Chile’s court ruling allows Tianqi to buy stake in lithium miner SQM

Aerial view of the brine pools and processing areas of the Soquimich (SQM) lithium mine on the Atacama salt flat. (Image from: SQM Corporate Presentation.)

China’s No.1 lithium producer Tianqi has won a favourable court ruling in Chile that paves the way for the company to become the second-largest shareholder in Sociedad Química y Minera de Chile (SQM), the world’s second largest producer of the metal used in electric-vehicle batteries.

Chile’s antitrust court signed off Thursday on an agreement struck by Tianqi with the country’s competition regulator FNE over its proposed $4.1 billion acquisition of about 24 percent of shares in SQM from Canada’s Nutrien (TSX:NTR)

The country’s antitrust court has approved a deal between the competition regulator and Tianqi, allowing the Chinese miner to buy a nearly one-quarter stake in SQM.

As part of the deal with FNE, Tianqi is not allowed to name any of its executives or employees to SQM’s board, and must notify regulators of any future, lithium-related deal with either the Chilean producer or rival Albemarle.

SQM, which had objected to the extrajudicial agreement on the grounds it did not go far enough to limit Tianqi’s access to corporate secrets and sensitive information, did not immediately reply to a request for comment.

That deal ended a FNE-led probe into Tianqi’s acquisition of SQM shares, based on complaints from Chile’s development agency Corfo, which oversees lithium leases in the country’s Salar de Atacama, and a couple of lawmakers wanting to block the deal.

They had argued such move would give China an unfair advantage in the global race to secure resources to develop electric vehicles (EVs), which use Beijing has been aggressively promoting to reduce air pollution and help the local auto industry build global brands.

Lithium carbonate prices have been drifting lower from highs in December, trading around the $12,000 a tonne according to the latest estimate from the Metal Bulletin. The figure is still considerably higher than the $6,450 per-tonne-price at the beginning of 2015.

Unlike cobalt, another crucial battery ingredient, the so-called “white petroleum” is abundant and existing brine producers in South America have the capacity to quickly increase output. Combined with many hard-rock projects coming on stream in Australia, last year’s roughly 220kt of production could more than triple within less than a decade.