Tianqi pushes against Codelco-SQM lithium deal

Chinese miner Tianqi appealed a decision by Chile's financial market regulator CMF, which denied its request to demand an extraordinary shareholders meeting to approve the alliance between state mining company Codelco and local lithium producer SQM.

Tianqi, SQM's second largest shareholder, owning 22% since 2018, claims the deal represents an asset transfer rather than a merger by absorption, under which Codelco would gain 50%+1 of the shares of Minera Tarar, a PPP with SQM Salar, which is planned to extract lithium in the Salar de Atacama between 2025 and 2060.

In particular, Tianqi's local subsidiary Inversiones TLC claimed in the appeal that the transfer of control to Codelco, planned for 2031, of all activities in the world's largest lithium reservoir in Antofagasta region, implies a transfer of assets and actions that are more complex than a merger.

It argued that SQM's reorganization and the modification of SQM Salar from a public limited company to a joint stock company escape the legality of a merger. The modification will allow concentrating all lithium-related assets, including personnel, permits, and current contracts between SQM and development agency Corfo, in SQM Salar.

Tianqi opposes the transfer of contracts with suppliers and clients, and those related to assets, intellectual property and mining concessions, granted or under evaluation, including for the Salar de Maricunga, to Codelco.

“The association implies the transfer by SQM of all the assets for the development of extractive, productive and commercial activities related to lithium,” the appeal, filed on Friday, said. 

See the CMF decision and the appeal in the Documents box in the top-right corner.

On July 15, CMF decided that an extraordinary shareholders meeting was not necessary, which Tianqi claims does not protect the interests of minority shareholders.

However, CMF argues that since SQM Salar will be the absorbing company, SQM will continue to exist after the merger and maintain its legal status and assets. “SQM's shares in SQM Salar continue to be its property, and there has been no change of ownership over them,” the decision said.

MORE OPPOSITION

In a recent extraordinary session of the lower house, a majority of lawmakers approved a motion to request President Gabriel Boric to nullify the Codelco-SQM agreement and launch a public tender instead in which local and international companies are allowed to bid, which would lead to the best deal for the country.

This motion "shows that there is still time to rectify and convene mining entities and professionals to achieve a formula that optimizes public participation with private partners that contribute capital and downstream development in our lithium mining," José Cabello, president of critical minerals think tank Cemec, told BNamericas.

During the lower house session, Camilo Lagos, a former research analyst at copper commission Cochilco, highlighted that "there would be no reason to hand over 49% of the Salar de Atacama business to SQM, for 30 years," once its contract with Corfo ends.

"This is a US$50 billion gift to SQM, while Codelco, between 2025 and 2030, would only receive a profit corresponding to the commercialization of 33,500t/y of lithium in that period," which translates to US$2.2bn, or 20% of SQM's profits, Lagos said.

Cabello said Codelco should finance no more than 20% of the current lithium operation, "just as Tianqi already did by acquiring that percentage [in SQM] for about US$4bn."