China private equity player GSR eyes stake in $9 billion Chilean lithium miner SQM: Sources

Key Points
  • China private-equity player GSR Capital is aiming to buy as much as 20 percent in SQM, one of the world's biggest lithium producers, sources said.
  • GSR, an investor in clean technology and electric cars, met the Chilean government in April to discuss the potential purchase and was now moving towards a deal, the sources said.
An aerial view of the brine pools and processing plant of the Soquimich (SQM) lithium mine on the Atacama salt flat in northern Chile, on January 10, 2013.
Ivan Alvarado | Reuters

Chinese private equity firm GSR Capital is looking to buy a substantial holding in Chile's Sociedad Quimica Y Minera (SQM), one of the world's biggest lithium producers, according to two sources with knowledge of the matter.

GSR could buy a stake of around 20 percent - worth just under $1.9 billion at current market values, one of the sources said, but added there was no firm agreement.

SQM is one of just a handful of established lithium miners globally and a Chinese investment would go hand in glove with an electric car boom in the world's biggest auto market.

Beijing is aggressively promoting the vehicles to combat air pollution and as a means for the domestic car industry to compete with foreign rivals that have decades more experience in internal combustion engines.

The sources said GSR, which has invested in clean technology and electric cars, met the Chilean government in April to discuss the potential purchase and was now moving towards a deal.

A Chilean government transparency web site reported two GSR representatives met Eduardo Bitran, the head of the government development agency Corfo that manages the nation's lithium leases, on April 24.

An SQM representative declined to comment. GSR did not respond to a Reuters request for comment.

The sources did not specify who would sell the shares to GSR, but Julio Ponce, former chairman and one-time son-in-law of Chilean ex-dictator Augusto Pinochet, has previously tried to sell part of his interest in SQM. That process ended in late 2016 after offers fell short.

Suitors then included Ningbo Shanshan, a Chinese manufacturer of lithium battery materials. Canada's Potash Corp was also seen as a potential buyer.

According to a presentation on SQM's website, Ponce's holding firm Pampa Calichera and Japanese trading and chemicals firm Kowa, who have a joint voting pact, together owned a 32 percent stake in SQM as of the end of March 2017. Potash also owns 32 percent.

Potash declined to comment. Reuters was not able to reach Ponce for comment, but a source with knowledge of Pampa Calichera said he was not aware of the potential stake purchase. Kowa did not have immediate comment.

SQM, which has access to vast mineral reserves in the so-called 'lithium triangle' in Chile and Argentina, said in May it was planning to expand production as lithium demand continues to rocket on the back of its increased use in electric vehicles and mobile phones.

GSR, currently managing a $5 billion M&A fund, mainly targets foreign industrial and emerging technology companies, including electric car batteries and pharmaceuticals firms. It is in talks to buy control of a Nissan Motor rechargeable battery unit for about $1 billion, media have reported

GSR was also involved in a Chinese consortium to take over Italian football club AC Milan last year, but dropped out before the deal was signed, sources said at the time.

It grabbed headlines in 2015 when it teamed up with other investors to buy Philips's lighting component unit for $2.8 billion, a deal later blocked by a U.S. foreign investment panel on security grounds.