SQM informs five-week delay in lithium carbonate expansion

Tuesday, October 23, 2018

By Sociedad Química y Minera de Chile S.A.

SQM (NYSE: SQM; Santiago Stock Exchange: SQM-B, SQM-A) informs about the lithium carbonate expansion in Antofagasta in Chile. In May 2018, we announced an ambitious strategic lithium expansion plan in Chile. This expansion is to be done in three phases, the first was to expand our production from 48,000 to 70,000 MT, in 2018. The second is to increase production from 70,000 to 120,000 MT, to be completed in 2019, and the third phase is to add an additional 60,000 MT of capacity to our operations, reaching a total of 180,000MT by 2021.

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The execution of the first phase of this expansion plan considered a complete overhaul of the current lithium carbonate plant by changing and upgrading key components and implementing state of the art technology. These changes will not only allow for an increase in our capacity, but also ensure the highest quality battery grade products.

The completion and ramp-up of the plant has taken approximately five weeks more than anticipated mainly due to the calibration and fine tuning of some of the new components. During this period, the plant produced approximately 4,000 MT less battery grade product than originally anticipated.

Patricio de Solminihac, CEO of SQM commented: "It has been an ambitious project that in a short timeframe considers technical and operational challenges allowing us to not only increase our sales volumes, but also meet the lithium quality standards required by our customers". Then he continued: "We knew that overhauling and ramping up the plant at this moment would be challenging; we have very low inventories, the demand growth is strong, and our customers are requiring complex technical specifications. We didn't want to wait to move forward with these plans, as these conditions were not expected to change in the near future. We have built the most cutting edge lithium carbonate plant in the world, with the lowest investment, totaling less than US$4,000 per ton of additional capacity."

The ramp-up delay, along with logistical challenges given the low inventory levels, resulted in sales volumes in the third quarter of approximately 15% lower than the volumes reported in the second quarter. Fourth quarter sales volumes should be in line with what was originally anticipated, letting us reach sales volumes in the second half of the year of over 20% more than the sales volumes reported during the first half of 2018. T

he prices of lithium carbonate during the third quarter of this year remained relatively stable. Our average prices for this period should remain similar to average prices reported during the first half of 2018, as we see lithium demand growing around 20% this year.

Within the next week, we expect the lithium carbonate plant to be producing high quality product at 80% nameplate capacity, and reach its full capacity in mid-November. With respect to the expansion of the lithium hydroxide plant, it is being completed on time, and we expect it to reach full capacity by the 2 end of November. An update of the ramp up of the overhauled lithium carbonate plant will be included in the third quarter earnings press release, which we expect to publish on November 21, 2018, unless new information about the ramp up of the new plant becomes available before that date