October 17, 2018 / 8:35 PM / 10 months ago

UPDATE 3-Chile to seek international arbitration over Albemarle contract

(Adds comment from Albemarle)

SANTIAGO, Oct 17 (Reuters) - The Chilean government said on Wednesday it would seek international arbitration over what it alleged was the failure of lithium miner Albemarle Corp to adhere to the terms of a contract drawn up in 2016.

Under the contract, U.S.-based Albemarle had to provide as much as 25 percent of its annual production at a discount to companies seeking to produce battery metals within Chile.

But state development agency Corfo, which leases mining rights to Albemarle in the lithium-rich Salar de Atacama, said on Wednesday the miner had failed to make a “serious” offer to the companies, thus violating the terms of its contract.

The state agency said in a statement it would refer the dispute to the Paris-based International Chamber of Commerce.

Albemarle said it regretted the need for arbitration, but decried what it considered the “substantial difference” between the contractual agreement and what Corfo is now demanding.

“We are confident in our position,” Eric Norris, head of Albemarle’s lithium operations, said in an emailed statement to Reuters. “Our company maintains the highest standards of corporate governance, so we will face this new scenario with the utmost seriousness and with the same good faith that has guided all of our actions in Chile for almost 40 years.”

The company said in a statement last week that it had made several price offers, and that it believed it had complied with its obligations to the Chilean government.

Chile is the world’s No. 2 producer of lithium, a key component in the batteries that power everything from cellphones to electric vehicles.

Corfo has said the clause that requires Albemarle to provide the ultralight battery metal at a reduced price is intended to help spur a value-added lithium industry.

A similar clause exists in a contract struck in January with Chilean competitor SQM, but Corfo said previously that SQM had complied with the terms of its agreement.

“Corfo wants to find a solution as soon as possible that will allow it to invest ... in the creation of a value-added lithium industry,” it said in the statement on Wednesday.

In March, Corfo awarded contracts to Chile’s Molymet, China’s Sichuan Fulin Industrial Group and a joint venture between Samsung SDI Co Ltd and South Korea’s POSCO to produce battery components in Chile using discounted lithium from the Atacama, for a total investment of $754 million. (Reporting by Aislinn Laing; Additional reporting by Ernest Scheyder in Houston; Writing by Dave Sherwood; Editing by Peter Cooney and Sandra Maler)

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