after that. So we have between three to four months from the moment we actually make the payments or accrue the payments to the moment the revenue from those sales, from those exports, are actually recognized in our books.
That, of course, creates some noise, as some of you pointed out on the results that we published for the second quarter. Following IFRS rules, part of the payments that we make to Corfo are activated as additional cost of inventory, and part of these payments are expensed at the moment the product is exported from Chile. Of course, there is a function. I mean, the amount that is actually spent and what you see as a cost of goods sold is a function of the ratio between our exports and our sales. Because we have been increasing capacity significantly over the last several quarters, we have been increasing our production, and when we increase production, we increase our exports, and then we increase the sales.
You see there, over the last four quarters, we have been exporting on average, of course, on the first quarter of 2022, it was a special case, but we have been exporting more than what we have been selling. And of course, that is creating some kind of noise in the sense that we pay, for example, in the second quarter, we pay to Corfo, we accrue payments to Corfo as a function of 53,000 metric tons, while we reported sales for 34,000 metric tons. The difference, of course, is inventory that is in transit that will be sold in the very near future. Now, this was not significantly relevant in the near past, but when you see this chart, this is pretty much the definition of what off the charts means, huh?
These payments that we have made to Corfo over the last ten years have been significantly smaller than what we have paid this year, and we're very proud. As Ricardo was saying, this is a private-public partnership, and this is where we're actually putting the money where your mouth is, huh? We're very proud of what we have made, but of course, this payment is making this effect, sorry, this effect a little bit more big in the numbers when you see them. But this is just an accounting issue that is important for you to keep into consideration. And one minor comment, this is exactly the moment when we renegotiated the contract with Corfo, as Ricardo was saying, and today we're seeing these big results from Corfo's point of view.
Now, very quickly, on the financial that we published a few weeks ago, you saw that the numbers were quite positive. Lithium prices were significantly higher than last year. Lithium volumes were significantly higher. Prices of iodine were also in a very good position. Volumes were lower because the second quarter last year was an amazing quarter in terms of volume. Prices of potassium nitrate were also very, very high, same as the price of potassium chloride. We have had, over the last many, many years, a very strong financial position. For those that have been following us for a long time, you know that we are the company that has been in Latin America for the longest period of time, Baa1 with Moody's, and that is quite important for us.
Because all the products that Ricardo was mentioning that are the challenges that we want to develop in the near future require us to have a strong financial position. As you see there, I would say the most important one on this table is the net financial debt over EBITDA. Currently, following the capital increase that we did in the first half of last year, our net financial debt over EBITDA is close to zero. We're in a very strong position to develop the products that the market, the lithium market, needs, and also the nitrates and iodine market needs. Finally, we have a dividend policy.
You know, it has been there for quite some time, and this dividend policy basically let us distribute dividends as a function of how strong our balance sheet is. So far, the board has approved interim dividends of approximately $1.3 billion on total net incomes of almost $1.7 billion. So on top of making huge contributions to the government, making huge payments to Corfo, to local communities, to R&D, and of course, the development of the regions where we operate, we have been able to distribute to our investors quite a substantial amount of money, and we're quite proud of that. I told you it was quick. Patricio?
...Thank you. Thank you, Gerardo. So I was supposed to deliver on bad news, but resulting from what happened in 2019, I mean, you're all familiar with the riots and the perception that Chile was no longer a unique case in Latin America, and that all of a sudden, the market-friendly model was over, and Chile was in the middle of turmoil. And the response that the political class gave was a constitution writing process. And after three years, we had an election. Well, we had a plebiscite in October 2020. 80% of the people who voted, only 50% of the people voted, but 80% of them voted to start this constitution writing process in May 2021.
In the middle of the pandemic, Chileans selected a 155-member assembly to draft this new constitution. The assembly had a median voter way to the left, and they ended up writing a very, very long, comprehensive, what I defined as a Christmas tree constitution, with presents for everyone. A very, very high price tag, on the constitution. Everyone expected that given that a lot of people had voted for a left-wing constitution, then people would vote in favor of left-wing constitutional assembly, then they would vote in favor of approving this constitution. But then all of a sudden, on September fourth, 2022, Chileans overwhelmingly rejected that proposal, so by a 62% margin, or 62% to 38%, with 85% turnout. Everyone turned out, and people voted against the constitution.
This is very relevant for one particular aspect. We all predicted that people would approve the new constitution because the old constitution was written by Pinochet. So if you wanna think about Chile today, think of Chile as Luke Skywalker, and Pinochet is Darth Vader. So everything associated to Pinochet is sort of bad news. It's, it's tainted, it's corrupted, it's toxic. But then all of a sudden, Chile said: "Well, you know what? There are things that are worse than a Pinochet-written constitution, like the one you guys wrote." So 62% voted against the new constitution, and in essence, we're now back to the old Pinochet constitution. Notice that the margin of victory was somewhat surprising. The red is the vote against. Already in March, things were looking pretty tough for the constitutional convention.
