On January 30, Tianqi Lithium Corporation (002466.SZ) released its 2025 performance forecast, projecting a net profit of 369 million to 553 million yuan, a dramatic reversal from the substantial 7.9 billion yuan loss incurred in 2024. The significantly increased investment income from SQM was the primary driver behind this turnaround. However, Tianqi Lithium recently received news of a final defeat in Chilean courts, introducing uncertainty to the very equity investment returns from SQM that fueled its recovery.
Against the backdrop of lithium industry nationalization in Chile, Sociedad Quimica Y Minera De Chile SA (SQM) initiated a strategic partnership with Chile's state-owned copper giant, Codelco, in late 2023. This collaboration involves establishing a joint venture to co-develop the core lithium operations at the Atacama Salt Lake. Tianqi Lithium Corporation (002466.SZ), which previously invested over $4 billion to become SQM's second-largest shareholder, views this partnership as potentially detrimental to its investment returns. For over two years, Tianqi Lithium pursued a series of administrative and legal measures in an attempt to block the cooperation. Now, the final verdict has arrived: Chile's Supreme Court has rejected Tianqi Lithium's appeal.
Is the impact on investment returns now a foregone conclusion? On January 29, Tianqi Lithium informed reporters that all matters concerning Chile would be communicated via official announcements. He Guoliang, a senior partner at Jincheng Tongda & Neal Law Firm, stated, "As SQM's core lithium business is transferred to the Chilean state-owned joint venture, the earnings from that core business will be substantially adjusted due to government profit-sharing and changes in the equity structure. As a shareholder in SQM, Tianqi Chile (a wholly-owned subsidiary of Tianqi Lithium) will be unable to prevent the cooperation agreement from taking effect without new facts or grounds for appeal. However, Tianqi Chile is highly likely to leverage its status as an investor, invoking the series of agreements made when it initially acquired its stake in SQM, to assert relevant rights or seek remedies from SQM and other shareholders."
From a Chilean legal standpoint, this protracted legal battle has concluded. Tianqi Lithium announced on January 29 that its subsidiary, Tianqi Chile, received the judgment from the Chilean Supreme Court on January 27 (local time). The Supreme Court dismissed Tianqi's claims, aligning with prior rulings from the Chilean Financial Market Commission and lower courts. Tianqi Lithium stated in its announcement, "Going forward, the company reserves all possible avenues to safeguard its rights and, while ensuring the interests of relevant shareholders are protected, does not rule out taking further action."
Currently, it appears there are no further obstacles to the cooperation between SQM and Codelco. He Guoliang noted, "Within Chile's judicial system, the Supreme Court is the court of final appeal, and its judgment is definitive. This case should be considered within the broader context of the nationalization of Chile's lithium resources. Without new facts or grounds, Tianqi Chile cannot stop the cooperation agreement from taking effect." Back in November of last year, SQM indicated during an earnings call that the joint venture project had received approval from Chinese antitrust authorities and aimed to achieve substantial progress before 2026. On December 27 (Chilean time), SQM disclosed that the joint venture had been successfully renamed, marking the formal completion of the strategic partnership, though the full legal implementation of the cooperation agreement remained contingent on the outcome of Tianqi Lithium's lawsuit.
According to Wind data, SQM has stated that following the rejection of Tianqi Lithium's appeal, its joint venture project with Codelco has been approved. Consequently, the transactions outlined in the previously disclosed "Partnership Agreement" now possess full legal effect and are officially effective.
The origin of this dispute dates back to late 2023 when SQM and Codelco reached a non-binding contract concerning the operation and development of the Atacama Salt Lake from 2025 to 2060. SQM subsequently advanced the cooperation, and the parties signed the "Partnership Agreement" in 2024, proposing to establish a joint venture to develop the production and operation rights for the Atacama Salt Lake, which SQM leases from the Chilean government. In 2018, Tianqi Lithium invested $4.066 billion (approximately 27 billion yuan) to acquire a 23.77% stake in SQM, becoming its second-largest shareholder. From Tianqi's perspective, such a significant cooperative decision required approval from SQM's special shareholders' meeting, prompting Tianqi to initiate successive appeals. However, rulings from Chilean regulatory bodies indicated that the decision-making authority rested with the Board of Directors, not a special shareholders' meeting.
