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saltpeter industry

THE REINVENTION OF THE

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PATRICIO GARCÍA MÉNDEZ

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THE REINVENTION of the saltpeter

industry PATRICIO GARCÍA MÉNDEZ

About the author

Patricio GarcĂa MĂŠndez (66) is an agricultural engineer, graduated from the Universidad de Chile. He worked at the Center for Information on Natural Resources (Ciren) and then for more than 20 years in the commercial department of SQM. His early work at Soquimich Comercial was with the pioneering project of blend fertilizers before he moved into soluble fertilizers and their introduction into the domestic market. He then joined the head office as commercial manager for Latin America where he was in charge of developing the markets in the region, before he moved into a parallel position for the Asian market. Later, as manager of fertilizer products he was mainly involved in planning, administration and the development of products with an emphasis on speciality plant nutrition. Nowadays he works primarily as a consultant in commercial public relations.

‹ INDEX ›

THE REINVENTION OF THE SALTPETER INDUSTRY Author: ©Patricio García Méndez Production, text, editing and design Memoria Creativa Infographics Gráfica Interactiva

INFOGRAPHICS

English version Miriam Heard English proof-reading Patricio García Méndez

14 62 74 134 146 182 206

Photographic Archives SQM Archive, Memoria Chilena, National Historical Museum, National Digital Library of Chile, Cenfoto-UDP, Museum of Antofagasta,

Chilean National Archive, Library of Congress USA, Juan Vásquez Trigo Archive, Sebastián Freed Archive, Hernán Tejeda Sanhueza Archive, El Mercurio.

Printing A Impresores Printed in Santiago, Chile, December 2018. Cover photo SQM Archive

Caliche By land and sea María Elena Current production systems Evolution of the production processes SQM on the north SQM around the world

2 18 The products born in the Chilean desert 230 The port of Tocopilla

Intellectual Property Register Nº A-295299 ISBN Nº 978-956-358-763-0 This book was produced by the SQM department of Communications. 8

7 About the author

CHAPTER 1

The power of the powder

An industry in four decades

The Guggenheim loyalists

Lines of Time

The fascinating history of chilean saltpeter

CHAPTER 2

John Thomas North

James Thomas Humberstone

Marketing before the age of marketing

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122

138

CHAPTER 4

CHAPTER 5

The end of the golden era

Revolution in the saltpeter desert

Eureka! Potassium nitrate made in Chile

CHAPTER 6

The desperate recapturing of the markets

CHAPTER 7

The unexpected boom of iodine

CHAPTER 8

The innovative Guggenheim legacy

CHAPTER 3

The last gasp of the saltpeter sailing ships

A merciless competitor

Elias Cappelen-Smith

Stanley Freed

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CHAPTER 12

CHAPTER 13

The agony of unparalleled wealth

CHAPTER 9

The odyssey of the potassium nitrate plants

CHAPTER 10

The impressive synergy of the Atacama salt flats

CHAPTER 11

Made-to-measure sales of specialty fertilizers

The leap into the vertiginous lithium market

A long arm stretching out into the future

‹ THE FASCINATING HISTORY OF C H I L EAN SAL T P E T E R ›

chapter

THE FASCINATING

HISTORY OF

chilean

In the middle OF THE 14

CENTURY A GROUP OF ATACAMA NATIVES WALK FROM THEIR

SETTLEMENTS AT THE FOOTHILLS OF THE ANDES TOWARDS THE PACIFIC OCEAN IN ORDER TO EXCHANGE GOODS WITH THE INHABITANTS OF THE SEA SHORE. IT’S A JOURNEY THAT THEY UNDERTAKE FROM TIME TO TIME, TO BARTER FOR DIFFERENT PRODUCTS THAN THE ONES THEY, AS GATHERERS AND HERDERS OF CAMELIDS, USUALLY HAVE. Archivo SQM

saltpeter

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A The stones which could ignite and stoke a fire, and

which so impressed a group of indigenous tribes-people from the Atacama desert, were called cachi, which in Quechua means “salt”, and which later became the word caliche.

t the end of the long day the leader of the group –older and more experienced than the others– decides to find a place to camp for the night, and looks for a rocky outcrop to shelter them. With the dry sticks and cacti that they brought with them they light a fire to ward off the cold nighttime desert that can chill the bones. Lighting the fire they’re amazed to see the ground and the stones ignite and give off sparks. Believing the area to be bewitched they run away as fast as they can, leaving their belongings behind them. The next morning they return to fetch their things in order to continue on their journey, and the leader orders one of them to take a few pebbles so that they can tell the rest of the tribe about their adventures.

When they’re back among their people they light a fire again, and realize that some of the pebbles catch fire, and even seem to kindle and stoke the fire. The knowledge that some stones have these peculiar characteristics spreads among the indigenous communities of the area, who call the stones cachi, meaning “salt” in Quechua, which then became the word caliche. When the Spanish arrived at the beginning of the 16th century, their missionaries, who were determined to convert the local populations, heard about these “devil’s stones” and decided to go to the desert and visit the places the local people told them about, to take some samples and study them. The newcomers’ greater access to scientific knowledge led them to realize that

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‹ THE FASCINATING HISTORY OF C H I L EAN SAL T P E T E R ›

the stones contained a mineral similar to that used in gunpowder, but with less potency. They threw the samples away, and were amazed to see how, weeks later, in the areas around the mission-station where the stones had been discarded, the vegetation grew and flourished in comparison to the rest of the flora. Which is how the combustive and the fertilizing properties of this mineral came to be understood. Nobody knows how much of this legend is true or not, but it would take many centuries and a vast accumulation of human scientific knowledge before there was a real understanding of saltpeter’s properties, both in terms of its firepower, and for fertilization. There are some indications that indigenous tribes had a basic understand-

Although nitrogen is abundantly present in the atmosphere it is only fixed in the soil by bacteria that decompose organic matter, a process that takes years. Naturally-occurring nitrate is therefore obtained from moldy caves, salty floors or, more usually, from the deposits of old stables where fungus on the walls leaves behind “flowering” crystals of potassium nitrate. This knowledge was the scientific advance that led to the establishment of the first nitrate production for gunpowder: places where through the accumulation of organic matter covered by layers of sodium hypochlorite or lime ash, ammonia and then nitric acid was obtained and then dried to get the nitrate for gunpowder. The nitrate production of Navarre,

NATURALLY-OCCURRING NITRATE WAS USUALLY TAKEN FROM SEDIMENT IN OLD STABLES ON WHOSE WALLS CRYSTALS OF NITRATE “FLOWERED” FROM THE FUNGUS. ing of saltpeter’s properties of fertilization before the arrival of the Spanish, as there is evidence that they would place the mineral-laden stone, the car calchi or later the caliche, in the irrigation channels among the crops. For the Spanish who arrived in the Americas the real value of saltpeter was as the primary ingredient of the gunpowder that had been brought from the Orient: a mixture of charcoal, sulfur and potassium nitrate that burnt until it exploded. Even the Spanish word for “saltpeter”, salitre, is attributed to the Catalans bringing together in one word, salnitre, the Spanish for “salt” and the Greek nitro for nitrogen. In the 17th century saltpeter as a source of nitrate for gunpowder was extremely scarce.

Aragon and Catalonia were famous and their gunpowder was highly prized. In America the richness of potassium nitrate and saltpeter hidden in the caliche of the pampas was discovered over time. Records show that the Incas knew of the “Chancay saltpeter”, near Lima, which were seized by the Spanish in 1571 in the name of King Philip II and where the first nitrate state monopoly was established for use in gunpowder, even though the quality of the mineral found there was negligible. At the time little or nothing was known of the vast reserves of saltpeter in the Atacama Desert. By the end of the 1700s the Spanish had explored the coastline of Tarapacá and Atacama. They had almost exhausted the extraordinary

silver deposits of San Agustín de Huantajaya, inland of Iquique, and some of the colonists began to export the guano dung from the Ique Ique island (now known as the Serrano Peninsula, where the port of Iquique is) as fertilizer to Europe, because of its high phosphorus content. This lead to a settlement and then the construction of the first cargo port to the south of Arica. The first European scientists, exploring the northern provinces of what is now Chile, were particularly intrigued by the extension of the Atacama Desert, which was at the time part of Peru. In 1778 a Spanish scientific expedition, led by Hipólito Ruiz y Pavón explored Peru, with the French natural scientist Joseph Dombey on board. Dombey took back to Europe the first samples of sodium nitrate from the enormous salt flats of the pampas of Tamarugal, in Tarapacá. However, for the history of saltpeter, a more important expedition was that of the Czech botanist and geologist Thaddeus Haenke, 13 years later, who explored the region in 1791 during the first scientific and political journey around the world of the Spanish captain Alejandro Malaspina, which was, for that time, the most significant voyage undertaken for scientific purposes. Shortly before the journey began the Spanish government requested that a botanical specialist be included from the University of Vienna. Haenke was chosen – he had studied botany, medicine and mineralogy at the University of Vienna and was highly esteemed by his colleagues and professors. At the age of 28 he was hired, for 150 pesos a month, and he travelled to Spain to join the cartographers, painters and numerous other

natural scientists who were in Cadiz about to board the ships Descubierta and Atrevida. Haenke’s voyage was not without mishaps. He arrived late in Cadiz for the boarding and had to follow in another ship to South Ame rica. The ship he was on then sank as it entered the River Plate and Haenke was only just saved. He took refuge in Montevideo where he waited for three months while Malaspina was exploring the coastline of South America. But Malaspina then docked in Buenos Aires and once again Haenke was left to wait ashore. Three months later he crossed the Andes, passing through Santiago on the way to Valparaíso where he finally managed to board one of Malaspina’s ships. They explored the islands of San Félix off the coast of Copiapó and arrived in El Callao a month later. This was Haenke’s first glimpse of the desert and the inhabitants of the Atacama and Tarapacá provinces. In Lima Haenke asked permission from Malaspina to go inland, and he explored Are quipa, Cuzco, Lake Titicaca, the Altiplano and southern Bolivia. The expedition then returned to the Pacific Ocean: after setting sail in Callao he arrived in Guayaquil on the 30th December 1790, before continuing to Panama, the Mexican coast, the Marianas islands, Macao, the Philippines and Australia, from where they returned to Callao, arriving on the 23rd July 1793. The expedition then continued southwards, rounding Cape Horn, visiting Buenos Aires and then returning to Spain. But Haenke had requested a health permission from Malaspina to disembark in Callao, with the intention of returning once again by land over the Andes to rejoin the ship in Buenos Aires. On the way he decid-

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Thaddeus Haenke, the Czech botanist and geologist who joined the first scientific and political expedition around the world led by the Spanish Captain Alejandro Malaspina. In one of his first reports he talks about the fertilizing properties of Chilean saltpeter.

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Memoria Chilena

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The chapter Description of the Kingdom of Chile by Thaddeus Haenke, an unknown text until it was discovered in 1938 in the archives of the British Museum in London. In Chile the text was published in 1942 by Editorial Nascimento.

ed to stay put and Malaspina, waiting for him in Buenos Aires, returned to Europe without him. Haenke settled in Cochabamba where he dedicated himself to botany and investigation, inventing a vaccine against smallpox. Even though he had promised his European friends that he would return and take up his post in Bohemia, he never set foot in Europe again, and died in Cochabamba in 1816 at the age of 48. During his travels across Bolivia he collected over 1,200 specimens of plants and minerals, which he catalogued using Dombey’s nomenclature. He recorded stones and made political observations. Between 1789 and 1794 two members of the Malaspina expedition, José Espinoza and Felipe Bauzá, wrote the book Description of the Kingdom of Peru, which was for many years wrongly attributed to Haenke. In the descriptions of the Tarapacá region the existence of the salt flats is described, and in the chapter Description of the Kingdom of Chile the ferti lizing properties of Chilean saltpeter are discussed for the first time. This chapter of the book merits a mention: it existence was unknown until 1938, when it was discovered in the archives of the British Museum in London. The Chilean ambassador to Great Britain, Agustín Edwards Mac-Clure recuperated the book and it was published in 1942 by Editorial Nascimento in Chile. Thaddeus Haenke, who was still being paid by the Spanish crown for his research, wrote in 1801, while in Cochabamba, his first report in which he mentioned the Peruvian desert: “In the heights of the Andes a perpetual winter reigns [...] right to the ends of this

superimposed world, without exception even in the areas situated in the tropical regions. The entrails of these mountains are an immense mound of all kinds of metals, and their slopes and plains spill over with every imaginable mineral, salt and earthly wealth, while their lagoons are inexhaustible sources of common salt”. Some historians exaggerate Haenke’s role, crediting him with the discovery of saltpeter. They even write that he taught the indigenous populations as well as the conquering settlers how to mine for the mineral. But the truth is much simpler. What caught his attention on the pampa of the Atacama Desert in 1791 –from the western side of the Andes to the sea– wasn’t so much the existence of these strange salts, but rather the vast size of the deposits of “that cap-rock or vitriol of common iron” as he described the caliche. That was the discovery. He then identified it as a source of sodium nitrate, and with his scientific expertise learnt at the University of Vienna, he took this to be a possible primary ingredient for the making of white gunpowder or soft. In 1806, when the English, then at war with the Spanish, invaded Buenos Aires, the troops of the viceroyalty of La Plata ran out of gunpowder and ammunition. Faced with the possible advance of the English through South America, the Viceroy of Peru, José Fernando Abascal, asked Haenke to explain to the Peruvian industrialist Matías de la Fuente how to purify the saltpeter –sodium nitrate– from Tarapacá so that it could be transformed into potassium nitrate which could be used for black gunpowder. Thus he described that moment in a later

letter to the Viceroy Baltasar Hidalgo de Cisneros, in Buenos Aires: “On the 15th July of last year, 1806, an important discovery was made on the coasts of Tarapacá, in the Administrative Province of Arequipa, of cubic nitrate which, to the theoretical and practical extent of my knowledge and understanding, could be reduced, and was reduced to prismatic nitrate, the vital ingredient for the making of gunpowder and for medicine...” Converting sodium nitrate into potassium nitrate was a simple chemical process, well known at that time. Haenke’s crucial input at that moment made him famous, and assured him a place in history as the “father of saltpeter”. In any case, following this procedure, in 1811

It only took a few years for these preca rious mining camps to produce nearly 800 hundredweight of black gunpowder for Lima, which were then sent to Spain. In 1811 the ship Standard, from the Bri tish navy, came ashore in El Callao, under the command of Captain Drummond, to ensure the safe passage of the merchandise from the viceroyalty to Spain, given the recent waves of independence. According to The Gazette of Lima he arrived in Cadiz in 1812 and unloaded “150 hundredweight of gunpowder for canons; 30 of the same for guns; 27 hundredweight of refined saltpeter and 512 hundredweight of Tarapacá nitrate”. This is the first known exportation of saltpeter.

TRANSFORMING SODIUM NITRATE INTO POTASSIUM NITRATE WAS SIMPLE CHEMISTRY. HAENKE’S WORK IN THIS BROUGHT HIM FAME AND THE NICKNAME “THE FATHER OF SALTPETER”. and 1812 the first seven or eight saltpeter companies set themselves up in Negreiros, Pampa Negra and Zapiga, several kilometers north of Iquique, to extract the saltpeter using the ancient copper pots that were used to precipitate the silver. This copper pots or containers were placed over furnaces to ensure a direct heat, and the first saltpeter works, with low-capital costs, were invented and called Paradas. There are two theories about the origins of this name: one refers to the metal containers which were stood up (“parado”); the other refers to the temporary camps that were set up around the mines and which, when the mineral deposit was depleted, were taken to the next stop (“parada”) in another place.

Caliche in its natural state is a conglomeration of minerals and, even though it sparks when brought into contact with fire because of its contribution of oxygen to the combustion process, the reaction is not strong enough to cause an explosion. Caliche is found in four natural states in the desert pampa: In salty lands or permeated in volcanic rocks from the Mesozoic era; as flowerings of salt or in cavities in riverbeds or cliff faces, both from the Jurassic era; and from the end of the Quaternary period in underground layers or pockets in strata of 50 cm to 8 m thick that form deposits. Of the four types only the last –and oldest– kind was of interest to the development of the saltpeter industry.

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Alexander Humboldt was surprised by the discovery of natural saltpeter, because as

early as 1797 he had been investigating how to obtain nitrogen from the atmosphere for use on plants.

‹ THE FASCINATING HISTORY OF C H I L EAN SAL T P E T E R ›

These large deposits were found between the latitudes 19 and 26 of the Atacama Desert, from the south of the Azapa Valley in Tarapacá and Taltal to the south of Antofagasta, which until 1879 belonged to Peru and to Bolivia, respectively. In this stretch of 800 km saltpeter deposits were found in the valley hemmed in by the coastal mountains to the west, and the Andes to the east, commonly known as the pampa. The main deposits were found on the western edge of the Tamarugal pampa, the Toco pampa, the Antofagasta pampa, the Aguas Blancas pampa and the Taltal pampa. From 1812 onwards geologists and scientists gradually discovered just how enormous the deposits were. First of all the above-mentioned

leaving Europe he had published Essays on the Chemical Decomposition of the Circulation of Air, which included studies into the artificial production of nitrogen. He had seen the nitrate deposits in Toboso, Spain, as well as those in Germany “where walls of mud are piled up in parallel lines, on top of which the nitrate is heaped”. Humboldt wrote that “it is possible that part of the atmosphere could be transformed into nitric acid under the influence of electricity”. He suggested the following theory: “Saltpeter generates in a greater volume on clay or limestone than on quartz [...] and there is a precise relationship between the formation of the saltpeter and the nature of the substance on which it is decomposed”.

FROM 1812 ONWARDS GEOLOGISTS AND SCIENTISTS BEGAN TO DISCOVER THE EXTENT OF THE SALTPETER DEPOSITS IN THE ATACAMA DESERT. Joseph Dombey and Thaddeus Haenke, then the famous naturalists, the German Alexander Humboldt and the Englishman Charles Darwin. In 1802 Alexander Humboldt stayed in Peru for three months during his four-year voyage around the world. He heard about the Inca stories of the properties of saltpeter, and described the Inca culture as “a great civilization lost through luxury and the squandering of its palaces”. He explored the Amazon and part of the ruins of Cuzco, visiting the “nitrate plantations” near Lima. He was surprised by the natural phenomenon of saltpeter, as he had already, in 1797, been investigating how to obtain nitrogen from the atmosphere for the benefit of plants. Before

Even though this theory contradicts his later observations made in the Peruvian desert, which argued that saltpeter was also to be found in nature in deposits, he didn’t focus so much on saltpeter as on the layers that the earth was made up of, which gave rise to one of his main theories about the lifting up and movement of the plates of the earth’s crust that make up the continents. However, mainly because of his popularity and his scientific renown, Humboldt is considered one of the primary promoters of saltpeter as a fertilizer for plants. The Peruvian government only identified the potential of saltpeter in 1827. General Ramón Castilla, Lord Mayor of Tarapacá, commissioned the mining entrepreneurs George

Smith and William Bollaert to write a general register of the saltpeter resources potentially available. In their report they write of the enormous potential wealth that the territory offered and a probable extension of the deposits towards the south of the River Loa, in land which was at the time Bolivian. This was later confirmed. They write that the caliche varied in quality and that the layers varied in thickness. “In some cases in only one square yard of land [approximately one square meter] there is nearly a ton of saltpeter to be found... If we estimate a production of 100 pounds of saltpeter per square yard we have the enormous quantity of 63 million tons which, at the current rate of consumption of saltpeter, is enough to last 1,300 years”. Another scientist who at the beginning of the 19th century also came to these northern coasts was Charles Darwin. He arrived in Iquique on the 12th July 1835 and wrote in his diary that “we managed, with great difficulty and for 2 pounds, to obtain some mules and a guide who would take us to the sodium nitrate mines which currently maintain Iquique”. Iquique had, at the most, 1,000 inhabitants, and although “there is nothing more desultory than the sight of this town”, he was amazed at the potential of the saltpeter industry, which at the time stretched 13 leagues inland to La Noria. Darwin foresaw that the future wealth of Iquique wouldn’t be based on the exploitation of saltpeter to make gunpowder, but rather on its uses as a nitrogenated fertilizer. “This compound was first exported in 1830: in one year the equivalent in value of 100,000

pounds was sent to France and Great Britain. It is mainly used as a fertilizer and for the preparation of nitric acid: given its propensity for turning liquid it is not useful in the production of powder...” he wrote. The road to La Noria surprised Darwin for the complete lack of forest life in Tarapacá: “It is perhaps the first real desert that I have seen in my life”. And he suggested that this barren plain must have been in this state for a long time to reach such a level of dryness. He explained the mineral and salt deposits as owing to “the existence of an ocean which, as the Andes rose and created a natural barrier, produced great lakes which then dried out”. Using Darwin’s observations, and without knowing the desert, this theory would later be developed by the chemist Friedrich Noellner and the geologist Karl Sieveking. They explained that the decomposition of the algae in those lakes left a layer of ammonia which then, in the presence of sodium chloride and the salty water, became saltpeter and nitrates. However this theory, accepted for 50 years, never based itself on other discoveries such as the substrata of bromides and phosphoric acid left behind by marine organic material. For this reason the theory, despite its popularity and fame, was never really accepted by the scientific community. Other theories have tried, up to the present day, to find a satisfactory explanation for the size of the saltpeter deposits. The theory of the guano droppings, for example, argues that the saltpeter was originated by the nitrification of immense and successive layers of ammoniacal guano and of organic materials.

Darwin confirmed that the future wealth of Iquique would not be based on the production of saltpeter for explosives, but for nitrogenated fertilizer.

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The concentration of nitrates is so high in the northern salt flats that there is no defined chemical or geological theory to explain the extent of these unique mineral deposits. Atacama Desert

SQM Archive

The origins of saltpeter are parallel to the geological formation of the Atacama Desert and its desert condition, the lack of humidity or biological diversity ensured that the saltpeter was preserved.

This theory is supported by the presence of iodine in the caliche. Further theories were developed, such as the volcanic theory, the atmospheric theory, the electrical theory and the nitrifying microbe theory. The presence of nitrates in the atmosphere is so negligible and their concentration in the northern salt flats so high that there is no single geological or chemical theory that can explain these unique deposits. The presence of stagnant salt water, the scarcity of biological life, the extreme dryness of the region, the volcanic processes, and the occasional floods, are the elements that can go some way to explaining the formation of this huge mineral deposits. The origins of the saltpeter deposits are parallel to those of the geological formation of the Atacama Desert, and its arid condition allowed for their later conservation, which would not have been the case had the area been more humid or more biologically diverse ensuring that the nitrate would have decomposed and passed into the atmosphere. At the same time as these discoveries and the first exportation of saltpeter for use in gunpowder in 1840, in Europe the German botanist Justus von Liebig was discovering how to replace in the soil lost minerals that had been absorbed by plants. With Humboldt’s support he published in 1840 his book Organic Chemistry and its Application in Agriculture and Physiology in which he described early experimentation with saltpeter as a fertilizer, which was later proven by the scientists at the Rothamsted Experimental Station in England. It was demonstrated that the properties of soil already rich in natural minerals, or of soil

enriched artificially, were of equal benefit to plant growth. The presence of scarce nitrogen being particularly beneficial. With his Law of the Minimum Liebig argues that if there is not enough of a particular essential nutrient then the plant’s growth will be limited, even though there might be an abundance of other nutrients. It can therefore be deduced that saltpeter can be fundamental if it is the only nutrient that is missing in the set of essential nutrients. The impetus that Liebig’s theories gave to research proved precisely such a deficiency. Thanks to Liebig’s work in 1840 the generic concept of “manuring” was replaced by the new concept of “fertilizing” – making the plants more fertile.

ly greater than the capacity of the earth to produce food for man. If no obstacles, population increases in a geometric proportion. Food increases only in an arithmetical ratio. A slight acquaintance with numbers will show the immensity of growth capacity of the first in comparison of the second”. He proposed several solutions to this dilemma, among them birth control at any cost to avoid an overpopulation without the necessary food resources coupled with a subsistence economy, which would result in a way of life so impoverished that it would, according to Malthus, lead to the extinction of the human race by 1880. His work also included the development of mathematical models and a detailed and

THANKS TO LIEBIG’S WORK IN 1840 THE GENERIC CONCEPT OF “MANURING” CHANGED TO “FERTILIZING”, OR MAKING PLANTS MORE FERTILE. These scientific advances in agriculture and botany were a breath of fresh air in the catastrophic environment created by the theory developed some decades earlier by the British economist, demographer and cleric Thomas Robert Malthus in his Essay on the Principle of Population published anonymously in 1798 and then in an extended edition signed by the author, in 1804. Malthus established one of the most controversial theories in history by expounding on his understanding of a quandary between population and food resources. He argued that populations multiply geometrically while resources multiply mathematically. Malthus wrote: “I affirm that the capacity of growth of the population is infinite-

profound argument, which is why his theory had such a catastrophically significant impact on the society and European governments of the time. To the extent with the publication of the second edition of the book, the term “Malthusian” came into use to define a new moral and economic trend characterized by its pessimism about the future of the human race. The search for land to nourish the growing and future needs of the European people goes a long way to explaining the expansionist, colonial policies of the European countries, in particular the British Empire. This colonial frenzy was only checked by the two world wars that would re-draw the international maps. ”

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Thomas Robert Malthus expounded a highly controversial theory comparing population growth to growth of resources. According to his calculations the human race would be extinct by the year 1880.

CHAPTER 1

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Railway yard and railway maintenance and reparing workshops.

Archivo SQM

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Crucial equipment for the development of the saltpeter industry.

It transported the product from the mines to the plants.

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THE EXPORTING BOOM

The power of the powder as it was called in the West, was developed by the followers of the philosopher, alchemist and mathematician GEBER in the 8th century.

he origins of Abu-Mussah-al-sofi-Yeber –or Geber– are unknown. It is said that he moved to Seville in 765, but of the numerous texts that are attributed to him the authorship is still contested. In these texts the author examines the nature of metals and explains the combustive properties of black powder, a mixture of sulfur, charcoal and potassium nitrate. Geber observed that potassium saltpeter developed as efflorescence in damp caves, and he called it sal petrae, “salt of the rock”. Alchemists dissolved this earthy material in boiling water and let it rest for 24 hours, after which the saltpeter would have appeared in the form of crystals at the bottom of the pot: this was a rudimentary leaching process. Ground into powder and mixed with charcoal and sulfur, it could explode and produce flames. However, it was only in 1250 that the English philosopher, theologian and proto-scientist Roger Bacon announced, in his Hermetic Writings that he was able to produce artificial fire “more brilliant than lightning” and project it to a great distance. It could be used to destroy a whole population or an entire army: gunpowder had been born. This invention changed the nature of warfare forever. But its efficacy depended largely on the quality of the saltpeter, and there was still no way of developing pure potassium nitrate. It could also only be extracted in relatively small quantities from caves, stables, and small-scale mines, or through the decomposition of dung and organic material. Producing saltpeter this way was slow and almost always resulted in a product contaminated with calcium nitrate. The Spanish gunpowder producers were nevertheless the most successful in Europe at the beginning of the Modern Ages. And with the conquest of America the production of gunpowder began in Peru, thanks to the nitrate that bloomed around the ancient Inca ruins along the coast. In his ordinance of 1571 about the state monopoly of gunpowder, King Philip II mentions “the saltpeter mines of Chancay” near Lima, from where nearly half the gunpowder of the Spanish Empire originated. Aside from its use in weapons, the gunpowder was also used in the Peruvian silver mines. Where silver was being exploited the indigenous populations offered this powder to the miners

National History Museum Collection

Although it has been widely acknowledged that the Chinese had been using GUNPOWDER in their fireworks for centuries, “ARAB GUNPOWDER”,

Throughout the colonial era wherever there was mineral exploitation the indigenous tribes would offer the gunpowder to the miners.

throughout the colonial era. In 1806, under pressure from the Viceroy José Fernando Abascal to double his production, the gunpowder factory of Lima was destroyed in a fire. The saltpeter from Tarapacá turned out to be insufficient to supply the machinery that was built in replacement, and in any case it was sodium nitrate and not potassium nitrate, the latter being the better ingredient for the gunpowder. Confronted by the dual need –for potassium saltpeter, and in great quantities– explorers and miners headed into the desert. As the newspaper Minerva Peruana announced in 1809: “Along the coasts of the province of Tarapacá 30 leagues of cubic (sodium) nitrate have been found in the hills just under the surface (...), in such great quantities that it is enough not only to supply America but also Europe”. At the same time the Czech natural scientist Thaddeus Haenke was explaining to the scientists of the viceroyalty the formula to transform sodium nitrate into potassium nitrate. These milestones were followed by the exploitation of saltpeter and the production in Lima of high-quality gunpowder, which gave rise to the beginnings of the saltpeter export industry. In the beginning a small dock at Zapiga was used, but Iquique soon became the camp where all the merchandise of the saltpeter industry was stocked, because it had had a customs post since 1792 and a warehouse belonging to the port of Valparaíso. The saltpeter for gunpowder gave the mining camp a new lease of life and transformed it into a commercial hub. It was the beginning of a new city. ”

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THE GUANO WEALTH

An industry in four decades In 1720 the English privateer GEORGE SHELVOCKE reached the port of Iquique at the helm of his ship RECOVERY, and described the place as “a scattered collection of some 60 badly-built houses (if you can call them that) and a church” where most of the inhabitants were “negroes collecting guano that they put into bags to ship to Arica”. 24

he guano began to be harvested from the Isla de Iquique, now known as the Serrano Penninsula, more than a century ago. The descendants of slaves and of the indigenous Chango tribe bagged the guano and ship them in sea lions leather rafts from Pisagua to Arica and other destinations. The little rocky outcrop of Ique Ique was the nesting place for millions of seabirds including gannets and yuncos duck, collectively known as guanay. Indigenous tribes tended to respect the spring mating season and to start collecting the dung again in the summer. The guano collecting was completely artisanal, with the surface being scratched and the powder collected unrefined. The layers of guano dung that had accumulated over thousands of years, deposited by birds on the surface of the island, could be as thick as 2 meters, and was considered inexhaustible. In about 1775, as global wheat production slowed down, a more sustained exploitation of guano began, and between 1840 and 1870 it became the most important source of fertilizer in the world. The German natural scientist Alexander von Humboldt undertook the first analysis of Peruvian guano in 1804 and described its extraordinary potential of 9 to 15% of nitrogen. Traditional fertilizers such as manure, ashes and organic material only provide between 0.2 and 0.5%, so the Peruvian guano was superior in quantity and quality to anything previously used as fertilizer, and it tripled agricultural production. Initial exploitation was private until the Peruvian government nationalized the industry in 1842, but established exploiting contracts to foreign private companies in return for an advance on sales costs. But without a sufficiently large merchant navy to transport the merchandize, or even the commercial organization to successfully sell abroad, the government set up contracts with private companies to export the guano. Isla Chincha and Isla Lobos, to the west of Pisco, were the main source of guano in the world for 40 years, until the material was depleted.

Isla Chinchas and Isla Lobos to the west of Pisco in Peru were the main source of guano in the world for 40 years, until its depletion.

In the three decades that saw peak exportation, 500,000 tons of guano were exported annually, becoming Peru’s primary source of income. However from 1872 onwards the guano deposits were beginning to wear thin, and from one year to the next production was reduced to half, and in 1873 Peru suspended the payment of its external debt. Other guano locations and deposits were looked for, but no deposits of similar quality and quantity were found. The new guano deposits could not generate the anticipated income for the Peruvian government. Because of this, and because of the depletion of the resources being exploited, insolvency loomed. In 1874 Peruvian guano exploitation barely covered domestic consumption, and at that moment the Peruvian government began to look at saltpeter, the other natural resource that was being taken, almost exclusively by British and Chilean companies, from the desert. ”

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Dredger at work

SQM Archive

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Huge capacity and speed for dredging up and shifting material.

A significant innovation in the process at that time.

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✩ ‹ L A F A‹S CRI ENVAONLTUE T H I OI SNT O I NR ITAHDEE LS A S LATL PI T ER T E RC H DE I LSEEN RO T ›

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OF THE TARAPACÁ PROVINCE, THE LARGEST NUMBER OF OFFICES OWNED BY JUST ONE COMPANY. HOWEVER, THESE FIRST EFFORTS TO INDUSTRIALIZE THIS PART OF THE DESERT WAS JUST THE BEGINNING OF THE BOOM.

In 1865 most of the saltpeter offices in the north were still using the rudimentary paradas system. This method

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consisted of applying fire or direct heat to the vats or buckets from which the pure

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nitrate was then extracted.

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In 1851 THE BRITISH ENTREPRENEURS GEORGE SMITH AND JOHN WILLIAMSON WERE THE

PRIMARY PRODUCERS OF SALTPETER, WITH WILLIAMSON OWNING 10 SALTPETER OFFICES IN THE SOUTHERN PART

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Memoria Chilena

he gradual growth in the exploitation of saltpeter for agricultural use began in the middle of the 1860s when numerous saltpeter mines were opened and called “saltpeter offices”. Given that there wasn’t a local source of labor the mines had to employ from distant places, mainly the center of Chile. Towards the end of the 1870s more than 15,000 Chileans were working in the saltpeter industry, and the need to supply the offices with all the necessary products meant that there was a thriving commerce in the area. Typical postcards of the time show the port filled with ships waiting to unload goods and then load the saltpeter. Before 1860 around 50% of the investment into saltpeter mining in the Tarapacá region (which was part

of Peru at the time) came from Peruvian capital investment. Chilean capital came second, followed by British and German investments. Aside from these there were also (in this order) Italian, Spanish, Bolivian and French producers who had invested in the industry. In contrast, in the Bolivian Antofagasta region the primary investors were Chilean. By the middle of the 1870s a large part of the industry was in the hands of foreigners, as Chilean and Peruvian companies lost dominance. Towards 1865 there were 165 saltpeter offices in Tarapacá and Antofagasta, of which over a 100 were barely more than basic camps that used the rudimentary processing system of the paradas (basic on-site saltpeter works). Only 71 offices had any sort of sophis-

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containers to continue a chain process that ended in large ponds where the water evaporated and the saltpeter crystalized. This was the first time that a continuous industrial process could be observed. The crude saltpeter was brought from the mine already ground up, in the offices it was processed in the containers and then crystalized in the large ponds. Gamboni first installed his system in the Sebastopol office, near La Noria. The system was then replicated, with variations, in many offices until its use in the Alianza office, the largest saltpeter office, made him well-known and popular. Gamboni also developed an annex to the process, through which he separated the io-

IN 1865, OF THE 165 SALTPETER OFFICES ONLY 71 HAD SOLID INSTALLATIONS THAT COULD REALLY BE CALLED ESTABLISHED SITES, AND EVEN THESE USED ONLY RUDIMENTARY INDUSTRIAL PROCESSES. saltpeter office. It was through observing the inefficient processing methods of the paradas that he developed his own, and in mid-1853 he applied to the Peruvian government for a patent for his exploitation system. The patent was authorized on the 2nd November 1852 by the Deputy Prefect of Tarapacá. “The new design proposed by Don Pedro Gamboni to improve saltpeter processing through a machine –design attached– is unknown in the country and offers economic and operating advantages... For this reason this patent is issued”. The steam was introduced through pipes at the bottom of the pots, which made the contents boil and rise, overflowing into other

dine from the original solution that came from the leaching process, using a solution of sulfur, copper nitrate, and ferrous sulfate to precipitate and isolate the iodine. For this system he obtained a 10-year patent from the Peruvian government in 1866. Previously iodine had only been extracted from algae, so Gamboni’s invention ensured a cheap and mass-produced production of an ingredient vital to medicine and chemistry. The saltpeter offices had to pay a right to use the invention, 15 pesos per pound of iodine, but the agreement was soon cancelled, the patents expired and no payment was respected. In the Bolivian territorial fringe, from Loa to 100 km south of Antofagasta there was no

massive or industrialized saltpeter extraction similar to the Peruvian industry, because the important deposits of Taltal and Antofagasta hadn’t been discovered yet. In 1857, during an expedition, two French brothers, Domingo and Máximo Latrille, discovered an enormous saltpeter deposit in the El Carmen salt flats. José Santos Ossa, who had discovered first silver and then saltpeter in Cobija to the north of Antofagasta, continued exploring and discovered better deposits to the north of latitude 24 which was at the time the border between Chile and Bolivia. Six years went by before he obtained, with another explorer Francisco Puelma, the concession from Bolivia to mine “the land in which saltpeter and borax were found”. They established a company in the fringe of Bolivian land separating Chile and Peru. Ossa and Puelma took a risk and set up the Sociedad Exploradora del Desierto de Atacama, which, with Chilean and British investment, was from 1869 onwards called the Compañía de Salitres de Antofagasta. This company was a counterweight to the Compañía de Salitres de Tarapacá in Peru, owned by George Smith, Gibbs and Clark. The two companies did however have one partner in common: the family of Anthony Gibbs, who was the largest investor in saltpeter before the War of the Pacific. The hundreds of offices that were using the paradas system in 1865 produced 1,200.000 hundredweight of saltpeter. The 71 offices using the vapor system produced 8,000.000 hundredweight saltpeter. Peru produced 80% and Bolivia 20%. Faced with the rapid depletion of the guano and the corresponding increase in demand

Ossa and Puelma set up the Sociedad Exploradora del Desierto de Atacama.

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The caliche waggons were used for transporting the caliche to the mills where they were unloaded. The operators of the waggons were known as palanqueros.

Cenfoto-UDP

ticated or solid installations that would suggest a real industrial plant, and even these used the very precarious industrial processes invented in 1853 by the Chilean chemist Pedro Gamboni. Gamboni’s system was basically the same as that of the paradas but instead of heat or fire being applied directly to the container, its contents were heated with steam which entered the containers or pots where it dissolved the saltpeter, raised the temperature and made a liquid solution. The vapor-making contraption was called “The Machine”. Gamboni was born in Valparaíso in 1825 and studied chemistry. He first considered emigrating to the US, but in 1850 he moved to Cobija where he worked as a chemist in a

National Digital Library of Chile

CHAPTER 2

National History Museum Collection

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The boilers heated the water to produce the steam for the cachuchos, large

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for saltpeter, in 1870 there was a flurry of fresh investment and a large number of workshops built or modernized machinery to be used in the saltpeter offices. But for other reasons some of these machines were never even installed. The Peruvian government, suffering from the decline in guano exportation, which had profoundly impacted on the country’s tax income, was threatening to nationalize the saltpeter industry. At the San Antonio office, where the English chemist and engineer James Thomas Humberstone had arrived, the modern machines were never installed. The company had acquired new equipment but because of political uncer-

tainty coupled with the death of the office’s administrator through dysentery, the machinery had been abandoned in the port of Pisagua. When Humberstone brought the revolutionary Shanks mechanism from London the machinery was finally installed and put to work. At the San Antonio office Humberstone adapted the system invented by James Shanks for the process of cold-leaching in the production of carbonate and bicarbonate of soda, to the hot-leaching process needed in the production of saltpeter. With this new system waste products were re-used and saltpeter processed to the same quality and in the same quantities as if fresh caliche had been added. Humberstone acquired cheap and poor-quality caliche that had been rejected by other offices, resulting in a huge profit for the San Antonio office. There were no more slag heaps, leftovers, dirty salt or other waste products, and the process quickly had a profound impact on the saltpeter production in the north. But the mill didn’t have the capacity for supplying the leaching process with enough raw material and production had to be limited to 60,000 hundredweight per year. In 1878 Humberstone was hired by JD Whitelegg, administrator of Agua Santa, the largest saltpeter office of the time, to convert the plant to the Shanks system. Soon all the large saltpeter offices had adopted the system because of its relatively low cost. The output for exportation doubled and the operating costs fell, just at the time when the Peruvian guano was exhausted and the European farmers were demanding high-quality, cheap and abundant fertilizer.

Agua Santa Office

Museum of Antofagasta

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National Digital Library of Chile

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AT THE SAN ANTONIO OFFICE HUMBERSTONE ADAPTED THE SHANKS METHOD OF COLD-LEACHING FOR THE PRODUCTION OF CARBONATE AND BICARBONATE TO THE HOT-LEACHING PROCESS NECESSARY FOR SALTPETER.

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R THE SALTPETER MONOPOLY

Museum of Antofagasta

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The calicheras, or caliche mines, opened after an explosion in the pampa in the north, enable the extraction of the caliche which was then transformed into saltpeter.