They didn't update their writing of the Constitution. They kept on moving left, but the polls were closing in in the last few days. Many of us thought, well, you have a Christmas tree constitution in one hand. People want Christmas trees. I mean, nobody's against Christmas trees, not even if you're not Christian. Beautiful presents for everyone. And on the other hand, you have the Pinochet constitution, sort of the toxic Darth Vader constitution, and people then all of a sudden voted for that toxic constitution. Okay, and this is how it felt like in on September fourth. So a ship goes through a storm. Everyone thinks the ship is going to sink. The ship did not sink, but a few containers did fall off.
So you have to keep in mind that there will be consequences as to the entire process. Chile is not back to where it was before the social riot in 2019, but then again, the ship did not sink. But we're gonna discuss a bit as to what containers fell off. In short, since we don't have that much time, let me just put it to you this way. Chileans want a new constitution. They don't want a new country. So they voted against the proposed constitution because that proposed constitution offered them a new country, and they just simply want a new constitution with more social rights, with more provisions for pensions, healthcare, and education, so a higher price tag, but they don't really want a new country. They wanna fix the country that they do have.
So there were other things going on as well. There was high inflation. We know that nobody wins elections when there is high inflation, so the government in favor of the new constitution was punished by voters because there was high inflation. So some voters didn't even look at the constitution. They just wanted to punish the government. So low inflation might have produced a different result, but then there was high inflation, nothing to do or largely to do with the government, but, people voted against high inflation. The government is not that popular. There was also a vote against the elites, and now the Constitutional Convention was the new elite. People don't like the elites, and they voted against, all those things. A number of other things, the convention made a number of unforced errors.
They made a really bad name for themselves, so they screwed it. They could have produced a median vote or a constitution that was acceptable for the median voter, but they decided to go way left. And, for the people who did read the Constitution, they didn't like it. People wanted equality in the Constitution, and they thought that the old constitution favored the upper class, but the new constitution favored indigenous communities. So the large majority of mixed-blood Mestizo Chileans said, "Well, I didn't like the old constitution because I was a second-class citizen, and now, under the new constitution, I'm going to remain a second-class citizen because the constitution just grants way too many rights to indigenous communities." If we look at the text of the constitution, the constitution was really out there.
I mean, it had some really, really stupid, incredible, extremely innovating and damaging things, but then people didn't really read them. So it was really a bad contract, but for most people, they voted on other things. But the perception was that the Pinochet constitution was not that bad. President Boric, while campaigning for the new constitution, said, "Anything is better than a constitution written under a dictatorship." And Chileans didn't think about, they didn't agree. And this is relevant, and it's very important because up to September 4th, everything associated to Pinochet was toxic, and we expected that anything associated to Pinochet would be voted down. And now, all of a sudden, people don't seem to care that much about Pinochet, and that is significant for the historic connection of SQM with the military dictatorship. So that's particularly positive news for SQM.
So we dodged a bullet, but it is important to keep in mind that a few containers did fall off, so there will be some changes in the constitution that we need to take into account. And I would mention three things. One is that people do want more social rights, so the government is going to be hard pressed to raise more revenues to fund those social rights. So the news that Gerardo just offered you come to, like, very good news for the government because they need to raise revenues, and now all of a sudden, SQM is paying more money in taxes.
So maybe you don't wanna kill the goose that lays the golden eggs at this point or nationalize it, because you need the money to provide for education, pensions, and a number of other things in this Christmas tree constitution that people want. There will be other things as well that have to do with labor costs and environmental protection regulations. But I do want to underline that those things were going to happen anyway. So right before the riots in 2019, the most important legislative item on the agenda was the reduction of the work week from 45 to 40 hours. So those things were already in the pipeline, and they were going to happen. You can't blame the social riots for higher labor costs or, more important, environmental concerns and environmental regulation.
But people do want social rights, and whatever new constitutional process we get into, and I'll get to that in a minute, will include more social rights, and thus a higher price tag in terms of what the government will have to the government share of GDP. Now, could we potentially get into a constitutional rewriting Groundhog Day? So we're gonna have a new constitutional convention. The convention might there was this convention member in the old convention that dressed up as Pikachu, like the Pokémon. Well, maybe we're gonna elect another Pokémon this time around, and the new constitutional convention might end up producing another really bad constitution that people might end up voting against. So there is the risk that we end up falling into this Groundhog Day constitution writing.
