Chilean Miner Loses Lithium Concession (SQM)

Chemical & Mining Co. of Chile Inc. (NYSE: SQM) or Sociedad Quimica y Minera de Chile SA, has lost its 20-year concession to produce lithium awarded recently through a public tender from the Chilean government. Lithium is a critical element in the lithium-ion batteries that power devices from smartphones to electric cars.

One of the losing bidders contested SQM’s win on the grounds that the mining giant failed to declare that it was involved in pending lawsuits against the government. The government’s mining ministry declared the tender process invalid, but did not say whether a new process would be initiated.

SQM is the largest lithium miner in the world with a market cap of $16 billion. In July 2011 the company’s trailing P/E ratio was a magnificent 41.26 and its forward P/E was 25.04. Today the trailing P/E is 24.92 and the forward P/E is 21.55. Still a little rich, but SQM is a major fertilizer producer as well.

The share price has jumped by about 28% in the past year, but the weak forecast for electric vehicles have held back demand for lithium in electric vehicle batteries and no other large-scale application has come along to pick up the slack.

SQM’s shares are down 1.7% at $60.99 in a 52-week range of $43.00 to $65.31. The high bid came just two weeks ago.

Paul Ausick