The increased revenues and investment that the Shanks system brought to the offices where it was installed, distinguished them from other offices. They were no longer basic work camps but splendid little self-contained towns built with a school, a hospital and entertainment for the workers. They were recognizable by their typical central square with its kiosk, their streets and villas built along the lines of a well-designed citadel, almost always in an English, Mexican, Spanish or even Venetian style (the latter being the Filomena office). But politics seemed to be endangering these extraordinary developments. Faced with a decrease in income from guano the Peruvian government decided to expropriate the saltpeter offices and restrict production. Since 1862 Peru had been suffering from increased political instability and unrest, corruption and its war with Spain. At the end of General Ramón Castillo’s time as president (he had depended on the guano wealth, which reached its apex between 1850 and 1870), national bankruptcy was imminent. Income from guano had decreased by half and saltpeter was its clear replacement, but while the former industry had been nationalized early on, 100% of the saltpeter industry was in the hands of private, mainly foreign, companies. When Manuel Pardo became the first civilian Peruvian president in 1872, he declared the Monopoly Law on the commercialization of saltpeter. The State issued debts certificates and the holders could execute that debt in the following years. But first it was needed to know the companies that would intervene. The English engineer Robert Harvey con-

vinced Pardo to visit the offices he intended to nationalize, and Harvey was himself named inspector of the saltpeter offices. In 1874 Harvey met John T. North, who described him as follows: “Another of the outstanding people working in saltpeter was Robert Harvey, whom I met in 1874. He mentioned that he was a civil engineer. The government had begun the process of expropriation with the aim of controlling the entire industry. A significant number of smaller offices were bought for cash, while the larger ones were exchanged for certificates of debt”. The price was fixed by an evaluating commission, and very soon many of the offices

the government for a concession to administer drinking water to the villages, and I obtained the concession easily for the entire region as nobody else seemed to have thought of applying for it –I can’t imagine why– and as a result I set up system of condensing machines to purify the water in Arica and take it to Iquique”. He managed to find investors who were both curious and had a taste for adventure. He bought five ships that he adapted to include cisterns on board, rented the water rights from the Water Company of Tarapacá, and established a water supply using the sailing ships Iquique and San Carlos as well as the steam ships Princess Louise, Iquique and Grimanesa.

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In 1883, at the end of the War of the Pacific, John Thomas North and 8 British investment groups owned 60% of the saltpeter industry, as well as the railways, the drinking water rights in Iquique and a bank.

IN 1873 WHEN HE WAS ELECTED PRESIDENT OF PERU, MANUEL PARDO DECREED THE MONOPOLYS LAW ON THE SALTPETER INDUSTRY, MONOPOLIZING ITS COMMERCIALIZATION. stopped working. At the same time lots of title holder of property couldn’t be proven, or were falsified, were expired and cancelled. After a year the Monopoly Law hadn’t yielded the expected income, nor had it had any impact on the Peruvian saltpeter industry. Exports fell from 7,200.000 hundredweight in 1875 to 5,000.000 in 1877. The loans from North American, Dutch and British banks to pay for investment into the saltpeter offices could not be secured, and the certificates of debts ended up as worthless bits of paper. Despite this, John T. North took the risk in 1877 of setting up a company to provide drinking water to Iquique. He writes about his decision almost innocently: “So I applied to

“These little ships –as he called them– were later put to good use by the Chilean army”. On the 9th May 1877 an earthquake devastated Iquique. An earlier one had already shaken Arica and provoked a tsunami, but this one was much worse. It struck at 9 pm when many people were already asleep, and 2,541 people were killed in the many houses that were destroyed throughout the region. By today’s measurements it is estimated that the earthquake was one of 8.8 on the Richter scale, and it was felt from Arica to Copiapó. The situation couldn’t be worse. The precarious equipment was thrown to the ground and neighboring offices were in an even worse condition. The railway had also been dam-

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Workers in the Solferino office in Tarapacá move trucks of caliche to be

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The government of Hilarión Daza imposed an export tax on Bolivian saltpeter. After Chile opposed it the Bolivian government embargoed the industry and then auctioned the Compañía de Salitres y Ferrocarril de Antofagasta.

sort of taxation additional to that already in place. This stipulation is valid for 25 years”. However in 1878 the government of Hilarión Daza rejected the treaty and the Bolivian National Assembly imposed a tax rate of 10 cents per hundredweight of saltpeter exported from the Bolivian territory. The total Bolivian exportation of saltpeter in 1878 –1,000.000 hundredweight– came from one company: Melbourne Clark. Chile lodged a complaint, arguing that this was a violation of the treaty and requested arbitration. But Hilarión Daza would only accept the jurisdiction of the Bolivian justice system. When the company refused to pay the tax the Bolivian government decreed the embargo and later the auction of the Compañía de Salitres y Ferrocarril de Antofagasta. The company had invested 1,500.000 pesos in the construction of the railway between Antofagasta and the salt flat, and from there on to Carmen Alto and Salinas. Another 1,200.000 had been invested in the building of the saltpeter office itself, and a similar amount in the port. The losses were enormous. On the day of the auction, the 14th February 1879, Chilean military forces were sent at dawn from Caldera and occupied Antofagasta, facing no resistance. Within a few days they had advanced to latitude 23 S and occupied the entire strip of Bolivian land that separated Chile from Peru. Six years earlier Peru and Bolivia had signed a secret treaty to form a defensive alliance, and to define the procedure to follow before declaring casus foederis (“motive of alliance”), and during a war, to stipulate the costs to be paid in the event of Chilean aggression.

unloaded into the vats or tanks. Workers

1889

Memoria Chilena

National Digital Library of Chile

aged as nobody had been able to really make it work or attract investment given the threat of expropriation by the Peruvian government. The earthquake seemed to be a fatal blow to the industry that reduced production to nearly 3,500.000 tons – half that of two years earlier. Bolivia, also destabilized by the decrease in income from the guano and the reduction in the saltpeter output due to the lack of interest from a threatened industry, saw a tax increase as the only solution. Antofagasta, which hadn’t suffered in the same way as Iquique from the earthquake, was able to recover much faster. The main saltpeter exploitation in Bolivia was in the hands of the Compañía de Salitres y Ferrocaril de Antofagasta, owned by the Chileans José Santos Ossa and Francisco Puelma, who in 1874 had as investment partners Agustín Edwards Mac-Clure, George Smith and the English companies Melbourne Clark and Anthony Gibbs & Co, collectively known as Melbourne Clark. In 1873 the company had signed an agreement to exploit saltpeter for 15 years from the Bay of Antofagasta to Salinas, and to the El Carmen salt flat to the west, in an area that was also in dispute because of the 1866 border treaties. In 1874 Chile and Bolivia signed up to a new treaty and one of its requirements was the obligation not to impose new taxes on Chilean individuals, companies and investments in that area for a period of 25 years. Article IV of the treaty specifies as follows: “The exportation rights applied to the minerals exported from the area referred to in the above articles, shall not exceed the quota currently exacted, and Chilean individuals, companies and investments shall not be subject to any

IN 1873 THE COMPAÑÍA DE SALITRES Y FERROCARRIL DE ANTOFAGASTA SIGNED A 15-YEAR DEAL TO EXPLOIT THE SALTPETER FROM THE BAY OF ANTOFAGASTA TO SALINAS AND THE EL CARMEN SALT FLAT IN THE WEST.

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After Chilean forces advanced on the disputed territory, on the 1st March 1879 Bolivia declared war on Chile. Peru refused to remain neutral and on the 5th April 1879 Chile declared war on both the allies. The next day Peru declared casus foederis, that is, the secret alliance with Bolivia came into action. When Peru entered into war with Chile the value of the saltpeter bonds fell dramatically. Towards the end of October 1880 the Chilean expeditionary army bombarded and then disembarked in Pisagua, leading to an exodus of the British. John T. North was in Britain at the time, but Humberstone fled in the night on a mule, with his wife and mother-in-law, to Arica. From the pampa they could hear the

used as military quarters, for provisions and even contingents of troops. For both Chile and Peru Tarapacá was a source of potential wealth that they needed to defray their national expenditure. In 1879, scarcely two weeks after the conquest of Tarapacá, Benjamín Vicuña Mackenna made a speech in the senate in honor of the army: “An immense region of work, production and wealth has been opened up to the country”. After the Battle of Camarones, in which the Chilean army defeated the Peruvians and drove them out as far as the Loa, pushing the war even further, the Chilean president, Aníbal Pinto, suggested to his Minister for War, Rafael Sotomayor, a policy specifically

ON THE 5TH APRIL 1879 CHILE DECLARED WAR ON BOLIVIA AND PERU, WHO HAD PREVIOUSLY SIGNED A SECRET TREATY IN A MUTUALLY DEFENSIVE ALLIANCE. explosions in Pisagua. The Agua Santa office was occupied by Peruvian troops until they were defeated by the Chileans. Humberstone returned to Agua Santa, and like many of the British didn’t see the Chilean victory as anything negative. “We had good reason not to fear the Chilean army, because we were convinced that it was in the army’s best interests to ensure that the saltpeter offices were preserved intact so as to restart production as soon as the region was stabilized”, he wrote. Most of the Tarapacá saltpeter industrialists actively cooperated with Chile during the first year of the war, putting railways at the army’s disposal and allowing the offices to be

dealing with the saltpeter offices: “To allow the industrialists to restart saltpeter production as soon as possible, impose a 3 cent per hundredweight tax on them and release from any rights the products that will arrive from Chile”. Production restarted in 1880 and in the end the tax was fixed at $1.6 per metric hundredweight, despite opposition from the industrialists. In 1887 the tax on exported saltpeter was established at $3.38. At first Chile didn’t want to recognize the bonds, but the Bank of England put the Chilean government under pressure. The experienced diplomat Alberto Blest Gana was sent to London and renegotiated £30,000.000 sterling pounds with the British creditors. He

managed to refinance the considerable debt through policy-holder bonds and banks. The delay while this took place, and the misinformation swirling around at the time allowed John T. North and Robert Harvey, who both knew the real value of the saltpeter offices (the latter having been the inspector in charge of valuing them for Peru, and Chile had confirmed him in this role) associated themselves with the Bank of Valparaíso and undertook the first speculative run on the banks in Lima by buying undervalued bonds. Just to give an idea: for £5000 sterling they bought offices that were worth £150,000 sterling. When peace returned the Chilean government returned the saltpeter offices to the policy-holders of the bonds through the decree of the 28th March 1882. Of all the offices 27 were returned to policy-holders, 18 were auctioned off, 19 were handed over to contractors, and 71 remained in the control of the state without producing anything. North and Harvey emerged as the owners of half a dozen of the most productive offices in Tarapacá, “a pearl necklace” made of the offices Primitiva, Buen Retiro, Jazpampa, Virginia, the very modern Ramírez y Peruana, as well as the railways and the water rights, which were owned by North. In London they set up the companies Liverpool Nitrate Co., the Nitrate Railways Co., the Colorado Nitrate Co., and the Water Company of Tarapacá. Gibbs & Company, which hadn’t sold its bonds in Antofagasta and was waiting, maintained its position of power under Melbourne Clark. The British were emerging as the kings of the saltpeter. North and his partners, along

National Digital Library of Chile

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Benjamín Vicuña Mackenna as senator of Coquimbo, made a speech in support of the Chilean army.

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President Aníbal Pinto proposed a policy for the saltpeter industry after which production restarted in 1880.

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Alberto Blest Gana obtained investment from British trusts to refinance the debt, on the condition that the Peruvian bonds be recognized as valid and the return of the saltpeter companies.

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When José Manuel Balmaceda became president in 1886 the Chilean state took over 71 saltpeter offices that had not functioned since the War of the Pacific.

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with Gibbs & Company, came to own 60% of the Chilean saltpeter production. The decrees of 1882 meant opening the doors to the boom. Saltpeter became the most important fiscal income for the governments of Domingo Santa María and José Manuel Balmaceda. All the saltpeter offices quickly adopted the Shanks system, which more than doubled earlier production. But this also had negative consequences: the market was flooded by oversupply and the prices dropped. In 1884 the first of various Combination of Saltpeter Producers was organized to limit production, but it only lasted a year. In 1886 production had once again sky-rocketed and reached extraordinary levels, around 1,000.000 tons. However a new direction in state policy became apparent under the presidency of Balmaceda, when he took over in 1886. In April he took out a loan to liquidate the saltpeter certificates that were still pending, and with this the state bought the 71 non-producing saltpeter offices. A long discussion began as to whether to license them out, sell them, or make them work directly for the state.

This debate carried on until March 1889 when Balmaceda began a train journey around the recently conquered northern regions. In Iquique he made a fiery speech against John T. North and his monopolies, accusing him of stopping other investors from developing the railway network. The state ruling that broke this monopoly on the railways was approved in a climate of tension and passionate partisanship that divided the executive from the legislative powers, leading to revolution in 1891. Over 8 months of civil war something changed in the collective national consciousness: while the War of the Pacific had consolidated the actual ownership of the land, with this civil strife the idea took hold of the wealth of the north being a “national property” that should be exploited with efficiency and intelligence in order to maximize its beneficial impact on the country. And that’s how it would be. Balmaceda had seen the link between the saltpeter and a developmental leap for the country. He did not, however, manage to preside over it. ”

With the civil war the idea took hold of the saltpeter wealth as being “a national property” to be exploited efficiently and intelligently for the general good.

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With the Shanks system adopted in most of the saltpeter offices production more than doubled, which meant that there was a corresponding drop in price per bag.

National Digital Library of Chile

CHAPTER 2

National Digital Library of Chile

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SQM Archive

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Established in 1931

María Elena

Its urban planning implemented the concept of the “ideal town”.

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Falta foto está en baja

RISE AND FALL OF THE KING OF SALTPETER

John Thomas North Leeds, Great Britain [ 1 8 4 2 ] - London, Great Britain [ 1 8 9 6 ]

By 1888 saltpeter had become a source of great wealth, with more than 300 OFFICES functioning. National income had TRIPLED and Chile began a plan of public works, building schools and railways, palaces and public buildings, unimaginable a decade earlier. 44

ushed by President Balmaceda, the idea of nationalizing the saltpeter industry took a hold in the contemporary Chilean mindset. Consequently John T. North, who owned more than 40% of the saltpeter offices, as well as the railway and the rights for the drinking water in Iquique, moved to calm the jittery nerves of the British investors as only he could: He organized a fancy-dress party in London at which, on the 3rd January 1889, according to the South American Journal the “aristocracy, plutocracy and the ‘histrionocracy’ of the kingdom came together”. John T. North liked to pretend that he was a self-made man of humble origins, but the truth wasn’t quite so simple. His father had been a successful coal merchant from Yorkshire, he was educated at school in Leeds, and was an apprentice mechanical engineer for a railway company that supplied the Chilean mines and which in 1869 sent him to the port of Caldera. In 1871 he moved to Iquique where he found out about the prosperous saltpeter industry, as well as taking over the drinking water rights. In 1878 the Peruvian government nationalized the saltpeter offices by force: 25% of their investment was Chilean and the owners of the offices were compensated with state bonds. For its part Bolivia was also threatening to nationalize the saltpeter offices of Antofagasta, also primarily owned by Chilean investors, because the latter had refused to pay an increased tax on saltpeter exportation that the Bolivian government had imposed but which was considered illegal in Chile. The impasse led to war. During the conflict the state-issued bonds became worthless. But in contrast to most of the British industrialists, North stayed in Iquique. In 1881 he formed a partnership with Robert Harvey and the banker John Dawson to buy the devalued Peruvian bonds from the owners who had fled the area. At the end of the war the value of the saltpeter bonds increased by hundred-fold from the moment that they were accepted and confirmed by the victorious country, Chile. Some historians claim that North lobbied the government of Domingo Santa María to ensure that the government returned the saltpeter offices to the policy-holders of bonds. In any case it

North’s mansion in London was the epicenter of the saltpeter world. In the meetings with investors his name alone ensured an increase in capital invested.

was through this process that North became the “King of Saltpeter”, as he enjoyed being called. He bought a huge mansion in Avery Hill, Kent, 20 km from London – close enough to keep an eye on his business and “far enough from the capital to enjoy with his friends the delights of country parties” according to his biographer William Edmundson. North’s country house became the epicenter of the saltpeter world. However, the fancy-dress party he hosted in 1889 in London would be his farewell. Three days later he travelled to Chile to calm his investors’ fears. President Balmaceda, however, took away the concession for the railway that was to be built in Iquique and while some consider the 1891 revolution North’s ultimate triumph, the Saltpeter King would soon understand that his throne was indefensible. In 1888 La Primitiva office was built, but over the next seven years it never generated the income to cover investment and it emerged that its deposits were over-valued. This was North’s greatest failure. On the 5th May 1896 he died from a heart attack. While his funeral was being held in London, the facilities of the La Primitiva office were dismantled and sold of to small offices. ”

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PIONEER OF INNOVATION

James Thomas Humberstone D over , E n g l an d [ 1 8 5 0 ] - I q uiq ue, C h il e [ 1 9 3 9 ]

Even when he was a child, mending rabbit hutches in a forge in Dover, Humberstone always knew he wanted to be a mechanic. His father was a postal inspector and couldn’t afford to send him to university, so he got a job in the workshops of the LONDON NORTHWESTERN RAILWAY IN WOLVERTON, while at night he studied at the Institute of Mechanics. 47

t the age of 22 he was awarded a scholarship to work as an assistant to the chemist John Davies Mucklow who had been commissioned by the British owners of some saltpeter offices in Tacna how to extract sodium nitrate. Humberstone’s help in perfecting the instruments and designing prototypes made him stand out. When he was faced with the choice of starting a doctorate at the University of Yokohama or going to work for a tiny saltpeter company in Pisagua, Peru, he opted for the latter. Because of the money, but also because he was a practical, hands-on worker. In December 1874 he left London, arriving in Arica a month later, continuing straight on, by train, to Pisagua and then to the San Antonio office. Once he was installed there Humberstone was shocked at the waste of material and the complicated system of transportation and stockpiling that seemed necessary to the extraction of the mineral. For every hundredweight of saltpeter obtained 2 tons of high-quality caliche was needed. Of the 165 offices functioning in Tarapacá at the time of his arrival about a hundred were still using the precarious and primitive paradas system, and were yielding between them 1,200.000 hundredweight of saltpeter. The other offices, which could properly be called industrial-scale saltpeter offices, were producing 8,000.000 hundredweight between them. The San Antonio office where Humberstone arrived to work was using the direct steam method of Gamboni, which had the disadvantage of producing a a continuous waste of mud from which it was difficult to filter the nitrate. Even though up to 4 containers of saltpeter could be produced per day, it was impossible to produce a fifth because the process had to be stopped to clean out the pumps and pipes of the muds residues. In addition, a huge slag-heap of waste material was accumulating as big as the office itself. Humberstone immediately saw the inefficiency: “San Antonio was a typical example of an office using this sort of highly inefficient process, although the administrator, James Walker, like many of his

Memoria Chilena

At 25 years old Humberstone took an important decision: Instead of starting a doctorate at the University of Yokohama he decided to work for a tiny mining camp in Pisagua, Chile.

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Memoria Chilena

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When Humberstone arrived most of the offices in Tarapacá were basic camps still using the rudimentary paradas processing system.

contemporaries, seemed to be satisfied with the general way things were going. However, nobody could be indifferent to the huge amounts of valuable nitrate that were going to waste”. In Tarapacá Humberstone also saw the processing of the mysterious waste-mud. “After the saltpeter was extracted a pile of this substance was left over, which was extremely valuable. 14 shillings per pound, at wholesale. Although the rocky material only contains it in trace quantities, it is left to accumulate in the mother liquor until it is concentrated enough to be extracted. That is the idea of what is happening”. Without being a formally educated engineer, Humberstone had worked in the improvement of industrial processes and experimented with the leaching procedure in the laboratory of John Davies Mucklow, who showed him the system developed by James Shanks to produce carbonate of soda. Shanks had shown that if the temperature of the heating process applied to the raw material could be regulated then a liquid of greater purity could be obtained. By 1874 Shanks’ method for obtaining carbonate and bicarbonate of soda was accepted and implemented around the world. Despite his apparent expertise, Humberstone was stopped from installing the Shanks system at the San Antonio office because of the large amount of fuel needed. A series of events led to the investors rethinking the issue, just as James William Walker, the administrator, died of dysentery after having authorized the acquisition of a heating and vapor system to be installed in an annex of the office that would re-use the waste mud. Five rectangular iron boilers were used to clarify the solutions in the process, attached to an iron evaporating machine with many tubes to ensure a constant flow of vapor. Also attached was a system of water pumps to eliminate the slag material moved by mules, and a mechanized grinding mill. But when the machine was unloaded at the small camp of Pisagua it became clear that it was too heavy to be shifted into place up the steep hill, by a team of mules. Every mule could only carry a load of 300 pounds, (150 kg), but the individual parts of the machine weighed literally tons. The iron parts were cut up: lathes, drills, mills and even a heavy flywheel from a machine were all cut into pieces to be reassembled on-site in the saltpeter office. With Walker’s death the installation of the annex looked like it would never be completed, but Juan Syers Jones, one of the owners of the office, allowed Humberstone to install the equipment so as to make use of the residue of saltpeter that was deposited on the slag-heap and was going to waste. Humberstone decided to set up the equipment, using the cold Shanks method but adapted to the saltpeter.

As it was all an experiment Humberstone used an old boiler from a ship, and various bits and pieces of equipment that he found lying around. Conveniently the annex was near to both the railway and to a slag-heap of waste material from the office. The nickname “Santiago” used by the workers began to stick to James Thomas Humberstone. Soon the equipment in the annex allowed for the use of such low quality material that even the slag-heap started to be used as raw material from which to extract the nitrate. “The installation was not without problems. But even though the annex was always thought of as a way of using up the extra material that “the machine” left over, soon the results were so good that they ended up by replacing the raw material”. This year yielded the highest production at San Antonio: nearly 40,000 hundredweight of saltpeter in the month of December. The advantages were obvious: working at low temperatures meant saving on fuel costs as the vapor was reused, and water was saved. No waste was produced, nor layers of residue to block up the pipes and ducts. The residue in the material produced in the annex fell from 35% to 2%, and the consumption of charcoal fell from 11 to 6 tons. The extraction of the saltpeter was so efficient that poor quality caliche could be used, as well as the slag material. “If nothing had gone wrong it is probable that the Shanks process would have remained a mere annex to the main extraction system, being used only to extract a nitrate solution from the waste material through some sort of a vaporizing process. Although the complications caused me many nights of lost sleep, they were the beginning of a process that remains in use today” he wrote. San Antonio was the first office to use the Shanks system. The Campbell office then bought the lands with the paradas of Santa Agua and installed a new saltpeter office using Humberstone’s plans. This office was the first to use a complete Shanks system, and one year after starting production, in 1878, it was producing 180,000 hundredweight. With the success of the Shanks system Humberstone travelled around the pampa installing the costly equipment. He was rewarded with important honors and decorations, but perhaps the most inmortal happened in the far north. In 1934 the Compañía Salitrera de Tarapacá y Antofagasta re-opened and changed the name of its largest office, La Palma, with its 3,500 inhabitants, to “Humberstone”. Today it is a national monument visited by countless tourists every year. Humberstone died in Iquique in 1939 at the age of 89, and was buried in the British cemetery of Tiliviche, in the region of Huara. ”

SQM Archive

James Thomas Humberstone

THE MOST IMPORTANT HOMAGE TO HUMBERSTONE CAME WHEN IN 1934 THE LARGE SALTPETER OFFICE LA PALMA, WITH ITS 3,500 INHABITANTS, WAS RENAMED “SANTIAGO HUMBERSTONE”.

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Chilean National Archive

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SALTPETER PROPAGANDA

Marketing before the age of marketing SALTPETER

was the primary source of CHILEAN NATIONAL INCOME but demand could fluctuate depending on the conditions

of agricultural land, the price of agricultural products consumed and competition from other nitrogenous sources.

he characteristics of the nitrate industry added to its instability, given that when prices were high or the potential for profits attractive, new plants were built or old offices that had been decommissioned in harder times were re-opened. This generated an increase in exportation and the consequent glut of supply meant that the prices would fall again. In this context, instead of restricting supply of saltpeter to increase the production company’s income and that of the Chilean state, it made sense to try and boost demand systematically. In December 1888 the Finance Ministry sent a letter to all the Chilean consulates around the world asking for information about saltpeter consumption in their respective countries and the possibility of increasing this. In the following years the promotion of saltpeter sales was one of the most important elements of Chilean foreign policy, to the extent that diplomatic relations were established with Japan in 1897 and with China in 1915, in both cases because of the drive to increase saltpeter sales in those countries. In 1888 the British companies decided to dedicate a budget to the promotion of saltpeter use. In 1894 the Asociación Salitrera de Propaganda was set up in Iquique with the aim of increasing demand from importing countries and growth in new markets. The marketing for Latin American countries was directed from Chile, and a sub-committee of marketing was set up in London for other countries. As of 1897 the Chilean Ministry of Finance allocated a budget to marketing, contributing a similar amount to that provided by the saltpeter producing companies themselves.

State and private companies co-financed research, scientific articles and conferences promoting the benefits of Chilean saltpeter. In every country a prestigious university professor, researcher or agricultural engineer who had a select group of contacts and access to the press, was chosen as an agent. The strategy was the same in every country: a clear message, technical support, and promotional gifts –free samples– that worked in the local language and customs. All this 100 years ago, when marketing as such barely existed. A whole series of attractive promotional posters were printed adapting to the idiosyncrasies of each country, a complete collection of which is held in the Saltpeter Section of the Chilean National Archives. The posters are striking for the quality of their images and the clarity of the message, brilliantly communicated. The emblematic poster produced for the Spanish market, with the silhouette of the horseman against the light, was designed in the middle of the 1920s by Adolfo López-Durán (1902-1988) while he was a student of architecture; he was commissioned to produce it by a friend who had contacts in the company that imported Chilean nitrate in Spain. What began as a favor to help an impoverished Madrid students earn a few pesos, turned into one of the 20th century’s most emblematic and omnipresent visual representations of the Spanish countryside. For its composition and contrast –the black silhouette of a farmworker on horseback against the yellow background, with white lettering, evoking German modernism and rationalism– is an excellent example of advertising art deco from the beginning of the 20th century. ”

High quality images and simple messages helped promote the sales of saltpeter abroad.

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Marketing before the age of marketing

Chilean National Archive

A R G EN T I N A

1959 He who fertilizes, harvests. Natural nitrate from Chile. Fertilizer from the earth for the earth. Unsigned

CHI NA Chilean fertilizer. Good for the earth. Good for efficiency. No date or signature

SWED EN

1 93 0 s Use Chilean saltpeter to increase your harvest. 15.5% nitrogenated saltpeter. Chilean Saltpeter Committee, Göteborg. Unsigned

FRANCE The best ingredient: natural nitrogen Sodium nitrate from Chile. Sodium Nitrate Agronomy Services of Chile. 11 bis, Av. Victor Hugo, Paris (16th). No date or signature

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Established in 1931

Pedro de Valdivia

Pioneer of the Guggenheim process SQM Archive

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IN TARAPACÁ, THE REST IN ANTOFAGASTA AND TALTAL. SHORTLY AFTERWARDS ANTOFAGASTA PRODUCTION EQUALLED THAT OF IQUIQUE AND IN 1912 IT OVERTOOK IT. THAT YEAR THERE WERE 300 SALTPETER OFFICES FUNCTIONING.

C Thanks to the fiscal surplus that saltpeter brought to Chile, the sailing ships coming from

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Santiago mansions.

hilean national income had never been so high; for the first time in its history it had a fiscal surplus. The saltpeter transporting ships such as the Preussen in 1909 brought back from Europe and unloaded in Valparaíso French fashions and trends, as well as grand-pianos to adorn the newly-built Santiago mansions. The bank and the public finances imposed their rules on the port, thanks to the 10,000 subjects of the British crown who had made Valparaíso their home in 1890, seeing there the opportunity to make their fortunes without losing the customs and traditions of home. This was true of the Edwards family and the Anthony Gibbs family, who ad-

ministered the fortune of the Compañía de Salitre de Tarapacá y Antofagasta. The colonial neighborhoods were replicas of the England they had left behind: they brought their cigars, their clothes, their tea; and they played football – the Wanderers team was set up in 1895. For these Englishmen it wasn’t so much Valparaíso in Chile, as Valparaíso in Great Britain. They also imposed British banking rules and regulations: the stock market was set up in 1892 and clubs were established of the companies that made up the basis of the Sociedad de Fomento Fabril (“Society for the Development of Manufacturing”), and the chamber of commerce, all along the lines of the London norms of lobbying and agreements.

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The streets around the Museo de Bellas Artes are a reflection of the taste for

Odber Hefner. Cenfoto UDP

everything French in Santiago.

that the 5 years of the War of the Pacific had cost 3 thousand million, which Chile had been forced to add to the external debt. The trend was for anything French, as can still be seen in the splendid legacy of the Museo de Bellas Artes and its surroundings. This museum was the first of its kind in South America, and its French-Chilean architect, Émile Jéquier designed it without any restriction to size or quality as a copy of the Petit Palais in Paris. The glass dome that soars over the central hall was designed and built in Belgium by the Compagnie Centrale de Construction de Haine-SaintPierre and brought to Chile in 1907, in a returning saltpeter ship. The dome was made of 115 tons of iron and 2,400 panes of glass. The park around the museum was the gardens of the museum and was designed by the French architect and landscape gardener Georges Dubois. This museum and park would have been unthinkable only a few years earlier, or indeed a few years later. There has never since been an initiative to build a similar building for art and culture, on that scale and of such beauty, in Chile. By 1812 the Chilean investments had increased and now represented 40% of the ownership of the saltpeter industry. 2,500.000 tons of saltpeter were sent to North America and Europe, and on the return journey an equal amount of British coal was brought back: Chile had industrialized itself from north to south to an amazing degree. In 1913 the Iquique railway went all the way to Puerto Montt, an example of the power of steam. Chile was consuming the same amount of coal as Brazil, 2,000.000 tons, and although there was coal mining in Lota and Coronel, a

lot had to be imported from Wales to supply its incipient but voracious manufacturing industry. Chile was by now the second manufacturing power in South America after Argentina, nearly overtaking it in metal and ironwork. But then the unexpected happened: world war broke out in Europe, dramatically impacting on saltpeter exports and on trans-Atlantic trade for four long years. When the war finished many industrialists expected trade to pick up again quickly, but the stock of saltpeter accumulated over the years was almost intact and the price crashed. The saltpeter shortage that Germany had experienced during the war led it to implement protectionist measure in 1921 and 1922, as well as seriously investing in the development of synthetic saltpeter. Some years earlier, in 1909, the chemist Fritz Haber had discovered a method for fixing the nitrogen present in the atmosphere in gaseous form to produce ammonia, using pressure and catalyzers which then, through oxidation, became nitrites and nitrates. The company Basf then bought the patent for the process and handed it to the chemist Carl Bosch to devel-

in an aggressive marketing campaign to sell the natural Chilean version to the international agricultural industry. Around the world posters, flyers and packaging trumpeted the benefits of Chilean saltpeter on harvests.

Tin with advertising

1948

IN 1912 CHILEAN INTERESTS REPRESENTED NEARLY 40% OF SALTPETER PRODUCTION AND 2,500.000 TONS WERE SENT TO NORTH AMERICA AND EUROPE. BUT THEN THE UNTHINKABLE HAPPENED: THE FIRST WORLD WAR BROKE OUT. op the industrial process, which he achieved in 1910. To this day the process known as the Haber-Bosch method is the basis for the production of the fertilizers urea, ammonium, ammonium nitrate and anhydrous ammonia.

National Archive of Chile

Chile experienced comfortable prosperity until 1910. Santiago had also changed. A sewage system was laid across the whole city. In the middle of the saltpeter boom the country celebrated its 100 years of independence. For the occasion the city’s main avenue, the Alameda, was decorated with a series of triumphal arches through which Santiago’s high society paraded. The government commissioned European architects to build a series of commemorative buildings that would today be unthinkable for their scale. The Law Courts were built, the National Library was begun, and the Cerro Santa Lucía and the Cerro San Cristóbal were re-modeled. In Santiago alone three hundred million pesos were spent, an extraordinary amount. 30 years earlier, in 1880, it is calculated

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In 1922 there was a first, acute, crisis in the saltpeter industry. Of the 134 active offices 91 stopped production, and although exports then rallied temporarily, they fell again in 1926. The industry was oversized and producing too much saltpeter for the demands of the market, and when a new and innovative production method was brought into use, making the process even more efficient, it affected the overall industry even more. In 1920 the Norwegen-North American metallurgical engineer

The efficiency of the process proposed by Elias Cappelen-Smith increased stocks even more and the saltpeter market was quickly saturated.

BY 1930 ALMOST ALL SALTPETER CONSUMED IN THE WORLD WAS SYNTHETIC; AFTER YEARS OF

SQM Archive

WEALTH FOR CHILE AND OTHER COUNTRIES, THE ERA OF THE WHITE GOLD HAD COME TO AN END.

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The saltpeter office Pedro de Valdivia pioneered the Guggenheim process at its plants.

Elias Cappelen-Smith, pioneer of the production processes in the copper industry and metallurgical advisor to the Guggenheim family which at the time owned the copper mine Chuquicamata through the Chile Exploration Company, made a proposal to his employer: to adapt to the saltpeter production the process of cold-leaching that he had been using to extract copper from low-grade ore. The process he proposed allowed for almost double the amount of saltpeter to be extracted from low-quality caliche, and envisaged leaching caliche containing smaller quantities of nitrate, thereby significantly improving the production process. Daniel Guggenheim, who led the mineral and industrial business side of the family, decided in 1923 to sell Chuquicamata and to go into the saltpeter industry using this new processing method. The saltpeter offices that implemented the new method, known as Guggenheim process, were María Elena and Pedro de Valdivia,

both in the Antofagasta region, and were inaugurated in 1926 and 1931, respectively. In 1929 exportation rose again, but the market was saturated almost immediately. 3,000.000 tons were produced but the stock was starting to affect the price and between 1930 and 1933 there was a total paralysis of the price due to the new synthetic product on the international market. Not that this was a surprise – since before the war the Chilean saltpeter industry had been suffering from the availability of the synthetic fertilizers. At the peak of Chilean saltpeter production in 1912 the industry was providing 50% of all the saltpeter being consumed in the world. After the war, in 1926, 80% of fertilizers used were synthetic, and by 1930 this had risen to nearly 100%. The era of the white gold had come to an end. The 50 years that Chile had enjoyed this wealth left a mark on the country, like a Belle Époque, which, from close up, few people really appreciated. More than 150,000 immigrants had made Chile their home, among them British, French, Germans, Italians, Croats, and North Americans, who all came to work in the desert, leaving behind the legacy of their hard work and traditions. “They came to a country of ponchos and straw hats” as one comedian said about a caricature sketched in 1860, when the country was still very much like that which had been painted by Rugendas in 1840. The immigrants changed the country to one of moustaches and derby hats, in which people travelled by train and a landscape with chimneys belching out a constant stream of smoke. In 1930 the saltpeter crisis was filling the newspapers. The taxes were criticized. The

lack of innovation. The lack of foresight to have anticipated the tragedy. With the Great Depression of 1930-31 the era of the saltpeter industry came to an end, and with it the wealth that had flooded the country. The politician and parliamentarian Enrique Mac Iver was witness to the splendors of the saltpeter era during his political career that spanned almost 60 years until he died in 1922. The son of an English sailor and a Chilean woman from Constitución he approved the budget for the War of the Pacific, he was an opponent of Balmaceda, and he foresaw the agitation of the second half of the 20th century. In his text La cri-

SQM Archive

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The María Elena office, inaugurated in 1926, needed up to 5,000 workers and was capable of producing 500,000 tons of saltpeter.

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The relative normalization of the economy during the early years of Arturo Alessandri Palma’s second presidential term once again brought to the fore questions of state support for the saltpeter industry.

‹ THE AGONY OF UNPARALLELED WEALTH ›

sis moral de la República (“The Moral Crisis of the Republic”) he wrote an undisputable diagnosis of his era: “It is impossible to ignore the fact that because of the unexpected wealth of the last decades we have more warships, more judges, more offices, more employees and more public income than at any other time; better public services, a greater population and more wealth, more industry and a better standard of living. In a word: Progress”. Then in the text he asks himself uncertainly “Did we progress?”. In 1930 the losses were so heavy that the state had to shoulder some of the financial responsibility. Law 4863 was passed in 1930 to create the Compañía de Salitres de Chile (Cosach) with the aim of supporting the ailing industry, and the state invested three thousand million pesos to obtain 50% of the “A” shares. The other 50% was the capital of the 37 saltpeter offices that were still using the Shanks method and were classified as having “B” shares. Among these were Chacabuco, La Palma, Vergara, Iris, La Granja, Ramírez, Santiago, and Peña Chica. Many gradually closed. Of these 37 original companies 34 joined together in 1934 as the Compañía de Salitres

de Tarapacá y Antofagasta (Cosatan). There were only two large saltpeter producing companies: the Anglo Chilean Consolidated that owned María Elena and Pedro de Valdivia (opened in 1931), which were the only two offices using the Guggenheim process; and the Lautaro Nitrate Co. which had absorbed the shares of the Gibbs family in Tarapacá and Antofagasta to own Chacabuco. The production of these two companies was more than the rest of the 34 Cosatan offices taken together. But this enormous mix company didn’t produce the expected results: debts grew, the quantity of unsold stock increased, and its contracts were challenged, until in 1933 Cosach was dismantled. The return to relative normality of the economy in the first two years of Arturo Alessandri Palma’s time as president once again put on the table the question of state control of the saltpeter companies. In June 1934 Law 5350 created the Corporación de Ventas del Salitre y Yodo, Covensa (“Corporation for the Sale of Saltpeter and Iodine”), which was given the 35-year mandate for acquisitions, sales and distribution abroad, as well as for fixing the production quota for

To avoid a complete paralysis of the saltpeter industry in 1968 the government created Soquimich. The company controlled all saltpeter production in Chile as well as the commercialization of saltpeter and iodine.

each company. The profits were shared 25% for the state and 75% for the companies. The producers were exempted from export tax and the state was free to award the saltpeter reserves to the companies. Even with the establishment of this new body most of the production remained in the hands of the largest companies, the Anglo and the Lautaro. Cosatan was now producing less than 20% with Humberstone, Santa Laura and Victoria –the latter opened in 1941 using a new system called Krystal, which was a variation on the Guggenheim process and owes its name to its use of much larger crystallizers. The Victoria office was at the time the most modern in the country. In 1950 Lautaro Nitrate and Anglo Chilean Consolidated merged to form Anglo-Lautaro and in 1951 a new evaporation system using solar energy was experimented with in the fields of Coya Sur near María Elena. In 1959 Cosatan was disbanded; in 1960 the offices of Humberstone, Santa Laura and Victoria were closed; and in 1961 Victoria was taken over by Corfo (state enterprise oriented to the development of production). In 1968, when the state monopoly who administrate Covensa was nearly expired the government set up the Sociedad Química y Minera de Chile (Soquimich, “The Chemical and Mining Society of Chile”): 37.5% state-owned and 62.5% owned by Anglo-Lautaro, which absorbed María Elena and Pedro de Valdivia. Soquimich now controlled all the Chilean saltpeter production and comercialization. In 1971 Corfo acquired all the shares and the government nationalized Soquimich. ”

El Mercurio

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National Digital Library of Chile

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The newspaper El Mercurio reported the establishment of the new Chemical and Mining Company of Chile and the measures to be implemented within the frame of the “new saltpeter policy”.

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Explosion to loosen caliche

New saltpeter plant

Horses were replaced with motorized vehicles

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CHAPTER 3

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THE NITRATE CLIPPERS

The last gasp of the saltpeter sailing ships In March 1926 the last of the great sailing ships began the Olympic lap as the CAPE HORNERS, the group of captains who had rounded Cape Horn by sail, called the dangerous crossing between the Atlantic and the Pacific. The PELLWORM, belonging to the shipping company the FL (Ferdinand 66

Laesz) left Lizard on its way to Valparaíso under the help of the experienced captain ALFRED WIST.

uring the crossing, buffeted by the strong winds around Cape Horn, the Pellworm was unable to make a crucial manoeuver and was forced to retreat. In grave danger of sinking, the ship had to return to the safety of the Falkland Islands, and the crossing was put on hold. This was the first time that a ship from the FL Company had not been able to round the cape. Was it an omen? It might well have been, as Wist was sacked because of his mistake, the Pellworm was sold for scrap metal in Hamburg, and that was the last time that a sailing ship tried to round Cape Horn in search of Chilean saltpeter. From then on steam ships were used to transport the saltpeter around the world: they were faster and had a greater capacity for cargo; they could cruise through the Panama Canal, thereby avoiding the unpredictable journey around Cape Horn where so many ships had been lost. Before the advent of steam a return journey from Chile to Europe took 150 days and the Cape Horn crossing was the crucial moment in that nautical symphony. It was there were died or speed records were made. The first shipping entrepreneur to have used the route was the Chilean saltpeter industrialist Santiago Zabala, who in 1830 sent 2 famous saltpeter shipments: the brig El Globo to the US, and the Intrépido, to Europe. Two other shipments were sent by the Peruvian State Monopoly, with a total of 18,000 hundredweight. It was the beginning of an era. The ships arrived in South America fully laden with coal, wood and construction materials, and they set sail again with guano, copper and saltpeter. Between 1840 and 1869 the cargo was mixed, with the most valuable element being undoubtedly the guano, which was the prefered fertilizer of European and North American farmers.

