Lithium Mogul Moves to Loosen Grip on Chilean Producer SQM

Updated on
  • Oro Blanco board approves 12-month contract with Itau
  • Holdco is evaluating ``all alternatives'' for Calichera stake

Fertilizer and lithium baron Julio Ponce took a step closer to relinquishing control of Soc. Quimica & Minera de Chile SA as the miner fights legal and regulatory cases.

Soc. de Inversiones Oro Blanco SA, one of the four cascading holding companies Ponce uses to control SQM, hired Banco Itau Argentina SA to study options for its stake in another of the holding companies, Soc. de Inversiones Pampa Calichera SA, and seek potential buyers, it said in a filing late Thursday.

Once the son-in-law of the late dictator Augusto Pinochet, Ponce built up his stake in SQM after it was sold by the Chilean government starting in the 1980s. In 2006, he fended off an attempt by Potash Corp. of Saskatchewan Inc. to gain control of SQM by signing a pact with Kowa Co. Pampa Calichera directly and indirectly holds 23 percent of SQM.

“A sale of Oro Blanco’s shares in Pampa Calichera does not cede control to the buyer but seems to be a strong move in that direction,” Citigroup analysts including Juan Tavarez wrote in a note to clients.

Funding Probe

In September, Ponce resigned as chairman and director of the four holding companies, citing “personal reasons.” SQM is embroiled in a tax and political campaign-funding investigation and a dispute with the Chilean government over its leases in the Atacama salt flat, a lunar-like landscape containing 29 percent of the world’s known lithium reserves. Ponce stepped down as SQM chairman in April after the company admitted evading taxes on $11 million of payments. Prosecutors are investigating how much of that was channeled to politicians.

Ponce’s handling of the tax probe led Potash Corp., SQM’s largest shareholder, to temporarily withdraw its board members. Ponce hasn’t been charged with any crime and has told prosecutors that he wasn’t in charge of selecting recipients for political donations.

He faces a separate investigation into tax evasion in the holding companies and is appealing a $70 million fine by the securities regulator last year for breaking trading rules, all as SQM engages in an arbitration case with authorities who accuse the company of breaching lease contracts. SQM says it has complied with all contractual obligations.

Stock Rallies

Potash Corp. has used two of its three SQM board seats to appoint regulatory compliance and accounting experts.

SQM’s more traded B shares rose 4.1 percent at 12:26 p.m. in Santiago Friday, the biggest gain among companies in the Ipsa index, while its American Depository Receipts advanced 5.1 percent. Shares in Ponce’s other holding companies also rose. Oro Blanco surged 19 percent, Norte Grande SA 11 percent and Nitratos de Chile SA 7.3 percent.