Chile’s Sociedad Química y Minera de Chile (SQM), the world’s second-largest lithium miner after Albemarle, is looking to spin off its foreign lithium and other assets into a separate company with foreign investor participation.
This move will effectively marginalize foreign assets—mostly in Australia—as SQM moves closer to being state-directed in the coming years, following the Chilean government’s push for greater control over its vast lithium industry, primarily carbonate produced from brine.
SQM’s assets outside Brazil are mostly hard rock, spodumene-based, particularly in Australia, with the largest investment being around $1 billion in the 50% stake it holds in the Mount Holland Joint Venture in Western Australia with Wesfarmers.
The Mount Holland mine is currently producing spodumene and shipping it, while construction of its hydroxide refinery in Kwinana, south of Perth, continues.
The 50% stake in Mount Holland and the refinery are held through the Covalent Lithium joint venture with Wesfarmers.
Additionally, SQM has joint control (with Hancock Prospecting) of Azure Minerals, which the two groups acquired for $1.7 billion earlier this year, just as lithium prices were crashing, mines were cutting back, and exploration was halting.
SQM’s move is reminiscent of Vale, the Brazilian iron ore giant, which separated its copper, nickel, and gold assets—primarily in Canada and Indonesia. Vale partnered with Manara Minerals, a Saudi company linked to the state investment fund, which paid $3.4 billion for a 13% stake (alongside an investment fund called Engine No. 1) in Vale Base Metals.
The plan is for Vale Base Metals and its partners to finance future growth in production, processing, and sales. Vale discussed the possibility last week of spinning off its base metals business into a publicly listed company.
Now, SQM seeks a foreign shareholder or shareholders; however, with lithium under pressure, the prospect of successfully executing this restructure is currently problematic.
The roles played by Wesfarmers and Hancock Prospecting in the new structure will be pivotal. Both could sell assets into the new structure in exchange for equity. Hancock also owns nearly 20% of Liontown Resources, which has started production at its Kathleen Valley mine in WA.
Bloomberg reported that SQM, advised by JPMorgan Chase, is in the initial phase of this process and will focus on investment funds and key investors rather than other mining firms. However, this may not be a difficult decision given the dominant positions that Wesfarmers and Hancock hold in SQM's Australian operations.