Of the dozen British, German and French shipping companies that covered the route in large cargo sailing ships, two companies transformed the journey to Chile into a question of national pride: the French company A-D. Bordes of Antoine-Dominique Bordes, and the German company FL, belonging to Ferdinand Laesz. Lowering costs and maximizing the journeys stimulated a fierce competition for getting to Europe as fast as possible. Before the saltpeter clippers a journey of 100 days was considered the norm, but the experienced captains managed to reduce the journey to 70 days, with the record being 57 days. The word “clipper” comes from this, from the idea of “clipping” time – the same ship doing the journey in a shorter time. Between 1869 and 1872 Peruvian guano supplies were dwindling dangerously and Peru banned its exportation. The last guano sold for an unthinkable price in 1870, nearly £20 sterling per ton. The European farmers started to demand a cheap and effective replacement, and the export monopoly on Chilean saltpeter was in the hands of the British customs agents: from 1830 onwards the ships had arrived in Wales and then been sold on from there to the rest of Europe. In 1870 Antoine-Dominique Bordes was on the point of bankruptcy. Guano and copper were no longer profitable enough to pay for the transport, in fact the ships rarely returned full to Europe. In 1870 he opened an office in Le Havre and for the first time imported saltpeter directly to France, saving on the British import tax and therefore offering French farmers the saltpeter at a highly competitive price. He quickly doubled his fleet of ships and then set up, with his sons, the largest saltpeter acquisitions company in history, La Compagnie Française d’Armements et d’Importation du Nitrate de Soude (“The French Arms and Importation of Sodium Nitrate Co.”). For their part the Germans also opened their ports to Chilean saltpeter, which began to arrive directly, opening a German market that Ferdinand Laesz was able to take advantage of.

The best ships for crossing Cape Horn were the German ones, made from a mixture of wood and steel.

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Juan Vásquez Trigo Archive

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Library of Congress, US

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Falta foto está en baja

The last gasp of the saltpeter sailing ships With this large-scale exportation the Chilean saltpeter exportation industry really took off. Every 5 years it doubled in tonnage. In 1870 135,000 tons of saltpeter were exported; in 1875 it was 331,000 tons. There was a dip during the War of the Pacific, but in 1885 sales picked up again and exports reached 435,000 tons, increasing to more than a million in 1890. In 1915 more than 2,000.000 tons of saltpeter left Chile, and the northern ports of the country were heaving with saltpeter sailing ships. The sailing ships were difficult to sail; given the unpredictability of the side winds they could be subject to, the bags of saltpeter had to be stacked on board in interlocking pyramids, which not all dockworkers were skilled at. Loading the ship was a slow and laborious process and up to 30 ships could be waiting at anchor in front of the tiny ports, getting their anchor-lines twisted or risking fire as they waited for other ships to be loaded. So once the sails were hoisted lost time had to be made up through the skill of the sailors. The best ships were undoubtedly those from the German shipyards commissioned by the FL Co. which used a mixture of wood and steel. They were characteristic because the names of the ships always began with a “P”: Preussen, Pellworm, Pacific, Princess, Potosí... They increased the speed and reduced the saltpeter’s journey to Europe to 10 weeks. They could even do two trips to Chile in a year. Antoine-Dominique Bordes had a different strategy and used lightweight wooden ships with three masts and small crews. The company had up to 127 ships, the largest fleet of ships in the world, coming and going between Europe and Chile, competing in time and daring-do with the enormous German FL ships. Although by 1870 steam technology had taken over in the railways, agriculture and shipping, the

sailing ships were still the most economically viable way of transporting saltpeter. The steam ships were twice as fast, but they had to reload coal every week, so a trip to Europe meant stopping up to 6 times to refuel, which was both costly and time consuming. The sailing ships just set off – they didn’t have to stop to refuel, and the wind was free. So while steam shipping was taking off around the world, the sailing saltpeter ships were still competitive. What’s more, as of 1895 the size of the ships was increased – they could have up to 5 masts and 5,000 square meters of sail, with a cargo capacity of up to 8,000 tons. At up to 130 meters in length and with masts reaching 60 meters high, they were truly monstrous in size; the largest sailing ships ever built. However, the dangers of Cape Horn hadn’t been resolved, and over the next years dozens of saltpeter clippers sank off the Horn, or their cargo was damaged during the crossing. When WW1 broke out many of the ships were held in Chilean ports waiting for hostilities to come to an end, and if, during those 5 years of war one of the ships left port, it was always in the greatest secrecy. Almost none of the large sailing shipping companies recovered from the war, and steam travel had completely taken over in terms of economic efficiency and speed. The Panama Canal, reopened in 1918 for private traffic, was the last straw for the clippers as only steam ships and modern sailing ships with strong motors were allowed through the canal. The era of the saltpeter sailing ship came to an end and the enormous skeletal remains of the ships became ghosts in the scrapyards of the ports. In the faster and more efficient steam ships the saltpeter transported through the Panama Canal could be taken from Iquique to Europe in 28 days. In March 1926 the last great sailing saltpeter ship began its olympic lap around Cape Horn, but, unable to tack properly, it never reached its destination. ”

Before the saltpeter clippers the journey between Chile and Europe could take 100 days. The experienced captains of the two major shipping companies reduced the journey to 70 days. From this came the word “clipper”, to “clip” the journey time.

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SYNTHETIC SALTPETER

A merciless competitor From 1903 onwards German and Norwegen scientists were experimenting with producing nitrogenated fertilizers through new methods fixing the nitrogen from the atmosphere. In the end it was the German method developed by

The saltpeter industry had to turn to scientific research in order to face up to the competition from the synthetic products.

FRITZ HABER and CARL BOSCH to produce synthetic ammonia that won the day, and this became the basis of the production

of ammonium sulfate and ammonium nitrate fertilizers. In 1912 the first factory producing these fertilizers was opened.

lthough these new fertilizers were known generically as “synthetic saltpeter”, probably because of the same use of the product in the market, in reality they are different nitrogenated compounds synthesized chemically, and nothing like the naturally-occurring saltpeter that contains sodium nitrate. But it wasn’t the agricultural industry that pushed forward development of the synthetic saltpeter, but rather the First World War, and the German need for nitrate for their gunpowder. The success of the Haber-Bosch method meant that after the end of the war its use spread rapidly to the US, England and the whole of Europe. If before the war Chile had provided 67% of the international market’s demand for nitrogen around the world through saltpeter, in 1921 this was less than 30%. During the Grand Depression of the 1930s this figure fell to nearly 10%, and by 1956 Chilean saltpeter was being used in barely 3% of fertilizers around the world. In 1926 the Asociación de Productores de Salitre set up an investigative body, the Centro de Investigaciones del Salitre, led by German chemists in Valparaíso, to confront the massive use of synthetic saltpeter in Europe. Large chemical plants around the world were no longer producing sodium nitrate, but rather a version of nitrogenated fertilizers that contained a much higher percentage of nitrogen (40 to 60%), compared to the 16% present in natural saltpeter. To face up to the competition from the synthetic saltpeter producers, the Chilean saltpeter industry had to turn to scientific research, focusing on higher concentration produced by solar evaporation for large quantities of nitrate and potassium, a more efficient use of iodine, and the recuperation of other substances. ”

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THE LEGEND OF LEACHING

Elias Cappelen-Smith The end of the First World War brought peace back to the world, but bad news for Chilean saltpeter. Foreign demand fell dramatically because of a competitor with whom it was impossible to argue... SYNTHETIC SALTPETER that was already being produced on a massive scale and at lower costs. The production of natural saltpeter would have to be increased radically, 72

and costs brought right down, if the Chilean industry wanted to compete. But the SHANKS system had reached its limit.

n engineer working in Chuquicamata had researched the extraction of copper from poor quality ore. Elias Cappelen-Smith had been working at the mine since 1912 for its owners, Henry and Solomon R. Guggenheim. He had been hired to develop a way of extracting copper from low-quality or porphyritic rock in a mine that only had a 1.5% copper yield. Born in 1873, Cappelen-Smith was well known before he arrived at the mine. He had studied chemistry and then moved to Chicago where he worked first in a pig factory and then a metal-works, until 1896 when he moved to Montana to work for the copper amalgamating company Anaconda Copper Mining Co. There Cappelen-Smith quickly solved a first problem: the copper converters were quickly used up through acid corrosion, and after a year of trial and error he changed the liquid used for an alcaline one but still diluted the copper. Erosion was reduced to almost zero, the fusion costs fell and the size of the copper converter could be increased. This copper converter has since been known as the Pierce-Smith (named after Cappelen and his colleague William Pierce) and is still in use in copper mining today. Hired by the Guggenheims, in 1912 Cappelen-Smith travelled to Chile to tackle a problem with the porphyritic rock. In Chuquicamata he opted for a leaching process using diluted sulfuric acid, the elimination of the unwanted chloride by treating the finely divided copper, and the electrolysis of the purified solution, achieving a recuperation rate of 99% of the copper from the porphyritic rock. Legend has it that one day, as he went from Antofagasta to Chuquicamata, he stopped in a saltpeter office and was told that it would soon be closing because of the poor quality saltpeter. This motivated him to invent a new leaching method. Until then Norway had been the main competitor for the industry because they produced saltpeter synthetically, which was cheap and competitive. Natural saltpeter was still produced using the Shanks method, and until then it was already clear to any chemist that this was completely out-of-date.

Sebastián Freed Archive

Trondheim, Norway [ 1 8 7 3 ] - New York, USA [ 1 9 4 9 ]

In 1919 Elias Cappelen-Smith patented the first method of saltpeter leaching in the US, named the Guggenheim process. It allowed for the natural saltpeter production to compete with synthetic saltpeter as long as production was massive enough to keep costs down. 73

In 1919, while in the US, Cappelen-Smith invented his first process for leaching saltpeter. It was patented as the “Guggenheim process” because the engineer was working for the Guggenheim Brothers Co. The method meant grinding huge quantities of ore into one inch size pieces, using caliche with a law of only 7% and cheaper fixed costs. The downside was that it needed a significant initial investment in machinery. In other words, the process allowed to compete with synthetic saltpeter if it was mass-produced, which should bring the costs down. The Guggenheim process meant mechanizing and electrifying the plant and reorganizing the workforce. The leaching process at a lower temperature prevented any saline contamination and meant that saltpeter could be extracted from caliche of as low as a law of 2%. In 1922 the company built a small experimental plant in the Cecilia office, in the central pampa of Antofagasta. One of the engineers working with Cappelen-Smith, Stanley Freed, helped him to perfect the processing of granulated saltpeter. Encouraged by the results, the Guggenheim brothers bought the lands of Coya Norte and Coya Sur, near Tocopilla, with the aim of establishing two more offices with the new system, at a cost of US$70,000.000, which they financed through the sale of the copper mine Chuquicamata. The first office, Coya Norte, started producing in 1926. It cost US$28,000.000 to build, produced 500,000 tons and required a workforce of 5,000. It had only just begun production when Cappelen-Smith’s wife, Mary Ellen Condon, died on the 2nd April 1927. Mary Ellen had been omnipresent and very active in all kinds of public events to do with the office, and was as well known, if not better known, than her husband. So when she died the community asked Cappelen-Smith if the name of the office could be changed to María Elena in her honor. Cappelen-Smith later moved back to the US where he developed methods of gold, bismuth and tin extraction for the Guggenheim Brothers Co. He had had American citizenship since 1900 but was in permanent contact with Norway throughout his life. He died in 1949. ”

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Sebastián Freed Archive

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AN INVENTOR WITH AN EYE ON THE FUTURE

Edgar Stanley Freed Pennsylvania, USA [ 1 8 9 0 ] - María Elena, Chile [ 1 9 5 0 ]

The development of the saltpeter industry brought to the Atacama Desert scientists and engineers who

The process of extracting nitrate through solar evaporation in large ponds, that was developed by Stanley Freed, is still in use today in the caliche industry.

fell in love with the place and adopted it as their home. One of these men was EDGAR STANLEY FREED , a chemical engineer who arrived from the US in 1922 and worked in copper before “converting” to the 74

non-metallic mining of saltpeter where his investigations and discoveries left their mark on the era.

reed was originally from Mount Pleasant in Pennsylvania where he graduated as an engineer from the University of Tennessee before obtaining his doctorate at the Massachusetts Institute of Technology (MIT). At the age of 30 he was recruited by the Guggenheim Brothers Co. to go to Chile just at the moment that the natural saltpeter industry was beginning to struggle in the face of the production of synthetic substitutes. On arrival he became part of the team led by Elias Anton Cappelen-Smith, contributing significantly to the development of the Guggenheim process which used poor-quality ore while managing to extract double the saltpeter compared to the Shanks method implemented half a century earlier by Humberstone. Married and with two sons, Freed settled his family in Santiago while he spent long periods of time working in the laboratory in the northern pampa. The result of his research, which ensured his legacy in the history of the non-metallic mining industry, was the system he invented for extracting nitrate by solar evaporation in large solar evaporaction ponds, a process that is still used today in the caliche industry. With the Guggenheim process only nitrate and iodine could be recuperated, while Freed’s system meant that other salts such as sodium sulfate, manganese sulfate, sodium chloride, and in particular, sodium-potassium nitrate, could be obtained without any further processing required. His invention had only one problem: the seismic nature of the desert limited the construction of the huge evaporation ponds required. After 10 years of trial and error he managed to develop a self-sealing concrete (through the magnesium solution that was used in the leaching process), which simplified the reparation of cracks in the underlying layers of the ponds. The “Freed cement”, made of lime and gravel was an effective and low-cost solution to the greatest practical impediment of his method, and

allowed for the installation of a first experimental pond of 5,000 square meters. Once its use had been established a series of similar ponds were built in Coya Sur allowing for the extraction of nitrate and iodine from the solutions that processed the waste of María Elena and Pedro de Valdivia, ensuring that the Guggenheim process had a high overall efficiency rate which would have been impossible without the solar evaporation ponds. Although the ponds are these days built with special plastic films, the experience and knowledge that Freed’s research brought to the construction and use of the first ponds has been essential to the success of later generations of installations. There are today more than 200 in the Atacama Desert alone, and taking into account all the SQM operations there is a total surface area of approximately 40,000.000 square meters of ponds (4,000 hectares) in use. One of Stanley Freed’s less well-known contributions, but which is nevertheless considered by many experts to be as vital as the one described above, was his research into the by-products of the saltpeter industry. At the beginning of the 1930s he recorded all of the by-products that could be commercially exploited and which could be directly obtained through his evaporation method, thereby anticipating the future of the saltpeter industry. An inveterate smoker and eternal admirer of the landscape of the north of Chile, a fan of cinema and a devoted father, Edgar Stanley Freed died from a heart attack in 1950 at the age of 61, before he could witness the full implementation of his revolutionary system in the María Elena and Pedro de Valdivia offices, although he did live to oversee the construction of the first four ponds. Among the personal items that he left behind is a thick notebook, handwritten, and dedicated specifically to his eldest son. In it he leaves his advice for living, and the affection which his long stays in the north often stopped him from showing in person, but which today his descendants remember with pride and respect. ”

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Valves for the circulation of liquids in the Pedro de Valdivia office.

The telegram that DANIEL GUGGENHEIM sent to La Moneda in 1928 began: “I have today deposited the sum

Library of Congress, US

The Guggenheim loyalists

SQM Archive

PHILANTHROPISTS IN CHILE

of US$500,000 in American gold in the account of his Excellency Carlos Ibáñez del Campo, President of the Republic, to benefit the Chilean people and help him promote the education and study of aviation”.

he Chilean government used the money to buy two French airplanes and a land in Cerrillos outside Santiago to build the first airport, which during the 1940s was the only one in Santiago. The Guggenheim family had a strong relationship with Chile. In 1904 they developed the copper mine El Teniente, and in 1912 they invested massively in the mine Chuquicamata, also copper, which many thought unproductive because of its poor-quality resources, despite the vast extent of those resources. Meyer Guggenheim, who had emigrated from Switzerland to the US in 1848, made his fortune in the copper industry in Utah. He died in 1904, and after the First World War his 11 sons dedicated a portion of his immense wealth to the philanthropy that has made the family famous. In 1919 the family owned 87% of the copper being exported from Chile. However, they sold Chuquicamata (after 100 years it's still today the largest open pit mine in the world) to the Anaconda Copper Mining Co. for US$70,000.000 and invested in saltpeter. One of their engineers in Chuquicamata, Elias Cappelen-Smith, had invented a new method of saltpeter extraction, patented as the Guggenheim process, which promised to reduce production costs by 40% thanks to cold leaching, and was theoretically able to recuperate saltpeter from ore of a quality as low as 1%. The Guggenheim plan was to establish a huge production cartel as the Guggenheim process was only financially viable on a large-scale. But their business with the big British saltpeter industrialists didn’t prosper. In 1923 Daniel Guggenheim travelled to Chile, especially to the north, before returning to Santiago to meet with President Arturo Alessandri Palma. He proposed to the president to set up a huge saltpeter company that would be half state-owned and would operate with the new Guggenheim process. But the government, worried by how the innovations would decrease the workforce required because of the mechanization of the process, a workforce already affected by international price reductions, declined the offer. Against all predictions the Guggenheims moved forward, buying a series of mines in Tocopilla as well as the Anglo-Chilean Nitrate Railways Co. set up by the company Anglo Chilean Consolidated to bring together its investments across the country.

The Guggenheim family had a strong relationship with Chile. In 1931 the Chilean state joined in partnership with the Guggenheim family through Cosach, and then through Covensa.

In 1925 they began the installation of Coya Norte, later named as María Elena, with the new process: highly mechanized, production at low temperature, and the end result of a granulated product. With the Shanks method the end product had been crystals. The Chilean state went into partnership with the Guggenheims in 1931 through Cosach and then Covensa, until at the end of the 1950s the family withdrew from industrial activities in Chile to focus their energies on philanthropic activities in the arts and sciences. It was Harry Guggenheim who dissolved the companies in Chile, and in his farewell letter he wrote: “My family has been involved with the Chilean people through large economic companies for nearly 50 years. We have tried to ensure that where before only one leaf could grow, now two can grow... We are loyal North Americans, but I think that we’ve shown that we are also loyal Chileans”. ”

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Sebastián Freed Archive

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First solar evaporation ponds

Coya Sur

Brainchild of the US engineer Stanley Freed

REMOTE TIMES

The rise and fall of an industry 14th Century

1874

14th century

The indigenous tribes of the Atacama discover the “firestones”.

16th century

The conquering Spanish invaders investigate the properties of the “firestones”, already called “caliche”, and discover their use as raw material to make gunpowder.

180 6

1571

The Chancay saltpeter mines near Lima are seized in the name of Philip II, who decrees the first saltpeter monopoly in order to manufacture gunpowder.

17 9 1

1778

The Spanish scientific expedition led by Hipólito Ruiz y Pavón, which includes the French naturalist Joseph Dombey, travels across Peru. Dombey takes back to Europe the first sample of sodium nitrate from the vast salt flats in the pampa of Tamarugal, in the Tarapacá region.

Haenke applies his scientific expertise to converting sodium nitrate from the caliche into potassium nitrate, which is a process already known at the time. This contribution to science earns him the nickname “the father of saltpeter”.

The Spanish captain Alejandro Malaspina docks in the north as part of his first scientific and political journey around the world, the most important scientific expedition of its time, in which the Czech botanist and geologist Thaddeus Haenke takes part.

18 1 1 - 1 8 1 2

The first 8 saltpeter offices, using the Haenke processing method, were established to the north of Iquique. They used large metal pots into which caliche and water were poured, and by direct application of heat, the nitrate dissolved in solution was obtained. The so-called paradas system was invented.

Thaddeus Haenke

Thaddeus Haenke discovers vast reserves of caliche between the western flanks of the Andes and the eastern side of the coastal mountains. He identifies the salts as a source of sodium nitrate and, as such, a primary material for the manufacture of white powder, or soft gunpowder.

1835

The British inventor George Smith discovers a method based on the use of the energy of water steam to leach the caliche, as well as developing an infrastructure of machinery that is considered the immediate forerunner of the modern saltpeter office.

1 8 74

The British engineer James Thomas Humberstone adapts the method developed by James Shanks to produce carbonate of soda in coldprocessing to the production of sodium nitrate in hot-processing. This new method, the Shanks system, revolutionized the saltpeter industry.

James Thomas Humberstone

The rise and fall of an industry Saltpeter tokens

María Elena

1879 1971

Worker at a plant

19 2 2

1 8 79

19 2 6

The first acute crisis of the saltpeter industry.

Chilean investments in the saltpeter industry are threatened with expropriation by the Bolivian state, and consequently the War of the Pacific is declared.

The María Elena office is opened using the Guggenheim process. In 1931 the Pedro de Valdivia office is opened, the second office to use this process, but on a larger scale.

1900

Saltpeter exports reach 1,500.000 tons.

1882

At the end of the war there is a boom in saltpeter production and exportation.

19 0 9

The German chemist Fritz Haber discovers how to fix nitrogen from the atmosphere to produce ammonia through high pressure and catalyzers, and then through oxidation to manufacture nitrites and nitrates. The chemist Carl Bosch then develops this into an industrial process, known as the Haber-Bosch process that is the basis of the manufacture of nitrogen fertilizers like urea, ammonium nitrate and anhydrous ammonium, that compete directly with saltpeter or sodium nitrate. Both scientists received the Nobel Prize.

19 2 3

The Norwegen-North American metallurgical engineer Elias Cappelen-Smith, inspired by the leaching process used in the copper industry, invents a more cost-effective process for leaching caliche to obtain sodium nitrate. The method is called the Guggenheim process.

Saltpeter production Laboratory technician

1934

1930

The international crisis directly impacts on the saltpeter industry. The Chilean state buys shares from the private companies to support the industry and creates the Compañía de Salitres de Chile (Cosach).

1 9 68

The Sociedad Química y Minera de Chile (Soquimich, “The Chemical and Mining Society of Chile”) is set up, with 37.5% state-owned (represented by Corfo) holding the Victoria office, and 62.5% privately owned by Anglo-Lautaro, which owns the offices María Elena and Pedro de Valdivia. In this way Soquimich controls all the production and commercialization of the saltpeter and iodine industry in Chile.

Sieving installation and cooling towers in Pedro de Valdivia Elias Cappelen-Smith

The Corporación de Ventas del Salitre y Yodo (Covensa, the “Corporation for the Sale of Salpeter and Iodine”) is set up and has a 35-year monopoly over the acquisition, sale and distribution of saltpeter abroad.

1 9 71

Corfo takes over all the shares of Soquimich, nationalizing the company.

LOOKING TO THE FUTURE

An industry undergoing constant change Prilled iodine

1972 1991 1 9 72

19 86

The Soquimich crisis worsens and the company loses US$21,000.000 this year, and has an accumulated loss of US$56,000.000 in currency of the time.

1982

1979

A drastic costreduction plan is put in place, and a sale of disposable assets.

The Victoria office is closed.

1 974

The Alemania office is closed.

1980

A new administration tries to save the María Elena and Pedro de Valdivia offices, the last saltpeter offices in operation. If they’re not profitable they will be closed as well.

19 83

The commercial offices are re-structured, the inefficient offices are closed and new ones are opened closer to the market. The mining industry is modernized moving from exploitation to open cast mining, from dredging and the gauge railway to plot mining, front-loaders and trucks. After decades of loss-making this is the first year of profit.

A new technological process developed within Soquimich for the production of potassium nitrate is put to use. The initial capacity for 100,000 MT per year increases to 250,000 MT and then, with subsequent improvements, to 350,000 MT.

1990

1988

The company is 100% privatized and renamed SQM.

19 87

The first experiments using heap leaching to extract nitrate from caliche are used.

19 83

1991

The use of solar evaporation ponds is expanded thanks to the use of synthetic films to line the ponds.

The first NPK Solubles plant is set up in Antwerp, and by the end of 2018 the company has 16 plants in 12 countries.

Caliche Pedro de Valdivia

1989

The Centro de Investigación y Procesos de SQM (CIP, “Center for Investigation and Procedures”) is set up. At the time it is the only research center set up by a private company in Chile.

1991

The privatization process begins (it will last 5 years) with the sale of the first shares.

Caliche

The process of manufacturing iodine prills is developed internally at SQM and then patented, and the first plant for the production of iodine prills is set up at Pedro de Valdivia. Subsequent plants are set up in María Elena, Pampa Blanca and Nueva Victoria.

An industry undergoing constant change Pedro de Valdivia

1993 2018

1996

1 993

The first ADR shares are floated on the New York stock exchange in order to finance the production project on the Atacama Salt Flat.

1995

1 994

2000

The potassium chloride produced on the Atacama Salt Flat replaces 100% of imported stock for the production of potassium nitrate.

Production of potassium chloride is begun on the Atacama Salt Flat. On the New York stock exchange it is in second ADR place.

The first plant to produce potassium nitrate technical grade, NPT I, is set up with a production capacity of 100,000 MT per year.

1997

The production of lithium carbonate starts in the facilities built on the El Carmen salt flats, using brines from the Atacama Salt Flat. SQM's world market share of potassium nitrate is 40%.

A second plant to produce potassium nitrate technical grade, NPT II, is built with a yearly production capacity of 200,000 MT, and the production capacity for potassium chloride on the Atacama salt flats is increased.

2005

The production of lithium hydroxide is started.

20 1 5

Pedro de Valdivia is closed and replaced by the use of heap leaching in Nueva Victoria. The Guggenheim process becomes part of the past.

2009

2007

MarĂa Elena closes and its production is replaced by the use of heap leaching at Pampa Blanca.

A new plant is set up for the production of prilled and granulated nitrates at Coya Sur.

2008

Production capacity for lithium carbonate is increased to 40,000 tons per year. SQM signs a joint venture with Migao Corporation for the production and distribution of potassium nitrate in China.

20 1 1

A new plant is set up to produce potassium nitrate NPT III with a production capacity of 300,000 tons per year. The new plant for the production of potassium nitrate in China is inaugurated with Migao Corporation.

20 1 7

SQM has 35% of the world market share of iodine and derivatives and is the largest producer in the world; it has a 54% of the market share of potassium nitrate of which it is also the largest global producer; and in lithium and derivatives it has 23% of market share.

20 1 8

SQM celebrates 50 years of existence, completely reinvented.

Del Carmen salt flats

Prilling plant Coya Sur

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OF THOSE YEARS WERE NEGATIVE DESPITE THE COMPANY RECEIVING SIGNIFICANT SUMS OF MONEY IN EXPORT SUBSIDIES, ALSO KNOWN AS “DRAW BACKS”.

T In the María Elena and Pedro de Valdivia offices, both survivors of the catastrophic crisis of the

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The beginning OF THE 1970s WAS A CHALLENGING TIME FOR THE COMPANY BECAUSE

OF CHANGES IN THE GOVERNMENT AND THE GENERAL DIRECTION OF THE COUNTRY. THE ECONOMIC RESULTS

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SQM Archive

than 50 years old.

he 1973 oil crisis and the subsequent increase in the international price of crude oil had a dramatic impact on costs as the Guggenheim process had been designed when petrol was cheap. The economic outlook wasn’t a happy one for this industry that had had so many glorious years. At the beginning of the 1980s the Sociedad Química y Minera de Chile (Soquimich, “The Che mical and Mining Society of Chile”) had employed over 10,000 workers despite the fact that, technically speaking, it was bankrupt. At María Elena and Pedro de Valdivia –the only two saltpeter offices still functioning after the disastrous previous decade– caliche was still being mined and processed in plants and in-

stallations that were over 50 years old, while the Guggenheim process had production costs that were more than 60% more expensive than the costs for international alternatives. Production didn’t slow down or stop, despite the fact that on the pampas and at the company warehouses in Europe and North America piles of sodium nitrate were accumulating without being sold. It was increasingly difficult to compete with urea, ammonium nitrate, ammonium sulfate and all the synthetic nitrogenated fertilizers that were dominating the market because they were cheaper and had the advantage of providing 46 units of nitrogen per ton, compared to the 16 units of nitrogen per ton in the Chilean sodium nitrate.

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Nitrate building

Teapot and water bottle belonging to the collection of utensils, tools and saltpeter mining equipment kept at the Museum of Antofagasta.

Despite the industry’s best marketing effort, on the international market Chilean saltpeter had become an obsolete product that was being sold less and less, and cheaper and cheaper. In the domestic market the Ministry of Economics had decreed that saltpeter had to be sold cheaply to subsidize the Chilean agricultural industry, even if this meant losing money. As a result, in 1982 the finances of the Sociedad Química y Minera de Chile had an accumulated loss of US$43,963.000. The company’s future was unsustainable and there were many voices calling for its closure and a definitive end to the Chilean saltpeter industry. It was only the social impact of closing operations and the geopolitical problem of de-populating a large part of the north of the country that held them back. Despite this, in 1974 and 1979 the offices Alemania and Victoria had respectively been closed and it seemed like only a question of time before María Elena and Pedro de Valdivia would undergo the same fate. In that dismal scenario 1981 stands out in the company’s history as an emblematic year. The whole board of directors and most of the company’s executives were changed in a last attempt to transform the company. “If that decision hadn’t been taken SQM wouldn’t exist today. María Elena had already been condemned to closure – it was just a matter of implementing the order. But instead those who had decided to close it were asked to resign, a new board of director and a new executive team were appointed. They started to restructure the company and to modify its commercial branch”, explains Julio Ponce, who became president of

the new board of directors. Patricio Contesse González was brought on as Chief Executive Officer, and soon afterwards Eugenio Ponce took over as Commercial Vicepresident. Together they brought on board a team of young executives, all professionals, all under-30, some with PhDs, who together took on the huge task of improving the company’s results. A new wind began to blow for the company and, at the request of the board of directors, a profound modernization process was undertaken which completely reinvented Soquimich and the Chilean saltpeter industry. Disposable assets were liquidated, production costs were brought right down, a way was devised to sell thousands of tons of sodium nitrate stock in order to reduce losses, and subsidiary companies –perhaps the most significant deadweight inherited from the glorious era of the saltpeter industry– were restructured.

R THE CULTURE OF AUSTERITY

The administrative, operational, financial and commercial areas of the company underwent profound changes. In order to streamline the structure of the company entire higher organizational ranks were eliminated and joined with other positions. Departments of technical and development management were created, and the departments of quality control and operations were staffed with chemical engineers. There were also significant changes to the transfer of certain production and maintenance tasks to contractors. Perhaps the most significant change was the introduction, for the first time, of a culture

of austerity in a company that wasn’t exactly known for it. In 1980, despite the figures remaining obstinately in red, and an apparently bleak future ahead, work continued on the eight floors of the company’s headquarters in the Nitrate Building in downtown Santiago on Teatinos Street, in a building whose sumptuous elegance was a throwback to the industry’s heyday. Valuable works of art hung on the walls. At one o’clock sharp work stopped and everyone went for their long extended lunch on the top floor, where waiters in black, with white gloves, served abundant portions from silver platters. It was the same for the company’s headquarters in Europe, in the middle of the City of London, where waiters appeared at noon to serve gin and tonic in a tradition left over from the 1930s. The company also had similarly luxurious offices in New York, on the 51st floor of the now-disappeared World Trade Center, and in Madrid in the highly-coveted Paseo de la Castellana. This despite the fact that saltpeter sales were so low in Spain that the employees had little to do other than mark their in-and-out cards at work. This extravagance came to an abrupt end in 1982 when the company, imposing its new austerity plan, sold the Nitrate Building and reduced the administrative and bureaucratic personnel working on the eight floors from 400 to 60. The company rented two floors of the building belonging to the ex-Corporación de la Reforma Agraria (“the Corporation of the Agrarian Reform”), where, despite the drastic reduction in personnel, space was so limited that everyone was as squashed as in monastery cells. The white-gloved waiters

National History Museum collection

Museum of Antofagasta

1940

with their shining silver platters, became a memory of the past, and the most valuable paintings that hung on the wall of the Nitrate Building, now adorn the Palacio de La Moneda (Government Palace). Eugenio Ponce, who had come into the company as part of the cohort of young executives, now spent a year travelling around the company’s international offices in order to evaluate the situation with the board of directors, to take the necessary decisions, such as what to do with the emblematic London office. Even though the British had always been the investors and the owners of the saltpeter companies, Britain had never been a strong market for sodium nitrate. Belgium and Holland, on the other hand, were two of the

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In 1980, despite the figures remaining obstinately in red, and an apparently bleak future ahead, work continued on the eight floors of the company’s headquarters in the Nitrate Building in downtown Santiago on Teatinos Street, in a building whose sumptuous elegance was a throwback to the industry’s heyday. The archive of this building, as well as the London offices, is housed in the Saltpeter Section of the National Archive.

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Thanks to a massive sale of assets dismissed workers were given favorable compensation and the necessary technological and production changes could be made at María Elena and Pedro de Valdivia.

SQM Archive

few countries where there was still a demand for Chilean nitrate, and where there was still a potential for growth. Consequently, in 1983, the company decided to close the London office and open a smaller office in the port of Antwerp, just in front of the ships that unloaded the product to be distributed around the various European markets. In the new office, made of containers, two young executives set up shop. One was the Belgian Frank Biot, at the time a 27-year old engineer, who is today the Commercial Vice-President of Nitrates and Potassium. These two were charged with the role of increasing saltpeter sales and transforming their offices in the port into the central nervous system of sales around Europe. Where the five floors of the London offices once stood is now a huge skyscraper. The Madrid office was also sold off, and a smaller office was set up in Barcelona. During this legendary trip around the world Eugenio Ponce spent three months in the US evaluating the company’s needs. He closed the office on the 51st floor of the World Trade Center and reduced the 50 employees to only 2, who were moved from New York to the port in Norfolk, Virginia where the nitrate that was exported from Chile to the US, was unloaded.

A COMPANY THAT HAD, UNTIL 1980, BEEN FOCUSED EXCLUSIVELY ON PRODUCTION, NOW FACED THE SIGNIFICANT CHALLENGE OF INSTALLING A CULTURE OF AUSTERITY AND PUTTING THE DEMANDS OF THE MARKET FIRST.

However, his journey wasn’t all about closing down offices. In Brazil a new office opened to sell saltpeter directly and cutting out the middlemen, thereby reducing costs to a fifth of what they had been. In the domestic Chilean market there were also changes made to the transport, distribution and sale of saltpeter: fixed-freight contracts were changed for on-the-spot contracts depending on specific needs to supply the market; expensive warehouses and direct sales locations were closed and replaced with distributors working on commission. Unused warehouses and railway stations were closed in Valparaíso, Talcahuano and Puerto Montt, and other disposable assets such as cars were sold off. Through this massive sale of assets it was possible to offer acceptable compensation to the staff who were inevitably sacked in the reduction of personnel, and also to finance the technological and production changes that were imposed on the María Elena and Pedro de Valdivia offices. The first measure was to reduce production and focus on selling the stock of saltpeter that had accumulated on the pampas and around the world. In a company whose primary focus until 1980 had been production, the major challenge was to instill a culture focused on saving and the needs of the market. The change in mentality required was thrashed out day after day, in one decision after another, like the day that Patricio Contesse González ordered to stop the exploitation of the El Lagarto mine, 25 km from the processing equipment, because at that moment the company couldn’t

SQM Archive

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Panoramic view of the saltpeter office María Elena, previously Coya Norte. The land for its construction, near to the town of Tocopilla, had been bought by the Guggenheim Brothers Co.

Significant changes were made to transport, distribution and sales in the domestic market.

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SQM Archive

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Saltpeter dredger

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The old-fashioned dredgers of the open cast strip mines were replaced by efficient front-loaders and modern trucks.

envisage a future for the site. “We’re losing millions of dollars this year, that’s our reality”: the cry was heard throughout the saltpeter office’s town. However, the truth is that the executives were thinking about that elusive future, because that was their only option: with the support of the engineers and the specialist consultants they studied technological innovations that made the mine more profitable. The most radical changes were implemented at the mine itself: From open cast strip mining that used huge and old-fashioned dredgers and ancient gauge railways, the company changed to a system of plot mining with efficient front-loaders and modern trucks, which reduced costs and significantly increased production. The plot mining system needed a quarter of the workforce of the open cast strip mining and was a key factor in the reduction of personnel from 10,000 at the end of the 1970s, to an average of 4,000 between 1983 and 1986. As the company’s performance improved the workforce grew again to 5,000 in 1987 and 6,000 in 1988. 1982 was the last loss-making year (1980 showed profits, but only because of the aggressive sale of disposable assets). After the important changes undertaken from the beginning of 1980 onwards, and because of the austerity imposed by the administration of the company, it was able to publish positive balances, thereby initiating the process of privatization for which it was essential to ensure market perception of Soquimich as a viable and attractive company for investors.

R INSCRIPTION Nº 0184

Before the company could be privatized it had to undertake a series of measures required by the legal norms of the day. The extraordinary general shareholders meeting of August 1982 approved to submit the company voluntarily to the rules governing publically traded companies for which it had to adapt some of the articles of its Statutes and legalize them. In March 1983 the Securities and Insurance Commission inscribed the company as Nº 0184 in its register. After the registration in the Securities Register, in May 1983 the Santiago stock exchange accepted the company’s request for inclusion in the stock market. The offer of shares was made on the stock exchange in June 1983 for 35 nominal pesos per share but there were no interested bid-

ders. It was only in September of that year that the first lot of shares, representing 0.25% of the ownership of the company, were sold, for 10 nominal pesos per share. Between January and June 1986 interest in the company grew and 6.87% of shares were sold. So in the first three years only 14.23% of the shares were sold in small lots, despite the positive results that the company had been showing, suggesting that the market still didn’t have enough confidence in the company’s successful future to invest in it. The real change came in June 1986 when the Risk Classification Commission declared that the company had conformed to the norms decreed in the 1980 Law Nº 3.500 enabling the Pension Fund to invest in the company. Once the modifications were complete the shares were quickly sold, with the Pen-

Economic results 1970-1972 CLOSING OF THE FINANCIAL PERIOD Profits or loss (negative) Draw-back

On the 31st July 1970

On the 31st July 1971

On the 31st July 1972(1)

US$ US$ US$ -13.685.845

-12.606.361

-21.139.909

4.352.787 9.751.205 13.893.732

(export subsidy) Accumulated loss

-23.141.815 -35.748.176 -56.888.000

(1) Change in legislation concerning closing of the financial period from 31st July to 31st December. Source: Financial Situation quoted by Ana Victoria Durruty in Salitre. Harina de Luna Llena, (“Saltpeter. Flour of the Full Moon”), July 1993.

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SQM Archive

The

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A quick trip to María Elena or Pedro de Valdivia was enough to see that there were still piles of unsold saltpeter. Despite the efforts of the marketing and sale departments there was no way of selling sodium nitrate.

sion Fund acquiring lots of shares at an initial price of 145 nominal pesos, buying over the following months 42.61% of the total number of shares. In parallel a collective negotiation with the company’s workers in 1985-1986 awarded them part of the company’s profits in shares. Given that there were profits in those years the workers did indeed receive the promised shares. The workers then established the Pampa Calichera Investment Fund so that each individual brought their shares to the newly-formed fund which owned 4.2% of the company. This fund continued to buy shares in the company until it became a majority shareholder. In October 1986, still during the years of the military dictatorship, Corfo stopped being a major shareholder, holding 48.56% of the shares. The Pension Fund, security brokers and small investors continued buying until March 1988 –five years after the beginning of the privatization process– Soquimich was completely privatized. Shortly afterwards the company changed its name to SQM. For all the shares it sold Corfo received approximately US$140,000.000 for a company whose book value had been US$79,528.000 on the 31st December 1983 when it began the privatization process.

