SQM Tumbles on Reports Chile Threatens to Revoke Land Concession

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Soc. Quimica & Minera de Chile SA slumped to a six-year low on reports that a Chilean government agency would seek to repeal mining leases.

SQM lost 14 percent to 10,342 pesos at the close in Santiago, the steepest drop since March 18 and its lowest value since October 2008. Its holding companies also plunged as Chile’s Ipsa index fell 0.9 percent.

Investment agency Corfo plans to end an arbitration process over fertilizer and lithium leases and will seek to terminate contracts, Santiago-based newspapers including El Mercurio and La Tercera reported Thursday. The dispute is intensifying at a time SQM faces allegations of unlawful political contributions and tax fraud and as former chairman Julio Ponce faces charges of illegal trading of shares in the holding companies through which he controls SQM.

“This will add more negative pressure to the stock,” Banco de Credito e Inversiones analyst Ana Carolina Santos said in an e-mailed note to clients. “We see this as the beginning of a long judicial process.”

SQM has complied fully with the contract, and an arbitration process with the government agency will continue even if Corfo quits talks, the Santiago company said in a response to the securities regulator. The license to extract brine rich in iodine, lithium and potassium from the Atacama Salt Lake provides 39 percent of the company’s revenue, it said.

Bonds Slump

Corfo alleges SQM has underpaid on contracts and sold products to related companies at below-market prices, El Mercurio reported. The agency plans to make the request at the next arbitration meeting scheduled for July 9, the newspaper reported. Corfo can’t comment because it is in a legal process with SQM, it said in an e-mailed response.

SQM’s New York shares fell 13 percent to $16.39. Its holding companies also tumbled in Santiago. Soc. de Inversiones Oro Blanco SA lost 16 percent to 1.513 pesos while Norte Grande SA retreated 6.7 percent to 2.1 pesos. Soquimich Comercial SA, a unit of SQM, slumped 9 percent to 130 pesos.

The extra yield, or spread, investors demand to buy SQM’s 2020 dollar bonds instead of U.S. Treasuries rose 42 basis points, or 0.42 percentage point, to 262 basis points.

Ponce stepped down from the board in April after Potash Corp. of Saskatchewan, the company’s largest shareholder, withdrew its board members in protest over the company’s handling of the political donation probe.

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