But the political elite is very much aware of that, so they are now trying to think of a process that looks very democratic and with a participation, but it is straitjacketed, so that they make sure that the new constitution is a right constitution or is a constitution that can work. Since the agreement in two thousand and nineteen ended with the exit plebiscite, so we're now in uncharted territory, but the constitution writing power has gone back to Congress, and there is no reason why Congress would want to give that up again. So Congress will probably want to set a process, establish a process where they keep the real power. And what they are now trying to balance is, okay, maybe we should have an election of some sort, but we are going to keep that elected body with a leash.
So we are going to decide what goes into the constitution. An alternative would be to let the clock run, and by the end of the year, they still haven't reached an agreement. The timing for a new election, six months to draft the constitution and an exit referendum just doesn't work well anymore because the exit referendum would have to take place in early 2024, and there is, at that time, there will be extremely high constitution writing fatigue in the country. We see some of that now. People just don't want to talk about the constitution. It's just... It's like when you bring people over to fix your house, and after a few months, they're still there, you just hate them. You want them to sort of finish, and get it over with.
So one alternative might be the appointment of a committee, kind of a Justin Trudeau cabinet, you know, fully representative, gender parity, different minorities, indigenous people, people who dress up as sort of different things, but leashed, straitjacketed, so that they produce a constitution that looks very much like the present constitution. So all the political institutions remain the same, but it has a longer chapter of social rights. So the same constitution with a much higher price tag, and that will be acceptable for people. So the argument is the following: a long social or a long chapter of social rights is pricey, but social peace is priceless. So just pay a bit more, and you will keep the good structure of your political system, but it will be a bit more costly.
So now, the worst-case scenario is a Groundhog Day kind of constitutional process, and we could potentially be there. It doesn't look like we will be there because two years ago, most Chileans wanted a new constitution, so they wanted to remodel the house. Two years later, they just want the workers out of the house, and they just want to close the deal and have a constitution that they can live with. We do conduct some polls at Universidad Diego Portales, and right after the constitutional convention, our rejection rate in responses just went through the roof. About 98% of people just didn't wanna talk to us about the constitutions. Don't wanna talk about it. So we started asking other questions because people just are into constitutional fatigue.
But there should be sort of a middle case scenario, with perhaps an elected body to be elected in April 2023. Cannot do it before, nobody wants to do that in the summer, so December, January and February are not going to be good months for an election. But there might potentially be an elected body that will be leashed, that will have a straitjacket, and Congress, in essence, will tell that elected body what the content of the constitution will be. It'll have a high price tag, because it will have a number of social rights, but the political institutions, property rights, and those things will remain the same. There will be more environmental regulations, but that was going to happen anyway, and there will be more labor legislation, regulations, constraints, but that was going to happen, anyway, as well.
The Boric administration, the center-left administration, has they did not dodge the bullet. It got right to their heart. So what we saw in the week after is that the old center-left ruling coalition parties conducted a hostile takeover of the far-left government. President Boric and his close associates have been put on the second floor, sort of daycare center, and on the first floor, the adults are now running the show, and they are controlling the constitution-writing process. So you can just look at President Boric's platform, his government program into 2021, and just toss it out. None of those things are going to happen, except the few containers that fell off the ship. There will be a tax increase, because the new constitution will have a much higher price tag, so they are going to have to raise revenues.
They don't really know how to do this. They have started with a tax reform that sought to increase tax revenues by eight points of GDP, so very high. They went down to six, and then to four. They are now at three point five, probably less than three. By the time this passes, the opposition has a majority in the Senate now, so they need to negotiate this with the right-wing opposition. By the time it passes, it'll probably be two points of GDP. They are not going to have enough money to do all the things that they wanted to do. They will do, though. The biggest container that fell off is pension reform.
There will be a significant pension reform that will probably drastically change the private savings account system that the country has. That's probably not as relevant for SQM, but that's probably where the government's efforts will be focused and concentrated. It will do the tax reform and then the pension reform, but they are not going to have that much more time to do anything else, any other significant thing. One of the things that President Boric wanted was to create a national public sector lithium company.
They are just not going to have enough time to get to that point, so I think they will be willing to talk to you, and Corfo will be a bit more open to discussing with you, especially when you show them the size of the check that you're ready to pay in taxes. Because they're really desperate for money to fund the social programs that the new constitution had and people liked, but were rejected nonetheless, so what will Chile look like in late twenty twenty-three? We're still gonna have a constitution-writing process, so prepare for that, and it might potentially look like Brexit or five years or Groundhog Day, but it will be a constitution writing with a straitjacket.