R MOUNTAINS OF SALTPETER

The company had managed the impressive challenge of putting its finances and administration in order, making productive and cost-effective changes in their mines and beginning to show themselves as skilled in business culture. However, a quick trip to María Elena or Pedro de Valdivia was enough to hammer home the hard reality that there were still piles of unsold saltpeter. Despite the superhuman efforts of the marketing and sales departments there seemed to be no way of selling sodium nitrate! There were still a handful of loyal markets, such as Japan, Belgium and Holland that were importing saltpeter to fertilize sugar beet fields, but the cold reality was inescapable: as a fertilizer sodium nitrate had had its day. It wasn’t enough to transform the mining side of the company or the production methods. It wasn’t a case of finding buyers for the leftover saltpeter. Despite the hard-won transformation of SQM the real changes were still to come. The company had to find a way to develop a new product from old caliche – one that would be attractive, powerful, and unbeatable. The complete and total transformation of the saltpeter industry still hadn’t occurred. But it was just around the corner. ”

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the use of trucks. He designed a system whereby trucks

technological

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transformation

the desert from where the train would take it on to the

took place in the

processing plant. This meant an end to the incessant laying

mines themselves,

and un-laying of gauge railway lines next to the strip of

where a rigid and expensive system of surface exploiting

open cast mine being exploited. Fuentes also suggested

were set off to extract the caliche in strips installed every

eliminating the use of iron dredges and replacing them with

500 m parallel to the railway tracks across the virgin

front loaders to put the material into the trucks. Fuentes

pampa. The caliche was 2 m underground so huge 180-ton

argued that in this way the better-quality caliche could be

dredgers –the same as those used to build the Panama

extracted with greater precision, faster, safer and using a

Canal– then removed the upper layer of dirt that covered

quarter of the manpower that the old system needed.

the ore with high content of saltpeter below. Next the caliche was drilled and blasting, before it was lifted out

Your proposal sounds fantastic. Right. Now let’s do it. Sergio Fuentes demurred:

of place by electro mechanical shovels up to 20 m high

My job is to do the study, not come and live here.

mounted on caterpillars, and loaded into train wagons that

You’re telling me that I have to close the railway line,

took the ore to the processing plants. It was an extremely

invest in buying front loaders and 70-ton trucks, and

labor-intensive system that needed heavy machinery and

you don’t want to take charge of it? No way, you have

significant amounts of electricity as the transportation

to do it.

trolleys required a constant 600 volts. It was also extremely

Sergio Fuentes accepted the challenge and for the next 5

dangerous and the accident rate was high. When Atilio

years he led the transformation of the system to one of

Narváez was head of the railway in the Pedro de Valdivia

strip open cast mining to one of plot mining. Together with

office he was in charge of 365 workmen who transported

the mining engineer Gastón Cerda, Fuentes designed, while

the caliche from the mine to the plant. The work was hard

Atilio Narváez, head of strip mining at that point, did the

and the harshness of the desert was a bad combination

groundwork. The Israeli Dan Amit, expert in machinery,

with the precarious security arrangements. The employee

advised Fuentes on the acquisition of new and secondhand

turnover was so great that the workmen were not properly

equipments, and between the end of the 1980s and the

trained, and there were accidents almost every day. A

beginning of the 1990s the mine was radically transformed,

lot of men hurt themselves using home-made tools as

and costs were reduced dramatically. The train and the

there wasn’t enough money to buy proper tools. The job

dredgers disappeared, as did everything that had been

of transforming this pharaonic system fell to the mining

mounted on iron wheels. The old hands in SQM called it

engineer and Professor at the Universidad de Chile, Sergio

“the arrival of the tire”. This new extraction system was

Fuentes who had been manager of the Navío mine and of

called “plot” because the caliche is present in the desert like

the cement company Cementos Melón. Eugenio Ponce hired

great big stains of oil, and with this new system using trucks

him to undertake a thorough consultation and make the

and front loaders these “stains” or “plots” of caliche could

necessary changes. After an in situ study Fuentes proposed

be mined simultaneously and precisely wherever they were

to the board of directors to replace the open cast strip

present in the best quality. The innovative changes reduced

system and its railways with plot mining of the mineral and

production costs significantly. ”

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HAD A READY MARKET AND GOOD PRICES. BUT WHEN THE SODIUM NITRATE PRICE FELL AND THE MARKET SHRANK IT WAS A WEAKNESS BECAUSE TO HAVE ONE PRODUCT YOU HAD TO PRODUCE THE OTHER AS WELL.

S At the SQM meeting the board discussed the changes that the commercial sector was undergoing. For the

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At the beginning OF THE 1980s THE COMPANY WAS SELLING SALTPETER AND IODINE

EXTRACTED FROM CALICHE. THIS DUALITY WAS A STRENGTH IN THE BOOM YEARS WHEN BOTH PRODUCTS

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SQM Archive

o, considering the natural resources available, in order to avoid a dependence on the traditional products that were clearly in decline, it was essential to broaden the company’s portfolio of products. In order to resolve this dilemma and analyze the future of the company the SQM board of directors called to an annual planning meeting in 1984 at the María Elena office. For the first time all the managers were brought together: those running the commercial offices abroad, the top-tier managers working in Santiago and the executives from the production facilities. Today that meeting is remembered by the older participants as a legendary brainstorming session (although

the word wasn’t in use yet in Chile, and definitely not in the pampa), in which they came up with the product that would convert the company into a world leader in specialty fertilizers: potassium nitrate. Not that the 60 executives who travelled through the desert in a rattling old bus to María Elena that year had any idea of the promising future in store. The rumors of an imminent end –closure, shutting down operations, or bankruptcy– were so open that when the executives arrived at María Elena the bus was greeted by a volley of stones thrown by a group of angry workers who thought that they’d come to announce the shutting down of operations. But ending the

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The experiments to create potassium nitrate, whose first production was a disaster, were undertaken at a mini laboratory at María Elena.

Shovels used by the workers at the saltpeter offices. Above: a coal shovel; below: a perforated shovel.

Museum of Antofagasta

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was an Israeli company, Haifa Chemicals, that produced high-grade potassium nitrate based on nitric acid (HNO3). It was an excellent source of nutrients for modern agriculture –greenhouses, hydroponic growing or high-tech irrigation system– that were at the time being adopted everywhere. There was no doubt: that was the future for fertilizers. The SQM sales agents had for a time now being watching enviously as the Haifa company easily sold their product, which was only manufactured in two places, in Israel and the US, while the bags of traditional Chilean nitrate that had enriched the soil of the continents during much of the twentieth century, lay untouched in warehouses. The Israeli company produced potassium nitrate by chemical synthesis. But the Chilean pampa, visible from the window of the María Elena hotel, had a ready supply of tons of high-grade sodium nitrate produced naturally by the caliche, water and the sun. One of those present at the meeting –today nobody remembers who it was– asked out loud the question that they were all asking themselves: Can our sodium nitrate be transformed into potassium nitrate? The chemical engineers present frenetically began to work out one formula after another, using chalk on the blackboard and scribbling in their notebooks and on scraps of paper, while the others looked on anxiously. What if they tried a chemical reaction mixing sodium nitrate and potassium chloride?

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SQM Archive

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caliche extraction was not the aim of this meeting, quite the opposite: it was a rescue operation, a desperate search for ideas that could lift SQM’s dismal sales. During the now-famous meeting in which the company’s general managers and the full team of international sale agents who had flown in from Europe and the US were present, there were also the heads of supply, and of projects, the operation managers of María Elena and Pedro de Valdivia, and several young chemists and engineers who had recently joined the company – such as Hugo Naritelli and Jorge Rodríguez. For three days they bunkered down in the old hotel of the salpeter office, in closeddoor meetings and round-table seminars, breathing in the heady fumes of the recently painted rooms that were being renovated. They discussed all the changes that the sales department was undergoing: marketing, shipping, sales tactics, and the possibility of creating new products. And in the air was the idea that perhaps SQM could produce this miraculous potassium nitrate. Frank Biot, a young Belgian engineer who was not even 30-years old at the time, and was head of fertilizer sales in the port of Antwerp, elaborated on the growing demand in Europe for potassium nitrate, a relatively unknown product but one with extraordinary technical properties as fertilizer for fruit and vegetable agriculture. At the time the biggest producer of potassium nitrate

HIGH-GRADE POTASSIUM NITRATE WORKED WONDERFULLY IN MODERN AGRICULTURE AND IT WAS BEING ADOPTED EVERYWHERE. THERE WAS NO DOUBT: THAT WAS THE FUTURE OF FERTILIZERS.

CHAPTER 5

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R A LONG-TERM TASK

The stoichiometric formula suggested that at least on paper it was possible, and that its formula would be:

Sodium nitrate (NaNO3) + Potassium chloride (KC1) = KNO3 (Potassium nitrate) + NaC1 (Sodium chloride).

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It took several years of trial and error, of failure and, above all perseverance, to obtain the crystalized, commercially viable and high-grade potassium nitrate.

That is, potassium nitrate would be produced, with sodium chloride as a by-product. There had never been an attempt to manufacture potassium nitrate from caliche and sell it as fertilizer. But while sodium nitrate was abundant and was leached every day from the caliche in the pampa, potassium chloride was not, and couldn’t be produced in Chile. It would have to be imported from one of the primary producers, Canada, Jordan or Russia. But if they were successful in manufacturing potassium nitrate they’d have a potentially unbeatable product to sell in the narrow market of fertilizers. Excited by the prospect, they decided to experiment with it straight away. Let’s try it, and see whether it works! Where shall we do it? –asked someone.

Tomás Simunovic, an experience mechanical engineer, said that there were some “old artifacts” in the Victoria office that could be used as reactors. Someone else went to fetch them from the ghostly old workshops in the old saltpeter office that had closed five years earlier. In the simple but historic experimental laboratory of María Elena the chemical engineers Jorge Rodríguez and Patricio Díaz used a metal spoon to mix sodium nitrate and potassium chloride into two containers the size of large cooking pots. The wished-for chemical reaction happened be-

fore their very eyes: the sodium molecule separated from the nitrate and the result was the mythical KNO3. From this early, primitive, experiment came a rustic potassium nitrate, “low quality” as the executives who watched now admit, with a low purity level (less than 95%), and containing unwanted chemical elements. But however imperfect the result, it was potassium nitrate, the sought-after KNO3! In order to compete with the Israelis they’d have to find a way of radically improving the product and attaining a purity grade of at least 99%. But it was possible. From that moment on the company concentrated its efforts on improving the technical process in order to produce what would become, in the near future, its star product. It took several years of trial and error, of resounding failures, but above all of perseverance and self-belief, before the high quality and commercially viable crystalized potassium nitrate was obtained. At the end of the 1980s potassium nitrate catapulted SQM to global fertilizer stardom. The company had managed, using imagination and its internal research department, to develop a new product that is based on caliche but is completely different to the traditional saltpeter, with characteristics that make it irreplaceable in the modern fruit and vegetable agriculture expanding throughout developed countries.

Although the purity grade of the potassium nitrate developed in the Atacama Desert was almost identical to that produced by Haifa Chemicals, the manufacturing process was completely different. The Israeli company, under strictly controlled laboratory conditions, produced potassium nitrate from potassium chloride and ammonia which, through chemical synthesis, was transformed into nitric acid and then potassium nitrate. The challenge that SQM was facing was how to produce it naturally from caliche, potassium chloride, water and a lot of sun. Given the surprising characteristics of Chilean caliche, whose deposits in the Atacama Desert are unique in the world, the process for manufacturing potassium nitrate had to be developed within the company. There was no off-the-shelf technology or know-how that could be bought in because, quite simply, it didn’t exist. SQM had to create its own unique potassium nitrate manufacturing process practically from zero. Getting there was a long process. Tests were carried out, one after another, in the tiny laboratory in María Elena, led by Jorge Rodríguez and Patricio Díaz. The first production of potassium nitrate began on the 22nd May 1986 in the muriate producing plant of Coya Sur, after the solutions passed through the large solar evaporation ponds. It was a disaster. The resulting potassium nitrate had a purity grade of 94.26% when the minimum required was 99%. It was contaminated by sulfate, chloride and other elements at levels

A discovery in a

library

At the beginning of the 20th century the magazine El Caliche published the experiments and analyses being undertaken at the various

saltpeter offices. In the 1980s Julio Ponce came across a bunch of these magazines in a Soquimich library and read them until he understood the chemistry of saltpeter. “I could then contribute to the production processes, the first of those –and the most important– being the conversion of sodium nitrate to potassium nitrate. From a chemical perspective mixing potassium chloride and sodium nitrate was relatively easy. The difficulty came in how to processing it and doing that in our plants. We started off using a discarded tin, but we managed it”.

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The first experimental stock of potassium nitrate was stored at María Elena. It was contaminated and impossible to sell. María Elena Coya Sur

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that were way above the norm. This first experimental batch of 16,900 tons was stored in María Elena as it was quite impossible to sell. Later production manufactured at the same plant was shipped to Europe to the port of Antwerp but the quality was still inferior to what was needed. In the meantime Eugenio Ponce and Frank Biot visited Haifa Chemicals, inspecting its sophisticated installations and laboratories, and then announced to the management –with a certain degree of pride– that SQM was about to start manufacturing potassium nitrate from caliche. They invited the Haifa Chemicals management to visit María Elena and Coya Sur, in a gesture of mutual friendship that was quite usual to producers at the time. In 1987 Haifa Chemicals, the largest producer of potassium nitrate in the world, sent its production manager to Chile accompanied by a small committee. The visitors looked at the extremely basic installations at Coya Sur with a barely-disguised disdain and afterwards the Haifa production manager commented to Frank Biot that it was impossible that SQM

SQM WOULD PRODUCE POTASSIUM NITRATE FROM CALICHE. IMPOSSIBLE! CHILEAN POTASSIUM NITRATE! PROBLEMS WERE ON THE HORIZON FOR HAIFA CHEMICALS: SOON THEY WOULDN’T BE THE ONLY PRODUCERS ON THE MARKET ANYMORE. A NEW PRODUCT HAD ARRIVED: CHEAPER, AND ABOVE ALL, NATURAL. could produce potassium nitrate from caliche. “Impossible!” But Biot assured them that the first shipment would be sent to Antwerp, and invited them to come and inspect the product in the warehouse when it arrived. And in the

end, the Israeli chemist did come to Antwerp and when he saw the bags of potassium nitrate he exclaimed “It’s not possible! Potassium nitrate from Chile!” A showdown between two giants of potassium nitrate was looming on the horizon. Haifa Chemicals was no longer alone on the market. An alternative, cheaper, and above all, natural product had arrived. The managers of Haifa Chemicals did have a point though in their initial skepticism because the potassium nitrate that was produced in those early years of experimentation was highly contaminated and did have problems that took years to resolve. SQM had to build a research center and a pilot plant in order to test all the possible products, as the facilities at María Elena were too basic and the production plants had neither the capacity nor the technology to produce high-grade potassium nitrate. Furthermore, the company’s research department and processes department had to be expanded with additional chemists and engineers dedicated to perfecting the product, to designing new processes and building new plants, all of which implied an unprecedented technological leap forward in the Chilean saltpeter industry. The company took the decision of training-up executives instead of recruiting staff from other companies. In an extremely targeted recruitment drive headhunters interviewed potential candidates up to 7 consecutive times and SQM began to hire the brightest and best graduates from the civil and industrial engineering schools, from chemistry, mining, economy and agronomy, depending on the needs of the company’s internal structure, both for

the Chilean organization and for its commercial subsidiaries abroad. This visionary decision allowed to train a powerful generation of executives and process engineers, who, led by the recently appointed board of directors and the administrative managers, put in place for the following 10 years the design of new products, the sustainable development of productive processes and investments yielding extraordinary results. This generation, who rose to the challenge, was gradually gaining in experience and today they occupy the most important positions in the company in the finance, production, operations, logistics and commercial departments. Without exaggerating, they can be called the golden generation for a golden age of the company.

R A CENTER FOR INNOVATION

As part of this bet on in-house innovation, in 1989 SQM set up its own Center for Innovation and Processes, the CIP, at the time the only center of its kind established by a private company in Chile. CIP was made up of professionals with post-graduate degrees in chemical engineering and chemistry, many with PhDs. The construction of the CIP building in Antofagasta cost several million dollars; it is 30 m high and contains towers, test reactors, laboratory equipment, a mechanics workshop for manufacturing tools and machinery on-site, and the necessary infrastructure for setting up a small pilot plant for experiments. The professional team was made of 30 people, including engineers, chemists, and lab technicians and operators.

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At the SQM Center for Investigation and Processes (CIP) key innovative technology was developed to ensure the competitiveness of potassium nitrate (KNO3) and prilled iodine.

This laboratory saw the beginning of various technical innovations that were essential to the competitiveness of SQM products, like prilled iodine –in millimeter-sized spheres– and potassium nitrate also in prilled form and soluble crystals. The laboratory attracted knowledge and expertise from universities and other prestigious international centers. The team, led by the doctoral engineer Armin Lauterbach, designed and put in place a pilot plant in Coya Sur in which the variables of the processes were tested before being put into action in a scaled-up, industrial plant designed and built by SQM engineers in Coya Sur. These installations used solutions rich in sodium nitrate taken from the processes in María Elena and Pedro de Valdivia, and added imported potassium chloride so that its reactors could produce the necessary chemical reaction to manufacture potassium nitrate. The plant had an initial capacity of 100,000 metric tons per year, but by 1989 it expanded to 250,000 MT per year (it currently has a nominal production capacity of 350,000 MT per year). It allowed the company to introduce the product onto the international market while at the same time allowing the company to develop the necessary technical expertise to support the commercialization of the product. It is hard to find a better example of the beneficial effects on a company of the introduction of a new product as it was the potassium nitrate in SQM. At the end of the 1980s the product still hadn’t reached the desired grades of purity and quality, but the pressure on the commercial sector of the company to introduce the

Nitrate prilling and granulating plant

product onto the market was so strong that there was no option but to sell the potassium nitrate with all its defects at a lower price to convince the undecided. In 1987 the first deals were closed in Spain, and then in Holland, the Philippines and Brazil. But as soon as the ships arrived at their destinations with their cargo, the telephones –still with earpieces, dials and cords– rang off the hook with complaints. Unforgivable damage was done, like the burning of a greenhouse’s produce because of a batch of potassium nitrate that was excessively contaminated. The fines were enormous, but the steep learning curve was useful and with the new plant opening in Coya Sur the purity grade of the product improved dramatically: by the middle of the 1990s the company had attained 99% purity.

Potassium nitrate production since 1986

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R THE MUCH FEARED “CAKING”

But there was still one problem that took a lot longer to iron out and which the clients still frequently complained about. Crystalized potassium nitrate tends to absorb humidity so, although it comes out of the manufacturing plant as a fine, dry powder, within days –and even sometimes in three hours– it solidified rock-hard. This was the much-feared “caking”, a term used colloquially in fertilizer slang. It was discovered with a certain amount of horror and bewilderment in the port of Antwerp when the first shipment arrived. Luckily the potassium nitrate had, on this occasion, been stored in 50 kg bags –rather than in bulk– in the ship’s cargo space, because the hardened product was impossible to crush, even with power drills and hammers. After

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various attempts to return the product back to its original form of fine crystals, the only way was to drive over the bags various times with gigantic bulldozers. Erik Borghys, who was at the time, and still is, in charge of logistics in the Antwerp port,

unit of the plant. The 50 kg bags didn’t even last a day without turning rock hard. The chemists aim was for the product to maintain its fine crystal structure and fluidity without losing its physical properties for at least a year, so that the farmer could store the bags

THERE WERE SO MANY EXPERIMENTS AND TESTS IN THE CIP LABORATORY AND THE PLANT AT COYA SUR, THAT IT WAS HARD TO KEEP UP WITH WHICH HAD RESULTED IN THE FIRST SUCCESSFUL SHIPMENT OF POTASSIUM NITRATE IN 1990 IN THE VESSEL GLORIA DEI. 108

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trembled every time a shipment of potassium nitrate docked, afraid that the cargo would arrive in huge solidified lumps. And in the Coya Sur pilot plant nobody was getting any sleep either: one work shift after another experimented with different anti-caking agents to solve the problem. So it’s understandable that Borghys has never forgotten the day in 1990 when the vessel Gloria Dei docked in the port and the potassium nitrate was unloaded in optimum condition: it flowed like sugar, it was shining white and its crystals were tiny. Borghys, very happy, immediately rang Armin Lauterbach at the laboratory and congratulated him. But Lauterbach replied: “That’s great news! The bad news is that I’ve no idea how we did it.”

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During the first years of trial and error the bags of potassium nitrate didn’t even last a day before they turned rock hard.

There had been so much to-ing and froing between the CIP laboratory and the plant at Coya Sur, so many experiments and attempts, that it was difficult to be sure exactly which experimented had resulted in this successful shipment. In those first years of trial and error the potassium nitrate was packed in the drying

for 12 months before using the product. The SQM chemists had to increase the duration of the product’s fluidity from 1 day to 365! It seemed to be an impossible challenge. The chemistry PhD graduate Patricio Araya took charge of the challenge at CIP, along with four other graduates with PhDs in chemistry and engineering, and five chemical engineers who had only recently graduated from university and been selected after a rigorous vetting process. Several laboratory assistants joined the team, some with studies only up to twelfth grade, for whom the work at the SQM laboratory was a real learning process. They took classes in chemistry, electrical engineering, processes and mechanics, and several of those who carried on with their studies rose in the ranks and are now heads of laboratory. They were in charge of analyzing the samples and undertaking the repeated tests, and on many occasions they were the first to detect important discoveries (see the insert). In the pilot plant at CIP in Antofagasta they did tests of crystallization, prilling and

drying. They used the same crystalizing and prilling towers as in Coya Sur, but on a smaller scale, 18 meters high for the prilling, and drying drums of 6 meters long with diameters of 1 meter for the crystalizing. So any problem that might come up in the industrial installations could first be detected in the pilot plant. The first issue that they resolved in the challenge to keep the product’s fluidity over time was the conditioning of the crystal and the refining of the drying process so as to avoid the particles sticking together. During this process they discovered that a by-product, magnesium, was responsible for making the crystals become compacted, but it took several months of experimentation to work out how to control this. They tried, one after another, various anti-caking agents until they found one that stabilized the product for a longer period of time. First they managed to get from three hours to one day of the potassium nitrate remaining in its original state, then one week. It took several months of trial and error until they managed to maintain the product in a fluid state for at least a year. At the same time, at Coya Sur they increased the plant’s capacity and went from producing 5 tons of potassium nitrate per hour to 20 tons, and then 50 tons. Productivity would continue to rise in the coming decades – it is now at 150 tons per hour. During those years this relatively defective potassium nitrate was sold in various countries because it was cheaper and because in the end it did do the job it was meant to. When finally the anticaking agent worked consistently and the product could be sold

flac versus clac

The problem of caking wasn’t one limited to potassium nitrate in powder or crystalized form. In prilled form (tiny spheres of 1 or 2 millimeters) it also caked, and what’s worse, it degraded in quality. SQM would promise prills to their clients but they’d receive bags of

powder. When Patricio Araya had just joined CIP in 1989 he received his first claim: the South Africans returned 800 tons of potassium nitrate as not a single bag was prilled – it had all turned to powder. The tests on the prills and the drying at the pilot plant took months and the results were then evaluated at the laboratory. The instructions to the lab technicians (who weren’t chemical engineers but rather technicians trained by SQM) was that they should inform of any characteristic, however small, that seemed out of place. One of the technicians –called Nino, apparently– had the idea of breaking the prills on a table, and in doing so he noticed something strange. Curious, he turned to Patricio Araya: You know, not all the little balls make the same noise when they’re crushed. I can hear that those that crush make a “flack” noise, while those that stay spherical make a “clack” noise. Interesting, –replied Araya, Why don’t you separate those that make a “flack” noise from those that make a “clack” noise? Nino returned a bit later with the samples; they analyzed them and together discovered the big difference between them: Contaminating magnesium affected the stability of the prill because of an undesired chemical reaction. Those with more magnesium fell apart with a “flack” while those with less magnesium made a “clack” noise. The solution was to make a friend out of the foe. They turned the magnesium into a more stable chemical compound to ensure that the spheres made the “clack” noise, and the more magnesium they contained the more stable they were. The magnesium, improved in its formulation, even allowed them to manufacture prills of 2.8mm, which was a bonus in the competitiveness of the market. Thanks to Nino’s observations they solved a problem that had been plaguing them for months at CIP. Years later it was discovered that Nino had died without any formal recognition of his discovery. This was an oversight which would not happen again, thanks to a changing culture within the company, and a program called M1. ”

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In the Philippines the freeflowing potassium nitrate was not appreciated. The farmers had got used to treating their fields with clumps of fertilizer and it took them some time to get used to the new format.

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The potassium nitrate had to arrive at its destination with the same consistency as it had when it left the drying unit of the manufacturing plant.

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free-flowing, in a loose powder that didn’t harden and easily disolved in water, clients around the world were very happy. Except in the Philippines. “No, no, no,” said the Philippine farmers, “this wasn’t the product we ordered. Where are the stones?” They had got used to working with clumps of potassium nitrate in their fields, and it took them some time to get used to the powder version. However, the major challenge from the end of the 1980s to the middle of the 1990s was how to achieve its bulk shipping, the resolution of which meant that potassium nitrate could finally be sold around the world. Until then 50 kg bags were filled by bagging machines at the manufacturing plant itself. These were loaded one-by-one into wagons and transported to the port of Tocopilla by train, and from there they were taken on barges to the cargo-holds of the ships. While the production capacity had been smaller this system hadn’t really impacted on costs. But demand was rising and the company was aiming to increase production. Loading 50 kg bags into a ship that could carry 1,000 tons of cargo took 10 hours, as compared to the 60 minutes it would take if the product were loaded directly into the hold in bulk. The difference in costs were so high that the project of exporting potassium nitrate to the rest of the world would only be financially viable if the product could be transported in bulk from Coya Sur, and only bagged at the destination port. A new problem; a new challenge to face up to. For this to work the product had to arrive at its destination with the same consistency that it had leaving the manufacturing plant,

without caking, compacting or being contaminated over the thousands of kilometers it would travel over various days. If it hardened or “caked” during the journey it would be impossible to get out of the ship’s hold. The team at CIP focused on finding a solution to this problem: they undertook accelerated experiments under extreme conditions of temperature, pressure and humidity, with simulated unloading in a port, transport by train and truck. They invented a series of physical tests –the problem had no ready solution in written manuals– like simulating, for example, how the bulk load of prilled potassium nitrate would fall from the conveyor belt into the hold of the ships in the port of Tocopilla. The prills had to be hard enough to resist the fall of 20 meters. Some discoveries took minutes to make, others various months. It took three years of endless, imaginative experiments with innovative anticaking agents until the potassium nitrate was sufficiently stable to be sent in bulk by ship. The first load was sent to Brazil. Eugenio Ponce, Frank Biot and a large number of the commercial team went to Porto Alegre to await the shipment. The ship arrived at 3 am, and anxious with the wait, Ponce and Biot crept in stealthily to see the state of the product. Imagine their delight at seeing that the potassium nitrate had survived the journey and was still in its fine crystalline form, wonderfully fluid! The handling in bulk of the SQM nitrates reduced costs considerably and meant the company could export an incomparable product to all five continents of the globe. ”

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THE CHALLENGE AT THAT TIME OF LEARNING, AT THE END OF THE 80S AND THE MIDDLE OF THE 90S, AND THE ONE THAT ALLOWED TO ARRIVE WITH POTASSIUM NITRATE TO ALL THE GLOBE, WAS TO ACHIEVE ITS HANDLING IN BULK.

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he first step was to provide a strategic focus to the sales efforts and to inspire the sales agents with an enterprising spirit. Some years earlier, in 1983, just before the main european sales office moved from London to Antwerp, SQM had begun to look for a young, local and talented professional who would take care of the fertilizers departament. The ideal candidate had to have the guts to form a team in the midst of the debacle of the inmovilized piles of saltpeter, and to take on the challenge of managing the commercial operation from Antwerp, now the distribution port for SQM products in Europe. Frank Biot was recruited through a headhunting agency; he was 27 at the time and was

the first professional with an MBA to be hired by the company. The board of directors gave him carte blanche to change whatever he considered necessary. Biot shut himself up for 3 months to read all the files of reports about product sales. The papers were in piles and piles of telexes –fax didn’t exist yet– that had come from the commercial offices, and they detailed how much had been sold, to whom, and where the obstacles were, market by market. Biot came to the conclusion that a big part of the problem was the lack of direct contact with the clients. He couldn’t understand the need for the enormous London office, with a staff of 60, if the sales were undertaken through traders, and he felt there was a clear

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laziness combined with heavy-handed bureaucracy. He started to travel to every country and deal directly with the clients, by-passing the traders. On one of his trips he invited the English salesman from the SQM London office in charge of sales for France and Holland. The main Dutch client was a cooperative of farmers and Biot drove from Antwerp, picking up the englishman at Rotterdam airport. Leaving the airport Biot asked him how

and Brazil. Neither Biot nor Ponce were in their respective offices very much – most of the time they were travelling around Europe, Asia and the Middle East visiting clients, distributors and potential partners. In 1984, as was mentioned above, 300,000 tons of sodium nitrate had accumulated in the European warehouses and it was vital that they should be sold. First of all the product was offered at cost price, in order to get rid of

IN THE SECOND HALF OF THE 1980s THE SQM DIRECTORS THOUGHT THAT CHILEAN SODIUM

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The Antwerp office in Belgium. One of the new headquarters, smaller and more efficient, that opened during the 1980s.

to get to the cooperative, but he had no idea, so Biot got out a map and found the way. Once they were at the meeting Biot realized that the cooperative’s acquisition manager had never set eyes on the salesman, who was his counterpart at SQM, so, addressing him in English Biot said: You’re responsible for the sales and you’ve never even met the client! You are fired! All the newly-fired sales director could reply was to ask how he’d get back to the airport. One after another Frank Biot sacked the personnel who didn’t have the dynamism he wanted in his new sales team. If anyone from the administration complained, he replied: “I’m an entrepreneur, not a bureaucrat”. Biot’s process coincided with Eugenio Ponce’s closing of the London, Madrid and New York offices and the opening of smaller and more efficient headquarters in the ports of Antwerp, Barcelona

it as quickly as possible. In Europe the main clients were the Dutch, Swedish, Spanish and French sugar beet producers who bought the product in reasonable quantities but at prices that continued to fall. In 1985 Hernán Tejeda joined SQM. He had a PhD in agronomy and was a specialist with international experience in plant nutrition and soil fertility. His mission was to provide agronomic support for the development of the sodium nitrate market, and then of the potassium nitrate market which at the beginning of the 1980s was just beginning to grow. At the time the board of directors of the newly-privatized SQM was convinced that Chilean sodium nitrate still had a real chance of being an excellent product if the right markets could be found around the world. That was Tejeda’s mission: to identify the crops for which Chilean sodium nitrate would be a better source of nitrogen than synthetic urea or other products that had replaced it.

In order to be able to raise prices and gain new clients, SQM had to prove in the field the advantages of their product over synthetic fertilizers. With this aim in mind, in the middle of the 1980s the SQM agronomists, and heads of sales and marketing began an ambitious campaign of technical-agronomic field trials on every continent of the world, concentrating their efforts on the tobacco-growing regions.

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OF THE TOBACCO

Aside from sugar beet, the historically important consumer of Chilean sodium nitrate, was the North American tobacco industry in the state of North Carolina, where all the tobacco quality studies were carried out. Those studies enthusiastically recommended bulldog soda fertilizer, as Chilean sodium nitrate fertilizer was known in the US because of its capacity for improving the quality of the tobacco leaf. In order to establish a common base of knowledge among the SQM agronomists, Tejeda organized a four-day meeting in November 1988 at the International Institute of Fertilizers in Muscle Shoals, Alabama. The Meeting of SQM Fertilizer Market Agronomists was dedicated to showcasing the most recent studies into sodium nitrate and the basic characteristics of the soil and plants that could benefit from this fertilizer. Sodium nitrate showed no relative advantage in the production of wheat, rice or corn, which are the largest crops grown around the world. But it showed a real advantage for fruit and vegetable crops grown in environments with

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The famous SQM field days during which farmers were invited to inspect the results of tests carried out with Chilean nitrate on a particular crop.

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very cold springs, in sugar beet, and above all in tobacco. The meeting helped ensure that all the company’s agronomists were speaking the same language about the products and were well-informed about its strengths and about the crops that could most benefit from sodium nitrate. Then, the aim was to conquer the regions of tobacco growth around the world where the company had more potential for growth. With the strategy decided upon, now came the difficult work: convincing farmers that sodium nitrate would benefit them although it was 2 or 3 times more expensive than the synthetic options. For three years between 1985 and 1988 Frank Biot visited the tobacco plantations country by country to speak directly to the clients. He opened up business in Taiwan, Indonesia and the Philippines. Together with Hernán Tejeda he convinced farmers to test the product on small plots of land. It was an approach like that of a door-todoor salesman, engaging with one farmer at a time. Agronomic trials were carried out, after the harvest they return back to visit, again and again, until the farmer gave in to the positive effect of the product. In order to give guarantees of objectivity Tejeda contacted local agricultural research centers, both governmental and at universities, asking them to undertake tests according to the standard protocols. The cropping were carried out in experimental centers, with laboratories on hand to analyze the samples, and with crops of sugar beet or tobacco cultivated in small plots using the

same soil and size for each comparative trial. One plot was fertilized with sodium nitrate and the other with urea or another nitrogen source used regularly by the farmer. The tests were repeated under different soil and weather conditions to prove that the effects were consistently positive. Finishing this stage, there were sample fields – simpler experiments, named comparative field studies in which small plots were chosen within the target crop in order to try out the new product, and with the rest of the crop being fertilized with the product the farmer had traditionally been using. Patience was the name of the game, waiting for the crop to grow and then inviting the neighboring farmers to come and see. These events became the still-famous SQM field days, when the farmers invited to come and look at the crop were received with a BBQ or a buffet of sandwiches. The SQM agronomist would give a short speech to the guests sitting on the grass or on tree trunks, like a sort of open-air conference in the shade of the trees. The guests would then be shown the fields grown with the traditional fertilizer before being shown the crops treated with Chilean sodium nitrate. Inevitably they’d ask how they’d managed to get such a colorful crop, such big leaves, and the quality and perfume of the fruit. Some would immediately order 20 or 30 tons. It was work at a snail’s pace, and it needed a close relationship with each and every client. 1, 2 or even 4 years could go by, with several visits, before a first sale could be accomplished.

crossing the

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The key to conquering the international tobacco market was in one country: China. During the 1980s this hermetically sealed country cultivated 1,300.000 hectares of tobacco, five times more than the US and infinitely more than the 7,000 hectares

of tobacco cultivated in Chile at the time. But the quality of the Chinese tobacco was very bad, mainly due to a use of the wrong fertilizers. For this SQM had a joker up its sleeve: quality control studies at the University of North Carolina had confirmed Chilean sodium nitrate as the world's best product for tobacco crops. Eugenio Ponce decided to send Hernán Tejeda, chief agronomist at the time for SQM, to convince the Chinese that Chilean sodium nitrate was their best option. Ponce would see to the commercial aspect –price and logistics– while Tejeda would deal with the agronomy side. Entering into a market as big as the Chinese one was exactly what SQM needed financially at that moment. The man who engineered the entrance into this impenetrable market was Dr. Cao, a researcher at the Chinese Institute of Soil Science (ISSAS) whom Ponce had met by chance at an international meeting in Hawaii and invited to visit SQM in Chile. On that visit the company showed Dr. Cao the benefits of sodium nitrate, offering him the possibility of undertaking tests at his research center in China, in order to give credibility to the product. The agreement reached with the research center was that SQM would pay for the field tests and ISSAS would undertake lab tests and the agricultural work. Dr. Cao would lead the tests and Hernán Tejeda would be his counterpart in SQM. In January 1986 Eugenio Ponce told Hernán Tejeda that Dr. Cao was waiting for him in Shanghai, and he handed him a plane ticket – he’d be flying to the People’s Republic of China that week. At the time foreigners were only allowed into three Chinese cities: Beijing, Shanghai and Canton. China was still closed off commercially and Tejeda’s presence was a rarity, as during the 1970s and 1980s there were hardly any foreign companies doing research in China. As had been arranged, Dr. Cao was waiting for Tejeda in Shanghai to take him to see the tests on orange crops being treated with Chilean sodium nitrate. But the plantations were in a zone that foreigners were not allowed to enter, so at the ISSAS headquarters in Nanjing they planned the tobacco tests together, to be repeated in various Chinese provinces, all under the guidance of Dr. Cao. Tejeda also found a

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technical advisor in Dr. Guy Jones, Professor Emeritus from the University of North Carolina and a specialist in tobacco cultivation. Jones travelled to China and supported SQM in the promotion of sodium nitrate through seminars and small congresses held with Chinese specialists in order to suggest a way of improving tobacco production. Over the next 6 years Tejeda came and went to China, doing tests and establishing a close relationship with his Chinese counterparts. For the first 2 years the tests were with sodium nitrate, until they started to replace this with prilled potassium nitrate which also gave excellent results with the tobacco. In 1992 SQM opened a representative office in Nanjing with the aim of preparing for the imminent start of commercial operations. Direct contact was established with 118

producing provinces, and an agreement was reached with Yuxi Tobacco Corporation in the Yunnan province, the largest tobacco producer in the country. The agreement envisaged technical support for more than 300,000 hectares of crops (the equivalent of 3.5 million small-scale farmers), international technical seminars, the publishing of a book about the use of potassium nitrate, the hiring of agronomists, and technical visits to the US, among other activities. Despite the positive aims of technical cooperation the situation was complicated. Apart from the tests on crops, SQM had to do a huge amount of administrative work to ensure that the potassium nitrate would be included on the list of fertilizers that receive special treatment: exception of import duties, exception of VAT and the benefit of a special state subsidy to ensure that farmers could pay the price. This administrative work took several years and the agronomical results were key to success in these commercial objectives. After 10 years of work in China, with an investment of nearly US$1,000.000, and once the potassium nitrate had been included on the list of fertilizers receiving the abovementioned benefits, in 1994 the first shipment of 25,000 metric tons was finally sent. Over the following years the sales of nitrates in China evolved favorably and in 2001 reached the record level of 100,000 metric tons. In turn the Chinese farmers improved their crop yield per hectare, the nicotine content in the tobacco leaves decreased, and the aroma intensified. Consequently Chinese exports of tobacco increased and the country earned foreign currency, rare for those days. ”

R THE FIRST MARKETS

The herculean efforts of the SQM agronomists and commercial department took the company from country to country, from field to field, reaching such remote areas as the regions of China – at the time a closed-off communist country with no trade relations with Chile (see insert). After all that effort and planning some small markets were opened in the tobacco and sugar beet industries, but the competition from the synthetic fertilizers, that were so much cheaper, made it an impossible job, and the profit margins were tiny. Luckily, from 1987 onwards SQM began producing the first batches of potassium nitrate, a new product based on sodium nitrate, and that had a promising future. The work done over the years in the field and opening up small markets now bore fruit and very quickly the product became –even though it wasn’t clear at the time– a star fertilizer, even in China. The potassium nitrate market had been growing 7% every year and at the end of the 1980s, when SQM entered the market, Haifa Chemicals had had complete dominance over the market. The Chilean potassium nitrate was the first product to seriously challenge the Israeli product and Haifa Chemicals fiercely guarded their access to their clients and the channels of distribution. The SQM commercial department, led by Biot, had done its homework and knew in which countries Haifa Chemicals was selling, where their soluble fertilizer mixing plants were, who their clients and distributors were, which farm was particularly important, and which farmers worked together in cooperatives.

The fertilizers could be sold as direct-use, that is, directly applied to the soil, containing 1 or 2 nutrients –that’s how the SQM sodium nitrate worked– or as water-soluble NPKs, a mix ture of nitrogen, phosphorus, potassium, magnesium, sulfate and different micronutrients essentials for the plants, which can be tailor-made to the requirements of farmer or developed specially for a particular crop or to resolve a specific climate or soil-related problem. What Haifa Chemicals did –and what SQM aimed to do– was to sell crystalized potassium nitrate to the producers of soluble NPK because it was one of the essential ingredients in the formula of its speciality blends. It wasn’t about selling the product to the farmers, as had been the case with sodium nitrate, but to the soluble NPK manufacturers. The agronomists and the whole of the SQM commercial team visited the NPK producers and the farming cooperatives to offer them the crystallized potassium nitrate at a very low price, in order to compete. But the PNK producers were used to the Haifa potassium nitrate and weren’t at all tempted to change to the Chilean product. Some farmers were seduced by the price to try out the Chilean product but in the end they decided to stay with Haifa Chemicals, who had them captive, and out of fear of taking a risk in their greenhouse production. However much SQM tried in those early years to enter the market of the PNK solubles used in greenhouses and in hydroponic crops, the company always faced with the blockade of its main competitor. In April 1990 Eugenio Ponce joined Frank Biot on a 3-day car journey from Spain to Bel-

gium They crossed the snowy Pyrenees and stayed in little villages on the way. During the journey they talked for hours about the difficulties of selling SQM’s potassium nitrate. Looking at the snowy tops of the mountains they thought of possible solutions, and during

THANKS TO ITS PRILLED SODIUM NITRATE MANUFACTURING TOWERS, SQM MASTERED THE FORMULA AND DECIDED TO REPEAT IT WITH POTASSIUM NITRATE IN ORDER TO COMMERCIALIZE THIS AT A BETTER PRICE. 119

one of those conversations they discussed how Haifa Chemicals didn’t have the capacity for manufacturing prilled potassium nitrate, while SQM had for some time now been using the prilling towers for the manufacture of prilled sodium nitrate. They handled the format and could work out the formula to apply it to the potassium nitrate! That’s how the idea came about to produce and commercialize prilled potassium nitrate and sell it at a lower price than Haifa Chemicals’ crystallized version. They would also look for other segments, such as direct use of soluble crystals, called field fertilizers, in which the product is applied directly to the soil and not in the irrigation water. Biot set up a sales team dedicated to field fertilizer and they undertook tests at the University of North Carolina with the prilled potassium nitrate. The results showed that the product worked sensationally well with tobacco, just like the sodium nitrate, but with the advantage that the potassium nitrate didn’t contain sodium and did nourish the plant with potassium. This is how SQM’s market domination with

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The new soluble fertilizer sold around

The strategic differentiation of the format was key to success. The SQM agronomists and sales agents sold prilled KNO3 throughout the tobaccogrowing belt of the world.

