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.
Runner-up asks Ministry to rescind tender annulment in its favorOn the grounds that SQM should have been barred from the concession competition in the first place, Li3 Energy (OTCBB:LIEG) formally appealed to the Ministry of Mining's Special Tender Committee, asking it to rethink its decision to annul the tender entirely. It wants the lithium extraction contract to be awarded to the POSCO Consortium, the runner-up in the bidding competition. Li3 is a member of consortium, which bid 8.26 billion pesos for the contract (US$17.5 million). “The CEOL should go to the highest offer, which belongs to Li Energy now that SQM's offer cannot be considered valid,” Cristián Quinzio, Li Energy's lawyer, told The Santiago Times. Despite the bad press that the so-called scandal has generated for SQM and Chile's Ministry of Mining, Li3 Energy's CEO, Luis Saenz, told Lithium Investing News that “Chile is a country that follows legal procedures and due process to the letter.” He views the familial relationship between de Solminihac and SQM's CEO as a non-issue and believes the company's signing of the no pending litigation declaration was an oversight. “Chile is a very mining-oriented country. Yet there are still barriers to entry into the lithium market, which has very few players. The objective of the process was to bring new players into the market, not promote the monopoly already inherent in this market,” explained Saenz. “The only one losing on account of this is Chile. We have a project that we are advancing to the feasibility study stage and we have fantastic partners, POSCO (NYSE:PKX). We are looking to move forward with the project using environmentally-friendly extraction technologies.” Saenz says he has yet to receive a formal response, but he is confident that due process will be followed and that his company's request will receive a timely response. “I am comforted by the fact that the new vice mining minister wants to review the case in depth because I believe a lot of mistakes were made in this process from the beginning. The terms of the auction process were rather ambiguous,” he added.
Lithium Investing News asked Saenz about the possibility that the Ministry of Mining may decide to start from scratch with a whole new tender process. “It would be complicated to initiate a new process. The first auction process didn't have the level of participation that the government expected. The only ones who participated were a few groups that already had projects, but required permits. I'm not sure what the point of a new process would be. You've got interested parties with advanced projects. Why not just deal directly with them?”Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company or commodity mentioned in this article. Chile Reviewing Lithium Auction Process and Outcome from Lithium Investing News