The new constitution is going to be a homage to one great Jorge Luis Borges story, the Argentine writer. He had a story that was called Pierre Menard Rewrites Don Quixote. This was a nineteenth century French writer who wanted to write a novel, Quixote, that was supposed to be exactly like El Quixote, like Cervantes' El Quixote, but with a different author. That's how the new constitution will like you will likely look like. The most radical reforms are going to be there. People do want a stronger safety net, so there'll be a high. There will be pressure on the fiscal side.
But since the traditional center-left coalition has conducted a successful takeover of the Boric administration, we should see the government becoming more moderate, and following on the example of previous left-wing governments that produced pretty positive results. The final point, Chileans just rejected populism. That is the significance of the September fourth plebiscite, and by a wide margin. Now, the fact that Chileans sort of tinkered, played with populism, reminds us that Chile, like the rest of Latin America, because of high levels of inequality and historical legacies, it's like a recovering alcoholic. Every few decades, countries just go into this political crisis, and they vote for populism. Now, Chile is like a recovering alcoholic that for three years was drinking like mad, from two thousand nineteen to twenty and twenty-two, and now the country has voluntarily checked into rehab. So it's good.
It's really good. We're really, really happy. Now, what we should do, though, is keep in mind that it's a recovering alcoholic, so don't send a whiskey as a sort of for Christmas, or don't offer them alcohol. And Chile might do well, and well, it might return to what it was. And recovering alcoholics can go for many, many years, decades without drinking, as Chile did. So the good news, the bad news is that passengers are still discontent, and they want change. So there will have to be some change. But the good news is that the mutiny is over, and the ship did not sink, so that's pretty positive. And what about SQM?
And I will just finish here because I know I've used up a lot of time. Probably the company that most benefited from the plebiscite on September 4th was SQM. Because SQM is probably, among the large companies in Chile, the one that people most associate with the Pinochet dictatorship. So because people associated SQM with the Pinochet dictatorship, everything that was associated with the Pinochet dictatorship was toxic. And now, all of a sudden, it doesn't seem to be that important anymore. People say: "Well, Pinochet is dead. We have other issues now." Really? I mean, after thirty years, you have been talking about Pinochet all the time. Yeah, yeah, yeah, Darth Vader is gone. I'm gonna worry about other things. So we're moving away from the Star Wars metaphor.
But this is very significant for SQM, and I think, the fact that there are other priorities right now takes SQM off the list of sort of the most immediate targets. In every ritual, there has to be blood, and the blood will come from the AFPs, from the private pension system. That's going to be the biggest victim of this political process. But, you know, I work at a university, so we go through active shooting trainings. And, the one thing about active shootings is that when a couple of people get killed, the chances that you will actually go down drastically. So we should worry about the AFPs more than, anyone else, right now.
So this is the point that I just made, and I just want to end up with what we expected to have in Chile, a sinking ship, and what we ended up getting. And there is a word of caution here. It's not that nothing happened. A few things happened. I mean, there were containers that fell off the ship. And there will be costs for Chile in the future, but the basic tenets of the economic model are still there, and they will probably remain there for the foreseeable future. Thank you very much.
Hi, good afternoon, everybody. This is Lucas Ferreira from JP Morgan. Congrats on the presentation on Salar Futuro. I have two questions. The first one on the Salar Futuro. If you can talk a little bit about the timing of this project, that $1.5 billion investment, how many years that would take, the technologies you are developing, how mature they are. So a little bit on the timeline for Salar Futuro. And if you can comment on the, what you wrote in the press release about the cost of production that could be increasing, as a consequence, if you have something to... More information about that. And the other topic I wanted to explore is, the economics on, lithium sulfate.
You're mentioning in the presentation why the plant in China. If you can discuss a little bit the reasons for going that direction, as opposed to eventually increase more the production of a carbonate in Chile. Just so technically speaking, what's the reason, the economics of that 30,000 tons production, how that compares currently with the operation of a carbonate in Chile? Thank you.
Okay. On Salar Futuro, first, if you consider the timetable, first we have to finish all the engineering and all the preparation for the environmental studies. Meaning, environmental studies in Chile are a very complex and very good ones. It means, we are very proud about our environmental standards and very, very high quality preparation. It means all your engineering has to be ready. It's not just an idea of the project, and at least we need one year in order to have documents ready to go to the environmental permit. Environmental permit is a very important issue because in order to go there, we need to go together with Corfo, because it's a huge change in the process, in the future, and we are a private-public association.
That's why we have, in order not to delay the project, probably one year to have a full agreement with Corfo. Of course, I need to sit together with Corfo, as we do all the time, because I want to agree with them some of the technological decisions, for example, in the direct lithium extraction. In the mechanical evaporation, it's more simple because we know the technology is very... It's not that complicated. It's big, but not that complicated. We have experience about that. But DLA, it means DLE, that is the direct lithium extraction, is something new. We have many alternatives. We have been working very hard on it, and we are ready to go.
