25/12/19
Chile to audit SQM-Codelco lithium deal
Sao Paulo, 19 December (Argus) — Chile's comptroller general office (CGR) will
audit "certain operations associated with" the SQM-Codelco agreement to form a
lithium production joint venture, following complaints by some of the country's
parliamentarians and indigenous communities, further delaying the deal. CGR on
18 December said its scope is limited to verifying whether government actions
follow the law and to audit public spending. The agency said that it is
forbidden from judging whether a policy or administrative decision is a good
idea or convenient. CGR does not have the power to veto the deal, because the
main legal challenges to the agreement are either in court, where the watchdog
has been ordered not to comment, have already been resolved by judges, or
involve policy judgments that Chilean law does not allow CGR to review. As a
result, its role is limited to reviewing the agreement for potential
irregularities. It can flag legal inconsistencies and delay the deal's effective
date until any identified issues are rectified. CGR's audit will focus on the
state-owned company Codelco's financial advisory contract with investment bank
Morgan Stanley, as well as Codelco's operations, to determine whether public
resources are being used appropriately. The audit will also examine claims from
a congressional investigative commission regarding the transparency of the
negotiation process, SQM's tax situation, and a clause that relates to Codelco's
obligation to sell 100pc of extracted potassium to SQM under the partnership.
The Atacama desert's brines, from which the joint venture will produce lithium,
contain potassium that is precipitated and extracted alongside lithium.
Additionally, CGR will review whether the companies' directors acted lawfully
and examine Chile's economic development agency Corfo's approval of the
contracts that underpin the partnership. These include Corfo's contracts with
SQM, which allow lithium extraction in the Atacama salt flats through December
31, 2030, and its contracts with Codelco's lithium subsidiary Minera Tarar,
which enables operations at the site from 2031 to 2060. Corfo's mining lease and
project contracts are a key legal step in allowing Codelco to partner with a
private company — SQM, in this case — to mine lithium in that area under the
national lithium strategy of President Gabriel Boric, who leaves office in
March. Although the SQM-Codelco agreement , which was struck in May 2024 and
would extend SQM's authorization to continue extracting lithium in the Atacama
salt flats from January 2031 to 31 December 2060, does not have a hard deadline
to close, it is still running against the clock. If the deal is not sealed by 31
December 2025, a contract clause in the partnership agreement allows any party
to void the deal if they so choose. If this deadline is not met, Chile would
also reduce SQM's lithium extraction quota by 300,000 metric tonnes of lithium
carbonate equivalent for the remaining period until 31 December 2030, when the
company's current mining permit ends. The joint-venture also faces opposition
from Chile's newly elected president Jose Antonio Kast . The far-right
politician said he would honor the deal if it is sealed before he takes office,
but risk of an overturn would grow if that condition is not met before he is
sworn in on 11 March 2026. By Pedro Consoli Send comments and request more
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