UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

For the month of March, 2020.

Commission File Number 33-65728

 

CHEMICAL AND MINING COMPANY OF CHILE INC.

(Translation of registrant’s name into English)

 

El Trovador 4285, Santiago, Chile (562) 2425-2000

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F: x  Form 40-F ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____

 

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

  

 

Santiago, Chile. March 23, 2020.- Sociedad Química y Minera de Chile S.A. (SQM) (NYSE: SQM; Santiago Stock Exchange: SQM-B, SQM-A) reports the translation of its financial statements for the twelve months ended December 31, 2019, the Spanish version of which was filed with the Chilean Commission for the Financial Market (Comisión para el Mercado Financiero or “CMF”) on March 2, 2020.

 

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

 

As of December 31, 2019, and 2018
and for the period ended

December 31,2019

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

In Thousands of United States Dollars

 

  

This document includes:

-

Report of Independent Register Public Accounting Firms

-

Consolidated Classified Statements of Financial Position

-

Consolidated Statements of Income

-

Consolidated Statements of Comprehensive Income

-

Consolidated Statements of Cash Flows

-

Consolidated Statements of Changes in Equity

-

Notes to the Consolidated Financial Statements

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Table of Contents –Consolidated Financial Statements

 

Consolidated Classified Statements of Financial Position	1
Consolidated Classified Statements of Financial Position	2
Consolidated Statements of Comprehensive Income	4
Consolidated Statements of Cash Flows	5
Consolidated Statements of Cash Flows	6
Consolidated Statements of Changes in Equity	7

Note 1	Identification and Activities of the Company and Subsidiaries	10
1.1	Historical background	10
1.2	Main domicile where the Company performs its production activities	10
1.3	Codes of main activities	10
1.4	Description of the nature of operations and main activities	10
1.5	Other background	12
Note 2	Basis of presentation for the consolidated financial statements	14
2.1	Accounting period	14
2.2	Consolidated financial statements	14
2.3	Basis of measurement	14
2.4	Accounting pronouncements	15
2.5	Basis of consolidation	17
2.6	Investments in associates and joint ventures	20
Note 3	Significant accounting policies	21
3.1	Classification of balances as current and non-current	21
3.2	Functional and presentation currency	21
3.3	Foreign currency translation	21
3.4	Consolidated statement of cash flows	23
3.5	Financial assets	23
3.6	Accounting policy for financial liabilities	25
3.7	Reclassification of financial instruments	25
3.8	Financial instrument derecognition	25
3.9	Derivative and hedging financial instruments	25
3.10	Derivative financial instruments not considered as hedges	27
3.11	Deferred acquisition costs from insurance contracts	27
3.12	Classification Leases	27
3.13	Inventory measurement	29
3.14	Transactions with non-controlling interests	30
3.15	Related party transactions	30
3.16	Property, plant and equipment	30
3.17	Depreciation of property, plant and equipment	31
3.18	Goodwill	31
3.19	Intangible assets other than goodwill	32
3.20	Research and development expenses	33
3.21	Exploration and evaluation expenses	33

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

3.22	Impairment of non-financial assets	33
3.23	Minimum dividend	34
3.24	Earnings per share	34
3.25	Borrowing cost	34
3.26	Other provisions	35
3.27	Obligations related to employee termination benefits and pension commitments	35
3.28	Compensation plans	35
3.29	Revenue recognition	36
3.30	Finance income and finance costs	36
3.31	Current income tax and deferred	37
3.32	Segment reporting	37
3.33	Primary accounting criteria, estimates and assumptions	38
3.34	Environment	38
Note 4	Changes in accounting estimates and policies	39
4.1	Changes in accounting estimates	39
4.2	Changes in accounting policies	39
Note 5	Financial risk management	40
5.1	Financial risk management policy	40
5.2	Risk Factors	40
5.3	Risk measurement	43
Note 6	Background of companies included in consolidation	44
6.1	Parent’s stand-alone assets and liabilities	44
6.2	Parent entity	44
Note 7	Board of Directors, Senior Management and Key management personnel	45
7.1	Board of Directors and Senior Management	45
7.2	Key management personnel compensation	47
Note 8	Background on companies included in consolidation and non-controlling interests	48
8.1	Background on companies included in consolidation	48
9.3	Other information	60
9.4	Disclosures on interest in associates	60
10.1	Policy for the accounting of equity accounted investment in joint ventures	61
10.2	Disclosures of interest in joint ventures	61
10.3	Investment in joint ventures accounted for under the equity method of accounting	62
10.4	Assets, liabilities, revenue and expenses from joint ventures:	65
10.5	Other Joint Venture disclosures:	66
10.6	Joint Ventures	67
Note 11	Cash and cash equivalents	68
11.1	Types of cash and cash equivalents	68
11.2	Short-term investments, classified as cash equivalents	68
11.3	Information on cash and cash equivalents by currency	69
11.4	Amount restricted (unavailable) cash balances	69
11.5	Short-term deposits, classified as cash equivalents	70
11.6	Net Debt reconciliation	72

