(Bloomberg) — Chile’s government indicated that SQM and Codelco will go ahead with striking a binding lithium alliance by Friday, a self-imposed deadline, despite growing headwinds surrounding the deal.
“We hope that the agreed deadlines will be met,” Finance Minister Mario Marcel said in an interview in New York on Thursday. “An agreement of this magnitude does not end with simply signing a document. There is a whole implementation process that follows.”
His comments suggest the two companies have opted to sign the paperwork for the deal, which takes effect next year, while overcoming opposition from SQM's investors and some lawmakers. Under the deal, Codelco will acquire a majority stake in SQM's Atacama salt flats assets in exchange for a 30-year extension of operations. Increasing production of battery metals while transitioning away from fossil fuels while also strengthening state control over key assets is a pillar of Chilean President Gabriel Boric's policy.
If formally agreed, the new public-private partnership would allow for an expansion of production from less than 200,000 tonnes to 300,000 tonnes, giving battery makers greater security about future supplies of a key raw material.
But potential obstacles remain. SQM's second-largest shareholder, Tianqi Lithium, has sought to put the deal to a shareholder vote, alleging that SQM failed to disclose key terms during the negotiations. The Chinese company, which also has open litigation possibilities, has endured restrictions on SQM's confidential information since acquiring a 22% stake in the company for $4 billion in 2018.
Some members of the ruling coalition have argued that the current board restrictions on SQM's largest shareholder, Julio Ponce, and his close relatives should be reflected in the Codelco deal. Ponce, the former son-in-law of dictator Augusto Pinochet, was fined in 2014 for illegal trading of shares in a holding company. Around the same time, SQM was embroiled in a scandal over illegal funding of political parties.
Indigenous groups in the region have also criticized the way Codelco and SQM communicated their plans.
The binding contract signed on Friday ratifies a provisional agreement signed between the two companies. The minister declined to comment on the value of the contract, saying the figure would be communicated in an official announcement.
“We are going through stages,” Marcel said. “We signed the MOU in December last year, but now the challenge is to meet the deadline to sign the final agreement, followed by other implementation issues including regulatory and financial requirements.”
(Updated with additional comment from Marcel)
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