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prilled KNO3 began, in this segment of the market in which there were no competitors and in which the product was sold in high quantities. SQM’s agronomists and sales agents travelled through Thailand, Indonesia, the US, China, Mexico and the whole tobacco-growing belt around the globe, selling prilled potassium nitrate. In China not a single kilo of the product had been used but at the beginning of the 1990s they were buying 100,000 tons annually. It was a strategy of differentiation that yielded incredible results: the huge increase in sales got SQM out of the financial doldrums in which it had malingered for decades. Spain was the first potassium nitrate market that the SQM sales team opened up, in 1987: today it is the company’s largest market. Frank Biot set up an office in Barcelona, managing the first joint venture between SQM and Fenasa, hired scores of first-rate agronomists who traveled around the countryside doing trials, until finally prilled potassium nitrate was being sold, using the old image of the silhouetted horseman that Spaniards remembered seeing on the posters and bags for Chilean saltpeter,

in the idea of the soluble potassium nitrate and began to consider abandoning this market, given how comparatively small it was and its domination by Haifa Chemicals. They were inclined to focus on soil applications like prilled nitrate. Here the persistence and vision of Frank Biot and Eugenio Ponce were key in arguing that the company shouldn’t stop manufacturing the soluble versions because, according to them, the company’s future lay in fertigation. Neither Chile nor the rest of South America used the techniques of modern agriculture that had been introduced in Europe in the 1980s. It was only well into the 1990s that similar methods would start to be used around the world. Eugenio Ponce and the other executives who had travelled around the world opening up new markets had understood the potential for water-soluble fertilizers. Which is why the efforts to conquer that market continued unabated. However the NPK soluble blend production plants didn’t want to buy the crystallized potassium nitrate from SQM as they were loy-

THE DECISION TO MANAGE THE BLENDING PLANTS IN-HOUSE WAS A CRUCIAL STEP TO ESTABLISHING THE LEADERSHIP THAT SQM TODAY ENJOYS IN THIS MARKET. and which they recognized as a reliable Chilean product for their crops. A year later a subsidiary office was opened in France, then Holland, Italy, China and South Africa. Every year the agronomists took over a new country. The success of the prilled format meant that several of the SQM executives lost faith

al to Haifa Chemicals. What could be done? Invention –fruit of internal SQM brainstorming– came at the most desperate moments and at the beginning of the 1990s there was the idea of a taking brave gamble: given that they couldn’t sell their product to the

Haifa Chemicals’ clients they’d set up their own plant of NPK soluble blend products in Europe and compete directly with those clients. The distributors would be by-passed and they’d sell directly to the farmers a soluble version with the added advantage of containing potassium nitrate with other nutrients needed by the crops for their growth. The idea gave a vital boost to the SQM fertilizer department. The first manufacturing plant was built in 1991 in Antwerp. The fixed formulas used were 20-20-20 (with nitrogen, phosphorous and potassium as the macro-nutrients), which took 3 – 4 years to be perfected. SQM began to sell this soluble fertilizer around the world to farmers, cooperatives and large agro-industry in huge maxibags right down to 2kg bags. Depending on the client’s requirements, and cutting out the middleman. The Haifa Chemicals stranglehold on the market was broken and SQM integrated vertically and established a model: new NPK soluble blend plants were constructed –in 2018 will be 30 in total– and several joint ventures were set up with local partners, and warehouses were opened on 5 continents. The decision to manage the company’s own blending plants was crucial to establishing the leadership that today keeps SQM in that market. Today SQM’s sales power and logistical infrastructure are unparalleled in other fertilizing companies around the world. Years later another leap forward would take place when the company developed the special formulas depending on the crop: SQM’s famous and pioneering made-to-order agronomic formula. ”

the world to large agricultural companies, cooperatives and smallscale farmers.

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30,000 TONS PER YEAR AND ALMOST 60% OF THIS COMES FROM THE NORTH OF CHILE WHERE TWO-THIRDS

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Iodine is one OF THE SCARCEST MINERALS IN THE EARTH’S CRUST

CURRENTLY THE WORLD’S LARGEST PRODUCER OF THIS PRODUCT. GLOBAL SALES OF FRESH IODINE ARE

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the waste heaps.

hile international competitors in the potassium nitrate market are relatively few, in the iodine industry there are lots of competing producers. Iodine is manufactured from brines associated with the extraction of natural gas in Japan and the US or oil extraction in Russia. Chile is the only place in the world where iodine is extracted from a mineral: caliche. So when production started, obtaining iodine from this source, there was no reference for how to do it. The technical evolution of the plants and the continual improvement of the production processes to improve the iodine quality has been a learning curve of innovation completely internal to SQM.

Up into the 1960s the old saltpeter offices on the pampa that were mining the caliche, were looking for sodium nitrate to make saltpeter. Most of the iodine was lost in the waste. The international market for iodine was very small at the time – few of the technological needs for it existed. In the saltpeter offices like Santa Laura and Humberstone a small side-line in iodine production in a shed existed to use up this waste product. And at the saltpeter offices María Elena and Pedro de Valdivia, built in 1929 and 1931 respectively by the companies Anglo and Lautaro using the innovative Guggenheim process to produce saltpeter on an industrial scale, iodine was not even a subject. In these

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Nueva Victoria Plant

2018 Thanks to new uses of iodine in medicine as an antiseptic, disinfectant or for X-rays, the demand for iodine began to grow, becoming a business opportunity.

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large manufacturing plants 12 million tons of caliche were mined each year with an average grade of 6 to 8%. Iodine was an unappreciated by-product until 1968 when the first industrial iodine-producing plant using the solutions from the nitrate leaching process was set up in the Pedro de Valdivia office. At the beginning of the 1980s, thanks to new uses for iodine in medicine as antiseptic, disinfectant and for X-rays, the demand for iodine began to grow, transforming it into a potentially lucrative product for the then state-owned Soquimich company. It was in fact the increase in demand for iodine that kept the company financially afloat during the 1980s when the high production costs of sodium nitrate and the low sales prices didn’t even cover operational costs. Iodine was a financial buffer in those years when it stopped being a by-product of saltpeter production and became a co-product with the same, or even greater, importance as the nitrates. In the 1980s SQM produced 1,600 tons of iodine a year. Every kilogram was sold for between US$12 and US$15, making it a profitable product. Iodine was also easy to sell because, like today, there are few buyers –between 20 and 30 large companies in the US, Europe and Asia– and they are fairly concentrated. The clients for sodium nitrate, on the other hand, are thousands around the world, from small-scale farmers to enormous agricultural cooperatives. All of these clients need to be supplied with shipments sent to the five continents. The commercial and logistical effort of selling iodine is much less onerous.

With the low price of sodium nitrate and the seductively high price of iodine the argument in those years was to produce more iodine without necessarily mining more caliche, and hopefully without having to invest in infrastructure. The company’s best brains met to try to work out how to do it. Until that moment the iodine plant at Pedro de Valdivia processed the solutions resulting from the saltpeter leaching vats, but there was also a percentage of iodine left over in the fines or gravel accumulated as waste heaps after the crushing of the caliche ore. In 1982, right in the middle of the privatization process the first plan was conceived: to take the iodine out of “the tail”, that is, directly from the waste heaps. It sounded like a good idea. Instead of building a big plant with the capacity for processing 9,000 cubic meters it was decided to build 3 modules, each for 3,000 cubic meters. If the first module worked then the other two would be built. The manager of the iodine plant was Juan Lagos Tonelli at the time, and because of his expertise and experience he was put in charge of the construction of the first, experimental, module. The new plant came on line in 1984. The brine that was treated in the main part of the iodine plant came from the solutions taken from the sodium nitrate leaching vats so it was completely clean, as transparent as distilled water. In contrast the brine that came into the experimental module of the plant was muddy because it came from the wasteheap, and was full of clay sediment, sterile material, rocks, chlorides and sulfates of cali-

che broken up in the water. The murky liquid quickly clogged up the pipes and filters. Faced with this inauspicious beginning, Lagos Tonelli built a pond for the brine to settle in. The solid matter sank to the bottom and the now-clear solution was sent to the experimental module. The plant saved energy because rectangular tanks were used for the liquid-solid separation process and these were designed so that the solution would flow over from one tank to another through gravity. This design also helped the later process of liquid-from-liquid extraction in which kerosine was used as the medium for separating the iodine from the brine. As the liquids arrived at the process already clear it was a lot easier to separate them.

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R MORE IODINE PER TON OF CALICHE

The new plant was a huge triumph in a moment when success was scarce at SQM. It manufactured more iodine per ton of processed caliche with a low-cost production system. So much so that soon afterwards the company’s new administration began to build a new iodine plant at Pampa Blanca using the same criteria as those used for the construction of the module processing iodine from waste fines at Pedro de Valdivia. As the first module had been so successful the second one was built. The original design proposed by Juan Lagos Tonelli had located it 80m from the first module so that, in the case of a fire, it was unlikely that both would burn. He still remembered the fire that had devoured the Pedro de Valdivia iodine plant in 1971.

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However, in the end, the new module was built next to the first one, in order to save on piping, because at the time the only pipes resistant to the highly corrosive iodine were the very expensive Dupont brand. The second module was ready in 1988, just as iodine reached a good price and production had to be increased. There was pressure to get it operational as soon as possible and certain precautions were not taken. The very first night that the module was operational a short circuit set fire to it. The kerosine caught fire and the entire plant burnt. Juan Lagos Tonelli and Mario Rojas, head of saltpeter leaching at Pedro de Valdivia, could only stand by and watch as the flames

ing vats at 45 degrees was generated in this power plant. When it burnt Pedro de Valdivia received external energy for the first time, hooking into the electrical grid of the north of Chile. The three historical power stations left in use at SQM plants, which had been active since the 1930s, were now eliminated. At the end of the 1980s and the beginning of the 1990s SQM had increased its iodine production but it was still a relatively small producer. The Japanese dominated the world market because they were the only ones producing prilled iodine – perfectly round little balls, rock hard and less than 3mm in diameter, much more resistant and easier to ma-

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THE ONLY WAY OF COMPETING ON EQUAL FOOTING WITH THE JAPANESE, LEADERS OF THE MARKET, AND TO REACH LARGER CLIENTS, WAS TO PRODUCE IODINE IN PRILL FORM.

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grew. They ran to get extinguishers but there was no way to calm the fire, and the firemen from Tocopilla arrived too late. Within minutes the flames had destroyed the two modules for producing iodine from waste material, all because the right security measures hadn’t been followed. Juan Lagos Tonelli still has a scar on his hand. In 1996 there was another fire at the Pedro de Valdivia office that marked a milestone: the power station of the saltpeter plant burnt down. This was a huge iron structure dating back to 1931, housing 5 petrol-run motors that generated the energy required by the plant. The heat that the Guggenheim process needed to maintain the solution in the leach-

nipulate than the brittle flake format that SQM and most of the other iodine producers around the world were manufacturing. The only way to compete with the Japanese and capture the market with the most important clients was to manufacture prilled iodine as well. But that was easier said than done! The Japanese had the trade secret of the format but hadn’t patented their invention. When Julio Ponce, Jorge Rodriguez and Hugo Naritelli undertook a courtesy visit to Japan in 1989 their hosts were polite and amiable, showing them all the installations apart from the prilling plant. They had even gone to trouble of covering their equipment with sheets so that the Chilean guests couldn’t

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IN 1996 THE POWER STATION OF THE PEDRO DE VALDIVIA OFFICE –A HUGE IRON CONSTRUCTION WITH 5 GENERATORS, DATING FROM 1931– BURNT DOWN. IT HAD PROVIDED THE ENERGY NEEDED BY THE SALTPETER PROCESSING PLANT.

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guess how they transformed the iodine into the tiny solid balls, all of the same size. The next year Jorge Rodriguez, head of the project division at María Elena at the time, had to travel to Atlanta to deal in person with the complaints from one of his main iodine-buying clients. The North Americans, all wearing protective face-masks, showed him the red dust that rose up when the drums containing SQM flaked iodine were emptied. The flakes were difficult to use because they would clump together in the drums, and when these were emptied the clumps of flakes would knock about and clog up the conveyor belts, and part of the iodine would sublimated. They then showed the Chilean engineer how the Japanese prilled iodine flowed smoothly out of the drums, with the little balls free-flowing down the conveyor belt. That’s the type of product they wanted, they stressed. “If you don’t change to prilled iodine, we’re going to buy from the Japanese”, they warned him. Jorge Rodriguez returned to Santiago, worried. How on earth were they going to make prilled iodine? The only thing that was clear was that they couldn’t continue to produce the iodine in flake form, as they’d lose the market.

R PRILLED IODINE MADE IN CHILE

The SQM commercial department urgently requested the company CIP to find a way –any way– of manufacturing high quality prilled iodine that didn’t clump or get damp. Armin Lauterbach and his team of chemists set about the finding a solution in the laboratory, while SQM simultaneously hired a European laboratory to design a way of manufacturing prilled iodine. And, in parallel, Jorge Rodriguez did the same in the experimental laboratory at María Elena where chemical engineers, metallurgists, mechanics and lab technicians were experimenting with various different processes and inventions in the production of nitrates and iodine, following in the long company tradition of innovation, dating from the time of Stanley Freed. Julio Ponce, company president at the time and very involved in the chemical processes, remembered that during a visit to Japan he had managed to see, half-hidden by sheeting, a large cylindrical tower several meters high. It made him think of the prilled sodium nitrate towers – a sodium nitrate form that had existed in the company for a long time. Why not try something similar with the iodine? Ponce and Jorge Rodriguez took a pipette and a bottle of hot melted iodine from the María Elena laboratory and climbed to the top of one of the old crystallizing plants, whose height was the equivalent of a 3-storey building. From the top the president of SQM, using the pipette, released droplets of liquid iodine which, as they cooled in the air, solidified and transformed into little balls.

But as they hit the ground they exploded. What made it even harder was that the rubber of the pipette melted with the hot iodine. They tried to go higher and higher but the same thing happened until Ponce had the idea of putting a drum of cold water onto the floor to see whether that would stop the balls breaking. The cold water solidified the iodine. After several hours of trial and error they managed to make four little balls of prilled iodine. Later, in the old laboratory of María Elena, armed with instruments and equipment Rodriguez and the engineer José Marín, the head of the laboratory Emilio Olivares, and his deputy Nelly Rojo, continued the experiments to prill the iodine, each time perfecting the concept a little bit more. First they melted iodine to 117 degrees and dropped it through a small metallic shower of 5 cm diameter and 1,5 m high. The hot flow of iodine was pushed through the pinholes in the “shower head” in the form of long threads which then fell through a counter-current of cold air, solidifying into little balls. The problem was that, as they fell to the floor, the little balls smashed into pieces. After a few days of tests they had the idea of putting a drum of water on the floor to avoid breaking the prills. But then the iodine dissolved in the water. Next they tried a sieve to catch the little balls and take them quickly out of the water before they could dissolve. That experiment worked better and in the sieve several hard little balls were gathered, intact. However, when they were taken out of the water

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The innovation of prilled iodine enabled the company to expand production and open the market so that SQM became the primary iodine producer in the world.

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The solar evaporation ponds allow for energy savings

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solar evaporation ponds

Considering various possibilities the CIP engineers sketched a prototype in a notebook: a funnel through which water flowed and a small pump to return the water to the top and make it fall again. Onto this they sketched a container with liquid iodine, the base of which was perforated with little holes, like a shower. When the droplets of iodine fell into the water they cooled immediately and as they jumped out of the water again they solidified, but were still warm enough to retain the humidity that would evaporate as they fell down into a receptacle. They built a prototype with a bucket, a cooking funnel, a small water pump and plastic accessories, and –something that’s extremely rare in this sort of situation– the experiment worked first time. It was an efficient system that significantly improved the yield and quality of the prills. The invention was immediately patented in Chile and in the US. The researchers at the CIP were happy with the result, but they still had to transform this home-made apparatus into an industrial-scale installation with the capacity for prilling thousands of tons of iodine a year. They designed a 30 m high tower with finely perforated walls through which jets of water were pumped so that the inside looked like a sort of snowstorm. Droplets of iodine were released from the top of the tower, cooled as they came into contact with the cold water, and then solidified as they fell until they reached the bottom in the form of solid little balls of prilled iodine.

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they were still hot, and stuck together. The unwanted “caking” again... The lab technicians grappled with the problem until, about a week later, they came to the idea of drying the little balls on absorbent kitchen paper as soon as they came out of the water. Using José Marin’s wife’s hairdryer they managed to keep the prilled balls separate without them clumping together. But the paper was stained red which meant that it had absorbed the iodine, and the balls were opaque, not shiny like the elusive Japanese version. But at least it was a first, and promising, attempt to manufacture prilled iodine at SQM. They put the sample into a jar. Some days later Julio Ponce, who hadn’t been following the experiments at María Elena, went to the Pampa and, with Jorge Rodríguez, visited him at the Directors house. We’ve worked out how to make the prilled iodine –Rodriguez told him. You’re kidding? –exclaimed Ponce, astonished. –Show me, I want to see it. So the next morning they repeated the experiment in the María Elena lab in front of Ponce, who filled 3 bottles with the sample and took them to the CIP lab in Antofagasta. There he put the bottles down onto the counter. Here, I did the job for you, now I want you to take this and improve it! Once the iodine prilling method had been invented in the María Elena laboratory, the CIP in Antofagasta considerably improved the process to give the little balls the necessary homogeneity and hardness so that they wouldn’t lose their iodine content.

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At the Nueva Victoria plant iodine production expanded quickly, transforming SQM into the world’s largest producer.

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The engineers undertook various to-scale tests in the tower in order to calculate the exact height, humidity, temperature and falling time of the iodine droplets within the tower to ensure that the prilled iodine spheres were perfectly round, resistant, shiny and the correct size. At the beginning, the iodine fell down not as expected, but quickly the formula was adjusted and in a process that did not take more than six months SQM had the prilling tower

THE LEACHING AND THE SOLAR EVAPORATION PONDS WERE TWO INNOVATIONS THAT ALLOWED FOR DRAMATIC SAVINGS IN ENERGY AND WHICH WERE LATER REPLICATED IN NUEVA VICTORIA.

a treasure

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SQM’s directors asked Mario Rojas, manager of the iodine workforce. Rojas had an idea: They’d process the iodine from the

cakes of waste and gravel next to the old nitrate plant. In this way the iodine plant at Pedro de Valdivia today employs 230 people who irrigate 400,000 square meters of waste in order to leach it and extract the remaining iodine and nitrate, in an excellent example of the recycling of both products and workforce. The solution rich in iodine is piped to the Pedro de Valdivia plant where the product is extracted and prilled yielding 1,000 tons annually to the total SQM production (8%) at minimal cost. You never know what treasures can be found on the rubbish heap! ”

ready and began to produce and sell iodine in prills of a perfect roundness and hardness. When SQM exported the first batch of prilled iodine to the US the Japanese competitors couldn’t believe it and accused the company of industrial espionage, and of copying the prilling method. However SQM had patented its iodine prilling method and defended itself before the US Patents Office. The Japanese competitors had to withdraw their lawsuit. Prilling towers was installed in Pedro de Valdivia, María Elena and Pampa Blanca. Years later, when the iodine plant was set up in Nueva Victoria it used the same system that had been the result of the research and brainstorming by SQM’s own chemists and engineers. The innovation with the prilled iodine meant –at a critical moment for the company– that SQM could compete on equal terms with the Japanese and supply the client base

María Elena Coya Sur

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Aerial view of the iodine manufacturing plant. The solutions from the heap leaching are concentrated and then crystallized in the solar evaporation ponds.

with a product of similar quality and price. It meant that the company could expand production and open up new markets, ensuring that SQM quickly became the largest iodine producer in the world. However, the exclusivity of the prilled iodine was fleeting: the towers and installations were made using factories from the region and soon other companies in Chile had copied the prototypes. Although SQM today holds 23 innovation patents for its processes and products, it keeps a lot of its inventions as trade secrets in order to avoid imitation. With the iodine prilling process mastered the challenge was to increase production, and a plant was opened at Pampa Blanca, south of Pedro de Valdivia. For the first time cold heap leaching and solar evaporation ponds were used to produce iodide which was then sent in tanks to the iodine plants at María Elena and Pedro de Valdivia. The leaching and the solar evaporation were two innovations that allowed for huge energy saving, and they were later replicated on a larger scale in the ponds at Sur Viejo at the Nueva Victoria plant. The iodide production at Pampa Blanca lasted for about 10 years until it was replaced by the actual iodide plant at Nueva Victoria, built at the end of the 1980s.

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AFTER TRIAL AND ERROR THE SQM ENGINEERS ARRIVED AT A SINGLE IODINE PRODUCT –NOW THE COMPANY’S ONLY IODINE PRODUCT– THAT IS ACCEPTED AND VALUED BY CLIENTS.

R BECOMING WORLD LEADERS

In Pedro de Valdivia and María Elena the caliche was mined about 30 km from the plant and taken by train to the installations where it was ground down and leached to get sodium nitrate, with iodine as a by-product. In Nueva Victoria it is the opposite: the caliche is

mined, then leached in heaps 1 km from the extraction site, and the brine or rich solution is sent by pipeline to the iodine plant to be extracted and prilled. At the new iodine plant at Nueva Victoria production expanded quickly, equaling the demand. From 1,600 tons per year, production increased to 2,500 tons, then 4,000, 5,000 and then 6,000 tons, in a trajectory that made SQM the largest prilled iodine producer in the world. Since the company had given more importance to iodine, the SQM technicians had been more careful about the production. They noticed that the quality of the iodine from the various offices varied significantly. In the Pedro de Valdivia, María Elena and Pampa Blanca plants it was sometimes purer and at other times more contaminated. They calculated up to 8 different levels of iodine quality. The commercial department sold these different types depending on the needs of the client. For example, during the 1990s iodine was much in demand in the photographic industry, and had to have a very low level of mercury content so as not to affect the sensitivity of the product. So for that particular client an iodine with a minimal level of mercury had to be developed. In its use in X-ray machines the iodine had to have an extremely high level of purity and safety as it would come into contact with the human body. So there was a moment in the middle of the 2000s when the company was producing 9 varieties of the product. SQM had captured the main client base around the world and was selling large amounts of

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SQM has four iodine production plants in Chile and abroad; it is both the world’s largest consumer of iodine and the largest producer of its derivatives.

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For three or four years iodine was SQM’s primary product in terms of margins. Today it represents a smaller margin than potassium nitrate but both come from

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caliche and complement each other when the market for one or the other falls.

iodine, but it was expensive to maintain 9 products in the catalogue. Why not create just one product that would fulfill all the requirements, however complicated, for all the different clients? In the blink of an eye the SQM process-engineers started to work on the project of One Iodine. The technical challenge was to obtain the highest possible level of purity and quality. After several trials they managed it and SQM now has only one type of iodine, used and highly prized by all the clients. In the last decade new technological applications, such as the use in liquid crystal

screens (LCD), have appeared on the market, which have again increased demand for iodine. In this international context, through a joint venture with Ajay Chemicals, SQM integrated itself vertically into the business to produce organic and inorganic derivatives of iodine. Today the company has 4 plants operating –two in Chile, one in the US and one in France– and it is simultaneously the world’s largest iodine consumer and producer of iodine derivatives (manufacturing more than 70 iodized derivatives). In 2007 the group Ajay Chemicals-SQM developed the brand Iodeal® which accepts responsibility and provides the company’s guarantee that any product with this stamp is manufactured under consistent processes, standard and quality-controls, irrespective of which of the company’s plants it has been produced at. Similarly, through Ajay Chemicals, or on its own, SQM is actively present in the iodine recycling business in Europe, the US and Asia. For three or four years iodine was SQM’s primary product in terms of margins. Today it represents a smaller margin for the company than potassium nitrate but both products come from the same caliche and, in a historic synergy, they complement each other when the market for one or the other falls. SQM’s diversification strategy into both fields has been one of the secrets of the company’s success, along with its creativity-driven development of production processes and commercialization of excellent but low-cost products, as the Iodine and Nitrate Operation VP, Carlos Díaz, commented. ”

More production of iodine per ton of caliche processed.

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BY THE GUGGENHEIM BROTHERS IN THE MIDDLE OF THE CHILEAN DESERT. THE MARÍA ELENA AND PEDRO DE VALDIVIA OFFICES USED THIS METHOD FOR MORE THAN 80 YEARS.

I At the Pedro de Valdivia plant the caliche falls into the grinding machine: two huge rotating manganese

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GENHEIM PROCESS, A METHOD FIRST IMPLEMENTED AT THE END OF THE 1920s IN THE SALTPETER INDUSTRY

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blades that break the blocks into smaller stones.

t was an extremely energy-intensive method in terms of electricity, manpower and processes. But it had the benefit of being hugely efficient, processing 35,000 tons daily and 12,000.000 tons annually of 7-8% grade caliche, as well as allowing for the extraction of the precious iodine as a by-product. Using this method, at the Pedro de Valdivia plant alone 1,400 to 1,500 tons of high-quality sodium nitrate were extracted every day and sent by train to the port of Tocopilla. The Guggenheim process had been developed in 1920 by the Norwegen-North American metallurgical engineer Elias Anton Cappelen-Smith, pioneer of copper production processes and metallurgical advisor to

the Guggenheim family’s mining companies which at the time owned Chuquicamata. Cappelen-Smith suggested adapting to saltpeter production the vat-leaching process that he had recently invented to treat low-quality copper. Daniel Guggenheim, who led the family’s mining and industrial interests, sold Chuquicamata in 1923 to invest in the saltpeter business using this new method. The technical innovation meant lowering leaching temperatures from 90 to 45 degrees ensuring significant energy savings, as well as allowing for caliche with a low grade of nitrates to be used (7-8% compared to the 14% caliche required by earlier methods) thereby improving production efficiency. Until

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The major innovation of the Guggenheim process was keeping the ions stable in the brine leaching in the troughs. The solution was called the “mother liquid”.

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then the nitrate deposits in Chile’s first and second regions that had a quality grade less than 14% were left un-exploited. The process was mechanized, becoming continuous, and used on an industrial scale that meant the production of natural saltpeter was once again financially competitive compared to the synthetic version. With this new method the Guggenheims built the María Elena office in 1926, and, five years later the Pedro de Valdivia office in 1931. The design and construction of the machinery, equipment and its installation, were undertaken by US engineers and workmen. The method is revolutionary in that the expertise already used in the leaching of copper was used to improve the extraction of nitrates from caliche. In fact, the installations at the copper mine Chuquicamata were so similar to those at María Elena and Pedro de Valdivia that when one of the iron bridges at Pedro de Valdivia broke it was replaced by an old one from Chuquicamata. SQM only stopped using the Guggenheim process to extract nitrates in 2015.

R THE MOTHER LIQUID

Other saltpeter offices tried to copy the processes at María Elena and Pedro de Valdivia, but the great innovation that the Guggenheims had patented was to maintain stable the ionic equilibrium of the brine that was leaching in the vats. To do this, the method’s inventors calculated the exact chemical composition of the leaching solution that had to be kept within a certain range by being re-circulated through the vats. This solution

was called the “mother liquid”, or ML as the workers at María Elena and Pedro de Valdivia called it. When the exact range of the ML concentration was kept stable the mineral didn’t break apart during leaching, allowing the nitrate and iodine to dissolve efficiently. For this reason, in both Pedro de Valdivia and María Elena, until the day the plants stopped using the method, the ML was treasured in two tanks and constantly monitored so that its range of concentration was exactly the same as that which the creator of the Guggenheim process had calculated in the 1920s. If it became necessary to replace the solution because of some operational loss –a burst pipe, for example– there was always a 9,000 cubic meter stock of ML brine where the nitrate concentration just had to be increased, to transform it into ML. Few plant’s workers understood the need for maintaining the concentration of the ML stable, but woe betide anyone who didn’t take this precaution because if the ML wasn’t looked after properly in less than a day the quality and production efficiency decreased dramatically in the vats and in the results. “Mamá needs to be looked after” the old workers would say in Pedro de Valdivia and María Elena. However, although it was efficient, the Guggenheim process became increasingly expensive because caliche is distributed superficially on the pampa at a maximum depth of 2,5 m, so that thousands of hectares had to be mined annually. It is a type of mining that is very superficial and very widespread,

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meaning that the more caliche was mined the further the point of extraction was from the processing plant. 60% of the Guggenheim’s process operational costs were in mining, done in strips along the railway lines. In the 1930s the strips were right next to the railway line, but by 2015 the extraction points were 40 km south of Pedro de Valdivia; and a similar distance for the El Toco mine that supplied María Elena. In the 1980s, during the privatization of Soquimich, changes were implemented to the most expensive parts of the Guggenheim process. One of those changes was to replace the strip mining system with its enormous dredgers and 40 archaic locomotives, with a

system of trucks and front-loaders. However, the cost of maintaining the now-ancient steel contraptions at the María Elena and Pedro de Valdivia plants remained onerous. At Pedro de Valdivia, the same equipment was used from 1931 until the day the plant closed. Every day 1,000 wagons of caliche arrived at Pedro de Valdivia from the mine, in convoys of 33 wagons pulled by a diesel locomotive, with each wagon carrying 30 tons of caliche. These wagons were then operated by brakemen: when the convoy arrived in the yard, wich were slightly inclined, the brakemen took off the brakes of the wagons, so that they would slide into a cradle (the name came

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Until Pedro de Valdivia closed, the crystallization troughs were a key part of the process. It was an efficient system but one that became expensive over time.

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Caliche wagons

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1,000 wagons arrived every day at Pedro de Valdivia from the mine, each one carrying 30 tons of caliche that had to be ground up.

from its half-cylinder shape) which would receive and held the wagon, turn it around and pour the caliche onto two enormous rotating manganese blades that ground the gigantic blocks into 8-inch chunks. This primary grinding machine was the most expensive part of the process as it absorbed 70% of the plant’s operational costs. At least 30% of the caliche was a very fine powder which had to be separated, processed and cleaned. This fine material also had to be leached because of its high concentration of nitrates and iodine, but the content of sulfate prevented it from being leached at the average temperature of 40-45 degrees like the more solid caliche, so the material had to be shaken violently at 90 degrees, which was very energy intensive. In 1984, right in the middle of the company’s crisis, in one of the numerous measures taken to reduce costs the plant stopped treating this fine material. Instead it was mixed with water and poured into a waste deposit. However, the installations of the Guggenheim process were still pharaonic. In the ore-grinding section of the plant there were several hundred workers and a team of cleaners, completely masked, keeping the dust out of the tunnels through which the caliche was transported on conveyor belts. If even a few minutes went by without the tunnels being cleaned the material would block the bearings and the conveyor belt would stop working. Modern technology uses extractor fans to avoid the accumulation of dust, but at that time the only option was this army of workers.

The ore-grinding section was permanently covered in a cloud of dust, and the noise of the rotating blades never stopped. It was impossible to breathe without face masks. The cleaners would typically remove 120 tons of waste, but another 150 tons floated in the air. Outside in the unloading yard there was less dust but the rhythm of work was frenetic and implacable: 60 wagons an hour –one per minute– emptied their loads into the grinding machine. The 20 brakemen on each shift had 60 seconds to push the full wagon down to the grinding machine, empty it, turn it in the cradle, push it back up the yard so that it could be grabbed by one of the 6 machinists who would send it on its way back to the mine. It was a dangerous, completely manual process, as Mario Rojas, head of the plant at the time, remembers. Operations continued like this until 1990, until Rojas designed and installed a new unloading yard, horizontal and much safer. He went to the US to buy the equipment that would place the wagons automatically into the cradle without the need for a brakeman. His budget wasn’t enough to buy everything he needed so the cabins of some of the locomotives of the mine were cut and adapted to fit into the cradle. After the primary grinding the chunks of caliche continued on their way on conveyor belts to a secondary grinding machine, and then a third, until the material was in halfinch chunks, ready to be taken into the heart of the system: the leaching vats. The advantage of this system, even compared to more

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modern ones, is that all the sodium nitrate could be extracted from the caliche in only 70 hours. Every vat was filled with 11,000 tons of caliche using conveyor belts, and the famous ML was added. This meant that despite the caliche’s high content of salts, the nitrate was selectively leached and concentrated. It was a process of ten stages and ten vats. Each vat was filled with caliche and 4,500 cubic meters of ML before being heated to 45 degrees. The petrol consumption at Pedro de Valdivia alone cost US$1,000.000 a month! About 70 hours later the nitrate and iodine had finished leaching out and the inert,

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The leaching vats were the heart of the Guggenheim process. Their advantage was that they could extract all the sodium nitrate from caliche in only 70 hours.

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or waste, material had to be removed from each vat using enormous dredgers, loaded onto trucks and thrown onto a slag heap before the whole process could be started again. Given that the plant never stopped working the 10 vats were at different stages of the pro-

fell under its own weight to the bottom of the crystallizers and the clean solution was returned to the leaching process. The nitrate in pulp form –resembling refined sugar in consistency and color– was the placed in a centrifuge, much like in sugar-processing

THE PEDRO DE VALDIVIA OFFICE OPERATED FOR 84 YEARS WITH ITS ORIGINAL INSTALLATIONS AND TECHNOLOGY FROM THE PAST CENTURY. THE FACT THAT IT FUNCTIONED AT MAXIMUM OUTPUT AND EFFICIENCY ALMOST ALL YEAR ROUND WAS THANKS TO SQM AND ITS VARIOUS GENERATIONS OF WORKERS. 145

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The solutions were cooled in the crystallization plants using a complex system of enormous compressors, condensers and evaporators.

cess: while some were being filled others were beginning the leaching process; some were right in the middle of the cycle and others were being emptied. The shifting of fresh material into vats and waste material out was an enormous operation. The process then continued with the pumping of the nitrate-rich solutions into huge crystallization plants at María Elena and Pedro de Valdivia, where the solutions were cooled to low temperatures so that the sodium nitrate would crystallize. In order to cool the solution from 45 to 10 degrees ammonia was used to capture the caloric energy in a complex system of enormous compressors, condensers and evaporators, operating under strict safety rules. An ammonia leak could be extremely toxic. A US specialist in cooling processes who visited the crystallization plant in the 1990s couldn’t believe that the old equipment and compressors were still working perfectly. “They could be in a museum”, he commented. The last step in the process was to crystallize and thicken the solution. The nitrate

plants. In fact, Soquimich bought several automatic centrifuges from Iansa, a sugar refining company. Both plants had their own power stations, huge buildings with 5 diesel combustion generators, each the size of a house, capable of generating the energy for the plant, the mine and the work camp. The generators produced gas of 500 degrees, which, through heat exchangers, was taken to the ML that captured the energy to use it in the leaching vats. The entire electrical system was originally from General Electric, with components which, for a time, were no longer being manufactured, so a maintenance crew built the necessary pieces so that steel monster would never stop processing its daily 36,000 tons of caliche. The power station at Pedro de Valdivia worked uninterrupted from 1931 to 1996, when it burnt down and the plant was connected to the country’s electrical grid. Pedro de Valdivia and María Elena were giant hulks that worked 24 hours per day, ev-

ery day of the year except Christmas and New Year. In Pedro de Valdivia alone, using exclusively the Guggenheim process, 450,000 tons of high quality sodium nitrate were produced annually during the years that the plant was operational. It was to the credit of SQM and its various generations of workers that the plant, with technology from the past century, and whose original structure was in impeccable condition, operated at maximum efficiency and capacity for 84 years.

R THE LONG ROAD TO HEAP LEACHING

In Chile the first time heap leaching was used was in the 1980s, for processing minerals in copper. In heap leaching the material is piled high into heaps that are watered for

months with ambient-temperature water until the mineral of the copper oxide begins to leach out. The SQM engineers, in a moment when the company had to tighten its belt and was looking for ways to optimize resources, considered trying something similar with the caliche. After all, the leaching of copper oxide was comparable to what SQM did with the leaching of nitrates. The company had nothing to lose: efforts to reduce costs in the Guggenheim process at Pedro de Valdivia and María Elena weren’t bearing fruit, and the heap leaching process could potentially be ten times cheaper. Convinced that this was a more competitive technology that could help reduce costs, in the middle of the 1980s SQM began the

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Convinced that it was a competitive technology that could bring costs down, in the 1980s SQM began the first trials with cold heap leaching.

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Solar evaporation ponds

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Given that the solution obtained from the heaps was weak in iodine and nitrate content, it had to be concentrated in solar evaporating ponds.

first trials of cold heap leaching. Caliche is piled onto a carpet of high-density polyethylene into of 6 to 10 m high, 90 m wide and 500 m long. Sprinklers or a drip irrigation system are then used on the top part of the heap using water at ambient temperature so that the leaching process slowly occurs. The solutions rich in dissolved salts run off into impermeable drains on the sides of the heaps and flow to the solar evaporation ponds to be concentrated and then crystallized. To bring about this change of technology in 1986 SQM hired Fernando Porcile, an engineer who had for many years been general manager of Chuquicamata, as head of operations. He was strongly in favor of adapting the heap leaching system, already used in the copper mining industry, to caliche and he led the first trials with 6 m high heaps, piled up at the entrance to Coya Sur. He brought caliche in trucks from the mine more than 20 km away to pile onto the experimental heaps, each with at least 200,000 tons of caliche per heap. An irrigation system was laid onto the top of each heap and they were watered for several months in the hope that the water would leach the caliche slowly, releasing the nitrate-rich solutions into the drains on the sides of the heaps. However, the experiment turned to disaster: the heaps didn’t leach properly as the water formed little channels inside, which consequently dried out and the caliche wasn’t impregnated uniformly with water from top to bottom. Only a minimal amount of nitrate was recovered.

At least the failure allowed the engineers to see the difference between copper leaching and caliche leaching. With copper the ore is much more compact and isn’t eroded by the movement of the water. Usually this mineral is treated with sulfuric acid and other solutions that dissolve it, penetrating the rock but leaving it intact. Caliche, on the other hand, contains at least 50% salts so it quickly dissolves with water and disintegrates, but as it does so the heap becomes impermeable. This was a new challenge: to find the formula to leach the caliche in heaps, given that Soquimich was the only company producing nitrate from caliche. The innovation that would allow heap leaching of caliche would have to be another invention from within the company, requiring patience, perseverance, and a deep understanding of physics, chemistry and geology. During later trials different heights of heaps were tested: 6, 7, 8 or even 9 m high, to hit upon the formula that would be technically possible and economically viable. The higher the heap, the more caliche could be leached using the same base preparation cost, which included water-proofing the ground, installing the draining gutters, and piling the material into the heaps. But on the other hand, a higher heap meant that the leaching process was more difficult because the ore broke up and remained dry. In a long process of trial and error, in which many engineers and processing experts, some with 20 years experience, participated, they realized which techniques worked with caliche. For example, they dis-

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covered that the best irrigation systems were the micro-sprinkler that scattered tiny drops of water, and the drip-irrigation system with microscopic drops. The irrigation had to be slow and gentle; if too much water was applied the heap could collapse, which meant losing 500,000 tons of valuable caliche. Heap leaching required the patience of a saint: even a month later the heap could appear unchanged, with no solutions running through its drains. When finally the first trickle appeared in the gutters and it seemed that everything was working well, the solution run off into accumulating tanks. However, this

solution was much weaker in iodine and nitrate content than that which came out of the vats of the Guggenheim process, so it had to be taken to solar evaporation ponds to increase the concentration. After Porcile’s retirement from SQM, at the beginning of the 1990s the engineer expert in leaching Jaime Anfruns, who had experimented with ground ore for heap leaching, was hired. Heaps of caliche from the ore-grinding plant were piled up near María Elena. The output increased because it was easier to leach ore with small-sized rocks, but even then the process didn’t pay for itself be-

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The development of the leaching heaps was another innovation from inside the company. It required significant knowledge of physics, chemistry and geology.

Heap leaching Construction process Nueva Victoria

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cause the cost of grinding up the caliche was too high. For the heap leaching of caliche to work the engineers had to get to the heart of the caliche: the water had to penetrate right to the center of the ore from all sides in order to extract all the iodine and nitrate, otherwise only the surface area of the bits of ore would be leached. The only way to ensure a profound penetration of the water was

This process was first made operational on an industrial scale at Pampa Blanca and Nueva Victoria to cover its greater need for nitrate and iodine salts. The heaps were piled up close to the mine, 1 km away from the extraction site, and once leached, the io-

through slow and gentle irrigation, especially with the larger saltpeter rocks that were in the heaps after the grinding process. So in order to reduce costs the grinding process had to be skipped and the ore blast-crushed directly on the heaps. The blasting design and the types of explosives were adapted so that the ore would be blasted into 50 cm and not 1 m pieces, as the Guggenheim process permitted.

The solar evaporation ponds were first used in Coya Sur in the 1950s to concentrate the weak solutions from the treatment of waste at Pedro de Valdivia and María Elena and to extract the nitrate content from that waste, separating it from other salts such as

HEAP LEACHING IS A CHEAPER METHOD THAN THE GUGGENHEIM PROCESS BUT IT TAKES 6-12 MONTHS FOR A HEAP TO BE FINISHED. IN NUEVA VICTORIA TECHNOLOGY WAS DEVELOPED

the intermediary salts.