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 12	Inventories	73
Note 13	Related party disclosures	75
13.1	Related party disclosures	75
13.2	Relationships between the parent and the entity	75
13.3	Detailed identification of related parties and subsidiaries	76
13.4	Detail of related parties and related party transactions	79
13.5	Trade receivables due from related parties, current:	80
13.6	Trade payables due to related parties, current:	80
Note 14	Financial instruments	81
14.1	Types of other financial assets	81
14.2	Trade and other receivables	82
14.3	Hedging assets and liabilities	85
14.4	Financial liabilities	87
14.5	Trade and other payables	100
14.6	Financial liabilities at fair value through profit or loss	101
14.7	Financial asset and liability categories	102
14.8	Fair value measurement of assets and liabilities	104
14.9	Estimated fair value of financial instruments and financial derivatives	107
Note 15	Intangible assets and goodwill	108
15.1	Balances	108
15.2	Disclosures on intangible assets and goodwill	108
Note 16	Property, plant and equipment	117
16.1	Types of property, plant and equipment	117
16.2	Conciliation of changes in property, plant and equipment by type:	119
16.3	Conciliation of changes in right of use assets, by classes	123
16.4	Detail of property, plant and equipment pledged as guarantee	124
16.5	Impairment of assets	124
16.6	Additional Information	124
Note 17	Other current and non-current non-financial assets	125
Note 18	Employee benefits	126
18.1	Provisions for employee benefits	126
18.2	Policies on defined benefit plan	126
18.3	Other long-term benefits	127
18.4	Post-employment benefit obligations	127
18.5	Staff severance indemnities	128
18.6	Executive compensation plan	129
Note 19	Provisions and other non-financial liabilities	130
19.1	Types of provisions	130
19.2	Description of other provisions	131
19.4	Changes in provisions	132
Note 20	Disclosures on equity	133
20.1	Capital management	133
20.2	Disclosures on preferred share capital	134

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

20.3	Disclosures on reserves in Equity	135
20.4	Dividend policies	138
20.5	Interim and provisional dividends	140
20.6	Potential and provisional dividends	141
Note 22	Contingencies and restrictions	143
22.1	Lawsuits and other relevant events	143
22.2	Restrictions to management or financial limits	148
22.3	Environmental contingencies	148
22.4	Tax Contingencies	149
22.5	Contingencies regarding the Changes to the Contracts with Corfo:	149
22.6	Contingencies related to the Class Action lawsuit	150
22.7	Restricted or pledged cash	150
22.8	Securities obtained from third parties	150
22.9	Indirect guarantees	151
Note 23	Lawsuits and complaints	152
Note 24	Environment	153
24.1	Disclosures of disbursements related to the environment	153
24.2	Detailed information on disbursements related to the environment	153
	Accumulated expenses as of December 31, 2019	154
	Accumulated expenses as of December 31, 2018	156
24.3	Description of each project, indicating whether these are in process or have been finished	158
Note 25	Mineral resource exploration and evaluation expenditure	164
Note 26	Gains (losses) from operating activities in the statement of income of expenses, included according to their nature	165
26.1	Revenue from operating activities customer activities	165
26.2	Cost of sales	167
26.3	Other income	168
26.4	Administrative expenses	168
26.5	Other expenses by function	169
26.6	Other gains (losses)	169
26.7	Impairment of gains and reversal of impairment losses	170
26.8	Summary of expenses by nature	170
26.9	Finance expenses	171
Note 27	Reportable segments	172
27.1	Reportable segments	172
27.2	Reportable segment disclosures:	174
27.3	Statement of comprehensive income classified by reportable segments based on groups of products	176
27.4	Disclosures on geographical areas	178
27.5	Disclosures on main customers	178
27.7	Property, plant and equipment classified by geographical areas	180
Note 28	Borrowing costs	181
Note 29	Effect of fluctuations in foreign currency exchange rates	182