It means we are in a moment where we need to have enough information to take a decision, but we want to work together with Corfo during the next year, and that's why I put, if I'm not wrong, six months. I hope that we will have the final decision of the DLE in the next six months. This one year, you have to go to the environmental permit, and we need to go to Corfo. An environmental permit is very open discussion, and this is a complex project. In the Salar de Atacama is a very unique place in Chile. It means that it's reasonable to expect-
... at least three years between the, you need to have the opinion of the communities, you need to have the opinion of the different entities, more than 10 different governmental entities. They send you question after four or five months, you need to send them the answer. They come back, they, the questions again. It's, it's not a short process. Probably that's the problem we have in Chile, not having the environmental restriction, that is very good. The problem is that the timeframe is just a little bit too long, we know that. Getting the authorization, for example, from the pipe solutions or pipe water, it's long length. You have a lot of different authorization in order to do so. That's why three years is a good scenario, plus one, it means four. Construction, depends.
It's the pipeline on the other... You will start with some first and the other one, but at least three years construction sounds reasonable. Two, very short, probably three is more reasonable. And if you put together, you are talking about seven years, at least. And that's the framework in terms of the total investment in order to finish, if you follow all the procedures. But did you ask me about sulfate?
Yeah, but before that, if I can, just a follow-up on-
Okay.
On your point. When you say, we have to sit down with Corfo next year for the discussion. So the discussion, since it's a seven-year timeframe, so the discussion is about the renegotiation of your license, because obviously, you wouldn't do this project seven years if you didn't have the perspective of keeping, remaining the Salar, you know, after two thousand and thirty. So, does this twelve months also include the, it's, your base case is that you also discuss the renegotiation of that license, or not necessarily, you're gonna be discussing only the project?
During this period, remember that Chile, as a country, we are gonna have a national policy of lithium, something they are working as we speak today. Means whatever we have discussion, it will be inside this national policy of lithium, but I think it's important to have a very good ones, and I hope the government is working on a national policy that is gonna be a good one. We do believe in the public-private projects. I think the Salar is a very good example where you can do a private, public, positive projects. Chile is getting a lot of money. Probably, we're gonna get close to $5 billion if you consider the first half of the year. That is a lot of money of the GDP of Chile. Just because SQM, a private company, increased capacity, we have the ability to do it.
No other company in the world, not in China, not in Australia, did it. We did it. We have the people, we have the effort, we have the technology to do it. And because we did it, we can pay this amount of money. It means it's a very good association for both sides. That's why we have one year to find a solution. I'm not gonna say today what is the solution. We found a solution four years ago. We sit together, and the government is very smart. We think we are smart, too, and we find a way. And we expect to find a solution that is good not only for the government, it's good for the Second Region, it's good for the communities, it's good for the government, and it's good for the company.
We have to work hard in order to do it. But I don't want to get into detail. We need to find a way. I think it's important for the country, it's important for everyone to move forward in something better, and the Salar is something that we are offering today. The second question regarding potassium salt is lithium sulfate. We think that we need lithium today. If you wanna build a new facility of lithium, lithium hydroxide, starting from lithium sulfate, that we have the production, we invest in lithium sulfate, that it was easy to do it. If we want to have all the permits, environmental, we are gonna need to wait at least three or four years or five years to be ready. But I want to be ready selling tomorrow.
It means what you want as an investor is, on SQM, selling lithium hydroxide tomorrow. And lithium, the lithium.
Sulfate.
... lithium sulfate is not a competition of lithium chloride. In the process we have today, we produce a lot of lithium chloride, and as a by-product, we have this lithium sulfate in the Salar. We process the lithium sulfate, and we have a high quality lithium sulfate, that is a parallel process without affecting lithium chloride. And that we have this new alternative to produce more lithium, and we then want to use it as soon as we can. We went to China because in China, there are a lot of many chemical facilities, they do tolling with the Australians, with the spodumene and so on. And we adapt one of the tolling equipment, very good one, in order to be able to produce the lithium hydroxide as soon as we can.
As I show you, we can produce next year, and I think it's makes all the difference we can provide an additional 30,000 metric tons of lithium hydroxide next year instead of waiting five years. But it depends. In the future, we can do that? Yes, we can do that. But now we're very focused in order to deliver for the next two years, in order to produce, as soon as we can, this lithium sulfate into the lithium hydroxide.
Yeah, we got a question about relating to the plant in China, that maybe you could touch on now. The question's from Joel Jackson from BMO, and he is asking about the economics of the plant there, a 30,000-ton plant in China. Is it similar to other plants that are already producing conversion facilities that are already producing in China? And where will we get the lithium sulfate from?