TO MONITOR THE OUTPUT FROM THE START AND ANTICIPATE ANY PROBLEMS. dine and nitrate-rich solutions, called brines, were piped to the iodine plants. In María Elena and Pedro de Valdivia the Guggenheim process was still used in parallel, and this required the transportation of blasted ore 30 km from the mine to the plant. Heap leaching is 10 times cheaper than the Guggenheim process but much slower; it can take 6 to 12 months to complete a heap. In Nueva Victoria new technology was developed to monitor the output from the early stages of leaching and to anticipate possible problems. Throughout the process different sections of the heap are removed in columns and the potential output is measured in a laboratory so productivity is constantly improving and lower-quality caliche can be used: 4.5% compared to the minimum 7% required by the Guggenheim process. A key innovation in the process was the systematic incorporation of the solar evaporation ponds to concentrate the nitrate solutions and thereby recuperate as much nitrate and iodine as possible.

sodium chloride. The technology had been developed by Stanley Freed who was also the inventor of Freed cement, which was used to waterproof the ponds. At the beginning of the 1990s Freed cement was replaced by synthetic membranes that were cheaper and totally waterproofed the ponds. The ponds could be significantly increased in size, and their lining was changed, but they still worked the same way, as they do today, using solar radiation to evaporate the water and concentrate the brine, from one pond to the next, obtaining solutions rich in sodium nitrate, potassium chloride and iodine that were then processed at Coya Sur. The potassium, present in small quantities in the caliche as potassium chloride, was never extracted with the Guggenheim process, but with the solar evaporation ponds potassium nitrate could be extracted. These days, 3D models are used to calculate the exact moment when the solution should be moved from one pond to another. The process has become so efficient that

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In Coya Sur 3D models are used to calculate the exact moment in which the solution should be moved from one evaporation pond to the next.

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The productivity of the heap leaching is constantly improving and now allows for the use of lower-grade caliche: 4.5% versus the minimum 7% required by the Guggenheim process.

whereas previously only 10% of the potassium chloride in caliche could be recuperated, these days 35% is extracted in all, and more than 70% of the sodium nitrate. With the use of the heap leaching technology the solar evaporation ponds began to be used on a large scale to concentrate the solutions and harvest the by-product salts whose content in this case is a mixture of sodium nitrate and sodium chloride, in contrast to the pure sodium nitrate produced through the Guggenheim vats. These salts are later used as raw material in the potassium nitrate production plants. At Pedro de Valdivia and María Elena 98% of the electrical and caloric energy used came from petrol, in the heap leaching and the solar evaporation the sun provides 98% of the energy required. The method also eliminated environmental problems as the ore-grinding installations produced ter-

2015 the saltpeter office at Pedro de Valdivia closed down, bringing to an end the Guggenheim era. However, part of the installations are still used to process iodine. The quality and purity of the product had maintained Pedro de Valdivia and María Elena in operation for more than 80 years, but in 2013 the technology at the new potassium nitrate plants no longer needed high grade raw materials but could work with the above-mentioned recuperated salts, which meant for the first time producing technically high quality potassium nitrate from caliche with only 4% nitrate, something that was unimaginable with the old Paradas, Shanks and Guggenheim systems that were now obsolete. The fact that this new heap leaching and evaporation process for obtaining the nitrates and the iodine doesn’t have a specific name that identifies one person as its inventor, is a reflection of the new spirit at the company, where, rather

A HAPPY CONVERGENCE OF IMPROVEMENTS AND INNOVATIONS OVER 15 YEARS HAS MADE THE HEAP LEACHING PROCESS COMPETITIVE AND FINANCIALLY VIABLE. rible dust pollution, which is today a thing of the past. It took between 10 and 15 years for the small experimental heaps of 50,000 tons to grow to the current heaps of a million tons. A happy convergence of improvements and innovations over these years has made the process competitive and cost effective. In fact, in 2009 production at María Elena was stopped and replaced by the process of heap leaching and solar evaporation ponds. In

than depending on the genius of one individual, there is a continuous process of improvement and innovation on the part of all those working at the company regardless of rank. However, the new process wouldn’t be enough without the development in parallel of the technology for the use of low grade nitrate as a raw material in plants specially designed for the production of potassium nitrate, thereby maximizing the efficiency of the new process. ”

The spirit of Pedro de Valdivia

On the 22nd November 2015, the day that Pedro de Valdivia partly closed down, the workers created life-sized dolls, dressed them in their uniforms complete with masks and safety helmets, and placed them next to the ore-grinding plant, on the conveyor belts, and all around the work site. They said they were leaving their souls there, because most of the workers had dedicated 20, 30 or even 40 years of their life to the Pedro de Valdivia saltpeter office. ”

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WAS TO BUILD NEW PLANTS AT COYA SUR. THIS REDUCED COSTS, INCREASED PRODUCTION CAPACITY AND ALLOWED THE COMPANY TO MANUFACTURE POTASSIUM NITRATE TO A TECHNICAL LEVEL UNPARALLELED IN THE WORLD.

T The potassium nitrate plant at Coya Sur was soon too small to supply the growing market for KNO3.

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In 1994 the NPT plant (Technical Potassium Nitrate Plant) was inaugurated.

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One of the main INNOVATIONS DEVELOPED BY THE COMPANY’S CIP (“CENTER FOR

INNOVATION AND PROCESSES”) BASED IN ANTOFAGASTA, TO SUPPLY THE GROWING DEMAND FOR POTASSIUM NITRATE,

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been a challenge.

o start with, the SQM professionals – many of whom had PhDs in chemistry– built first a pilot plant to establish the full range of variables, and later, in 1986, they built the plant that would produce potassium nitrate at Coya Sur. The plant used solutions rich in sodium nitrate coming from the processes at María Elena and Pedro de Valdivia, then potassium chloride imported from Canada, Israel or Jordan was added, and in the reactors the chemical reaction produced potassium nitrate. The technology was very simple: the crystallization occurred by lowering the temperatures without altering the atmospheric pressure in the crystallizers, and then the potassium ni-

trate was prilled in the prilling plant at María Elena. At first it was just called the Potassium Nitrate Plant, given that it was the only one that existed. However over time, and to differentiate it from the other plants opening up, it was called the Atmospheric Potassium Nitrate Plant, or simply “La Atmosférica”. This plant originally had an annual production capacity of 100,000 MT, but in 1989 it was increased to 250,000, and today it has a nominal production capacity of 350,000 MT annually. It was from this plant that the potassium nitrate –KNO3– was sent out to the international market, and thanks to this plant that SQM could perfect the technical knowhow needed to support the product commer-

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After various tests high-quality crystallized potassium nitrate was produced at the NPT Plant thanks to a drying process and anti-coagulating agent developed by SQM.

cially. It’s hard to find out a better example of the benefits of a new product being introduced by a company than the potassium nitrate developed by SQM. Shortly afterwards the plant was already too small to supply the growing market for KNO3, especially with the purer and more water-soluble quality grade being requested by the demanding market of fertigation, an expanding area of agriculture. So in the early 1990s SQM decided to build a second plant specializing in high-purity –or technical grade– KNO3 that it called the NPT Plant (Technical Potassium Nitrate Plant). At that time the potassium nitrate being produced had a purity grade of 99.3%. The big difference with the processes of the first plant, aside from the increased automation, was that here the atmospheric pressure in the crystallizers was reduced so that they operated a vacuum to improve the crystallization of the salts. The plant used as raw materials the sodium nitrate (98% purity) from María Elena and Pedro de Valdivia, and the imported potassium chloride (95% purity). The plant was opened in 1994 with a limited production capacity of 300 tons a day (100,000 MT annually). It was relatively small, because it was the company’s first move into producing and commercializing pure potassium nitrate – it was like an experimental plant but on an industrial scale. Given that it was developed using only expertise and innovation from within the company, without external references, it was a particularly tricky challenge. The old plants, like the crystallizing one at Coya Sur from 1951, worked with ready-made

brine, while for this process brine had to be manufactured from solid raw ingredients, which needed equipment and reactors that were still unknown to the company: they had to be capable of a chemical reaction of sodium nitrate and potassium chloride resulting in high-grade potassium nitrate, while at the same time eliminating from the system the sodium chloride as a solid waste by-product. It turned out to be an expensive process because it needed very pure raw materials. Three years before the plant’s opening the process was still mired in failure, desperation and uncertainty as Armin Lauterbach and his team of engineers tried in vain to make the NPT plant work. The company had invested more than US$50,000.000, which at the time was an exorbitant sum for SQM, and this put a lot of pressure on the team. The commercial executives had already begun to offer the first shipments of Technical Potassium Nitrate, but the future looked bleak: the thickeners weren’t working, and when this hurdle was finally overcome the filters blocked or the vacuum crystallizers didn’t work properly. At the same time the company was developing a new drying plant to maintain the potassium nitrate crystals dry so that they didn’t solidify but maintained their free flowing texture – the ghost of the “caking” disaster hung over the head of the engineers at Coya Sur. After several attempts, in 1993, crystallized potassium nitrate was manufactured at the NPT plant thanks to a new drying process and an anti-caking owned by SQM and developed by the CIP. Finally, in 1994, they started to produce a high-grade purity product, water soluble and

and with sufficient resistance to caking to be able to export it in bulk. The three years it took to get in operation the NPT plant, costed the no-longer-soyouthful top management of SQM some grey hairs and lost sleep! It was a long and complicated process, full of twists and turns and unexpected complications, technical challenges and chemical difficulties. But thanks to this technological development Coya Sur now has the plants NPT1, NPT2, NPT3 – and it’s in the process of building NPT4.

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R THE NEW PRILLING PLANT

It wasn’t only the demand for the soluble product used in fertigation that had grown, but also for the format directly applicable to the soil in prilled form. The old prilling plant at María Elena had lost efficiency and capacity because the technology was obsolete, so it was decided to build a new one. In 2007 the prilling plant at Coya Sur was opened, ensuring a regular supply to the market and leaving the old María Elena plant as a piece of history in the landscape. All the products are now prilled at Coya Sur. The company now had the technical knowledge and expertise for the production process of potassium nitrate from pure, high-quality raw materials. The challenge now was to repeat that process and the necessary technology to operate with low-grade nitrates –much cheaper to produce– and still obtain a high-quality end result. At the same time the company was moving from the Guggenheim process of leaching in vats to the heap leaching and solar evaporation ponds.

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Thanks to technological developments Coya Sur has NPT1, NPT2 and NPT3. NPT4 is being built.

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Solar evaporation method, in use since 1951

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NPT3 was designed specifically to use lowgrade potassium and nitrate, enabling significant economic saving.

In the Nueva Victoria manufacturing plant heap leaching was already in use, and the solutions were concentrated in solar evaporation ponds to obtain low-grade salts with a 50% sodium nitrate content. There were also intermediary salts with 40% purity available from the Atacama salt flats. So it became clear that a new plant was necessary, with the capacity to use these low-grade potassium and nitrate salts as raw materials. To be able to adapt to using low-grade raw materials the new plant would have to be capable of dealing with more waste, so everything would have to be significantly larger: the size of the equipment and machines, the volume of feeding of the raw material, etc.

SQM faced the challenge by building NPT3, with an annual production capacity of 300,000 tons. The plant began operating in 2011; it was specifically designed to use low grade nitrates and potassium, which meant lower upstream costs, in line with the savings made by using heap leaching and the cheaper intermediary salts from the Atacama salt flats. Today the installed production capacity of all the plants at Coya Sur amounts to 950,000 MT annually. This –more than any other– was probably the watershed moment that allowed SQM to make the competitive leap to producing technical grade potassium nitrate of a quality that really is unsurpassed, a KNO3 of 99.9% purity: reduction of costs in the raw materials, concentration of value in the final refinement process, and the use of low-grade potassium and sodium salts –cheaper to produce– coming from the heap leaching at Nueva Victoria and from the Atacama salt flats. In 2011 SQM opened its own potassium nitrate production plant in China in a joint venture with the Migao Corporation. SQM’s presence on the Asian market consequently increased. All these different paths led to SQM today being the principal producer of potassium nitrate in the world, with a estimated market share of 48%. Over the last six years, as SQM has been competing in the rigorous market of soluble products for fertigation, that are used mainly in Europe in hydroponic and greenhouse farming, the company’s innovations have

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been focused on product-refining plants. The existing legislation demanded that impurities in the product be reduced by a third, and at the same time demand for high purity nitrate was growing for use in the solar energy industry. Using nitrates to generate electricity is a concept that has been gaining ground recently, combined with the public-private initiatives to shift energy provision to renewable energies. The principle is the following: the so-called solar salts –a mixture of potassium nitrate and sodium nitrate – are the material in which the thermal energy is stored. These salts melt at high temperatures produced by solar energy, concentrating that energy for several hours to be later released into the plant through a cooling process that generates high pressure steam and activates the turbines producing electricity during the night or on cloudy days. Then electricity is produced con-

production, the other Coya Sur plants would be closed. After a year of work with engineering companies, and a significant financial investment, the basic plans were ready. But the investment in the overall project was so high that the Vice-president of operations, Carlos Díaz, felt it was unviable, especially if it meant closing the other plants. He suggested that instead of building a new plant the company should find a new way of producing highly-refined nitrates at the existing plants. The process engineers wondered how on earth they were going to do that... “I don’t know. You tell me, invent something!” said the boss, shrugging his shoulders. The three process engineers in charge of the project discussed how to resolve the problem –almost an enigma– that had been laid at their door. After turning the dilemma over in their minds, considering it from all angles and brainstorming all and any possible solutions,

SQM IS THE WORLD’S LARGEST PRODUCER OF TECHNICAL GRADE POTASSIUM NITRATE AND, WITH 48%, IS THE INTERNATIONAL MARKET LEADER. tinuously, whether there is sunlight or not. Although SQM produced large quantities of nitrates from the heap leaching method, the product wasn’t sufficiently high-grade. When this demand for more nitrates became clear the company’s first reaction was to propose a new plant at Coya Sur with an annual production capacity of 500,000 tons of highly-refined products. The engineers quickly designed the project they called NPT4, with the aim that once this plant reached capacity

they looked again at the plans for the new plant, and decided to adapt part of them to the existing plants. It was decided to build two product refinement modules that would be integrated into NPT2 and NPT3. The design had to be as cheap as possible, so the plans for the proposed new plant were simplified as much as possible. These two modules would, it was calculated, cost 30 times less than the original project and would refine the same

500,000 tons of product, which was at the time 75% of the total production. The concept was on/off: if the refineries were not in use the modules would be disconnected with minimal financial loss. The plants would operate as usual and the modules would be part of the end of the process, refining the product in additional steps including washing and centrifuging to purify the product. The SQM process engineers set up a pilot plant at Coya Sur –with the same design as the proposed large plant– with a hydrocyclone, centrifuge, reactors and pumps, all to scale. They took samples of nitrates from the plants and tested the refining process in a continuous operation, one ton per day. For two months the product was refined in the pilot plant while the engineers drew up the designs and an external engineering firm worked on the basic final engineering plans of the final plant. So when they presented the project with a flow diagram, with the economic balance and a cost-estimation, they could also show the results of the pilot which showed an 80% efficiency in the cleaning process. Regulations at the time required a reduction of impurity of three grades, and they had managed to reduce it by five times! After this impressive presentation the project was green-lit and construction began. The engineers calculated that the building would take about 18 months, but their boss exclaimed What? 18 months? You’re crazy! We need it to be operative by the end of the year. They had eight months to build the first refinery plant at NPT3.

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The use of nitrates for energy production is increasingly common, which goes hand-in-hand with the public-private initiatives for shifting to renewable energy sources. ★

Solar salts are the material in which thermal energy is stored. Its great advantage is that it allows for continuous electricity production even in the absence of light or sunlight.

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To produce highly refined nitrates in the existing plants two refinery modules were built and integrated into NPT2 and NPT3.

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Meanwhile Ivan Catalán, head of the pilot plant, was the only one who knew how to work this new invention, so he was put in charge with four operators. Visibly nervous, they started operations on the new module of NPT3, but the first day was more catastrophic than even they had feared: the machinery simply wouldn’t start. The salts remained trapped in the reactor and wouldn’t move. Nobody could understand what was going on. And of course the inevitable doom-mongering comments began: “I knew this was going to happen... It was obvious this thing would never work”. Or “That’s what happens when we do the engineering in-house at Soqui”. Mutterings that didn’t help at all, and only dragged everyone down, stressing out the workers and unnerving the managers, who were convinced that the investment, however modest it had been, would be lost before the module could be made to work. And to cap it all, they were already building a second one! The exchange of accusatory looks began – this seemed to be cooking up into a real fiasco. In the following hustle and bustle and urgent hunt for a solution, one of the plant’s materials suppliers was contacted, and the salesman of the reactors appeared. He took one look at the reactor and said “that needs to be taken apart”. The operators took it apart and removed the mixer, at which point the provider said “that looks too small”. Accusations rained down on him: “Why did you sell us one that’s too small?” It turned out that they’d bought two mixers, one for

NPT2 and one for NPT3, and they’d installed the wrong one in the wrong plant, which is why the mixers couldn’t mix, and the solid materials stayed at the bottom. The correct part was brought from the warehouse, and within 12 hours the plant was

that produced sodium nitrate with the Guggenheim process were no longer functioning. There are millions of tons of waste heaps that had accumulated over the 80 years that the saltpeter offices were operating. These heaps are now re-processed by SQM to ex-

SQM BELIEVES IN RENEWING THE TECHNOLOGY OF EXISTING INSTALLATIONS SO THAT THE COMPANY CAN BE MORE PRODUCTIVE, THE PRODUCTS OF HIGHER QUALITY, AND THE WORKFORCE CAN HAVE BETTER WORKING CONDITIONS AS LONG AS THE ECONOMIC IMPACT IS MANAGED. 165

working perfectly. The entire process had been done in-house at SQM, from concept to installation, and the design was entirely unique to SQM, with minimal external engineering input. What could have required a whole new plant was achieved by adapting the existing plants, and with a relatively small investment. That is part of the vision that SQM engineers have in their DNA: how to upgrade technology in existing installations so that the company is more productive and the products are of a better quality, without significantly impacting on the cost, while simultaneously offering better working conditions to the workforce. In as far as new technologies and innovations were being introduced into the production processes, the operators were no longer having to move wagons or pipes but were now operating machines or controlling the processes on screens. The idea of taking advantage of existing installations is also applied to María Elena and Pedro de Valdivia where the old plants

tract a percentage of the sodium nitrate, potassium chloride, and iodine that the old technology of waste leaching had not been able to extract. Now, thanks to the SQM’s ability to cold leach the material, these vat heaps are watered by drip irrigation like the heap leaching but without the associated cost of mining the material. The solutions are piped first to the iodine plant and then to the potassium nitrate plants at Coya Sur. These waste heaps provide an impressive 10% of SQM’s production. Today the NPT plants at Coya Sur generate their own waste heaps of material, rich in sodium chloride and sulfates. They’re waste material now, but in the future... Who knows? ”

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The solutions from the leaching process are piped to the iodine plant and then to the potassium nitrate plants at Coya Sur.

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The ATM, Atmospheric Plant

The old crystallization plant, much loved for being the historic SQM plant, had started operating in Coya Sur in 1951 using the technology of crystallizing at atmospheric pressure. The plant was inaugurated with the solar evaporation ponds at Coya Sur that concentrated the diluted brines with its low nitrate content that had come from the treatment of finewaste material at María Elena and Pedro de Valdivia. Today the plant is called the KNO3 Atmospheric Production Plant, also known as “La Atmosférica” or ATM. At this plant, after the chemical reaction that produces the potassium nitrate in solution, this is cooled so that the KNO3 crystallizes. This was the first plant to produce potassium nitrate and potassium saltpeter. ”

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WAS OBTAINING ABUNDANT QUANTITIES OF SODIUM NITRATE FROM THE CALICHE IN THE PAMPA BUT HAD TO IMPORT ALL THE POTASSIUM CHLORIDE, AND WHEN THE PRICE OF THIS PRODUCT CHANGED THE EFFECT WAS IMMEDIATELY FELT.

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t that point Chile wasn’t a producer of potassium chloride and SQM had to import it from Russia, Israel, Jordan and above all, Canada. But in 1990 the largest potassium chloride producer in the world –who would soon become a shareholder in SQM–, the Canadian Potash Corporation of Saskatchewan, PCS (renamed Nutrien after the merger with Agrium), was privatized and began to produce less potassium chloride. This meant that prices rose. Bill Doyle, the new CEO of PCS, was known as “Five Dollar Bill” because the price of potassium chloride rose by $5 every month. At SQM, who now imported 250,000 tons of potassium chloride annually to manufac-

ture its star product, they were desperate. Just as the company’s profits were rising, this brought them plummeting down again: with costs like these the margins were derisory. Nor could SQM pass the cost on to their final product because the Israeli company Haifa Chemicals still dominated the speciality-fertilizer market and competed closely with SQM. Haifa Chemicals was unaffected by the increase in price of the Canadian product as they had access to the Dead Sea, the largest source of potassium chloride in the Middle East, and their most important clients were nearby, in Europe. Competing at such a disadvantage was increasingly difficult for SQM.

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The Atacama salt flats are the third largest in in Bolivia and Salinas Grandes in Argentina. Atacama salt flats

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Eugenio Ponce was obsessed with the price dependence on such a vital raw material. He met with Frank Biot and said “We have to buy cheaper potassium chloride, no matter what”, and Biot understood. He took a plane to Jordan and bought a vessel with 30,000 tons of potassium chloride 10% cheaper than the price established with SQM’s suppliers. However, prices rose frantically pulled up by the Canadians, and nothing could bring them down. SQM saw that it needed a long-term solution for its supply of potassium chloride. It turned out that the answer was 200 km away, 2,300 m above sea level! The Atacama salt flats, located in a geographical depression between the Andes mountains and the Domeyko range, in the Chilean region of Antofagasta, contain enormous deposits of mineral salts that have accumulated over thousands of years on its

THE ATACAMA SALT FLATS, IN A GEOGRAPHICAL DEPRESSION BETWEEN THE ANDES AND THE DOMEYKO RANGE IN THE CHILEAN REGION OF ANTOFAGASTA, CONTAIN ENORMOUS DEPOSITS OF MINERAL SALTS THAT HAVE ACCUMULATED OVER THOUSANDS OF YEARS OVER A 280,000 KM SURFACE AND TO 1,500 M DEPTH. 280,000 km surface, and its 1,500 m depth. It is the third largest salt flat in the world after Uyuni in Bolivia and Salinas Grandes in Argentina. Because of its form as a closed basin, the Andean melt waters bring salts down that filter into the subterranean salt flat, which is why it contains mineral-rich brine despite being in an area with near-zero rainfall.

It had been known for a while that there were reserves of potassium chloride in enough quantities to replace imports, and the information available also indicated large reserves of commercially exploitable lithium as well as other sulfates and boron. Some years previously, in 1986, the staterun development agency –Corfo, Corporación de Fomento de la Producción– had held a public tender to exploit the resources of the salt flats. At that point SQM was in the middle of privatization and undergoing a brutal cost reduction operation, and although the company was interested in the Atacama salt flats, especially because of the potassium chloride, the financial crisis of the previous years made it impossible for the company to bid. The tender was awarded to the consortium made up of the US company Amax and the Chilean company Molymet. In order to undertake the project a company was set up called the Sociedad Minera Salar de Atacama Limitada (Minsal) with Corfo having a 25% share and the winning companies taking the other 75% (Amax 63.75% and Molymet 11.25%). For 12 years Amax and Molymet tried in vain to produce potassium, lithium and potassium sulfate, until in 1992 the companies put their 75% stake in Minsal up for tender. It was the opportunity SQM needed to access and own a close source of potassium chloride, only 200 km from María Elena and Pedro de Valdivia. In the middle of the financially complicated moment that the company was going through, getting the concession for the Ata-

cama salt flats seemed illusory. Not only had the price of potassium chloride gone up, but iodine prices had gone down, potassium nitrate no longer provided the kind of profit margins it had a few years earlier, and the company consequently had a serious cashflow problem. There simply wasn’t the money to bid for the salt flats, but on the other hand this was perhaps the only opportunity for the company to become really competitive again and to consolidate its position. It was a question of survival. Life or death. Yes or no. Now or never. Two interested parties presented their case at the tendering process for the Atacama salt flats: the US firm FMC Lithium that produced lithium in North Carolina from a

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A saline depression located in Chileâ&#x20AC;&#x2122;s Second Region

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Atacama salt flats

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The surface was hard, cracked and cut like shards of glass. It was impossible to walk over the salt flats, let alone drive; there were no roads, and just a few old tracks.

mineral called spodumene and was coveting the lithium reserves on the Chilean salt flat; and SQM who desperately needed the potassium chloride. The SQM board of directors, led by Julio Ponce, anxiously did the math, and SQM didn’t have nearly enough to match the amount the US competitor could offer. But then he had an idea: the company could generate US$1,000.000 per year in payment. SQM’s offer was unusual, but tempting: it could offer US$12,000.000 to be paid over 12 years, at US$1,000.000 a year. So although the payment would be in quotas it was almost double what FMC was offering. The board of directors negotiated with the executives of Amax and Molymet all day, until deep into the night. Finally both companies decided to go with the SQM offer, which sold SQM the 75% Minsal stake and left 25% with Corfo. From the negotiating table an Amax executive phoned the counterpart in FMC to tell them that they couldn’t sign with them. The FMC executive exclaimed: What? We had the agreement ready! You’ve closed the deal with Soquimich? The American from Amax calmly replied: Life is difficult. That phrase went down in the history of the company, and SQM would repeat it when the occasion merited it, always with an unmistakable dose of malice. That night, with the bid for the Atacama salt flats in the bag, the SQM executives opened the champagne bottles. However, in 1992 the project that they’d won with rather more skill than hard cash, was still only on paper. Everything still had to

be built: the only remains of the old licensed mine was a small abandoned camp in Toconao. When the SQM logistical studies team first visited the terrain they did so clutching the maps of the Military Geographical Institute, and even then they spent 12 hours lost on the harsh salt flat. The surface was hard, cracked and cut like shards of glass. It was impossible to walk over the salt flats, let alone drive; there were no roads, and just a few old tracks, barely visible on the map, left over from longgone miners. Juan Carlos Barrera, currently the president of SQM Salar, was part of this nerve-wracking expedition and remembers climbing a small hill to try and get a connection for his satellite phone to call for help. Finally they found an old track, and managed to get back to the road. That night, back in civilization, Barrera couldn’t sleep thinking about the madness they’d got themselves into. They’d have to build the plant from scratch, in the middle of an environment completely hostile to human life. They were saltpeter workers, caliche-experts who knew by heart the secrets of iodine and nitrates, but they knew nothing about the salt flat brines; they didn’t have the money to invest at this scale, nor the technology, nor the slightest idea of how to mine a salt flat. All they had was faith in the project and an absolute need to get a secure source of potassium chloride for the company. Getting the financing for a project of this size wasn’t easy on the local financial market and would have meant paying exorbitant interest rates. Nor was the situation very different on the international market. Analyzing

the financial possibilities, it was decided that the best option was not to take on massive debt, but rather to emit shares and invite investors to inject fresh capital into the company. Given the amount needed these had to be international investors. But how to do this? Finding a foreign investor willing to invest in a Chilean company and take on the risk alone was like looking for a needle in a haystack. So the key was to lower the risk by inviting many investors to participate. The answer, initially timidly proposed by SQM, was to float shares on the NY stock exchange, but nobody in the company had any experience of doing this, and to date only one Chilean company had managed that, CCU in September 1992. Consequently there weren’t any consultants or experts who could advise the company and support the project. The only option was to follow common sense, and have all the numbers and papers in order so as to make a convincing argument to potential shareholders. Another challenge with the emission of ADRs (American Depositary Receipts) was to avoid losing political control of the company with the dilution of shareholding owners. Until that time the major shareholders were Calichera, made up of the SQM board of directors, its executives and workers who had 20% and Israel Chemicals who has 8%. The discussion between Julio Ponce, board member of Calichera, and the committee of shareholders was a difficult one, as they searched for a way of emitting shares (and thereby necessarily losing some of their own) while not losing control of the company. The solution seemed

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Several initiatives were undertaken at the salt flats to protect the environment, such as the ringing of flamingo chicks.

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to be to create two classes of shares, A and B shares. Series A shares would elect 7 board members, while Series B shares (to be emitted as ADRs) would elect 1 board member. In this way Calichera would reduce its participation in the profit of the company without losing its political rights. The management of Ricardo Ramos was key to this stage of proceedings, although

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more than once cries of “what have we got ourselves into?” resounded around the company’s financial department. Five SQM board members and managers, including Ramos – who despite his resistance agreed to wear a tie– flew to New York to look for investors. They presented an Initial Public Offering to shareholders and company executives, audacious because all they had was a project

The design and construction of the wells to pump out the best brines was, once again, a completely in-house development, with an emphasis on efficiency and low cost.

and ambition, with a PowerPoint projection to show how the company could produce 250,000 tons annually of potassium chloride and create a high return on investment. They also went to Europe to look for investors. In their presentations they talked about the almost insurmountable obstacles they’d overcome to get the company through various crises and how they projected the company into the future with the profit they’d make from the salt flats. The reaction of potential investors surpassed even the hopes of the board: trusting the project and in the abilities of the company’s executives SQM raised US$100,000.000 of investment. On the 21st September 1993 the first ADR shares were sold on the NY stock exchange and SQM became the second Chilean company to achieve this. Later Enersis, Andina, LAN, Concha y Toro and other companies followed suit to finance their projects. The board returned to Chile ready to begin operations in this unknown territory that took them completely out of their comfort zone. One of the first acquisitions by the logistics department was a specialized machine to flatten the area and open the first roads on it for the army of trucks and the builders who would build, in less than a year, the constructions, the solar evaporating ponds, the workers’ camps and the first production plant to process 250,000 tons of potassium chloride annually. This was the most important aim, in order to replace as soon as possible the need for importing the material. They knew there was lithium in the salt flat, but it wasn’t a priority at that moment.

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Celebration of the New York SQM Investor Day 2018, 25th anniversary of the day that SQM entered the NY stock exchange. The SQM stock is the most transacted Chilean stock on the exchange.

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Carmen salt flats

Carbonate and lithium hydroxide are processed in these plants

Extracting the potassium chloride meant taking it from the brine, highly concentrated in various mineral salts, lying under the hard surface of the salt flat. The design and construction of the wells to recover the highest-quality brine was once again an in-house operation, focusing on low cost and efficien-

dry the salts, but SQM uses filters because of the particle size. The difficulty is that the product is mined with a humidity content of 7-9%, compared to the more usual 3%. To deal with this new challenge every mini-batch of potassium chloride was measured for its humidity content –like a pharmaceutical process– until

THE ATACAMA SALT FLATS HAD ADVANTAGES MAKING ITS EXPLOITATION EFFICIENT IN PRODUCTION TERMS: LOW MAGNESIUM CONTENT REDUCED THE PROCESSING COSTS AND THE HIGH SOLAR EVAPORATION INDEX MEANT THAT BRINES COULD BE DISTILLED ALL YEAR AROUND.

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The brines are pumped up from a depth of 30m

cy, as was also the case with the network of solar evaporation ponds to concentrate the brines and crystallize salts that would be processed and refined at the plant in order to finally arrive at potassium chloride. Producing a high-quality product at the recently-built potassium chloride plant at the Atacama salt flat wasn’t easy. The potassium chloride in the salt flat was, because of its particle size, one of the most complex on earth. Normally this mineral’s proportions are 80% coarse and 20% fine, but the coarse particles of potassium chloride on the Atacama salt flats were the size of normally fine particles, and its fine particles were like talcum powder! Processing material with this texture is infinitely more difficult so the processing engineers, once again, were forced to develop new technology and methods to produce potassium chloride under these particular characteristics. Other companies that produce potassium chloride around the world use centrifuges to

the engineers discovered an efficient process. On top of that, the potassium chloride was also more abrasive than the norm so while in a normal processing plant equipment and replacements last 9 months, at the SQM plant they lasted 15 days. The company had to develop new materials so that the equipment would last at least 4 months. But on the other hand, the Atacama salt flats also had real advantages though which made its exploitation efficient in production terms: its low magnesium content reduced the processing costs and the high solar evaporation index meant that brines could be concentrated in this way all year around. In addition, the brines at the heart of the salt flat contain the highest concentrations of potassium and lithium ever found, which more than compensates for the challenges the company faced. By 1995 the first plant built by SQM on the Atacama salt flats was already producing 250,000 tons of potassium chloride. At first the product wasn’t as high-quality as expect-

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The brines in the salt flats contain the highest concentrations of potassium and lithium ever found, which more than compensates for the challenges the company faced.

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Under the strong Atacama sun the brines evaporate until they’re a green-yellow color, with a 6% lithium concentration.

ed, it was outside the acceptable range and wouldn’t have been sold on any market. But as the potassium chloride was for internal use it wasn’t a priority to get it to market-grade quality. In fact, for the first few years SQM sold only minimal quantities of potassium chloride, with most of it being consumed internally, as had been the original idea. It was a strategically good choice for the company to have control over the two natural resources –the caliche and the potassium chloride– that correspond to two radically different logics. Sodium nitrate taken from the saltpeter is a rock, while potassium chloride taken from the Atacama salt flats is in brine. Combining the synergy of both minerals produced a sharp takeoff and SQM’s potassium nitrate became an unbeatable product, with sales that couldn’t be imagined by the company’s competitors. Thanks to the investments planned to buy the concession of the Atacama salt flats, to the strategic vision at that turning point, and to the construction of the company’s own potassium chloride plant to supply its fertilizer-producing area, SQM managed in very few years to turn the tables and become the world’s primary producer of potassium nitrate, replacing Haifa Chemicals. There are many who think that without the Atacama salt flats SQM wouldn’t have survived. By 1996 the plant had doubled production to 500,000 tons and substituted 100% of the potassium chloride that it had previously been importing, with the consequent reduction in costs and use of foreign currency, and the excess was exported.

Towards the end of 1995 Corfo calculated that its mission of ensuring that the project would be guided to success was completed and it sold its 25% stake in a public auction. In less than 2 years that 25% stake had tripled in value and was sold for US$7,000.000. The stake was bought entirely by SQM and the company changed the name from Minsal to SQM Salar.

Atacama salt flats

High rates of evaporation and low rain fall

R THE LITHIUM CONQUEST

Encouraged by the huge success of the potassium chloride, in 1996 the company executives started to pay more attention to lithium. In 1993, when SQM had started to mine on the Atacama salt flats this mineral was far from its priorities, which were to reduce fertilizer production costs by assuring the company’s own supply of potassium chloride. But by 1996 the international price of lithium was at a not-insignificant US$4,000 a ton and, after all, the brine that was already being taken out of the ponds and being concentrated in the solar evaporation ponds was as rich in potassium chloride as in lithium. So the option of producing lithium as a by-product was quite logical. During the 1990s lithium was an industrial commodity whose sales were growing slowly, around 3% a year. Its main uses were in lubricant greases and paints, and secondly in the manufacturing of glass, aluminum, in metallurgy and construction. The market for cellphone batteries and portable computers hadn’t taken off yet. In fact, when mobile phones began to be mass-produced towards the end of the 1990s the batteries were made with cadmium nickel.

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Atacama salt flats

Surface area of the solar evaporation ponds is more than 6,000 football fields

By-products such as sulfate sylvinite are obtained

Lithium had until then been produced in China, Russia, and the US. In Chile two other companies were extracting small amounts of lithium from other parts of the Atacama salt flats, including the Sociedad Chilena del Litio belonging to a US mining company that owned mines in those three countries, dominating the market and maintaining prices at around US$4,000 a ton. As SQM had no expertise in lithium extraction they hired Felipe Anguita, who had 182

At the same time the commercial executives travelled to Russia and China to find out the cash cost of the competitors. In these countries lithium was extracted from spodumene, a rocky mineral, and its production cost was approximately US$3,000 per ton. The commercial executives immediately saw their great advantage – at SQM the production costs of lithium from brines was less than US$800 per ton, given that part of those costs were already absorbed by the 183

A COMPLEX EVAPORATION PROCESS REQUIRING CONSTANT OBSERVATION OF THE

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been production manager at the Sociedad Chilena del Litio. He had designed the lithium plants of the competition, so when SQM focused on lithium, he took over the construction of the new plants in 1996. Jerome Lukes, an American specialized in lithium, designed the original process of solar evaporation ponds basing himself on the brines that are left over at the end of the potassium chloride concentration process. A complex evaporation process, taking nearly a year and requiring constant monitoring of the chemical and physical balances, enabled the engineers to produce a highly concentrated lithium to develop the finished product at the plant in a variety of different types and specifications. The first plant built to process the brines and transform them into lithium carbonate was at the Carmen salt flats near Antofagasta. The first batch produced was 8,000 tons of lithium carbonate.

potassium chloride production. This was the window of opportunity: to boldly and right from the start capture an important portion of market share. There weren’t many lithium producers around the world, and their production costs were much higher than SQM´s at the Atacama salt flats, so it all seemed quite straightforward. However, the two US companies who dominated the market didn’t make it easy for SQM to enter the market. Clients were wary of buying from this new Chilean company offering lithium carbonate, so the commercial area of the company adopted an aggressive strategy, lowering the sale price to US$1,600. What buyer could resist that? And at that price SQM was still making a comfortable profit, but the effect was devastating for the competitors. Plants all over China, Russia and the US closed down. The price then stabilized and slowly began to go up again, but the landscape

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CONCENTRATIONS ENABLED THE ENGINEERS TO PRODUCE A HIGHLY CONCENTRATED LITHIUM.

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SQM’s huge advantage was the cost of producing lithium from brines; it was less than US$800 per ton, while in China and Russia the cost was triple that.

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Despite the huge technological advances made at SQM Salar in recent years, it still has the lowest lithium production costs in the world.

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2003 to 2006 was a difficult time for the Atacama salt flats project: production of all the minerals exploited fell continuously.

had changed: SQM had become the primary producer and was satisfying a large part of global demand at a lower cost. Despite of the enormous technological advances at SQM Salar over the previous 20 years, the company still has the lowest lithium production costs in the world.

R A NEW PLANT

After the spectacular run of good luck with potassium chloride and lithium, a series of catastrophic mistakes nearly sank the salt flats project – almost dragging the whole company down with it. Fired up with the success of the potassium chloride and the lithium the commercial area got very excited by a market study predicting excellent prices for potassium sulfate as a speciality fertilizer over the coming years. In the brines in the salt flats there was both sulfate and potassium so there was the potential for manufacturing potassium sulfate and take advantage of the good price (US$250 per ton) of potassium sulfate, generating a 15% profit. The decision was taken to build a new plant to produce 250,000 tons of potassium sulfate, 25,000 tons of potassium chloride and 16,000 tons of boric acid. All of the potassium sulfate plants around the world worked differently based on artificial processes. The Belgians for example mixed potassium chloride with sulfuric acid in an furnace at more than 1000 degrees. At the Atacama salt flats the idea was to develop a process that used the natural brines containing sulfate and potassium. In order for the project to be successful a unique process

would have to be developed from zero, and the product would have to be got to the market quickly, because the good prices wouldn’t last forever. Under pressure, the executives went for a second time to emit ADRs to finance the project, but the mistake lay in not evaluating properly the extreme complexity of mastering this type of process for which there were no precedents. The first plant was built using a sketch made at Corfo and the Comité de Sales Mixtas (“Committee of Mixed Salts”) before the salt flat was bid for. Input for the design came from several chemists as well as people from the best research centers in Chilean universities, but the implementation was a disaster: the project was delayed for several months and building it was much more onerous than all the investments previous in the salar: exceeded 100 million dollars. Then, when operations started, it didn’t yield as expected. The plant was designed to produce 250,000 tons but never produced more than 120,000 to 130,000 tons, and potassium chloride from the neighboring plant had to be added. The production costs were incredibly high and ate into the profit margins. As the plant was slow to become operational it was active for very few of the 5 boom years of the good prices, which soon began to fall. For about 10 years the plant’s profits were negligible and it became a drag on the company. To add to this, in the middle of this process the solar evaporation ponds began to break thanks to a construction fault, and brine leaked out. Nearly 40 millions dollar was lost this way.

It seemed like all the problems were coming at once. A cycle of low prices across the board of products –potassium nitrate, iodine, lithium, and potassium sulfate– plunged SQM further into economic problems. Things went from bad to worse, until in 2000 the company’s results were frankly dire, as was clear from the fallen share price of SQM stock. The situation was so bad that the company restructured and had to separate 18% of the company’s human resources. 2003 to 2006 was a difficult time at the Atacama salt flats as the production of all the mineral products fell. Years before SQM had bought the concession for the Atacama salt flats experts from Minsal had predicted a 20-year reserve for the deposits; by now that period was up and it seemed that the prediction of those US geologists had been correct. The content of law of lithium and potassium were decreasing in all of the extraction wells, and the company hadn’t managed to solve the problem of the low yield at the potassium sulfate plants. In 2007 the board of directors asked Juan Carlos Barrera from the company’s commercial area to come up with a solution for the disaster that the Atacama salt flats project had turned into. Barrera put his team to work, including Alejandro Bucher, Rodrigo Maffioletti among others with whom he had worked in other areas of the company such as in logistics and in the development of the nitrate plants. The team knew that improving efficiency at the salt flats plant would be hard, but they couldn’t believe their ears when, at the

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After the run of good luck with potassium chloride and lithium some catastrophic mistakes nearly sank the salt flats project, dragging the whole company down with it.