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 30	Disclosures on the effects of fluctuations in foreign currency exchange rates	184
Note 31	Income tax and deferred taxes	189
31.1	Current and non-current tax assets	189
31.2	Current tax liabilities	190
31.3	Income tax and deferred taxes	191
Note 32	Assets held for sale and detail of assets sold	201
Note 33	Events occurred after the reporting date	202
33.1	Authorization of the financial statements	202
33.2	Disclosures on events occurring after the reporting date	202
33.3	Details of dividends declared after the reporting date	202

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Consolidated Classified Statements of Financial Position

 

Assets		Note N°			As of December 31, 2019				As of December 31, 2018
					ThUS$				ThUS$
Currents assets
Cash and cash equivalents		11.1				588,530				556,066
Other current financial assets		14.1				505,490				312,721
Other current non-financial assets		17				50,552				47,972
Trade and other receivables, current		14.2				399,142				466,619
Trade receivables due from related parties, current		13.5				61,227				42,790
Current inventories		12				983,338				913,674
Current tax assets		31.1				91,433				57,110
Total current assets other than those classified as held for sale or disposal						2,679,712				2,396,952
Non-current assets or groups of assets classified as held for sale		32				2,454				1,430
Total non-current assets held for sale						2,454				1,430
Total current assets						2,682,166				2,398,382
Non-current assets
Other non-current financial assets		14.1				8,778				17,131
Other non-current non-financial assets		17				19,729				27,539
Trade receivables, non-current		14.2				1,710				2,275
Investments classified using the equity method of accounting		9.1-10.3				109,435				111,549
Intangible assets other than goodwill		15.1				188,358				189,350
Goodwill		15.1				34,726				34,866
Property, plant and equipment		16.1				1,607,070				1,454,823
Tax assets, non-current		31.1				32,179				32,179
Total non-current assets						2,001,985				1,869,712
Total assets						4,684,151				4,268,094

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Consolidated Classified Statements of Financial Position

 

Liabilities and Equity		Note N°			As of December 31, 2019				As of December 31, 2018
					ThUS$				ThUS$
Current liabilities
Other current financial liabilities		14.4				298,822				23,585
Trade and other payables, current		14.5				205,790				163,751
Trade payables due to related parties, current		13.6				475				9
Other current provisions		19.1				110,565				106,197
Current tax liabilities		31.2				17,874				47,412
Provisions for employee benefits, current		18.1				16,387				20,085
Other current non-financial liabilities		19.3				126,899				194,624
Total current liabilities						776,812				555,663
Non-current liabilities
Other non-current financial liabilities		14.4				1,518,926				1,330,382
Other non-current provisions		19.1				34,690				31,822
Deferred tax liabilities		31.3				183,411				175,361
Provisions for employee benefits, non-current		18.1				35,840				37,064
Total non-current liabilities						1,772,867				1,574,629
Total Liabilities						2,549,679				2,130,292
Equity
Equity attributable to owners of the Parent		20
Share capital		20,2				477,386				477,386
Retained earnings						1,623,104				1,623,104
Other reserves		20,3				(14,223	)			(14,999	)
Equity attributable to owners of the Parent						2,086,267				2,085,491
Non-controlling interests		8,3				48,205				52,311
Total equity						2,134,472				2,137,802
Total liabilities and equity						4,684,151				4,268,094

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Consolidated Statements of Income by Function

 

