Top Lithium Producer Tianqi Meets with Chilean Regulators on SQM Stake

Chile’s anti-trust prosecutor met with representatives of top lithium producer Tianqi Lithium (SZSE:002466) last week to discuss a complaint filed to block the miner from buying a stake in Chile’s SQM (NYSE:SQM).

According to Chile’s lobbyist transparency website, Felipe Irarrazabal, head of the National Economic Prosecutor’s office (known as FNE in Spanish), met with three lobbyists on March 29 to address concerns voiced by Chilean development agency Corfo.

Earlier this month, Corfo filed a formal complaint claiming the sale to Tianqi Lithium, or any related entities or state-backed firms, would “gravely distort market competition.”

Tianqi and SQM combined would control 70 percent of the global lithium market, the document filed with anti-trust regulator FNE said. Lithium is an essential component in the batteries used to power electric cars, and demand for the metal is expected to surge in the coming decades.

The complaint aims to block Canada’s Nutrien (TSX:NTR,NASDAQ:NTR) from selling a 32-percent stake in SQM to Tianqi, but so far it’s unclear whether it would stop all potential Chinese buyers.

FNE has until August, with the possibility of further extensions, to determine whether to launch a full investigation.

Meanwhile, on Monday (April 2), two major SQM shareholders proposed to change the company’s governing statutes to block other shareholders from gaining control of the firm.

Chilean businessman Julio Ponce, who was forced to cede power after SQM and Corfo’s deal in January, controls Pampa Calichera and Potasios de Chile, which called for an “extraordinary meeting” of shareholders to approve the proposal, according to the filing with securities regulator SVS.

The exception could allow Ponce-controlled firms to match the voting power of new or existing shareholders looking to purchase or increase their stakes in the miner, analysts said.

“The controlling (shareholders) are seeking to protect their political power within the firm,” said brokerage firm Banchile in a note to clients.

On Tuesday (April 3), shares of SQM were down 0.92 percent, trading at US$48.73 in New York. Meanwhile, shares of Tianqi declined 0.2 percent, closing at CNY 56 in Shanghai.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.