Yeah. First, who is asking? Sorry?
Joel. Joel.
Hi, Joel. First, yes, we bought this facility. We are in the negotiation with this company. It's a big company, chemical company in Sichuan, that they have many different facilities. They are in the same place. We asked them, we want to buy one, and we want to buy a new one they were building and adapt this one for producing, starting with lithium sulfate. It's not so different in some technological point of view, using lithium sulfate than using spodumene. It's better using lithium sulfate. We can produce the lithium sulfate at the Salar. We have the facilities, we have some facilities there, we adapt the facilities to have high content of lithium sulfate.
We have been testing this project for three years, and now we can export, and we have authorization to do so, and we did export in the past, I don't know, 10,000 metric tons, something like that, to China. We will continue to export, because now we have our own facility. The technology is very good, very high, straightforward, and we are negotiating, as we speak, some trading agreement with other Chinese. They use. We adapt some spodumene facilities to use our lithium sulfate. And that's why it's something that makes a lot of sense. From the economic point of view, it's very good. We will be releasing what we expect is our total cost in the short term, not today. But even though it could be just a little bit more expensive, that's what we're doing today.
Really, if you consider the price of lithium, it's a no-brainer, and it's a very good project. We're very proud about the development at the Salar level with our people, in order to create this new product, the sodium—the lithium sulfate, that was a by-product there, transformed to a high quality and to try to have the opportunity to transform to lithium hydroxide in China.
Hey, good afternoon. Corinne Blanchard with Deutsche Bank. I have two question. The first one, you mentioned on Tuesday in the press release, putting $700 million for a development hub in northern Chile. So if you could just give us some clarification on what you intend to do there. Are we looking into midstream or cathode production? And then the second question would be, which kind of lithium structure contract for the pricing can we expect for 2023?
Yeah, let me try to go to the first one. We mentioned some of the ideas we have with the $700 million. The first one is more lithium hydroxide. It means that we want, if we are gonna be producing 210,000 metric tons in Chile, from lithium chloride, we think having more lithium hydroxide is a very good idea, because we will have this ability. There's many different technologies in the world. We have different clients. Some clients want lithium hydroxide or the lithium carbonate. We want to provide the best lithium carbonate, the best lithium hydroxide to the world, not just one product, and we need to have capacity, and I think it's a very good idea to have capacity of both.
That's lithium hydroxide investment is a very good one, and we will move forward on that. Second one, lithium metal. As I mentioned to you before, solid state batteries are coming. We want to develop lithium metal. We are gonna have a joint venture with a third party, with the expertise in technology and know-how, and we have our own now. We can go directly from our lithium chloride. We think we have a very unique opportunity to move from lithium chloride to lithium metal. It's, we are working in the technology now. We need a partner, and we have the partner, and we are working with him. Today, he's not public so far, but we expect to be public about the partnership sooner. And lithium metal, for me, is a key element we have to produce.
Second one, we think that it's the moment to produce soda ash in Chile. Soda ash, that is, carbonates, soda ash. I don't know the translation in chemical point of view. But it's very important because we use soda ash in order to produce lithium carbonate, and we use more than 400,000 metric tons of soda ash, and we import that, and we import from the States mainly. And the footprint of the carbon footprint of the soda ash in the U.S. is very bad. We want to have every single footprint in our production very clean. We're producing lithium for electric cars. We need to have no footprint of carbon emissions. And producing our own soda ash is a big project.
It's a very big and very good project, and we want to implement this big project and very good project. Finally, we're working with LG, another one, because it was public, the announcement with LG, in order to produce some other derivatives. Yes, it's not out of the table, it's on the table, the alternative of producing cathodes, and some cathodes in Chile with the battery producer. The second question was about pricing this year?
Pricing contracts for next year.
You have an idea. We have pricing, we have contracts, very good contracts today. And all the contracts we have, a couple of them are under negotiation, but most of our projects, contracts are according market conditions. Means even though we have contracts, we have this: we supply products to all the big guys in the battery industry. We have agreement to them to supply high quality product next year. Pricing are fixed according market conditions. That's why most of our price for next year depends market condition, and we feel very comfortable about that. I think, I don't want to have a client that at the end he doesn't want to buy because it's too expensive, and I don't want to have a client that I don't want to sell because it's too cheap.
I think the best for the company is to be very effective. We're very effective, very low cost. We're very low cost, and to sell at market conditions. We, we don't want to have long-term pricing. There's nothing like long-term pricing. The market price is the best one, and the volatility of lithium is... the recommendation, reasonable recommendation is not to get into this fixed price for long term.