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The SQM Salar team couldn’t believe it when they were told that there were only 10 months worth of lithium and potassium reserves left. The hydrogeologist confirmed the projection.

first meeting in the north, they were told that the reserves of lithium in the salt flats would only last another 10 months. Not the reserves in stock, already processed, but the reserves in the salt flats themselves, according to the exploration and production systems! Barrera was shocked, he couldn’t believe it. To find out more he talked to the only hydrogeologist on site, who’d only been working there for a short while, but who confirmed the extremely limited reserves available. This couldn’t be happening. A mining company, even if it has plants, machines and workers, if it doesn’t have the deposits in reserve, is nothing. But how certain were they about what was in the salt flats? Surely it was impossible for a single hydrogeologist to provide an indepth and up-to-date investigation of the brine reserves in the whole, huge, Atacama salt flat. At the first planning meetings of the Atacama salt flats project the new potassium lithium team established their new focus from then on. The hardest thing is that this mine is a pool of brine, a living mine!” exclaimed Barrera. “Even though we’ve been mining these salt flats for 15 years we still don’t really know them because we’ve only explored a tiny part of their surface. It’s a living mine that is constantly changing because the waters flow and what could have been a good well 6 months ago when it was mined, could have become useless. What we have to do is to understand this mine properly, and to do that we need to explore it from top to bottom. If we need to we’ll

change our plants and all the production system to adapt them to the brines. If not we may as well go and look for a new job, because without the salt flats we’re toast. The first urgent and drastic measure taken was to generate a detailed plan of perforations in order to study the resource that was hidden under the hard crust of salt. Up to that point 6,000 to 7,000 m had been perforated a year, and from this year on 10,000 m were perforated annually. Putting the emphasis on the hydrogeology of the salt flats was key because it gave the company greater clarity on the existent and projected reserves. 10 people worked in this department, but within the year it had grown to 250 people to undertake all of the planned exploration while at the same time radically increasing production. Barrera, Maffioletti and Bucher travelled around the world visiting potassium chloride plants. Using Google Earth they identified evaporation ponds in Canada and Russia, and if something caught their attention they’d ask the production company for a courtesy visit. They spoke to all the suppliers, geologists, chemists and engineers. As there were no hydrogeologists trained in Chile they brought from abroad young, talented specialists from the best universities in Italy, Spain and other countries, offering them the chance to develop their careers here. The hydrogeology department grew from 1 to 36 professionals in 2018. They stopped outsourcing the perforations as this had been both slow and expensive, and

developed an in-house method of making the wells – faster and cheaper. They bought new equipment that was driven, maintained and adapted for the terrain by the engineers and mechanics of the salt flats. The new experts drafted into the hydrogeology department studied every single well with probes and gamma rays, using mathematical and physical models to predict their evolution in terms of volume and chemical composition. They also created a hydrogeological simulation model –on the 9th floor of the SQM offices in Santiago– that is among the most advanced in the world and which every day used the data and variables that the experts gathered in their measurements on the ground. The program is so advanced that there still don’t exist the computers to run it at full speed to full capacity. With all this information the hydrogeologists identified every single well and its production capacity of lithium and potassium for one, two and five years.

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In 2018 they stopped outsourcing the perforations and developed an in-house method of making the ponds.

Atacama salt flats

2018

THE FIRST URGENT MEASURE WAS TO GENERATE A DETAILED PLAN OF PERFORATIONS TO STUDY THE DEPOSITS UNDER THE HARD CRUST OF SALT. PRIORITIZING THE HYDROGEOLOGY OF THE SALT FLATS GAVE THE COMPANY CLARITY ON DEPOSITS AND THEIR PROJECTED LIFE-SPANS. Thanks to this impressive prospecting work and the consequent exploration into new areas of the salt flats, between 2007 and early 2008 the average law content of the lithium and potassium rose, and the Atacama salt flats became a legend: it’s the only example of a mine which, halfway through its lifespan, sees an increase in its law content instead of

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As the quality of the lithium and potassium rose the Atacama salt flats became legendary: it’s the only example of a mine which, halfway through its lifespan, increases in quality instead of decreasing.

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a decrease, as always happens. Far from the reserves running out in 10 months time the hydrogeologists were able to predict with scientific certainty that there were deposits to extract –and not 500,000 tons annually of lithium and potassium, but rather 2.5 million tons– for many years to come. With this revolutionary knowledge about the deposits on the Atacama salt flats, the Potassium-Lithium team defined an ambitious plan to triplicate production over the following two years, with investments less than half of what competitor companies were investing. It was difficult to convince the board of directors of the somewhat browbeaten company –and even harder to convince the workers on the salt flats– that this was possible, that they’d be able to make this enormous leap. But the objective was more than accomplished, and within two years production leapt from 600,000 tons annually to 2 millions tons annually thanks to the technological, creative innovations, and above all, thanks to a change in mentality: it was the mine that controlled the operation, not the other way around. Until then the mine had adapted to the needs of the plant: the chemical quality of the brines were prioritized, to ensure that there was no contamination, to avoid problems in the refining process, which meant that if a sector of the mine yielded very good potassium it wasn’t extracted if there was a lot of calcium present. These were conditions imposed by the plant that impacted on the mining process. But now the discourse

changed: the best concentrations of lithium and potassium were extracted and it was up to the plant engineers to work out how to get the most out of the raw material. “We can improve the plant and the processes, but we can’t control what’s in the brines. We have to adapt to the brines”, said Rodrigo Maffioletti. The teams of workers, the plants, and the whole strategy were now at the service of the natural resources, and not the other way around. This new flexibility quickly increased the available deposit. To increase production it wasn’t enough to optimize the plants and increase mining perforations. It was vital to increase the surface area of the solar evaporation ponds. The old system was changed to a new construction that reduced costs by 30% and increased capacity significantly, from 40,000 square meters to 800,000 square meters. To guard against leaks Barrera and Maffioletti visited all the most important plastic manufacturers around the world until they discovered a low-cost plastic perfect for their needs to water-proof the ponds. They went from using a crew of 8 trucks to one bulldozer that was more efficient, economical and faster. Achieving this aim was a huge and unprecedented milestone on the salt flats and it resulted in a change of mentality across the team because people started to trust that they were on the right track and that they’d manage to achieve much more ambitious production goals than had ever been aspired to. A new management of the studies of the salt flats was set up, dedicated to entirely restructuring the production process to

identify what could be optimized; the best specialists in the world were brought in to rethink the plants and their technology. The stubborn potassium sulfate plant, which had been giving the company headaches for the last 10 years because of its low yield, was among those studied. In fact that plant, using almost exactly identical structures but with improvements in the processes and the development of key supplies such as the flotation agents, improved drastically and even surpassed its maximum production capacity of 250,000 tons of potassium sulfate. Not only was it no longer necessary to add potassium chloride to produce potassium sulfate, but the annual production was such that there was excess potassium produced so potassium chloride could be produced as a by-product. The attitude towards the salt flats now focused on flexibility, adaptability, speed and low cost. The company designed and constructed the plants in half the time and at half the cost of their competitors around the world. The flexibility is such that the potassium sulfate plant closed in 2017 because lithium production is being prioritized and it’s not convenient to have it open at the moment. A new lithium carbonate plant is being installed, with a production capacity of 170,000 tons annually while the old plant is still being updated to increase current capacity from 48,000 to 70,000 tons. In 2017, when it was decided to extend the current plant, plans were already on the table to increase capacity even more. This meant that decisions could be taken in parallel, taking into

account both plants: while the engineering was being designed at the lithium pilot plant the systems engineers were studying the processes of the plants, and at the same time the research team was investigating and buying equipment and technology abroad. The speed, capacity for reaction and the satisfaction of market demand were key to increasing production capacity, investing a quarter of what competitors were investing, and with results in half the time. From 1994 to 2017, taking into account processes, engineering and construction of plants, solar evaporation ponds and annex buildings, SQM invested more than 1,8 billions dollars in the Atacama salt flats. The company’s great success has been the way in which it invested and the technology applied to have one of the most modern potassium chloride and lithium plants in existence, built in record time, at a low cost and with the best yield in the world. The achievement is down to the team of people who put their efforts, determination and creativity into building a visionary project from zero. ”

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The old system of ponds was changed to a new construction that reduced costs by 30% and increased capacity significantly.

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The complex hydrogeology of the Atacama

salt flats

The Atacama salt flats are a hydrogeological deposit: underground, in a

then continues until the brine is a green-yellow color with a 6% lithium concentration. It’s true that the

solid geological matrix –porous rocks– the liquid, a brine, flows continuosly

evaporating process is not complicated, but what is complicated is that the chemists, hydrogeologists

and varies constantly in composition. In order to work in this terrain –very

and process engineers have to ensure that the dissolved salts separate out in a certain order that

different from a solid deposit– geologists and hydrogeologists perforate the

depends on the initial concentration of the elements in the brine. The brines that are located at depths

area, exploring and mapping it under the surface in order to understand

of between 7 and 100 m are anything but homogenous or uniform in the concentration of salts. All

its composition, depth, the location of the brines and their different

the elements –lithium, magnesium, sulfate, sodium, chloride, potassium, calcium and boron among

concentrations, and in which places extraction wells should be made. A dozen field hydrogeologists monitor

others– are made up of a mixture of ions whose balance is unique. The lithium in particular is always

the perforating machines that crush the crusty surface of the salt flats day and night. Another crew assesses

accompanied by other ions so it’s difficult to process to a high-grade purity at the plants. In the solar

the data and develops models to see how the brine deposits act.

evaporations ponds the production engineers mix different types of brines coming from perforations

The SQM concession in the central part of the Atacama salt flats, 2,300m above sea level, are 280 km ,

in different geographical locations on the salt flats to obtain the correct “brine syrup” with a good

dominated by the Domeyko and Lila mountain ranges, and the Andes. Closer to the Andes this porous and

composition of all these ingredients. This is the alchemy of ions, chemical cooking, that has to be

rigid subterranean sponge changes and the liquid it holds is less saline, until it is actually fresh water. Under

monitored daily to obtain the top-quality lithium and potassium chloride.

a thick and sharp salt crust, between the millions of spaces within this salty, porous sponge is a brine rich in

As well as searching for the best brine extraction points, the hydrogeologists work on the recipe

lithium and potassium chloride, stored in a process that took millions of years.

of the “brine syrup” as they call it: they identify the brines that are best suited for mixing up in the

Due to this particular characteristics, SQM set up a hydrogeology department where today more than

solar evaporation ponds by monitoring the wells which, as well as having different volumes and

35 hydrogeologists specialized in mastering this deposit made up of porous material and a brine rich in

concentrations, also have varying characteristics over time. The concentrations are therefore measured

valuable mineral concentrates.

every day and checked in the laboratory to indicate to the production engineers how much brine to use

As well as being hydrogeologically complicated the climatic conditions on the salt flats are harsh: workers

and from which wells, so that the mixture is ideal. This mixture is evaporated, over 1 year, in one pond

are protected from the bright sun by sunglasses, hats, thick clothes and the permanent use of sun-cream.

and then the next while the chemists keep them well balanced. The establishment and optimization of

The surface of the salt flats is covered by a hard, brittle and razor-sharp salt crust that is impossible to

these processes are the result of in-house SQM innovation, which, as well as perforation and sample

walk on, so tracks have to be flattened and roads made to access the wells, the offices and the centers

measurement includes technology, prediction and control using mathematical models. The hydrogeology

of operations. When it rains in the months of the Altiplano winter the downpours turn the roads into

experts based in Santiago have integrated all the data into a simulator model based on the laws of

mush, the extraction wells collapse and the evaporation ponds dilute with the rainwater and changing the

physics to predict how the extraction wells evolve in terms of volume and chemistry over one, and

concentration. As unpredictable as these events are the team has to plan for their eventuality, above all to

two and four-year periods.

protect the valuable lithium brines distilled in the last three wells. The brine rich in lithium and potassium

Thanks to the constant measurement on-site –the stratigraphy of the subterranean cavities are evaluated

chloride that SQM Salar exploits from more than 370 wells is a semi-transparent liquid, viscous, oily and

with the help of gauges and gamma rays– as well as the simulated models, the hydrogeologists have

very dense. At the edges of the salt flats, away from the SQM operations area and in the tourist zones like

classified each wells, from first to last. The best for lithium production have been identified, as well as the

the Laguna Céjar the brines are similar to those of the nucleus of the salt flat, with water so dense and

best for potassium chloride, while those that are best for producing both minerals get special treatment in

salty than tourists can float in the ponds.

terms of monitoring and chemical control.

To extract the minerals from the brines, the surface is perforated and the liquid pumped up and left

With all these tools the hydrogeologists bring together the pieces of this enormous, fascinating and

to decant under the sun’s rays in large solar evaporation ponds that take up almost 50 km2 of the salt

complex underground puzzle, and develop theories about the currents, plates and strata that have made

flats. Through the evaporating process the water disappears, different salts separate out from one pool

up the Atacama salt flats for millions of years and which help the company to better understand this

to the next, until the potassium chloride separates as a salt and is harvested. The evaporating process

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28% of the worldâ&#x20AC;&#x2122;s lithium deposits

Atacama salt flats

Solar evaporation ponds take up 0.5% of the surface area

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VALUE THAN THAT OF A SIMPLE COMMODITY. SQM SALES TEAMS WORK CLOSELY WITH THE CLIENTS,

levels. The company also £

In contrast to other

THROUGH DISTRIBUTORS AS RAW MATERIAL, SQM HAS GIVEN ITS POTASSIUM NITRATE A MUCH HIGHER

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arly on SQM decided to selectively integrate into the area of nitrates, which meant managing its own port in Tocopilla, establishing a complex commercial network with offices around the world, and establishing a presence in local markets even if this was through joint ventures with partners to allow the company access to the end-users so as to understand first-hand that client’s needs. Although specialty fertilizers also come from mineral mining, its sales operate with a different, and perhaps more complex, logic. Iodine and lithium are raw materials for which demand is so high, and which are so hard to substitute that their market is almost assured. But to sell potassium nitrate one has

to persuade thousands of farmers –large and small– all over the world. This work of convincing the client is done individually, farmer by farmer, hectare by hectare, which makes it a hard product to sell. To start with, it costs three times more than its alternative on the market, potassium chloride. The only reason why a farmer would choose specialty fertilizers from SQM is because of the noticeably better crop yield and quality per hectare, which means longterm profit. For this painstaking work, since the middle of the 1980s SQM has developed its logistics and sales prowess to unrivalled levels. No other fertilizer company is even close to have the capacity to sell to more than

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The agronomists traveled the Mexican countryside organizing small presentations for farmers in village cafés or in local community centers.

110 countries, with its own ports such as Tocopilla and Ternuezen (Holland), 40 blending plants and more than 30 warehouses around the world, with the objective of reaching clients with trucks filled with tons of potassium nitrate, or with small bags of half a kilo. It’s not enough to have a great product at the right price, it is necessary to offer technical knowledge to ensure its correct and effective use. What it means is 100% field work for the agronomists in the SQM international sales offices, who clock up on average 180 days of travel a year by plane, train or truck on highways and small roads. As well as working as door-to-door salesmen these agronomists personally give the farmers advice on how and when to apply the product, depending on the type of soil and the crop. If they’re opening up a new market they’ll offer free samples for an area of the land –usually a hectare– so that the farmers can see the benefits of the product for themself. Mexico was one of the first markets that SQM developed for potassium nitrate since the beginning of the 1990s. Carlos Arredondo was a recently-graduated agronomist when he was sent to Mexico to “colonize” the country, along with four other experts. They started from zero, as was usual in every new market that SQM opened. Arredondo had been sent with a computer, a telephone and money to rent a truck. His mission was to explore the Mexican countryside and find people to talk to. With no local knowledge initial contacts were made through ministries of agriculture in order to establish a network of contacts and find the promising rural areas.

From daybreak to dusk the agronomists covered their assigned part of the Mexican countryside with a projector and slides in the back of the truck. Without a GPS they’d use the local maps to find their way around, and to promote the product they’d give small presentations in village cafés or in local community centers, or organize small-scale seminars with local farmers in a thorough work that took in huge areas of the country. Sometimes a farmer would say to them: “You know what, the sample you gave me worked really well, so I’m going to get together five other farmers I know, and I’ll invite you along”. That was the result the agronomists wanted! So in the host’s living room they’d talk about the benefits and ways of applying the granulated products to traditional farms, and the soluble blends for farms using drip irrigation. When the farmer’s friends tried the product and saw for themselves the excellent results, the product’s fame spread and the number of clients grew through word of mouth. Potassium nitrate can be used as a fertilizer in different types of soil and climatic conditions; only the addition of other micronutrients needs to be adjusted. The SQM agronomists would recommend which nutrients to add for which types of soil and crop, even though this meant recommending a product produced by a rival company. Their attitude was respected by the farmers, who appreciated the suggestions. This door-to-door strategy was rolled out across the world with differences depending on the local culture. In Turkey the meetings never took place in homes but in typical local

teahouse where people played cards, smoked water-pipes and the SQM agronomists would sometimes have to do their presentation through the tears induced by the clouds of smoke. In China “fertigation tours” were organized to which Dutch experts in drip irrigation were invited along to tour the countryside farm by farm, giving conferences in the morning, afternoon and evening. Today the SQM plant nutrition product dominates 54% of the international market, in large part thanks to the exhaustive work that is still the only way to open new markets. The traditional “SQM field days” still happen on extensive crops farming, but in the specialty fertilizer sector it has been evolving to highly specialized and personalized programs.

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The tests include quality controls in the post-harvest state to evaluate what the product is like when the consumer receives it. Tests

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The competition between farmers to be the first to offer their fruits or vegetables and with a higher quality than their competitors has led to confidentiality clauses about nutritional strategies and the tests undertaken with each producer. The tests in the field include quality controls of the fruit in the post-harvest stage, wrapped as it would be at its destination and kept refrigerated for between 21 and 42 days. That’s the acid test to evaluate the quality and nutritional physiology of the fruit or vegetable when it gets to the consumer. These tests are now a tool that SQM offers growers across the world in a market that is increasingly competitive. In exporting countries like Chile, Peru and South Africa, part of the business strategy is knowing when to hold back sales of fruits and vegetable and waiting for a better market price.

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R THE DEATH OF SALTPETER

A fundamental part of SQM’s reinvention was the progressive leaving-behind of sodium nitrate, or saltpeter, and to focus on its

KEY TO SQM’S REINVENTION IN THE FERTILIZER SECTOR WAS LEAVING-BEHIND SALTPETER, TO FOCUS ON ITS STAR PRODUCT, POTASSIUM NITRATE AND THE DEVELOPMENT OF SPECIALTY FERTILIZERS BASED ON THIS NITRATE. TRADITIONAL SALTPETER HAD COME TO THE END OF ITS LIFECYCLE. star product, potassium nitrate and the development of specialty fertilizers based on this nitrate. Some say that the end of saltpeter –or the beginning of the end– was 1986 when

the first tests on potassium nitrate were undertaken. Others place the death of saltpeter in 2006, when sales in Belgium stopped –it was the only remaining market in Europe for this product– and SQM stopped producing sodium nitrate as a fertilizer. Saltpeter was still needed in niche markets such as in the north of France and Belgium where the cold spring climate allowed the plants to better absorb the nitrogen from saltpeter than from urea. The product is also still used in some parts of Chile, but mainly to keep up a tradition begun by grandparents and great-grandparents. Apart from these tiny markets saltpeter disappeared from the world in terms of agricultural use when cheaper alternatives became available. And for SQM it simply wasn’t good business anymore as the production of sodium nitrate had become complicated. In 2016 SQM stopped producing and selling saltpeter. This traditional product, which had at one point provided more than half Chile’s GDP (today copper represents 13%) and was essential for the international agricultural industry to feed growing populations, had come to the end of its lifecycle. All that is left is a small but groing market for organic farming in the US and a tiny cooperative of farmers on the island of Hokkaido in the north of Japan for whom, subsidized by the government, 15,000 tons a year of saltpeter are produced to honor a commercial relationship of more than 100 years old. (See insert).

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15,000 tons a year of saltpeter are produced for a tiny cooperative of farmers on the island of Hokkaido in the north of Japan.

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Japanese interest in saltpeter, Chilean Nitrate, began in the middle of the 19th century when it was believed that “sugar beet plants prefer sodium nitrate”.

Japan and saltpeter a loyalty of almost

100 years

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As well as saltpeter, in 2001 a new product, Nipomag, was developed especially for Hokuren.

Sodium nitrate, usually called saltpeter, has played

WW2 due to Japan’s entry into the war, when Chile and Japan broke off diplomatic relations

a fundamental role in the productive and commercial

and Mitsubishi closed its office in Valparaíso. At the end of the war, with Japan defeated

history of Chile as well as influencing agriculture in

and destroyed by the allied forces, the Japanese population experienced a dramatic

numerous countries including Japan. In the middle of

decrease in their food production because the supply of fertilizers, both local and

the 19th century Japanese authorities began to show

imported, was insufficient. The embargo on importing Chilean saltpeter lasted until 1951.

interest in saltpeter, or “Chilean Nitrate” as it’s known in Japan, and the government of Japan

That year the Japanese companies Shin Nippon and Taihei imported 4,000 tons of saltpeter

undertook the first tests of saltpeter on sugar beet plantations in 1870 in the Tokyo Prefecture.

for the Hokkaido cooperative; the product was shipped aboard the Norwegen ship the Poly

The first registered commercial exportation of saltpeter to Japan was in 1921, as the records

Crown and arrived in the port of Otaru on the 12th April. Photographs showing the unloading

of the Hokuren Agricultural Cooperative show, and it was sent to the island of Hokkaido for

of the saltpeter appeared in newspapers across the country, giving a ray of hope in the somber

the sugar beet plantations. These exportations increased and today there are several products

post-war years when the country was being rebuilt, and in some ways heralded the country’s

developed specially for the Japanese market, such as Nipomag. 2018 is the 98th anniversary of

agricultural renaissance and the return to normal life in Japan.

this unique trade relationship between SQM and Hokuren.

In 1955 Mitsubishi reopened its office in Santiago and the sale of saltpeter to Hokuren

The island of Hokkaido in the north of Japan is the largest island of Japan and meets 25% of

continued unchanged during the turbulent years of the Chilean saltpeter industry, including

the internal sugar demand. On its 58,000 hectares, 7,161 small-scale farmers raise sugar beet

the dissolution of Covensa, the establishment of Soquimich in 1968, and the company’s

in a production that is protected and subsidized by the government because it is so crucial

subsequent privatization and name-change to SQM in 1988.

considers Chilean Nitrate

to the island’s economy. They practice crop rotation, planting sugar beet in one season and

In 2001 a new product was added to the contract of the sale of saltpeter: Nipomag (potassium

part of its agricultural

wheat or another crop the next season, and all the Hokkaido farmers plant sugar beet at

nitrate plus magnesium), specifically developed for Hokuren.

heritage. The history of the

least once every 3 or 4 years. Some of the larger-scale farmers plant sugar beet every year,

SQM currently produces nearly 15,000 tons annually of saltpeter exclusively for Hokuren,

fertilizers in Hokuren, and

rotating the crops around different sectors of their land. Hokkaido has two months of cold

and although the price has risen over the years and Japanese government studies show that

its link to Chile, is detailed in

winter a year and the spring is very cold, so the initial growth phase of the plant is particularly

sodium chloride plus nitrogen from other sources provide almost exactly the same benefits

Hokuren Fertilizer Business:

crucial, which is why the nitrogen from saltpeter is so appreciated and effective as it requires

as saltpeter, the farmers on Hokkaido continue to prefer and believe in the benefits of

50 Years of History.

no transformation and the plant can absorb and use it immediately. To grow and yield good

Chilean Nitrate. In a culture that strongly values tradition, they keep alive the agricultural

crops the plants need primarily nitrogen, phosphorous and potassium, and secondly calcium,

ways of their parents and grandparents. And the Japanese government considers the use of

magnesium, sulfur and microelements. Sugar beet is one of the few species capable of

Chilean Nitrate as part of its agricultural heritage and supports the farmers’ decision through

obtaining much of its potassium needs through sodium, and as sodium nitrate replaces this

subsidies. SQM, honoring the historical relationship of 98 years with Hokuren, is also happy to

need it’s as though the plant were receiving nitrogen and potassium at once.

continue producing saltpeter exclusively for them. Twice a year a committee from Japan visits

In fact there’s a sort of rural idea passed down through generations of farmers that “the sugar

the plants and the Tocopilla port to inspect the production of the saltpeter. The product is still

beet plant prefers sodium nitrate”.

exported with the old name “Chilean Nitrate”, now in 1,200 kg bags that are easier to load in

Mitsubishi is the importing agent for the product and was the first to import a Chilean product

ships and keep the prill spheres in better conditions. It’s a unique story of loyalty to saltpeter

to Japan. In 1936 Mitsubishi opened an office in Valparaíso with a representative and began the

that has survived wars, embargoes, commercial changes and more than five generations of

commercialization of saltpeter. The importation of “Chilean nitrate” was only interrupted during

Chileans and Japanese.

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R PIONEERS OF MODERN AGRICULTURE

SQM’s specialty fertilizers are designed for a modern agricultural industry in which all possible variables are controlled, from the climate, with greenhouses for example, to the quantity of irrigation through drip irrigation, and the nutritional support given to the plant at every step of its growth. Drip irrigation began in the kibutzes of Israel and was a revolution in farming and feeding human populations because it meant land could be used for farming even if it was degraded, desert-like and inhospitable to plant

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Drip irrigation was a revolution in farming and feeding human populations because it meant land could be used even if it was bad

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life. Drip-feeding through tubes in the desert, directly onto the root of the plant makes almost any soil apt for cultivation as the soil becomes just a substrate that holds the plant. Through drip irrigation all the necessary nutritional elements for a plant’s optimum growth can be provided by specialty fertilizers. Harmen Hollwerda, currently head of the Development of International Market and Products, began his career at SQM in 1993 developing potassium nitrate sales in Holland, which was at the time one of the main centers of greenhouse and hydroponic farming.

quality soil or even desert.

SQM’S SPECIALTY FERTILIZERS ARE DESIGNED FOR MODERN AGRICULTURE IN WHICH ALL POSSIBLE VARIABLES ARE CONTROLLED: CLIMATE, IRRIGATION, AND THE NUTRITIONAL SUPPORT FOR THE PLANT AT EVERY STEP OF ITS GROWTH.

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Potassium-Lithium Area

SQM is constantly studying how to deepen and extend understanding of the Atacama salt flats in terms of its hydrogeology, the productive processes, energy efficiency and environmental care. It works with 10 prestigious and active academic, scientific and environmental institutions:

In innovation THE COMPANY’S PHILOSOPHY CONSISTS OF RESOLVING THE CHALLENGE

OF MAXIMIZING VALUE WITH CURRENT ASSETS –THE PRODUCTION PLANTS– USING THE COMPANY’S

CONAF [ lagoons and flora and fauna ]

Nitrates-Iodine Area Laboratories, pilot plants and simulators. Policies to patent processes and products.

DEVELOPMENT OF 3 SPECIALTY AREAS Chemistry of phases applicable to crystallization of salts.

OWN RAW MATERIALS, ITS DEPOSITS, AND ITS PROCESS ENGINEERS WHO RESEARCH, DEVELOP AND TEST

DICTUC [ hydraulic systems and models of hydrogeology ]

Chemistry of iodine processes.

NUMEROUS INNOVATIONS THAT CREATE OPPORTUNITIES, NEW APPLICATIONS, AND NEW TECHNOLOGIES.

CORNELL UNIVERSITY [ origin of the recharge of the salt flats ]

Prilling and granulating.

BINGHAMTON UNIVERSITY [ paleoclimate, hydrogeology ] UNIVERSITY OF NEVADA [ evaporation, hydrogeology ]

Innovation

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Between 1989 and 2004 SQM innovations came from the Center for Investigation and Development in Antofagasta, which was unique at the time for a Chilean company as it housed a central laboratory, a small pilot plant, and numerous specialized professionals who researched and developed pilot projects essential to the company’s reinvention in the 1990s. At a moment of global consolidation SQM created a unit of Management for Innovation whose objective was to ensure that each production area had its own process engineers perfecting the processes in situ.

Applied creativity:

solar evaporation

Since the 1950s –and more if the previous Anglo Lautaro stage of the company is considered– SQM has used solar energy to concentrate solutions and harvest salts. The system has a long tradition in the company, and came from the creativity of a North American engineer working at María Elena during the 1940s. It might look craftsmanlike, but it is an efficient, and above all, cost effective and environmentally friendly method as minimal energy is consumed in its process.

From the role

to reality

The teams of engineers of the solar evaporation ponds plan quarterly renditions of their research to the managers of the productive areas. They start with basic, conceptual ideas in the laboratory –napkin engineering– before moving into the phase of studies and analysis of what could work and be profitable. These studies are sent to the Studies Management to be evaluated for their economic benefit to the company. Only then are new projects presented at meetings three times a year. Of all the ideas generated only 30% reach this stage.

CENTRO DE ECOLOGÍA APLICADA [ fauna and avifauna ] UNIVERSIDAD CATÓLICA DEL NORTE [ surface recharge, metallurgy, crystallography ] UNIVERSIDAD DE CONCEPCIÓN [ collectors and additives ] UNIVERSIDAD POLITÉCNICA DE CATALUÑA [ geo-statistical characterization ] CONSEJO SUPERIOR DE INVESTIGACIONES DE ESPAÑA [ hydrogeological models ]

RESEARCH AGREEMENTS WITH IMPORTANT UNIVERSITIES AND PRESTIGIOUS NATIONAL AND INTERNATIONAL RESEARCH CENTERS: La Corporation de L’École Polytechnique. Universidad Complutense, Madrid. University of Houston. Universidad Católica del Norte. Fraunhofer Chile Research Foundation.

PhD GRADUATES

HIGHLY QUALIFIED PERSONNEL

AND PROFESSIONALS DEDICATED TO R&D

RESEARCHERS [ 6 WITH POST-GRADUATE DEGREES. ]

ACTIVE PATENTS OF INNOVATIONS CONCERNING LITHIUM PRODUCTION

ACTIVE PATENTS 5 IN IODINE AND 3 IN NITRATES

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In the 1990s SQM began to manufacture technical grade potassium nitrate and it was launched on the market of high-tech farming as “hydroponic” grade fertilizer for greenhouse agriculture. With its high concentration of potassium and nitrate nutrients as well as its chemical purity, with low levels of sodium and chloride, SQM’s product stood out from its competitors. The Dutch greenhouse farmers, supported by the high level of horticultur-

In the 1990s SQM also made the huge technological leap with the special water-soluble blend of fertilizers for each crop, a famous and pioneering made-to-measure agronomic formula developed by the company, known as WS NPK. This range now contains more than 650 formulas of NPK that combine the advantages of potassium nitrate with the other nutrients that a plant needs for optimal growth, such as nitrogen, phosphorous, potassium,

IN THE 1990S SQM MADE THE HUGE LEAP INTO PRODUCING SPECIALITY COMBINATIONS FOR EACH CROP,

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WHICH BECAME THE FAMOUS AND PIONEERING SQM MADE-TO-MEASURE AGRONOMICAL FORMULAS.

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Fertilization through fertigation such as drip irrigation and sprinklers is considered the most efficient way to provide nutrients and water to the roots of the plants.

al development in Holland, considered it an excellent product to improve their crops. Harmen knew firsthand how the demands put on water-soluble fertilizers were getting increasingly complicated. In 1999, for example, Dutch farmers were facing a new technical challenge: with the aim of protecting the enviroment from residues of nitrates and potassium on the surface and groundwater, they were obliged by law to recirculate irrigation water with the nutrients and other elements diluted. To ensure that this recycling of the water was possible and to avoid the contamination of crops or the obstruction of pipes by non-soluble elements it was necessary to reduce to a minimum the undesired chemicals such as sodium and chloride. The Dutch farmers needed extremely pure fertilizers, and the technical grade SQM potassium nitrate, which already had high purity standards, was very well positioned to meet that demand.

magnesium, sulfur and six other essential micronutrients. SQM has developed hundreds of NPK formulas each created specially to improve the results for a specific farmer or to resolve a particular problem. These formulas have numerous advantages: the nutrient blend is ready and needs no additional products; they’re made-to-measure and cover the nutritional needs of a specific crop; they reduce the risk of mistakes in the dosing; and they are harder to steal as specialized NPK formulas, are difficult to sell on the black market of generic fertilizers. To date SQM has built 16 blending plants for NPK around the world: in Chile, Brazil, Peru, three in Mexico, two in South Africa, Abu Dhabi, Turkey, Holland, Spain, India, Thailand and China. They are strategically located in key local markets for their use in fertigation. Fertilization through fertigation techniques such as drip irrigation and sprinkler

irrigation is considered the most efficient way to provide nutrients and water to the roots of the plants, and it is thought that this market will continue to grow because of shortage of land and water, accompanied by a growing demand from consumers for fruit and vegetables cultivated in a sustainable way. Concerning to field fertilizers applied directly to the soil based on SQM’s potassium nitrate, ideal for chlorine and salinity-sensitive crops such as tobacco, potatoes and bananas, the most recent innovation was in the quality of the prills that have been increased in size and resistance, making them easier to spread either by hand or by mechanical spreaders. Given this potential for improving yield, the traditional extensive farming, which are in the base of human food production such as wheat, potatoes and onions, is being once again taken up by SQM after decades of not being a priority sector. In Mexico the potatoes that Frito-Lay grows for their Lay’s potato crisps are fertilized with SQM’s prilled potassium nitrate. To get that contract there was a thorough fieldwork and research process undertaken hand-in-hand with the brand’s potato producers. A similar process is underway with onion growers in Brazil and with British American Tobacco in Indonesia and Zimbabwe.

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Foliar application

BIOFORTIFICATION

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It has been demonstrated that fruits and commodity crops can benefit from foliar application.

A new field of research and development is the impact of foliar application –directly onto the leaf– in human nutrition. With its own formulas based on potassium nitrate it has been shown that these applications strengthen the growth and quality of the crops when the capacity to absorb nutrients through the roots is insufficient to supply the nitrogen and potassium needs of the plant. Scientific research has shown that not only fruit crops, but also commodity crops such as wheat and rice, can benefit from foliar application. The innovation is that this family of fertilizers not only improves plant growth and development, it also impacts directly on human and animal health as the plants have a higher nutrient level, directly affecting the humans and animals consuming that crop. In fact, a third of the world’s population suffers from nutrition deficiency due to low nutrient levels in their daily diet. Iodine is one of the three minerals most rare in human diet, along with iron and zinc. Herman’s department has been working since 2008 on the biofortification of fertilizers with iodine, through fertilizers that contain essential micronutrients, as an alternative solution to prevent iodine deficiency in humans. In this research foliar application has been much more effective than soil fertilizing for increasing the amount of micronutrients in grains and seeds. The PhD researcher in Agronomic Sciences Katja Hora joined SQM in 2014 to improve research and testing in biofortification with essential nutrients. Through the publish-

ing of various scientific papers, it has been established the evidence of the potencial of this strategy to improve iodine ingestion. The journal Plant and Soil, a peer-reviewed journal, published the results of research showing a 46% increase of iodine in wheat grains when the potassium nitrate was applied through foliar application with iodine. Basing itself on this research SQM is developing Speedfol Iodine SP, a formula based on potassium nitrate and rich in iodine, for foliar application in grain crops such as wheat and rice. At the same time, SQM has been driving the establishment of the World Iodine Association (WIA) whose objective is to incentivize initiatives that assure a best-possible ingestion of iodine in the human population at a global level. Agricultural biofortification is one of the pillars of that work. In 2017 SQM was the main sponsor of the WIA’s first conference “Iodine in Food Systems and Health” where the latest scientific developments in the subject were presented. To measure the potential iodine, selenium and zinc absorption levels in humans, SQM’s research labs in Holland already have results from tests on biscuits made of flour from biofortified crops, that were tested on robots with artificial stomachs. Today in Chile and other countries iodine deficiency is dealt with through salt, but one of the benefits of the biofortification of crops is that iodine needs could be met through the consumption of fruits and vegetables, thereby reducing the consumption of salt. The public health implications in terms of obesity and wellbeing could be revolutionary.

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R THE NEXT BIG STEP:

The biofortification of crops is a fascinating area, and new for SQM, because all the signs suggest that the agriculture of the future will move from plant nutrition to health and human nutrition. Just as Chilean saltpeter was fundamental during the 19th century to radically improving crop yield and feeding the growing human population, today the nitrates and iodine extracted from the caliche could play a similarly transcendental role in the nutrition of future generations. ”

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Foliar application is much more effective than soil fertilization to increase the micronutrient content in grains and seeds.

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BUT FOR THE NEXT 10 YEARS THE DEMAND FOR LITHIUM AS AN INDUSTRIAL COMMODITY FOR GLASS AND CERAMICS GREW STEADILY. IN 2006 THE COMPANY BUILT ITS FIRST LITHIUM HYDROXIDE PRODUCTION PLANT.

T A new client –the emerging battery market– appeared on the lithium market, with exacting

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demands and requiring greater purity in the product. The current

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When SQM STARTED TO PRODUCE LITHIUM CARBONATE ON THE ATACAMA SALT FLATS IN

1996 THE USE OF THIS METAL IN BATTERIES WASN’T RELEVANT, EITHER IN CHILE OR THE REST OF THE WORLD.

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with the speed of changes in this technology.

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he market demand for phone batteries represented a meager 1% as in those days most mobile cellphone technology used nickel-cadmium batteries. Until the middle of the 2000s lithium was produced and sold as a by-product of the potassium production but it didn’t have much importance in the company as the focus was more on the production of potassium chloride whose price was, in those days, at an alltime high. But in 2006 the commercial sector of SQM Salar noticed a tide-change in the lithium market. A new client had appeared; one that didn’t require more production but did have increasingly exacting specifications and need-

ed products with a higher purity level. This was the emerging market of batteries, which had set its eye on the lithium. Thanks to its portability, lithium had the potential to become the ideal metal for mobile technology such as cellphones and notebooks: it is an extremely light mineral that stores a lot of energy in very small volumes, and when combined with metals such as magnesium or aluminum it forms very resistant alloys. It is to date the most reactive of the alkaline metals; it has a low thermal expansion co-efficiency, and its density of 0.534g/cm3 is almost half the density of water; it is the solid with the highest known caloric capacity; and its electrochemical potential is extremely high.

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Sony invented a battery based on a cathode of lithium cobalt, and asked for specific requirements

‹ THE LEAP INTO THE VERTIGINOUS LITHIUM MARKET ›

The first companies to approach SQM Salar were highly-specialized Japanese companies producing cathodes for batteries requiring lithium carbonate of a higher quality than that available on the market. The first requirement that was out of the ordinary was that the particles of lithium carbonate had to be much smaller than was standard, reduced from the size of a grain of sugar to the consistency of a grain of talcum powder or flour. To satisfy this demand the engineers and chemists from the processing department at SQM Salar developed a plant with a mill that could reduce the particles to microscopic size. Samples were sent from Chile to Japan until the exact particle size was achieved along with the best-functioning chemical purity. This development was high precision in terms of the physics, the

in the lithium carbonate.

chemistry, and even the packaging of the product according to the requirements of every client. In less than a year SQM had a line of products with different grades of lithium, tailor-made for each of the companies competing in the recently unleashed technological race. Thanks to their experience in previous years developing specific products for specific clients in the specialized fertilizer market, the company had incorporated into its teams the flexibility and ability to listen to and respond to the clients according to their requirements. Added to this was the fact that it had been so hard for SQM to enter the lithium market because of the barriers in the industry that it was willing to fulfill demands that seemed extraordinary for an industrial commodity. This gave the company an advantage over its competitors, who hadn’t reckoned on SQM’s experience and adaptability. The commercial and technical teams traveled regularly to Japan to follow the tests on the samples with each of the clients at the various technological companies, with the aim of perfectioning the product and making it useful for this burgeoning industry that was changing daily. When it came to decisive technological developments, confidentiality with each client was key. In fact, it was in those years of experimentation that Sony developed a battery with a cathode of lithium cobalt oxide and asked SQM to provide various samples of lithium carbonate at different grades to reduce the calcium and sodium content as well as the magnetic particles that damaged the final product they needed.

All of these demands were a challenge for SQM Salar that had to invest in improving its processes, redesigning its systems of solar evaporation ponds, creating a variety of different quality grades and increasing production to 30,000 tons of lithium carbonate, with the approval of the board of directors, as it was predicted that lithium carbonate batteries would within 5 years be used for 30% of cellphones. Nobody imagined that in that time the technology would meet 99% of cellphone demand in the world. With all these investments and production plans ready, the 2008 world financial crisis crushed the world lithium market, in a hard blow for the SQM Salar team who had been producing 30,000 tons of lithium a year. In 2008 they only sold half of it. Faced with plummeting sales the company couldn’t keep up the same rate of production, especially as lithium is a mineral that can’t be stored for any length of time as it begins to degrade. But if production was halved, and staff operating the plant were fired SQM would run the risk that valuable members of the teams would be poached by rival companies and when the market inevitably recuperated SQM wouldn’t have the necessary experienced professionals and workers to hand. What could be done? The executive branch of SQM Salar held an emergency meeting with the SQM board of directors to propose a production program for the following three years. However hard it might be Barrera, Maffioletti and Bucher dared to predict that the demand for lithium would recuperate and that the best op-

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The 2008 crisis was a knock to the SQM Salar team. They had been producing 30,000 tons of lithium annually and that year they only sold half. 213

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IT WAS PREDICTED THAT LITHIUM CARBONATE BATTERIES WOULD IN 5 YEARS BE USED FOR 30% OF CELLPHONES. BUT NOW THE TECHNOLOGY MEETS 99% OF CELLPHONE DEMAND IN THE WORLD.

