SQM-Codelco Deal Cleared to Proceed Without Shareholder Vote

(Bloomberg) -- Chile’s securities regulator ruled that a landmark deal to share ownership of one of the world’s biggest lithium operations can proceed without seeking approval from shareholders.

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The decision is a boost to the planned partnership between SQM and state-owned Codelco, while delivering a blow to Tianqi Lithium Corp., the Chinese firm that owns a 22% stake in SQM and had requested a shareholder vote.

Under terms of the deal announced May 31, SQM will relinquish a majority stake in its prized Atacama salt flat mine to Codelco in exchange for three more decades of operations. The tie-up is part of Chilean President Gabriel Boric’s agenda to have more state control in key assets of the battery metal while boosting output in the shift away from fossil fuels.

Tianqi had asked the regulator, known as CMF, to overturn a previous determination by requiring a shareholder vote. In a statement earlier this month, the Chinese firm pointed to negative aspects of the deal, including dividend dilution and SQM losing control after 2030 when its current license runs out.

At the time, Tianqi said it wouldn’t “hesitate to resort to all necessary legal bodies to guarantee the full recognition and respect” of minority shareholder rights.

But the CMF decided boardroom approval was sufficient. That clears another obstacle for the public-private partnership to ramp up production from less than 200,000 metric tons a year toward 300,000 tons, thereby giving battery makers greater assurances on future supplies of a key raw material.

Tianqi’s frustrations appear to be anchored in boardroom restrictions it has endured as a condition of its purchase of the SQM stake six years ago for $4 billion. Formally known as Soc. Quimica & Minera de Chile SA, SQM is the world’s second-largest lithium producer. Its top shareholder is Julio Ponce, the former son-in-law of dictator Augusto Pinochet.

(Adds background to Tianqi’s SQM shareholding in final paragraph)

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