① On Wednesday, local time in Chile, at the request of Tianqi Lithium, the second largest shareholder, SQM held its second special shareholders' meeting in nearly two months; ② SQM had previously finalized a public-private partnership agreement with Chile's national copper industry, but the negotiation process was questioned and opaque.
Finance Association, April 25 (Editor Shi Zhengcheng) Due to the latest financial reports from Chinese mining giant Tianqi Lithium, SQM (Chilean Mining Chemical), which is as far away as Chile, has once again aroused the curiosity and attention of Chinese investors. In fact, a commercial game is also currently undergoing a final tug-of-war between the parties.
According to various media reports, on Wednesday local time in Chile, SQM held its second special shareholders' meeting in nearly two months at the request of Tianqi Lithium, the second largest shareholder. SQM will brief shareholders on the transaction with Chile's national copper industry and answer questions. At the same time, Tianqi Lithium is also pushing for a shareholder vote on the deal, but SQM's previous position has always been that only approval by the board of directors is required.
In 2018, Tianqi Lithium spent US$4,066 billion to buy 23.77% of SQM shares from Canada's Nutrien Group. Currently, the largest shareholder of SQM is Julio Ponce Leroux, the former son-in-law of Chilean President Augusto Pinochet.
(SQM weekly chart, source: TradingView)
Background: What deal?
The background to the whole thing is that the Chilean government is advancing the process of nationalizing its lithium resources.
Because of this, SQM, the world's second-largest lithium producer and operating the Atacama project at the world's largest lithium salt lake, was also asked to make a choice: either get kicked out after the 2030 project operation contract expires, or hand over the majority stake in Salt Lake assets to the Chilean National Copper Company in exchange for an additional 30 years of business extension.
May 31 of this year is the deadline for the parties to reach a final agreement.
In fact, SQM made the choice at the end of last year. According to the framework agreement announced at the end of last year, the two companies agreed to establish a public-private joint venture, and Chile's national copper industry will hold 50% +1 share. The company will begin the first phase of operations in January 2025 and will continue to use SQM's existing operating contract until 2030. After 2030, it will be replaced by a lease for the Chilean National Copper Industry.
Given the chips in the hands of all parties, this deal is clearly more beneficial to Chile's national copper industry. By the time the deal is officially implemented, the world's largest salt-producing lake will enter the status of a major national control.
Questioned about not being transparent? Chile's National Copper Industry Responds
For a US stock listed company like SQM, the biggest problem with this deal is that the entire negotiation process is not transparent. In particular, there is currently no accurate explanation about the economic benefits after the joint venture. Maximo Pacheco, the former Minister of Energy of Chile and chairman of Chile's National Copper Company, also responded this week.
Pacheco said in a public speech on Tuesday evening local time that the deal with SQM was “both transparent and beneficial to Chile.”
More importantly, although he stressed that negotiations are ongoing, it is impossible to reveal exact figures. However, he also said that starting with the joint venture in 2025, counting the revenue from taxes and operating contracts, the Chilean government can get 70% of the revenue generated by the new company. Starting in 2031, this percentage will eventually rise to 85%.