Lithium Power International Ltd (fka LTHHF)

[Dr_Vonschellan]

Simply_bookmark this_page on_CORFO/SQM/Albemarle for_future reference
https://www.latercera.com/pulso/noticia/el-litio-deja-a-corfo-en-cinco-anos-todo-lo-previsto-hasta-2030/YUHEFRZT5NEYNGHKZ2KYLHCKXE/
We will need some of the statistics for reference later.

the Doctor

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Lithium leaves CORFO five years ahead of schedule through 2030
by Víctor Cofré

"SQM Contract Projection". Sheet 18 was so titled and projected that, according to CORFO, the non-metallic miner SQM should pay until 2030 for the lithium exploitation rights that the Treasury extended in exchange for a new payment table that taxed at higher rates each ton of lithium that was extracted from the Atacama salt flat. The filing is dated January 2018, when CORFO was presided over by Eduardo Bitran, former Minister of Public Works who led the hostile negotiation with SQM over lithium rights. That agreement today feeds the fiscal coffers and that is why in the officialism they have remembered with flattery the pact that Bitran forced in the second government of Michelle Bachelet. But at that time nobody, not even Bitran, imagined that his predictions would fall so short.

CORFO's projection in 2018 was that SQM would pay between that year and 2030 the equivalent of US$4.189 billion for lease rights. That target expected in 13 years was met in only five years, or almost. Between 2018 and 2022, SQM has paid to the Treasury for the rights of CORFO, land holder of the Atacama Salar belongings, almost US$4 billion, pushed onward by a lithium price boom. In 2022 alone, SQM paid the equivalent of US$3.272 billion, according to the financial statements at the end of 2022 of the mining company in which Julio Ponce and China's Tianqi participate. CORFO's projection assigned only US$266 million for 2022.

The same over-compliance, although less than that of lease income, occurs with the income tax of 27% of the profits. For the 2018-2030 period, CORFO estimated a total payment of US$4.018 billion. In five years, half has already been achieved: US$2.180 billion, again with the boost of the extraordinary 2022, when SQM paid income tax of US$1.572 billion.

The difference lies in the 2018 renegotiation formula. Until 2018, SQM paid as ROYALTY to CORFO 6.8% of lithium sales. But since that year, CORFO managed to replace that percentage with a formula that depended on the evolution of the price. It started at 6.8%, but the marginal rate reached 40% when the price exceeded the US$10,000 per tonne barrier. At that time that was an attractive price and difficult to sustain over time. Global demand has since said otherwise.

"The negotiation allowed that, in a scenario of extraordinary prices, which was of low probability, the State would capture most of the rent," says a negotiator from those years at CORFO. And that low-probability scenario happened. And so with flying colors. In 2022, SQM sold its production at an incredible average of US$52,000 per metric tonne.

To calculate the contributions to the Treasury for the following years, CORFO based its 2018 forecasts on the price projections of Signumbox, a consulting firm created in 2009, a specialist in lithium, and headed by Daniela Desormeaux. But everything that was thought at the beginning of 2018 changed in the following years.

The decision by many governments around the world to stimulate electromobility and promote the use of electric cars triggered an explosion in demand. In 2008, the world consumed 288 thousand tonnes of lithium carbonate equivalent (LCE), the reference unit in the industry. The state agency Cochilco (who runs Codelco) estimated in 2020 that this figure would rise to almost 500,000 tonnes by 2022. But SQM says that the market reached 760,000 tonnes last year. And that by 2025 it will double again to 1.5 million tonnes. Seventy percent of the demand comes from car batteries, and 90% from SQM's production that goes to Asia.

"The fundamentals behind demand growth are solid, with electric vehicle sales growing in all markets, especially in the USA market, positively impacted by the Inflation Reduction Act-IRA, which allows us to believe that demand this year should grow by more than 20% compared to 2022?, SQM said in its balance sheets as of December.

A volume issue

SQM leases from CORFO a total of 16,384 mining properties from CORFO in the Atacama salt flat, equivalent to 81,920 hectares. Up to that date, from 1993 until 2030, it had the right to exploit 180 thousand tons of Lithium Metal Equivalent (LME) in the whole period. That figure is equivalent to a production of almost one million tons of lithium carbonate equivalent (LCE). In 2018, in exchange for changing the total payment, CORFO multiplied the rights by three: it added 349 thousand tons of LME, equivalent to another two million tons of lithium carbonate until 2030. Thus, a quota of 216,000 tonnes per year is estimated. With the new rights, SQM undertook expansions. And it tripled.

In 2018, SQM sold 45 thousand tons and generated revenues of US$734 million. In 2022 SQM sold three times more, 157,000 tonnes, but multiplied its sales by 10 times: US$8.152 billion. The annual production capacity is already 180,000 tonnes and it is executing an expansion to 210,000 metric tonnes starting next year.

In 2018, SQM claimed 17% of the global market, in 2022 it is 20%.

The Albemarle case

The change that Eduardo Bitran forced for SQM in 2018 had been made earlier, in 2016, with Albemarle, a company that also has holdings in the Atacama salt flat, but in a smaller dimension than SQM: 16,000 hectares. Albemarle also benefited from a quota increase: to the 100 thousand LME tons it had left in 2018, it added another 262 thousand, but until 2044. In lithium carbonate, there are 80,000 tonnes per year, versus 216,000 tonnes for SQM.

To compare with SQM, CORFO's expected revenue between 2018 and 2030, also based on Signumbox's forecast prices, amounted to US$1.43 billion. By 2022 the forecast was US$149 million in lease royalties. Again, the forecasts were outdated. "In 2022 Albemarle paid more than US$650 million in royalties alone, which implies a contribution 14 times higher than in 2021?, the company told Pulso. The firm produces 50,000 tonnes per year - one third of SQM - and plans to reach 85,000 tonnes in future expansions.

And everything points to another good year.