SQM Puts Out Main Points of Arbitration With Corfo

SQM (NYSE:SQM) put out the main points of its arbitration proceedings with Chile’s Corfo.

As quoted in the publication:

In light of the extensive press coverage in recent days of CORFO’s position regarding the arbitration process, SQM considers it necessary to make public its position on the main points under discussion subject to the ongoing arbitration proceeding.

According to the Lease Agreement, the way to solve any conflicts that arise between the parties is through arbitration. As such, the differences that recently arose were communicated to the Arbitrator in order to find a solution. Throughout the arbitration proceeding, keeping a reasonable level of confidentiality is advised, in order to avoid the dissemination of the specific arguments of each party, which may affect the normal operation of the arbitration proceeding. However, the public dissemination of CORFO’s arguments has made it necessary for SQM to make its own arguments available to its shareholders. Notwithstanding the above, the arbitration proceeding continues to follow its normal course.

SQM maintains and reaffirms its conviction that it has fulfilled timely and fully all of the obligations of the Lease Agreement and therefore it has no outstanding debt with CORFO.

The release also provided some background information on the situation:

SQM holds exclusive and temporary exploitation rights to mineral resources in 81,920 hectares in the Salar de Atacama pursuant to a 1993 lease agreement between SQM and Corporación de Fomento de la Producción (“CORFO”), a Chilean government entity (the “Lease Agreement”). The mining exploitation concessions related to such rights are owned by CORFO and leased to SQM in exchange for quarterly lease payments to CORFO based on specified percentages associated to the value of the products resulting from the minerals extracted from such concessions. For the year ended December 31, 2014, revenue related to products originating from the Salar de Atacama represented 39% of our consolidated revenues, which corresponded to revenues from our potassium product line and our lithium and derivatives product line for the period. All of our products originating from the Salar de Atacama are derived from our extraction operations under the Lease Agreement.

In May 2014, CORFO initiated an arbitration proceeding against SQM alleging (i) SQM had incorrectly applied the formulas to determine lease payments resulting in an underpayment to CORFO of at least US$8.9 million for 2009 through 2013 and (ii) SQM had not complied with its obligation to protect the mining rights of CORFO by failing to place markers to delineate property lines. Based on the alleged breaches of the Lease Agreement, CORFO sought (i) at least US$8.9 million plus any other amount that may be due in respect of periods after 2013, (ii) early termination of the Lease Agreement, (iii) lease payments that would have been paid through 2030 as compensation for the early termination of the Lease Agreement and (iv) punitive damages (daño moral) equal to 30% of the contractual damages awarded.

Click here to read the SQM (NYSE:SQM) press release