Sociedad Química y Minera de Chile S.A. (SQM) has reached an agreement with state development agency CORFO (Corporación de Formento de la Producción) to end the arbitration process. Chile accuses SQM of underpaying royalties and violating environmental regulations.

The Agreement includes a total payment of US$17.5 million plus agreed interest to end the dispute.

More important, the deal is coupled with an increase in the production quota. If SQM has not signed the agreement, it had reached the maximum allowed output in 2022. Under the new deal, Corfo raises SQM’s production quota to 180,000 tonnes LCE per year through 2030. Currently, SQM produces about 43,000 tonnes per year.

The agreement increases also the royalty payments dependent on FOB sales prices. The royalty scheme is exactly the same as Albemarle's previously signed agreement:

alb royalty.PNG

SQM commits to contribute (i) between US$10.8 and US$18.9 million per year to research and development efforts, (ii) between US$10 to US$15 million per year to the communities in close proximity to the Salar de Atacama, and (iii) 1.7% of total annual sales of SQM Salar to the regional development.

The Agreement considers that SQM will have the right to exploit, subject to compliance with other agreed conditions, process and sell during the term of the Agreement (until the end of 2030) up to 349,553 metric tons of lithium metallic equivalent in the addition to the approximately remaining 64,816 metric tons of lithium metallic equivalent from the originally authorized amount. The sum of the above amounts is equal to approximately 2.2 million metric tons of lithium carbonate equivalent.

SQM Salar shall offer part of its lithium production (up to a maximum of 25%) at preferential price to value-added producers that will potentially develop in Chile, a price based on the lowest export market price equal in each case to the weighted average FOB price calculated on the 20% lower price of the volume exported by SQM Salar during the last 6 months available.

It is not allowed for SQM to sell lithium brine extracted within the Mining Concessions. Additionally, it is prohibited to agree with Albemarle on the ways of operating resulting in a joint or integrated management of both production sites, therefore ensuring that SQM´s operations will always be independent without facilitating operational information, commercial strategies, information systems or common applications and/or personnel, conventions or price and other agreements that by their nature may negatively affect the lease income of CORFO.