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The move comes as Chile's government last week called on miners to slash water usage.
Albemarle said it had commenced a third-party assessment, using the Initiative for Responsible Mining Assurance's (IRMA) Standard for Responsible Mining, at its lithium brine extraction site, the Salar Plant, in the Salar de Atacama.
"Albemarle's third-party audit makes the company the first global lithium producer to commence such an assessment using the rigorous IRMA Standard," it said.
The audit would cover 26 areas including water management, human rights and greenhouse gas emissions, and the full report would be publicly available.
"How we produce lithium in the Salar de Atacama is as important as how much lithium we produce," Albemarle VP of lithium sustainability Ellen Lenny-Pessagno said.
IRMA executive director Aimee Boulanger said the audit was "an opportunity to further protect this fragile region's communities and the environment on which they depend, and for the market to value that effort".
Albemarle said its freshwater rights at the salar made up less than 0.5% of the total rights in the basin.
It didn't use freshwater in its brine extraction and concentration process, it said, and recently committed to reduce the intensity of freshwater use by 25% by 2030 in areas of high and extremely high-water risk.
The company noted it had invested US$100 million in a thermal evaporator at its La Negra plant in Chile, to increase conversion capacity without a corresponding increase in freshwater use, and said no other lithium manufacturer was currently using this technology.
It said La Negra was not included in the IRMA audit as the current standard only covered the mine site, not stand-alone mineral processing facilities.
Albemarle is holding an investor day on Friday.
Its shares have gained almost 160% over 12 months as the lithium market strengthens and it's forecast a strong second half.
Its shares are trading near an all-time high, closing at $241.86 in New York on Friday to capitalise the company at $28.3 billion.
