China's Tianqi contests Chilean regulator's move to hand over lithium reserves to state

China's Tianqi Lithium lodged an appeal against a Chilean regulatory body's decision that would allow Chile's state-run miner Codelco to take back the majority of control of lithium mineral reserves currently owned by Chilean conglomerate SQM.

China's leading lithium producer Tianqi Lithium has an around 22% interest in SQM.

Tianqi Lithium registered a formal request with Santiago's Court of Appeals, challenging the Chilean Financial Market Commission's (CMF) decision to allow a partnership agreement between Codelco and SQM, Tianqi Lithium said July 30 in a statement.

Under the agreement, Chilean state mining company Codelco is set to receive a majority stake in SQM's lithium business in exchange for continued access to state-owned mineral claims on the Salar de Atacama, home to the world's largest lithium reserves.

The Chilean government's move to gain more control over its major lithium reserves through a partnership with local giant SQM has created complications for Tianqi Lithium, highlighting a global trend of countries asserting control over mineral resources needed for energy transition.

The case

The CMF greenlighted the agreement between SQM and Codelco on June 18, adding that there was no need for the approval from the shareholders' meeting, Tianqi Lithium said.

Tianqi Lithium in its appeal requested the Chilean Court suspend the effect of the CMF decision in accordance with relevant legal provisions, in order to prevent possible adverse consequences for the shareholders of SQM.

Tianqi Lithium said the partnership agreement should be decided in a shareholders' meeting, as per local Chilean corporate laws, and should not be a unilateral decision from the SQM board.

Tianqi Lithium made an injunction request to the CMF in May, asking that the agreement between SQM and Codelco should be only approved at an SQM shareholders' meeting, receiving at least two-thirds of the shareholders' vote.

The CMF did not accept Tianqi Lithium's request in June and again decided to uphold the decision later in July in a response to the administrative review appeal submitted by Tianqi Lithium.

Impact on Tianqi Lithium

As of the date of Tianqi Lithium's latest appeal, the Chilean court has not made any decision on its request and the company was temporarily unable to judge the impact of the litigation on its profits, Tianqi Lithium said July 30.

It is expected that SQM will no longer have control of its core lithium business at Atacama salt flat in Chile after 2031, as the Codelco-SQM partnership comes into effect in 2025, Tianqi Lithium said earlier.

Tianqi Lithium invested $4.1 billion to acquire a 23.77% stake in SQM in 2018, becoming SQM's second-largest shareholder.

As of now, Tianqi Lithium holds approximately 22.16% equity interest in SQM.

Tianqi Lithium suffered a loss of nearly Yuan 3.9 billion ($537 million) in the first quarter of this year due to the significant drop in lithium chemicals prices and the performance decline in SQM operations caused by the ruling on a tax dispute, the company said.

Tianqi Lithium is one of China's leading lithium chemicals producers. The company produced 1.52 million mt of spodumene in 2023, rising 12.9% on the year, and 50,713 mt of lithium salts, increasing 7.3% from 2022.

Tianqi Lithium's existing lithium chemicals capacity is 88,800 mt/year and planned capacity around 55,000 mt/year. The company said it aims to reach a lithium carbonate equivalent of about 300,000 mt/year by 2027.