The Macquarie report, however, was dynamite for the lithium industry, because it is the first to analyse the detail of the deal between SQM and the Chilean Government, including a breakdown of the punitive royalty regime.
Under a deal which also catches US-based Albemarle, a 6.8% free-on-board royalty will be replaced by a sliding scale using the price of lithium carbonate as a guide with the new starting rate (when the price is less than $US4000 a tonne) being 7%, rising to 10% when the price is between $US5000/t and $US6000/t, and then up to 25% when the price is between $US7,000 and $US10,000/t – peaking at 40% when the price is more than $US10,000/t.
That royalty regime explains why Kidman Resources is not concerned about its joint venture with SQM at the Mt Holland hard-rock lithium project in WA, where royalties are a fraction of that being introduced in Chile.
I'd advise heading over to the link and reading the full article when you have a moment.
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$3.52 Sentiment: Buy Disclosure: Held