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World lithium reserves Extracted from brines

Atacama salt flats

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One of the demands of the Japanese companies was that the size of the lithium carbonate particle had to be reduced from the size of a grain of sugar to that of a grain of talcum powder or flour.

tion would be to maintain production and the current workforce. Good times would be back, they argued. It was a risk but it paid off, as the crisis was soon over and the demand for lithium grew exponentially. Because they hadn’t panicked, SQM was the only company in the world that could keep up with market demand and meet the needs of its clients. The system of solar evaporation ponds was ready to respond to the new requirements of the battery market, so all SQM had to do was to keep pumping out brines to work with. It was a huge relief, a euphoric time for the team at the salt flats, but also a stressful one, given the huge demands that had to be met. Sometimes, in order to meet an order, the lithium was sent to the client by air-freight. A big advantage for maintaining the production level was the internal work system characteristic to SQM, which oversaw the administration of the workflow in-house, from the mining of raw materials to the relationship with the client. This meant that the company maintained absolute control over everything being produced, and could take last-minute decisions. For example, if a product had a higher level of calcium, the team knew which client this could be useful for, and whom not. Or if a company needed a product urgently, it could be sent with another client’s order that had a longer delivery time. Although this way of working was risky and stressful for the commercial side of SQM, it gave the company a flexibility to respond at times when there was barely enough product to go around.

Soon most cellphones and notebooks started to use lithium ion batteries, and it became the technology used definitively in mobile devices. Thanks to the development of this market of batteries the demand for lithium grew as well as the price, until, at the end of the 2000s it overtook the previous value at which SQM had entered the market: US$4,000 a ton. Since then the price has tripled. From the initial 8,000 tons produced by SQM production has increased to 70,000 tons projected for 2018. Thanks to personalized – and made-to-measure– research into each client SQM now sells more than 36 different products based on carbonate and lithium hydroxide, at battery grade and industrial grade. More than half of the lithium sales goes to the battery market for mobile devices and for the now-growing electrical car industry.

R FLEXIBILITY FIRST

In the development of technologies that have shaken the entire world SQM has been a protagonist working closely with its clients anticipating the next technological leaps forward. In the past decade, when the research into batteries for electrical cars took off the manufacturers needed models that could be charged quickly, and in order to achieve this the lithium had to be free of any impurities, including copper. The density of the charge also had to be increased to allow the car autonomy for at least 400km – this was made possible by the very specific refinement of the particle size. In fact, the SQM Salar plants used a variety of techniques to grind the particles and different ways of crystal-

izing in order to remove the most infinitesimal copper or magnesium impurities. The constant updating of the production processes in the plants means that they are today completely different to what they were like even 5 years ago. The biggest challenge is still the speed of development of the technology. Not even the manufacturers know which of the battery technologies being researched will take off at a given moment. They’re in the middle of an

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Batteries for electric cars also use lithium components.

THANKS TO PERSONALIZED RESEARCH SQM SELLS MORE THAN 36 DIFFERENT PRODUCTS BASED ON LITHIUM CARBONATE OR LITHIUM HYDROXIDE IN BATTERY AND INDUSTRIAL GRADE PURITY. accelerated hunt, trying different alloys and demanding a similar speed of reaction and flexibility from the lithium provider – “I need it for yesterday!” If 10 years ago the clients using lithium for batteries were demanding in the level of purity they required, today these demands are extreme: they’re talking about parts per billion in the case of some elements. So, starting off with a natural brine the team up on the salt flats has to extract and refine the product even though the technology to measure or weigh those nano-dimensions doesn’t exist. In many cases there were elements that the chemists didn’t even know were in the lithium that from one day to the next took on a primordial importance. And, as the elements can’t be detected, the chemists and engineers on the salt flats had to work together with the clients on the methods of analysis in order to eliminate certain unwanted particles.

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The growing battery market exponentially increased the demand for lithium and since 2000 the price has tripled.

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The only given is that the client’s requirements change constantly and are increasingly complex.

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This odyssey affected the production plants as well, as they were remodeled and expanded; old equipment was modernized and high precision instruments are now used. But the changes have been so fast that the plants are designed to meet a specific requirement in lithium knowing that in a year or two it’ll be obsolete. In recent years it has been a major challenge to adapt the production procedures, the equipment and the technology to always meet the client’s needs, but at heart it’s the same old battle of streamlining and flexibility to maintain the plants state-of-the-art while avoiding the need for rebuilding. The only given of the market is that the client’s requirements are constantly changing and are increasingly complex. In order to be able to meet client needs on time, without compromising quality and without having to constantly renovate the plants and equipment, SQM took its own path: first of all it analyzes what is happening in the market, then it tries to anticipate. All the production plants have their own commercial and research areas, the teams of which are in constant contact with the clients and with the producers in the field. SQM also works with 10 universities and with the largest suppliers of equipment and materials in the world. Those in charge of research studies have covered 95% of the lithium plants around the world in order to understand the options available in the face of ever-changing challenges. Every week clients, suppliers, or investors, visit the SQM plants on the salt flats in order to learn from their experiences.

The rhythm of lithium is inexhaustible and growing. In 2017 an extension was designed and is now under construction on the lithium carbonate plant to increase production capacity from 48,000 to 70,000 tons. More than just a change in production capacity, this implied a design change as the brines feeding this plant come from new wells whose chemical composition is different; the same recipe for production can’t be applied. The chemical balance of the new wells was analyzed and the production plant was modified to adapt to the needs of the brine, with the understanding that its composition would probably change again and more modifications would be necessary because the lithium plants would undoubtedly have to increase their production capacity. This new production plant will be operational in 2019, while simultaneously another plant is being built with a production capacity of 110,000 tons of lithium carbonate. That’s the speed at which things change at SQM Salar. A new lithium hydroxide plant is also being built in consultation with international experts to increase production from the current 6,000 tons to 16,000 tons annually, dramatically changing the way hydroxide is produced. The development strategy for the lithium envisages a geographical diversification outside of Chile, and the participation in a metals mining project in Australia. SQM, in association with Kidman Resources, is exploiting a spodumene mine in Mount Holland, in Western Australia. It is projected that 40,000 tons of battery grade lithium will

be produced annually, and the production plant will be built in Perth. The SQM Salar team works on both projects, applying their expertise and experience with improvements that will then also be applied to the Atacama salt flats. For example, to deal with the problems of the Caucharí geography, which has a higher level of contamination in the potassium and a lower grade of lithium in the brines, they developed a process to eliminate impurities that was so successful that it will be applied in the Chilean desert. Similarly, in Australia, at the beginning of the design process it occurred to the team to design a dual lithium plant, that is, producing lithium carbonate or hydroxide on demand. They weren’t sure whether the market would require more lithium carbonate or more hydroxide so this dual capability allowed greater flexibility in meeting eventual market demands. The SQM Salar team studied the Mount Holland plant, they tested it with their suppliers, and when the tests were successful they applied the technique in Chile. Making the plants dual in this way was another revolutionary change for the production processes on the salt flats. The capacity for quick re-working and flexibility is part of the DNA of a tireless and ever-adaptable team that produces high purity lithium from the brines pumped out of the Chilean desert. ”

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The demand for lithium is inexhaustible and growing. In 2017 an extension was decided upon and is now under construction on the lithium carbonate plant to increase production capacity to 70,000 tons annually.

Atacama salt flats

Reserves of 7,500,000 tons of lithium metal

Atacama salt flats

Solar evaporation ponds of 44,000,000 m squared surface area

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Solar energy is used as a natural resource in the production process

Atacama salt flats

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372 productive wells of 30 m deep

Total surface area is approximately 3,000 km2

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Maximum depth of 1,450 m

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INDUSTRIES; EVERYTHING WAS DEVELOPED WITH HOME-MADE INNOVATIONS, WITH GREAT PERSISTENCE IN THE FACE OF CHALLENGES, AND USING THE INVENTIVENESS THAT CAME FROM THE COMPANY’S HISTORY IN SALTPETER.

T M1 was used to organize and plan SQM work. At every plant, laboratory, workplace and office the

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SQM is A COMPANY WITHOUT PRECEDENT BECAUSE THE CALICHE, RICH IN SODIUM NITRATE AND IODINE,

IS UNIQUE IN THE WORLD. SQM COULDN‘T IMPORT TECHNOLOGY OR PRODUCTION PROCESSES FROM OTHER MINING

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with this new work ethic.

his way of working marked the internal culture of the company and its way of developing. In lithium, iodine and potassium nitrate SQM competes with international companies and, in commercial terms, what’s important is not what happens in Chile but in China, the US, Japan and Europe. Globalization means fierce competition and in the long run the companies that flourish will be those that are most efficient, and capable of maintaining high productivity and low costs. Over the last 30 years, against all the odds, SQM has managed to make a place for itself in the major league, but at this level creativity and the leadership of the managers and board of

directors is not enough. It is essential to use the brains and creative potential of the company’s workers. This was particularly obvious in the super-cycle of 2010-2013 when the international price of commodities increased, including those at SQM. 2012 was a record year for profit for the company, but at the same time costs had increased so the first semester of 2013 opened somberly with a reduction in costs that meant laying off workers, adjusting spending and redesigning areas of the company. Laying off workers, painful on a personal level, was especially so given the recent boom years, and it made the board of directors think of looking for a different

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CHAPTER 13

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M1 Methodology

November

2013 methodology that would maintain the company competitive over time. This was the primary motivation for the company to try out the Lean methodology, a philosophy originating in Japan in the 1960s which Toyota used as a reference. The Lean method is a series of practices imbued with that very particularly Japanese love of order and harmony. In SQM the method was re-

named M1 and was used to plan and organize work through a process of efficient and productive meetings held at the beginning of each working day –in all the production plants, laboratories, manufacturing plants and offices of the company– at which workers were invited to propose ideas for the improvement of results. The key was that this was a methodical and daily effort to improve things

Pilot plan: Atmospheric Plant in Coya Sur

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In the performance discussions, part of the new work practices the workers adopted the motto “let’s beat the machines!”

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and not fall into the inertia and acceptance of the status quo, only improving procedures drastically once every four years, for example, as normally happens in the traditional management of companies. This initiative for cultural change within SQM was promoted especially by José Miguel Berguño who was at the time Manager for Performance and Strategic Supply, and by Carlos Díaz, Vice-President of Iodine Nitrate. But above all it was the leadership of Patricio de Solminihac, Deputy Manager of the company, that was key to the implementation of the methodology. With his more than 30 years of experience and knowledge of SQM, he was able to welcome new ideas

D-Day was in November 2013. Human Resources installed a crew of 10 consultants from the firm McKinsey who became “agents of change” for the next four months, a time during which new practices were introduced such as the 20-minute discussion about performance at the beginning of each day, with a white board and pen. In the first meetings –which were quite tense– the work groups tended to blame each other for problems, but it only took a few days for them to change their way of thinking. Working together to find solutions instead of blaming each other they all became increasingly aware of the role that others played in the different areas of production,

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THE HISTORIC PLANT ATMOSFÉRICA AT COYA SUR, WITH TECHNOLO GY 50 YEARS OLD, WAS CHOSEN AS THE PILOT PLANT FOR THE M1 METHODOLOGY.

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As the input of each worker is valued, many make the effort to contribute good ideas.

and be open to new initiatives and cutting edge projects that the younger teams considered useful for the new times. In this spirit of promoting change Patricio de Solminihac accepted and implemented the Plan for Strategic Development that fixed tasks and challenges for the company for the following years, and adopted the Lean/M1 method, two significant transformations. To make the M1 methodology work one of SQM’s historical plants was chosen as the pilot – the oldest, with technology dating back 50 years: The Atmospheric Plant at Coya Sur, run by a team that had been operating in the same way for decades and who would probably be fairly resistant to change.

and the integral importance of their own role in the plant’s smooth-running. As the opinion of each worker was valued most of them made a huge effort to propose ideas for the improvement of results. If the challenge was to produce 900 tons a day and a shift managed to produce 920, then the work crews would enthusiastically increase the level of the challenge to 950 tons day, and then 970 tons. During those discussions about performance the workers quickly found a motto: “Let’s beat the machines”. The results were impressive: when the pilot plan started the Atmospheric Plant at Coya Sur was producing 900 tons a day. Today, 5 years later, the same plant is producing

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FROM A RIGID HIERARCHICAL STRUCTURE SQM DEVELOPED INTO A MORE HORIZONTAL AND DYNAMIC COMPANY IN WHICH PROBLEMS ARE DEALT WITH IN SITU BY THE WORKERS.

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The invention proposed by Pedro Ortíz, a maintenance mechanic at the Pedro de Valdivia iodine plant, saved costs and time.

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1,400 tons a day with the same personnel and equipment but with a different mentality and work ethic. The Lean/M1 method was immediately applied across the rest of the operations at every level and every plant, from the laboratories on the salt flats where the analysts maintain their workplace impeccable and their testsachieved increased from 60 to 80 per hour, to the potassium nitrate plants NPT3 and NPT2 at Coya Sur where production increased 60%. The company developed from having an exceedingly hierarchical and rigid structure to a more horizontal and dynamic one where problems are resolved by the workers in situ and rarely need to be dealt with by the company’s directors. It was this new work culture that enabled the company to implement multiple innovations such as those put forward by Pedro Ortiz, a maintenance mechanic at the Pedro de Valdivia iodine plant. Ortiz started working with the company in 1999 as an assistant mechanic specializing in fiberglass used to internally coat the pipes

IN THIS NEW WORK CULTURE SOLUTIONS, IDEAS AND MULTIPLE INNOVATIONS ARE BORN AT A GRASS ROOTS LEVEL AMONG THE WORKERS WHO ALL PARTICIPATE; IT HAS HELPED TREMENDOUSLY TO REDUCE COSTS AND ENERGY CONSUMPTION WHILE IMPROVING PRODUCTION. and tanks in which the solutions for the iodine production are stored. In 2017, due to a fault, the iodine solution leaked out of one of the tanks to a cracked slab. It wasn’t possible to subcontract out of

the company the repair of the slab as that would have taken about a month, and time was of the essence. Ortiz analyzed the situation, the materials and resources available, and during one of the performance meetings of the maintenance team he suggested: “Boss, I’ve got a solution. I’m going to need the plywood sheets that we’re not using anymore (the ones used to stack the barrels of iodine on the pallets). We’ll use them as a base and cover them in fiberglass to replace the concrete”. His boss, José Espinoza, technical maintenance supervisor, trusted that he’d get it right, and Ortiz put his invention into practice, even though he also had doubts as to how well it would work. He stuck the sheets of plywood together and secured them to the floor in four-meter square blocks, before applying various coats of resin to get the sheets of fiberglass to stick. That weekend, along with José Espinoza, they undertook some hydraulic tests to make sure there was no leakage. They were both clearly nervous as they poured in some solution – and were delighted to see that the tanks held. Ortiz’ invention had worked! First thing on Monday morning they told Mario Rojas, the Pedro de Valdivia production manager, and Gabriel Munizaga, the overseer of iodine production, who were both impressed by the invention and immediately gave Ortiz another challenge: to build other sink slabs. Ortiz’ invention, even though it seems simple, had a very positive impact, as to subcontract to an external company the building

The exploration

of new projects

The SQM mining exploration area is made up of 30 geologists divided into three groups. In the nitrates and iodine areas the geologists establish production plans for the following

three years. Depending on the characteristics of the areas to be mined they define a mining plan: where to mine and what grade of caliche will be extracted to obtain a particular nitrate, in a technical analysis that is fundamental to the later processes. The exploratory geologists looking for potentially productive projects are focused on the long term: they define the areas to exploit for the next 5 to 10 years. They examine the pampa exhaustively, millimeter by millimeter, with microscopes, hammers and drilling equipment. One of the newest areas of SQM is the exploration of metallic mining. Company geologists are investigating potential deposits that could be hidden under an 8m-deep surface layer of caliche, of great interest to SQM. A new copper mine the size of Chuquicamata could potentially be hidden in the depths of the earth, waiting to be discovered by the persistent geologists of metallic exploration. ”

The workers feel motivated, supported by their colleagues and satisfied in their part in the improvements achieved.

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of a sink tank cost more than CLP$2,000,000 while Ortiz had managed it in less time and at a cost of 8 times less. The spilled solution is pumped back into tanks, as every cubic meter of iodine costs the equivalent of US$2,000. It used to take a month or two to build a sink tank, now it takes a week. To date Ortiz has built 6 sink slabs of various dimensions. This new work culture in which solutions and ideas are born at a grass roots level among the workers who all participate in proposals and inventions doesn’t only help the company reduce costs and energy consumption while improving production; it also motivates the workers who feel supported by their colleagues and satisfied in their part in the improvements achieved.

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R FROM TOCOPILLA TO THE WORLD

Tocopilla maintains its importance as a port and logistical center where all the SQM nitrates and potassium are stored, loaded and distributed to hundreds of countries.

In the last 30 years SQM has transformed itself from a mining company that was only focused on production whatever the cost, into an internationally competitive company. This reinvention has allowed the company, and the minerals extracted from the caliche, to take their place in industries such as food supply, renewable energies, health and new technologies that are today key to human development. Although most Chileans are unaware of it, SQM is omnipresent in the everyday life of ordinary people. The lettuces, tomatoes, avocadoes and other fruits and vegetables consumed on a daily basis by millions of people around the world are grown using SQM’s potassium nitrate. At the same time, most cellphones contain three SQM products: iodine in the screen, lithium in the battery,

and potassium nitrate in the glass that provides the specific thermal properties. The mobile technology industry, from smart devices to electric cars, would also not have the same speed and safety without the high-grade lithium, iodine and potassium nitrate from SQM. The extraction of minerals from the desert is SQM’s competitive advantage, and is the noble legacy of the saltpeter industry. But the company is also selectively integrated and capable of adding value to the minerals that it commercializes. There are few companies in the world that produce, ship, distribute and sell directly to their clients in more than 110 countries. Within SQM operations the port of Tocopilla is the center of the nervous system. Historically Tocopilla was the port that sent saltpeter out into the world, and today its importance is intact as the port and logistical center where the nitrates and potassium are stored and shipped to the hundreds of waiting countries. It is a complex logistical terminal, at which every moment of good weather is worth gold dust as the port isn’t protected by a breakwater, so the loading operations take place practically on open seas and, depending on the weather, the port is often shut. In a good year the port might be closed for 70 days; in a bad year up to 100 days. Sometimes there are high tides that last for 2 or 3 weeks, leaving 4 or 5 ships waiting out at sea while the storage courts and warehouses fill up, and the trucks have to be re-routed. And when the tides suddenly drop loading starts again at full speed. Each ship takes 2 or 3 days to be loaded.

Despite the uncertainty of the weather 60 to 70 ships leave the port every year, each one carrying up to 35,000 tons of product to its destination. On average 200,000 tons of cargo are shipped from Tocopilla every month, between 700 and 900 tons an hour. This is a feat that SQM manages to pull off with an unusual mixture of old-school technology, tenacity and innovation. For more than a century one of the key elements of the port was the historical saltpeter train. From 1899 to 2015 the railway ran from El Toco to Tocopilla, an extraordinary work of engineering that carried its valuable cargo of fertilizer over the hills, down steep slopes and through hair-raising gorges from María Elena, Pedro de Valdivia and Coya Sur right up to the port. Then, in 2015, a devastating landslide destroyed parts of the track of this old and much-loved train. Since then all SQM’s nitrates and potassium are transported by truck from the pampa to the port. Switching from using the train to transport the 700,000 tons of the seven different types of products in bulk to transporting it by truck to a port in the middle of a town required a drastic logistical change in terms of safety and road-use. Maintaining the zero-accident statistic while ensuring that the products arrived uncontaminated at the port was a grueling challenge for the workers running the port. SQM is currently developing a 5-year master plan to redesign the movements of the trucks both inside and outside the port, as well as modernizing and dividing into sectors the warehouses, the storage courts and bagging center, in order to ensure an impecca-

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The railway from El Toco to Tocopilla transported fertilizer from María Elena, Pedro de Valdivia and Coya Sur to the wharf. It closed in 2015 after a landslide.

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Dock 5, built in the latter half of the 19th century, is used to load bagged products into the cargo holds using a system of barges and tugboats.

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ble operation over the next 20 years without jeopardizing the port’s reputation as a good neighbor to the town of Tocopilla. Although the unforgettable train’s whistle no longer sounds, the SQM port is active and fully functioning with two emblematic signs of its local identity and of what it was before the 1968 creation of Soquimich: the historical Dock 5 and its formidable mechanical arm. Its use is still vital to the loading of material, and it confirms the company’s desire to give new life to the town’s heritage and to the saying “let’s beat the machines”. Dock 5, built in the latter half of the 19th century is used to load bagged goods into the holds of the ships using a system of barges known as “faluchos” and tugboats, that have been used here since the golden days of saltpeter. This system, worthy of a museum and that exists in no other commercial port in the world, is still used in Tocopilla where the shallow waters mean that the ships can’t come in to the wharf. Of course the installations at Dock 5 have been modernized since the 19th century: for loading the bags, for example, it was used manpower to throw bags of 50 kilos to the barges was replaced by the use of a modern crane that load maxi-bags of 1.2 tons. The old wooden faluchos are nowadays strong steel tenders. But it’s true that by using this traditional falucho loading system SQM has been able to consistently meet its commercial obligations concerning the bagged products, without wasting time or losing material. These bagged products only represent 10% of the product shipped out of the port, with

the other 90% being shipped in bulk, loaded straight into the cargo hold of the ship using a gigantic metal loading arm, a hulking metal contraption that’s visible from one end of the town to the other. In technical terms this mechanical loading arm is known as the Mechanical Bulk Storing and Loading Machine, and it was first used on 21st August 1961, when it was the first modernized piece of equipment to grace the old port. It’s construction –that took 2 years– was undertaken by the Salfa Snares Co. for the Anglo American Saltpeter Co. which was at the time the owner of the concession of the port and the María Elena, Victoria and Pedro de Valdivia offices. Its inauguration put an end to the slow and primitive system of manual loading using barges, longshoremen and workers, which had been a very expensive system not least because of the significant amount of material that fell overboard and into the sea. It was also an operation that needed a lot of manpower, and each ship took several days to be loaded. However, its use also implied a knock-on financial blow to the commerce and night life of Tocopilla which saw a decline in the seamen who would come down and enjoy the town while their ship was being loaded. It was, in engineering terms, a colossal undertaking. For its foundations 32,400 cubic yards of ground were dug up, and 8,300 cubic yards of concrete were used. 24,000 tons of rock landfill was used to extend the land out to sea, and another 20,000 tons were used to protect the extension from the tides.

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THE MECHANICAL ARM IS USED FOR BULK LOADING, AND IT BECAME OPERATIONAL ON 21ST AUGUST 1961, AND WAS A KEY ELEMENT OF MODERNIZATION OF THE PORT.

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The mechanical arm

More than 20 different products of a variety of grades of quality and purity. A peak of 900 tons loaded every hour.

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TO SUPPLY THE DEMAND AROUND THE WORLD SQM HAS ITS OWN LOADING TERMINAL IN THE PORT OF TOCOPILLA. FROM HERE POTASSIUM NITRATE IS EXPORTED TO THE MARKETS, WHERE IT IS RECEIVED BY THE COMPANY’S DIVISIONS OR JOINT VENTURE PARTNERS AND THEN DISTRIBUTED IN 110 COUNTRIES

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ON ALL 5 CONTINENTS WHERE SQM SPECIALTY FERTILIZERS ARE USED.

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‹ A LONG ARM STRETCHING OUT INTO THE FUTURE ›

Within a short time the workers who had shoveled the saltpeter were replaced by a “cradle” that upends the same full wagons at a rate of 28 wagons per hour. The saltpeter is taken from there on conveyor belts to six gigantic silos that have a storage capacity of 9,000 tons of saltpeter and its derivatives. Another system of conveyor belts takes the product to the mechanical arm which, using gravity, places

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The SQM strategy for the port has been one of constant investment in technological improvements to the Mechanized Plant, reinforcing rather than replacing it.

the product into the cargo hold of the docked ship. Manpower and physical effort were replaced by a modern mechanical chore. The most striking thing about the port is that since 1961 it has used the same mechanical loading system, from the conveyor belt to the hold of the ship, and in all this time the colossal mechanical arm has resisted not only the ravages of the sea but also seismic movements, without ever losing a single day’s work. It’s a simple but solid design, and it’s unique – there are no similar structures in other ports around the world where most loading is done using cranes and containers. The SQM strategy for the port has been one of constant investment in technological improvements to the Mechanized Plant, rather than replacing it. The idea is to reinforce it, maintaining its high levels of efficiency and operations to confront the challenges of the future. The current Logistics Manager, Rodrigo Jasen, remembers that in 2008 when he was a recently-hired young engineer, he couldn’t understand the managers’ sentimental loyalty to this hulking chunk of steel that he considered obsolete. One day he accompanied his boss, Carlos Díaz –who at the time held the position Jasen does now– to Tocopilla. Hey Carlos, when’s that arm going to be changed? Díaz replied with a mixture of horror and laughter: Are you crazy? I hope nobody asks me to change it! At the time Jasen didn’t have the experience to understand what it would mean to

change that gigantic beast, but now that he’s Logistics Manager and has seen the metal arm hold firm against rough seas, floods and earthquakes, he, as well as the port’s old hands, touches wood in the hope that nothing ever happens to that beloved metal arm. For the company’s inner-working the mechanical arm is like the surgeon’s hand – if one day a huge earthquake or some sort of naval accident harmed it, the construction of a replacement bulk loading system would take at least a year and require an investment of millions of dollars, which would be a disaster for a company that fights a daily battle to keep its costs down. All the workers who’ve toiled at Tocopilla over the last 50 years have had the creativity and ability to keep the mechanical loading system efficient and matching up to the requirements of the production plans, despite the changes over time. Given that the original equipment was designed to load 1,200 tons per hour of only one product (saltpeter) this hasn’t always been easy. These days SQM loads more than 20 different and incompatible products of a variety of quality levels. So every time a product has been loaded the equipment of the mechanical arm needs to be thoroughly cleaned, conveyor belt by conveyor belt, silo by silo, to avoid any contamination of the next load of product. The operations reach a level of complexity and interruptions that few ports in Chile have to deal with as most load only one product, such as copper concentrate or zinc. Despite the delays produced by the necessary cleaning process, the mechanical arm reaches peaks of 900 tons loaded an hour.

SQM is currently undertaking new steps of modernization at Tocopilla, with a master-plan for the next five years, that aims to improve efficiency in the operations and optimize the storage space with an eye in particular on the company’s star product: potassium nitrate. While these logistical improvements are being implemented the mechanical arm continues to serve, in glory and majesty! It is resistant to the havoc nature plays with it, to the devouring sea air and the fiercely drying desert dust. It is a symbol of the company’s historical spirit that has always used the ingenuity of its workers and the resources at hand to keep costs down while maintaining the efficiency of its processes and the quality of its products. This very Chilean resilience –making do with a little to get a lot– and surviving the challenges however brutal they may seem, is also typical of SQM. This unchanging arm, anchored to the seabed on the very edge of a desert that stretches into the Andes mountains, connecting the synchronized efforts of a huge team of people to the wider world represents a moment in a story that is still on-going. It is the unique story of saltpeter, that began nearly 200 years ago, and in which the entire country of Chile has played a leading role. It is the story of a national industry whose far-flung reach touched every continent; of an industry that plumbed the depths of tragedy and knew how to reinvent itself in a silent desert. Of an industry that rose again from the ashes to take its place on the international podium of international mining. ”

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The company is currently undertaking a new stage of modernization of the port to improve its operations and optimizing the warehouse space.

Port and logistic center 240

Tocopilla

An average 200,000 tons are loaded a month.

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Photographic credits

Author’s thanks I WOULD LIKE TO THANK ALL THOSE WHO CONTRIBUTED THROUGH MEMORIA CREATIVA‘S RESEARCH TEAM OR WITH WHOM I COLLABORATED DIRECTLY, FOR THEIR KNOWLEDGE, IDEAS, MEMORIES AND SUGGESTIONS. WITHOUT THE CONTRIBUTION OF THE FOLLOWING PEOPLE, WHO ALL WORK FOR OR HAVE WORKED FOR SQM IN THE LAST 50 YEARS, THIS BOOK WOULDN’T HAVE BEEN THE SAME:

Carolina Tabilo, Berta Morales, Alejandro Bucher, Armin Lauterbach, Atilio Narváez, Alfredo Doberti, Carlos Irarrázaval, Carlos Arredondo, Carlos Díaz, Corrado Tore, 242

Carlos Durán, Daniel Jiménez, Eugenio Ponce, Felipe Smith, Frank Biot, Gerardo Illanes, Gabriel Munizaga, Gabriel Meruane, Hernán Tejeda, Harmen Hollwerda, Julio Quezada, José Miguel Berguño, Juan Carlos Barrera, José Milla, Jorge Téllez, Juan Lagos Tonelli, Juan Palma, Julio Ponce, Jorge Rodríguez, Juan Carlos Durán, Mario Rojas, Óscar Montecinos, Osvaldo Yáñez, Patricio de Solminihac, Pablo Altimiras, Pablo Cereceda, Patricio Araya, Patricio Díaz, Rodrigo Maffioletti, Rodrigo Jasen and Sebastián Freed.

I would particularly like to thank for their collaboration, proactive attitude, interest, professionalism, readiness to help, and kindness the SQM Communications team made up of Carolina García-Huidobro, Tamara Rebolledo, Álvaro Cifuentes, Mauricio Olivares, Mario Sánchez y Claudio Álvarez. Their participation in this book was essential. To all these people, my sincerest gratitude.

Patricio García Méndez

Page 14: Edwards, Agustín / Haenke, Thaddäus. Descripción del Reyno de Chile (“Description of the Kingdom of Chile”). Available in Memoria Chilena, National Library of Chile. Page 23: Collection of the National Historical Museum, the Prosperidad Office. Page 29: Macuer Llaña, Horacio. “Parada” or basic saltpeter mining plant, ca. 1830. Available in Memoria Chilena,  National Library of Chile. Page 31: –Collection of the National Historical Museum, Saltpeter worker. –Photograph by Leblanc (Chile). Francisco Segundo Puelma Castillo, portrait of F. Leblanc, old Garreaud photograph. Sala Medina.  Available in the National Digital Library of Chile. Page 32: Saltpeter workers handling the heating basin equipment.   Sala Medina. Available in the National Digital Library of Chile. Page 33:

The Agua Santa Office, ca. 1878. Historical-Heritage Collection. In store. Photograph album No. 8559, Chilean Saltpeter Industry 1830–1930, pp. 2.  Historical Heritage Collection, Museum of Antofagasta.

Page 34: Blasting to start caliche mining. Historical Heritage Collection. In store. Photograph album No. 8559, Chilean Saltpeter Industry 1830–1930, pp. 7.  Historical Heritage Collection, Museum of Antofagasta. Page 36: General Hilarión Daza, President of Bolivia, 1879. Sala Medina. Available in the National Digital Library of Chile. Page 37: Solferino Office, workers moving trucks of caliche, ca. 1889. Available in Memoria Chilena,  National Library of Chile. Page 39: –Courret Brothers (Lima, Peru). Benjamín Vicuña Mackenna. Courret Brothers. Sala Medina. Available in the National Digital Library of Chile. –Aníbal Pinto. Sala Medina. Available in the National Digital Library of Chile. –Alberto Blest Gana. Sala Medina. Available in the National Digital Library of Chile.

Page 40: –José Manuel Balmaceda Fernández. Sala Medina. Available in the National Digital Library of Chile. Page 41: –Workers storing bags of saltpeter in a warehouse. Sala Medina. Available in the National Digital Library of Chile. –Workers and machinery for saltpeter manufacture. Sala Medina. Available in the National Digital Library of Chile. Page 47: Santiago Humberstone, 1850–1939. Available in Memoria Chilena, National Library of Chile. Page 48: Primitiva Office: refinery section, ca. 1889. Available in Memoria Chilena,  National Library of Chile. Page 62: Arturo Alessandri Palma. Sala Medina. Available in the National Digital Library of Chile. 243

Page 90: –Tea pot. Copper, welding equipment. 15 cm x 22 cm.  Historical Collection. On display in the “Cycles of Mining” room. Inventory N° 5583. Historical Heritage Collection, Museum of Antofagasta. –Water bottle (detail). Historical Collection. On display in the “Cycles of Mining” room. Inventory N° 5820. Historical Heritage Collection, Museum of Antofagasta. Page 91: Collection of the National Historical Museum, Robert Gerstmann, Saltpeter building. Page 100: –Spade. Head: melted iron; Handle: Wood, carved. 1,09m tall. Historical Collection.  On display in the “Cycles of Mining” room. Inventory N° 5772. Historical Heritage Collection, Museum of Antofagasta. –Spade. Historical Collection. On display in the “Cycles of Mining” room. Inventory N° 8767. Historical Heritage Collection, Museum of Antofagasta.

Relevant Bibliography · Diary of a naturalist around the world, 1839, Charles Darwin. · Rápida ojeada sobre la cuestión del salitre (A glimpse at the issue of saltpeter), 1875, Guillermo E. Billinghurst. · Una visita a las oficinas salitreras de Tarapacá antes del sistema Shanks (A visit to the saltpeter offices of Tarapacá before the Shanks system), 1876, Mineo: Iquique, James Thomas Humberstone.

· El salitre: resumen histórico desde su descubrimiento y explotación, (Saltpeter: a historical review from its discovery and exploitation), 1930, Roberto Hernández C. · La industria salitrera y el salitre como abono, (The saltpeter industry and saltpeter as fertilizer), 1930, Enrique Cuevas. · El salitre de Chile, 1830-1930, (Saltpeter of Chile, 1830-1930), 1931, Santiago Marín Vicuña. · La tragedia del salitre: veinte años después, (The tragedy of saltpeter: twenty years later), 1933, Jorge Vidal.

· Los capitales salitreros de Tarapacá (The saltpeter resources of Tarapacá), 1889, Guillermo E. Billinghurst.

· El Salitre, Boletín Minero Sociedad Nacional de Minería, (Saltpeter, Mining report from the National Mining Society), 1938, Juan Brüggen.

· Salitreras de Tarapacá (The saltpeter mines of Tarapacá), 1889, L. Boudat & Ca.

· Estudios sobre la Industria Salitrera de Chile, (Studies about the saltpeter industry in Chile), 1955, Fernando Gorroño, Roberto Fiedler, Alfonso de Castro, Fernando Canessa and Fernando Mardones.

· El salitre de Chile o Nitrato de Soda, (Chilean saltpeter or sodium nitrate), 1893, René Le Feuvre and Arturo Dagnino. · Description of the kingdom of Peru, 1901, Thaddeus Haenke. · The chilean saltpeter industry, 1908, Dr. Semper & Dr. Michels. Translated by Javier Gandarillas and Orlando Ghigliotto. · The saltpeter crisis, Louis Michaud Editor, Paris, 1910, Alejandro Bertrand. · Un siglo de Historia Económica de Chile: dos ensayos y una bibliografía 1830-1930, (A century of Chilean Economic History: two essays and a bibliography 1830-1930), 1982, Carmen Cariola Sutter and Osvaldo Sunkel. 244

· Manual práctico de los trabajos en la Pampa Salitrera 1930, (Practical manual for work on the saltpeter pampa, 1930), 1930, Horacio Macuer.

· Historia del salitre desde la Guerra del Pacífico hasta la Revolución de 1891, (History of saltpeter from the War of the Pacific to the 1891 Revolution), 1984, Óscar Bermúdez Miral. · Los empresarios, la política y los orígenes de la Guerra del Pacífico, (Businessmen, politics and the origins of the War of the Pacific), 1984, Luis Ortega. · Salitre chileno, Mercado mundial y Propaganda (1889-1916) (Chilean saltpeter, the world market and propaganda 1889-1916), 1986, Enrique Reyes Navarro. · Chile y Gran Bretaña durante la Primera Guerra Mundial y la Post Guerra, 1914-1921, (Chile and Great Britain during WW1 and the after-war years 1914-1921), 1986, Juan Ricardo Couyoumdjian. · Rich beyond the dreams of avarice: The Guggenheims in Chile, Business history review, Vol. 63 No 1, 1989, Thomas F. O’Brien, pp. 122-159. · Salitre, harina de luna llena, (Saltpeter, flour of the full moon), 1993, Victoria Durruty. · Una visita a las oficinas salitreras en 1918 (A visit to the saltpeter offices in 1918), in Historia, Vol. 27, 1993, Introduction, translation and notes by Juan Ricardo Couyoumdjian, J.B. Hobsbawm, pp. 567-594. · La industria del yodo en Chile: 1815-1915, (The iodine industry in Chile: 1815-1915) in Historia, Vol. 27, 1993, Ronald D. Crozier, pp. 141-212. · El salitre hasta la Guerra del Pacífico. Una revisión, (Saltpeter until the War of the Pacific. A revision) in Historia, Vol. 30, 1997, Ronald D. Crozier, pp. 53-126. · Influencia británica en el salitre, origen, naturaleza y decadencia, (British influence in saltpeter: origins, nature and decadence), 1998, Alejandro Soto Cárdenas. · Guerra del Pacífico. De Antofagasta a Tarapacá, (The War of the Pacific. From Antofagasta to Tarapacá), 1911, Gonzalo Bulnes.

· Historia del salitre desde sus orígenes hasta la Guerra del Pacífico, (History of saltpeter from its origins to the War of the Pacific), 1963, Óscar Bermúdez Miral. · Historia del salitre desde la Guerra del Pacífico hasta la Revolución de 1891, (History of saltpeter from the War of the Pacific to the 1891 Revolution), 1963, Óscar Bermúdez Miral. · El Mercado del Salitre durante la Primera Guerra Mundial y la Postguerra, (The saltpeter market during WW1 and in the postwar period), 1974, Juan Ricardo Couyoumdjian. · Historia de Chile, (History of Chile), 1974, Fernando Silva Vargas. · Gobierno chileno y salitre inglés, 1886-1896, (Chilean government and english saltpeter, 1886-1896), 1977, Harold Blakemore. · Las ciudades del salitre, (The saltpeter cities), 1999, Eugenio Garcés Feliú. · Red norte: la historia de los ferrocarriles del norte chileno, (The northern network: the history of rail in the north of Chile), 2003, Ian Thomson. · Las ideas y los grandes procesos económicos en el tiempo, (Ideas and important economic processes through time), 2004, Alejandro B. Rofman, Ricardo C. Aronskind, Matías S. Kulfas and Valeria S. Wainer. · El salitre en los mercados internacionales, (Saltpeter and the international markets), 2004, Manuel Fernández Canque in Eco Pampino. Antecedentes para una política pública en minerales estratégicos: litio, (Antecedents for public policies in strategic minerals: lithium), 2009, Cochilco Head of Studies and Public Policies. · The alchemy of air, 2009, Thomas Hager. · Enciclopedia de Iquique Siglo XIX, (Encyclopaedia of Iquique 19th Century), 2013, Hrvoj Ostojić Perić. · La sociedad del salitre. Protagonistas, migraciones, cultura urbana y espacios públicos 1870-1940, (The saltpeter society: protagonists, migrations, urban culture and public spaces, 1870-1940), 2013, Sergio González. · Veleros franceses y alemanes en la ruta de salitre, (French and german sailing ships on the saltpeter route), 2015, Guillermo Burgos. · The nitrate industry, 2016, Enrique Cuevas.

· Poemario popular de Tarapacá 1899-1910, (Book of popular verse of Tarapacá), 1998, María Angélica Illanes and Sergio González Miranda.

· La épica del salitre en el Desierto de Atacama 1880-1967. Trabajo, tecnologías, vida cotidiana, conflicto y cultura, (The saltpeter epic in the Atacama Desert, 1880-1967. Work, technology, daily life, conflict and culture), 2017, José Antonio González Pizarro.

· The saltpeter and iodine industries with 100 illustrations and 1220 pages of text. Includes: Annexes A, B, C with 96 pages of text and glossary of 1,200 technical opinions with 144 pages of text from 1907-2014, 1914, Enrique Kaempffer.

· Agenda del Salitre, (The saltpeter agenda). Years: 1956, 1964, 1969, 1985 and 2001.

· Política salitrera. Bases de un programa de defensa del salitre, (Saltpeter policies. Basis of a program of the defence of saltpeter), 1918, Alejandro Bertrand. · Salitre y guano, (Saltpeter and guano), 1929, Miguel Cruchaga.

· La Publicidad del Nitrato de Chile en el Primer Tercio del Siglo XX. Ejemplos de Art Déco en el Valle del Henares (Advertising chilean nitrate in the first third of the 20th century. Art deco examples in the Henares Valley) in Azulejería, cerámica y publicidad, (Tiles, ceramics and advertising), Ricardo Barbas Nieto-Laina. · Memorias Anuales y Reportes de Sustentabilidad de SQM (SQM yearly report and sustainability reports). Years: 1989 to 2017.

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