A new left-leaning constitution could include even tighter lithium mining operations in the country.
“Even, possibly, to the point that those old, grandfathered, licenses are revoked. Or the lithium operations (intimately tied in with the potassium and iodine ones, they’re not separable) might be taken back under direct state control. There are those, as above, who still would relitigate that initial privatization,” former Forbes writer Tim Worstall wrote in a Seeking Alpha piece in late 2020. Back then, he was writing about SQM’s path in light of a new constitution in 2021.
“The process here is a constitutional convention and it’s really difficult to predict what the end result of one of those is going to be. After all, they are, by there mere declaration of what they’re doing, insisting that they’re going to change the basic rules of the country. And SQM does have that slightly anomalous position – as does more strongly lithium mining in Chile – which means we might want to worry here.”
A new constitution could change SQM’s position in the country and even affect their legal right to mine. No wonder the stock crashed.
Basically, if Chile writes a new constitution then those old mineral licences – which are pretty weird – could be up for grabs again. So Chileans have elected a fairly lefty constitutional convention to rewrite the constitution. On that news alone this stock drops 10%.