When initially dismissing Tianqi's诉求, the Chilean Financial Market Commission stated that this did not equate to shareholders losing all protection. If circumstances arise that harm the interests of SQM and its shareholders, shareholders retain the right to pursue accountability from the Board of Directors according to the company's applicable rules.
SQM, headquartered in Santiago, Chile, holds the mining rights to the Atacama Salt Lake, which boasts the largest lithium reserves globally. It is the world's largest producer of iodine and nitrate and a leading producer of lithium carbonate and hydroxide.
According to Wood Mackenzie's Q2 2025 data, the Atacama Salt Lake is projected to be the world's largest producing salt lake brine project in 2025. Its annual output is expected to account for 36% of the total production from all global salt lake lithium projects and 11.8% of total production from all global lithium resource projects. Furthermore, the production cost of lithium salts from the Atacama Salt Lake consistently ranks among the lowest globally. Based on Q2 2025 data, the Atacama Salt Lake lithium project is the lowest-cost operation in the world.
Tianqi Lithium currently holds approximately a 22.16% stake in SQM. From 2018 to 2024, the dividend payments Tianqi received from SQM were approximately 88 million yuan, 551 million yuan, 351 million yuan, 605 million yuan, 5.641 billion yuan, 3.13 billion yuan, and 103 million yuan, respectively, with cumulative dividends exceeding 10 billion yuan. In the first half of 2025, SQM's sales volume of lithium products reached approximately 108,100 metric tons, a year-on-year increase of 12.96%. Its total operating revenue was 149.16 billion yuan, with a net profit of 16.21 billion yuan. In its 2025 performance forecast, Tianqi Lithium indicated that SQM's 2025 performance is expected to show year-on-year growth, leading to a significant increase in the investment income recognized by the company compared to the same period last year.
"In principle, Tianqi Lithium's investment returns began to be affected from the date the joint venture was established. Tianqi Chile was already in a relatively weak position as a financial investor within SQM. As SQM's core lithium business is transferred to the Chilean state-owned joint venture, the earnings from that core business will be substantially adjusted due to government profit-sharing and equity structure changes. Tianqi Chile can only indirectly obtain returns through dividends SQM receives from the joint venture," He Guoliang explained.
Effective from the implementation of the "Partnership Agreement," the core lithium operations of the Atacama Salt Lake will be transferred to the joint venture. This joint venture will be majority-owned by Codelco and will be consolidated into Codelco's financial statements starting in 2031. It is anticipated that from 2031 onwards, SQM will no longer possess control over the core lithium business. However, He Guoliang also suggested that this might not be entirely negative for Tianqi Lithium. "When production volume increases and the mining period is extended, even if the profit-sharing percentage is lower, the value of Tianqi Lithium's indirect equity stake could potentially increase."
Tianqi Lithium, however, believes that the loss of control could lead to adjustments in SQM's future strategic planning, and there is uncertainty regarding whether the production quotas stipulated in the "Partnership Agreement" can be achieved. Particularly concerning is that Codelco will secure over 50% of the interests in the Atacama Salt Lake previously held by SQM. This could potentially reduce SQM's future earnings, thereby impacting Tianqi Lithium's investment returns and dividends from SQM.
The key risk to Tianqi Lithium's potential investment returns lies in differential voting or profit rights—essentially, profits generated by the joint venture will not be distributed strictly according to shareholding比例 but will flow disproportionately to Codelco. He Guoliang elaborated, "Theoretically, SQM would not opt for a joint venture at an undervalued price. If the agreement stipulated equal rights for equal shares, then Tianqi Chile's indirect interests should remain unaffected. However, under a structure with differential rights, the other party's profit distribution ratio will be higher than its shareholding比例."
Comments