					For the period from January to December of the year
Consolidated Interim Statements of Income		Note N°			2019				2018
					ThUS$				ThUS$
Revenue		26.1				1,943,655				2,265,803
Cost of sales		26.2				(1,383,603	)			(1,485,631	)
Gross profit						560,052				780,172
Other income		26.3				18,218				32,048
Administrative expenses		26.4				(117,180	)			(118,126	)
Other expenses by function		26.5				(25,995	)			(36,907	)
Impairment of income and reversal of impairment losses (impairment losses)		26.7				(1,057	)			2,967
Other gains (losses)		26.6				(383	)			6,404
Profit (loss) from operating activities						433,655				666,558
Finance income						26,289				22,533
Finance costs		26.9				(76,939	)			(57,807	)
Share of profit of associates and joint ventures accounted for using the equity method		9.1-10.3				9,786				6,351
Foreign currency translation differences						(2,169	)			(16,597	)
Profit (loss) before taxes						390,622				621,038
Income tax expense, continuing operations		31.3				(110,019	)			(178,975	)
Profit (loss) from continuing operations						280,603				442,063
Profit attributable to:						280,603				442,063
Profit (loss) attributable to Owners of the Parent						278,115				439,830
Profit (loss) attributable to Non-controlling interests						2,488				2,233
						280,603				442,063

 

					For the period from January to December of the year
Earnings per share		Note N°			2019				2018
					ThUS$				ThUS$
Common shares
Basic earnings per share (US$ per share)		21				1.0567				1.6711
Basic earnings per share (US$ per share) from continuing operations		32.3				-				-
Diluted common shares
Basic earnings per share (US$ per share)		21				1.0567				1.6711
Basic earnings per share (US$ per share) from continuing operations						-				-

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Consolidated Statements of Comprehensive Income

 

		For the period from January to December of the year
Consolidated Interim Statements of Comprehensive Income		2019				2018
		ThUS$				ThUS$
Profit for the year			280,603				442,063
Other comprehensive income (loss)
Items of other comprehensive income (loss) that will not be reclassified to profit for the year, before taxes
(Losses) gains from measurements of defined benefit plans			(3,310	)			(1,337	)
Gains (losses) from financial assets measured irrevocably at fair value through other comprehensive income			1,152				(5,546	)
Total other comprehensive income (loss) that will not be reclassified to profit for the year, before taxes			(2,158	)			(6,883	)
Items of other comprehensive income that will be reclassified to profit for the year, before taxes
Foreign currency exchange gains (losses)			788				(1,220	)
(Loss) from financial assets measured at fair value through other comprehensive income			-				-
Gain from cash flow hedges			1,907				5,723
Total other comprehensive income (loss) that will be reclassified to profit for the year			2,695				4,503
Other items of other comprehensive income (loss) before taxes			537				(2,380	)
Income taxes related to items of other comprehensive income (loss) that will not be reclassified to profit for the year
Income tax (benefit) expense related to financial assets measured irrevocably at fair value through other comprehensive income			(311	)			1,498
Income taxes expense related to measurements of defined benefit plans			702				396
Total income tax related to items of other comprehensive income (loss) that will not be reclassified to profit for the year			391				1,894
Income tax relating to components of other comprehensive income (loss) that will be reclassified to profit for the year
Income tax benefit related to cash flow hedges			(2,683	)			-
Income tax benefit related to financial assets measured at fair value through other comprehensive income			-				-
Total income tax benefit relating to components of other comprehensive income (loss) that will be reclassified to profit (loss) for the year			(2,683	)			-
Total other comprehensive loss			(1,755	)			(486	)
Total comprehensive income			278,848				441,577
Comprehensive income attributable to
Comprehensive income attributable to owners of the parent			276,137				439,180
Comprehensive income attributable to non-controlling interest			2,711				2,397
			278,848				441,577

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Consolidated Statements of Cash Flows

 

