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Chile Reviewing Lithium Auction Process And Outcome

Chile Reviewing Lithium Auction Process and Outcome

The Chilean government claims that it acted “transparently and immediately” once it learned that SQM (NYSE:SQM), lithium giant and winner of Chile's mining concession auction, was in fact ineligible to participate in the tender process. The tender was revoked and Deputy Minister of Mining Pablo Wagner resigned from his post, taking full responsibility for the botched tender process.

However, media reports about the blunder portray a scandal of epic proportions. While Chile's Ministry of Mining said it created the lithium tender process to level the playing field and open up opportunities, some believe that its intention all along was to grant SQM further control over Chile's lithium.

Mining Minister Hernan de Solminihac is the brother of SQM's CEO, a relationship that led him to recuse himself from the tender process. Given the nature of this relationship, it is difficult for some to believe that the Ministry of Mining was not aware of the ongoing litigation between SQM and the government — to be more plain, what brother is blissfully unaware of his sibling's legal problems, especially when they relate directly to his own job?

SQM's exorbitant bid of $40 million raised eyebrows throughout the industry. The company's decision to sign a sworn statement declaring it does not have any pending lawsuits against the government — which evidently it does — made its inclusion in the bidding competition all the more dubious to some in the industry.

Given the gravity of the scandal that has erupted, the Chilean government will have to do more than let Wagner fall on his sword to convince Chileans and the mining industry as a whole of the credibility of the tender process.

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