SQM to raise $1.1 billion to fund lithium expansion: company

Santiago — SQM plans to raise $1.1 billion to help increase its major expansion program over the next three years, the Chilean lithium producer said late.

The company plans to invest $1 billion expanding lithium carbonate production in Chile to 180,000 mt/year by 2023, from 70,000 mt/year currently, and lithium hydroxide production to 30,000mt/year, up from 13,500 mt/year, in Chile and Australia.

The capital increase will be put to shareholders at an extraordinary general meeting on Jan. 22, where they will be asked to approve the issuance of 22.4 million Series B shares, the company said Dec. 23.

The money raised will be used to finance parts of the company's $1.9 billion investment program to expand production of lithium, iodine and nitrates, largely at its operations in northern Chile as well as the Mt. Holland lithium hydroxide project in Western Australia.

"We believe all of these investments are necessary to grow and maintain our leading world positions in the lithium, potassium nitrate, iodine and thermo-soar salts markets," SQM said in a statement.

A joint venture with Australian conglomerate Wesfarmers, the Mt .Holland project is expected to produce 50,000 mt/year of lithium hydroxide. The SQM board is expected to approve construction during the first quarter of next year.

Another $440 million will be invested in the company's nitrate and iodine operations in northern Chile, including $150 million for a pipeline to transport seawater from the coast. Around $120 million will be invested annually in maintenance.

SQM's decision to ramp up output comes despite falling prices for lithium, its chief revenue earner. The company said Tuesday that prices for the mineral have continued to fall during the final three months 2020 although costs have also fallen.

With the ramp up of production in 2020 to its new capacity of 70,000 mt/year, the company expects fourth-quarter lithium sales to reach almost 25,000 mt, up threefold from the first quarter, when the coronavirus pandemic hit Asian demand.

Despite barely rising this year, SQM said lithium demand remains on target to reach 800,000-1 million mt by 2025 and 2 million mt by 2030, driven by the electric vehicle sector. Demand for lithium hydroxide is expected to grow faster than lithium carbonate.