The Chilean economic development agency Corporacion de
Fomento de la Produccion (CORFO) issued a statement at the
end of June, saying it has proof that miner Sociedad Quimica
y Minera (SQM) failed to fulfil its obligations under a lease
to extract lithium from land owned by CORFO in the Salar de
According to a report by Chilean news service
emol, CORFO’s executive vice president,
Eduardo Bitran, published an announcement stating that the
agency had "abundant and undeniable evidence that SQM has
systematically sold production of potassium and lithium
carbonate at prices below the market, affecting [CORFO]".
Chile’s Salar de Atacama is one of
the world’s richest sources of lithium brines and
SQM originally agreed to lease and manage CORFO’s
mineral claims in the region back in 1986, with rental fees to
be calculated according to revenues from selling minerals
extracted from the 81,920 ha (819.2km2) site.
The two sides have been locked in a bitter
dispute over the lease since May last year, with CORFO alleging
that SQM owes it $8.9m in unpaid fees.
Bitran said that the agency would provide the
records of evidence to the Superintendency of Securities and
Insurance, Internal Revenue Service, Superintendency of Pension
Fund Managers and the US Securities and Exchange Commission,
during the evidentiary phase of the arbitration proceedings
currently in progress between the two entities.
In a stinging warning to SQM, Bitran said: "SQM
must understand one basic thing that is inherent in ethics: the
contracts must be fulfilled in good faith and the private
partner must be fit to partner with the state".
The announcement followed an earlier statement by
SQM denying accusations that it had underpaid CORFO for
revenues accrued on its exploitation of, and sale of minerals
from, the Atacama leases.
In the statement, SQM asserted its "conviction
that it has fulfilled timely and fully all of the obligations
of the lease agreement and therefore has no outstanding debt
SQM responded to CORFO’s claims that
it could prove the miner had infringed its agreements,
reiterating that "it has always acted in good faith in the
operation of the lease agreement and has always acted in
accordance with [the] lease agreement".
The Santiago and New York Stock Exchange-listed
company, which also produces potash and iodine in Chile, noted
that under the terms of the lease, any legitimate differences
arising between the parties with regard to its administration
must be resolved through an arbitration process.
In its latest response to the Chilean government
body, SQM said that it would "continue to cooperate with CORFO
and the arbitrator in order to resolve the current dispute",
and restated its willingness to continue to collaborate with
CORFO over the Atacama leases.
The company had issued a previous statement
denying reports in the media alleging that the conciliation
proposal it made to CORFO had been rejected, implying the
termination of the company’s lithium mining lease
agreement in the Salar de Atacama.
Responding to a request for additional
information from the Santiago Stock Exchange to explain the
media reports and a drop in SQM series B share prices, SQM said
that it and its subsidiaries maintained a lease agreement with
CORFO related to mining property in Atacama.
SQM confirmed that it was involved in an
arbitration proceeding with CORFO relating to certain
differences in past rental payments and the early termination
of the agreement.
"Currently the arbitration proceeding is in the
conciliation stage before the arbitrator and SQM has not been
informed of any decision by CORFO to no continue in this
stage," the company outlined.
SQM has also come under scrutiny recently for its
use of water to service its mining operations in Chile.
Aside from its use of water to supply its lithium
operations in the Salar de Atacama, which the company has
asserted "constitute a small percentage of the total water
rights constituted by third parties established in the
corresponding basins [and] does not affect the interests of
CORFO", SQM is facing questions about water it uses for iodine
Back in 2010, SQM mooted its intention to
increase its iodine capacity at Nueva Victoria in
Chile’s Tarapaca region to 11,000 tpa in addition
to a 1.2m tpa nitrate plant, as part of the
company’s Pampa Hermosa project, based in the
Pampa de Tamarugal National Reserve.
Seeking to address concerns about how its use of
water in this protected desert landscape would affect the
environment, SQM stated on its website that: "Under the Pampa
Hermosa project, SQM [has developed] an environmental
monitoring plan that has a set of environmental variables that
establish that the project activities are in accordance with
the definitions in the environmental assessment".
According to an article published by the news
service Pulse in June, SQM’s Pampa
Hermosa project is the subject of a complaint by the Regional
Council of Tarapaca, filed with the Chilean Superintendent of
Environment, about potential damage caused by its extraction of
water for iodine production in the Salar de Llamara.
The report states that the complaint expresses
concern that the project could impact water quality at the
A source familiar with SQM’s plans
for Pampa Hermosa told IM that the company is
regularly following up of its environmental commitments. "Most
of the points included in [the Tarapaca Council] claim have
already been covered by the environmental authorities in the
observations [of] our regular follow up reports. They have all
been properly managed by SQM," the source said.
However, another industry observer suggested to
IM that SQM was facing further tough questions
about its water use policy and that its confidence in its
ability to achieve its plans to increase iodine production
could be misleading, given the tight control over water rights
in the region.
SQM is also subject to a tax investigation and
was forced to oust its CEO, Julio Ponce, earlier this year.