China’s Tianqi Lithium, a major shareholder in Chile’s SQM (Sociedad Química y Minera de Chile), has said it may consider taking action to protect its interests in a key deal signed by SQM and Chilean state miner Codelco.
The deal, announced on Friday, is seen as pivotal to boosting Chile’s lithium output, but it could potentially dilute Tianqi’s stake in SQM, the world’s second-largest producer of the metal critical for electric vehicle batteries.
In a statement to the Shenzhen Stock Exchange on Sunday, Tianqi said it will conduct a comprehensive assessment within the legal framework and may consider actions to ensure the protection of its shareholder interests.
Tianqi is SQM’s second-largest shareholder, with a stake of more than 22% that it acquired for $4.07 billion in 2018. The company said the planned 2025 partnership between SQM and Codelco needs to win government approvals and meet conditions such as the completion of a consultation process with indigenous communities.
Tianqi expressed concerns over the potential impact of the deal on its future returns from SQM, which could cut its investment income and dividends. The company’s SQM dividends of 2.28 billion yuan ($315 million) were about 5.6% of its revenue in 2023, according to its annual report.
The deal between SQM and Codelco aims to increase SQM’s lithium production by 300,000 metric tons of lithium carbon equivalent (LCE) through 2030, with the goal of reaching annual output of 280,000 to 300,000 tons through 2060. The companies said this increase would come from the use of new technologies and improved operations.
The partnership’s start depends on Chile’s financial regulator rejecting Tianqi’s request for shareholders to vote on the joint venture. SQM says only a board vote is needed.
Goldman Sachs has warned investors to focus on whether Tianqi will seek legal action to block the deal. Chile is the world’s second-largest producer of lithium after Australia, thanks to the output from SQM and Albemarle.
The global shift toward electric vehicles in the fight against climate change has fueled a rush by automakers and others for more lithium supplies, making this deal a crucial development for Chile’s lithium industry.