... Hi, this is Chris Kapsch with Loop Capital Markets, and I had a sort of a follow-up on your discussion just now about the commercial strategy. But it's clear right now that, you know, supply constraints are creating concern on behalf of automotive OEs about the security of supply, and it's changing their behavior in terms of their willingness to invest upstream, to partner upstream. And so, I guess the question is, in some cases, they're even prepaying for, you know, commitments of future production. But I'm just wondering if that, you know, the other thing that they're concerned about, obviously, is sustainability and that footprint, it could be a source of marketing advantage looking forward.
So you guys make the case that your future production is gonna be highly sustainable, great, great footprint environmentally. Just wondering if that confluence of dynamics is making you rethink your commercial strategy in terms of being more willing to commit to those longer term agreements, or do you just feel that you're gonna let the market prices dictate what your commercial agreements with those customers might look like? Thanks.
Yeah. First point, we think that our footprint, carbon footprint and environmental footprint today is very good, it's the best in the market. What we want to be is to be even better than that, not just to improve because we're bad. We are good, and we are gonna be better than that. Second, we are more than willing to commit in long-term relations. Don't, don't, don't mislead my words. It means we're open for long-term relations. We are signing, as we speak, different contracts with the most important clients of lithium in the world. I'm more than prepared to commit long-term supply of lithium because it's good for them, they can rely, they will get the lithium. I know that I will produce high quality lithium to them. There is no problem, and we're signing long-term contracts.
What I think is good for my client, is good for me, that the price will be the market price and not to fix the price today. But if one client, big ones, I'm talking about all the big guys buying lithium for batteries or electric cars, whatever, wants to have a long-term agreement with us, we're open. We do business twenty-four/seven, and we are signing long-term agreements. We are fully committed for long-term relation with all our clients. We, as you can see, we are increasing production capacity. We are gonna have Australia going to the market with the spodumene at the end of next year. We will try to convert the spodumene to lithium hydroxide, means we will, we will have lithium, and we're willing to provide this lithium for the big customers all around the world.
Thank you. Markus Geyer, MEAG, and I had a question about the Australian volumes that you mentioned. Are those incremental to the volumes that you've spoken about up until now?
Yes, but keep in mind... Sorry?
No, no, no. Okay, you're asking about the volumes that Ricardo mentioned of spodumene?
Correct.
Yeah, those are, those are the volumes of spodumene that we will produce, that will later be transformed into lithium hydroxide. But the total volumes that we have informed are the same, which is a total capacity of 50,000 metric tons.
Yeah, but it's Australia. It's not considering the 210, for example.
Okay.
It's a different joint venture. We are 50% with Wesfarmers in Australia. We're gonna produce 50,000 in the first stage, 50,000 metric tons of lithium hydroxide. We expect, and we're working very hard in order to deliver the second stage, that is moving to the 100,000. I hope we will do it this year or beginning of next year. We're working in the engineering, geological, everything. But the thing is that we are gonna start producing the spodumene before having the final chemical facility for one year in advance. And we are thinking what we are gonna do with this spodumene, that is equivalent to 50,000 metric tons of lithium hydroxide, and it's in a joint venture.
I had an additional question. Speaking on the demand side, with the acceleration of cathode production, battery production globally at a rate much faster than supply, what gives you the lack of confidence moving forward, as far as... You talked about volatility even going, or uncertainty about price in Q4. But when you look even throughout multiple years, what gives you the lack of confidence when there's a relatively clear supply-demand fundamental backdrop?
It's not lack of confidence, it's a very dangerous world out there. We get out of this room, it's a very dangerous world. It means the recession is something that can happen. The economic situation of the world today is not the best situation ever. It means you have this war in Europe, you don't know where it's gonna end. You have an economic situation with an unprecedented inflation in the U.S., and as professor said, inflation is not a good news for electors and for political changes. We don't know if we are facing a recession in the world. It's something that we need to be aware about that and if you face a recession, you face a bad economic situation worldwide, of course, electric cars are gonna be affected. There's nothing like you sell to someone that is not affected.
We are selling something that is for the good quality of life and depends on the growth of the economy. If you are fully confident of the growth of the economy in the Western world and China, of course, you are right. But there's a lot of tensions between China and the West. You don't even know where it's gonna finish. I'm very positive about that. I think it's gonna finish very good after October in China, and they will reach some agreements with the West, and especially the U.S., but there's some risk, and the only thing that I say is there's some risk. But it's quite my explanation. Definitely, every single scenario, demand, it means the supply divided by demand will be in excess of 90%.
It means I'm very confident that it's a very good market, but I cannot assure you what is gonna be the price.
Hi, this is Howard Klein at RK Equity. Just on your M&A strategy, you only mentioned possibly buying resources in Western Australia. So I just wanna ask you about other geographies, maybe in North America, South America, and also, given the Inflation Reduction Act in the U.S. and, I mean, Chile has a free trade agreement, and Australia has a free trade agreement, but if you're processing in China, you know, there may be impacts there. So acquiring resources maybe outside of Australia, and also, are you thinking at all of building conversion facilities in the United States or Canada or maybe Europe?
That's a very good question. We have a group of geologists doing active work in Australia, but in the M&A side, we're open for everywhere. It means there's no place of the world where we don't want to look an opportunity. We look opportunities in Canada, in China, even in United States, there's some opportunities in Europe. We will continue to do so. Of course, we are not. Our strategy is not to be the largest producer of lithium at any means. Means my strategy, or SQM strategy, is to be profitable company and doing right our business. We are not prepared to overpay. Means, if someone wants to sell something very expensive, and we don't think it will create value for the company, we will not buy it. Doesn't matter if it means that we will increase our market share.
Increasing market share at any cost is not our strategy. We feel comfortable being very low cost producer, and if you buy very expensive, you are not low cost producer, because the payment is part of your cost. That's why we are very careful. We have a strong discipline about M&A, but we're looking forward everywhere in M&A. But active geologists, studies, and early mining is in mainly. We have a group of people in Australia, but looking for projects everywhere, yes. If we thinking about having some production of derivatives outside Chile, it's an alternative, but we think that we have a full commitment in our public- private alliance with the government to generate a hub of development of value added in Chile. We feel very part of this deal.
It means one of the key element of this alliance is that we have to work together in order to produce as much as possible value added in Chile, because we think it's part, essential part of the public-private agreement we have today.
Very conscious of everyone's time, but if we wanna take just one more there in the middle, Evina, and then we can wrap it up, or Diana. But make sure it's a good question to end on a high. No pressure.
Hi, Wayne Pinsent with Gabelli Funds. Just, you know, you mentioned the lithium sulfate project, and how it's a little higher cost and market based pricing. Just wanted your thoughts on long term, when you're factoring in these projects, your thoughts on long-term lithium pricing.
Wow! It's... Of course, supply and demand is the key element. One key point is at what price the demand of electric vehicles will be affected. We at today's price environment don't foresee any. Of course, any car manufacturers today complain that the lithium is too expensive. That's for sure, but the demand of electric vehicles at today's price environment of the lithium has not been affected. It means this is a pure economic. Demand has not been affected today. That's for sure. As you see the numbers, has not been affected. You need to have an equilibrium in order to have a long-term price. Supply is very difficult to have a forecast.
But the good news for me, and I think that the, we will have a lot of supply in order to supply the lithium, very high cost supply. And the very high cost of lithium supply will pull the price. It's not marginal cost, it's total cost. If you need 150,000 metric tons of additional lithium next year, and after that, 200,000, 220,000 additional lithium, means a lot of investment in order to maintain the 1 million tons or whatever total production, plus new projects for the 200 or 250. A lot of new projects. Means every single year, you need new projects, and they have to pay everything: investment, OpEx, CapEx, whatever.
That's why if you try. If you go to 1.5 million tons, 1.6 million tons, what really matters is the total cost of the last 200,000 metric tons. This is what really matter. It doesn't matter what is the cost of the first 500,000. The last 200,000 is the one that put the price, because those are the guys that put investment in order to go to the market. That's why the equilibrium will be the last 150,000 or 200,000, that are three or four new projects, and the market demand. I just think at today's price environment, market demand is not being affected. The key question is gonna be: What's gonna be the supply, the last supply, in order to catch the demand?
You be my guest with the model. I don't know. It's not like we have in my computer the answer of the question I don't wanna share with you. We have the same assumptions maybe you have or other people have. A lot of investment banks, they have their own assumptions about penetration, about what is costing produce in Australia, if those projects are gonna go ahead or not, what is gonna be the marginal total cost, because are new projects or not, when are gonna be available, and so on. And putting everything together, as I said before, we have no reason to believe that the prices in the fourth quarter will be lower than third quarter. This is very short term, I know.
But we need to be very short term in terms of being, giving you assurance, because we cannot give you assurance. What assurance I can give to you, that we are doing the best in order to provide the best lithium and lithium hydroxide and lithium metal in the future to the market, the best one, quality, and to increase the production. It's our commitment, and to be very low cost producer, and to have a very good alliance with the government. That's our commitment, and the price will be the supply and the demand equilibrium. There's nothing different than that.
All right. Thank you. I wanna thank everyone for coming, for the New York Stock Exchange for hosting us. Patricio, thanks for coming down or up from NYU. And Ricardo, Ricardo, thanks for all your efforts with the presentations and sharing your insights.