		For the period from January to December of the year
Consolidated Interim Statements of Cash Flows		2019				2018
		ThUS$				ThUS$
Cash flows from operating activities
Classes of revenue from operating activities
Cash receipts from sales of goods and rendering of services			2,044,746				2,284,514
Cash receipts from premiums and benefits, annuities and other benefits from policies entered			2,925				2,140
Proceeds from leases and subsequent sale of assets			361				-
Classes of Payments
Cash payments to suppliers for the provision of goods and services			(1,284,204	)			(1,226,091	)
Cash payments to and on behalf of employees			(195,782	)			(205,590	)
Variable payments relating to identified leases as required by IFRS 16			(1,037	)			-
Other payments related to operating activities			(25,218	)			(21,240	)
Net cash generated from operating activities			541,791				833,733
Dividends received			14,449				8,815
Interest paid			(70,963	)			(59,565	)
Interest paid on leases liabilities			(1,537	)			-
Interest received			25,809				22,533
Income taxes paid			(173,319	)			(240,115	)
Other incomes (outflows) of cash (1)			90,741				(40,562	)
Net cash generated from operating activities			426,971				524,839
Cash flows generated from (used in) investing activities
Cash flows arising from the loss of control of subsidiaries and other businesses			994				68,988
Payments made to acquire interest in joint ventures			(2,600	)			(19,989	)
Proceeds from the sale of property, plant and equipment			487				61
Acquisition of property, plant and equipment			(321,324	)			(244,693	)
Proceeds from sales of intangible assets			28,126				14,056
Proceeds payments related to futures, forward options and swap contracts			1,403				(204	)
Purchases of intangible assets			(2,492	)			(74,374	)
Other (outflows) income of (2)			(190,065	)			69,151
Net cash generated from (used in) investing activities			(485,471	)			(187,004	)

 

(1) Other inflows (outflows) of cash from operating activities include increases (decreases) net of value added tax. Banking expenses, expenses associated with obtaining loans and taxes associated with interest payments.

 

(2) Other inflows (outflows) of cash include investments and redemptions of time deposits and other financial instruments that do not qualify as cash and cash equivalent in accordance with IAS 7, paragraph 7, since they mature in more than 90 days from the original investment date.

 

The accompanying notes form an integral part of these consolidated interim financial statements

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Consolidated Statements of Cash Flows

 

					For the period from January to December of the year
Consolidated Interim Statements of Cash Flows		Note N°			2019				2018
					ThUS$				ThUS$
Cash flows generated from (used in) financing activities
Repayment of lease liabilities						(7,221	)			-
Proceeds from long-term borrowings						450,000				256,039
Proceeds from short-term borrowings						-				120,000
Repayment of borrowings						(7,096	)			(213,000	)
Dividends paid						(329,787	)			(550,352	)
Net cash generated from (used in) financing activities						105,896				(387,313	)
Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate						47,396				(49,478	)
Effects of exchange rate fluctuations on cash held						(14,932	)			(24,894	)
Net increase (decrease) in cash and cash equivalents						32,464				(74,372	)
Cash and cash equivalents at beginning of period						556,066				630,438
Cash and cash equivalents at end of period		11				588,530				556,066

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Consolidated Statements of Changes in Equity

 

Consolidated Statements of Changes in Equity		Share capital			Foreign currency translation reserves			Cash flow hedge reserves			Reserve for (losses) gains from financial assets measured at fair value through other comprehensive income			Actuarial (losses) from defined benefit plans			Other miscellaneous reserves			Total Other reserves			Retained earnings			Equity attributable to owners of the Parent			Non-controlling interests			Total
		ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Equity as of January 1, 2019		477,386			(26,307	)		7,971			(1,111	)		(6,884	)		11,332			(14,999	)		1,623,104			2,085,491			52,311			2,137,802
Net profit		-			-			-			-			-			-			-			278,115			278,115			2,488			280,603
Other comprehensive income		-			562			(775	)		841			(2,606	)		-			(1,978	)		-			(1,978	)		223			(1,755	)
Comprehensive income		-			562			(775	)		841			(2,606	)		-			(1,978	)		278,115			276,137			2,711			278,848
Dividends (1)		-			-			-			-			-			-			-			(278,115	)		(278,115	)		(6,817	)		(284,932	)
Increase in Equity		-			-			-			-			-			2,754			2,754			-			2,754			-			2,754
Increase (decrease) in equity		-			562			(775	)		841			(2,606	)		2,754			776			-			776			(4,106	)		(3,330	)
Equity as of December 31, 2019		477,386			(25,745	)		7,196			(270	)		(9,490	)		14,086			(14,223	)		1,623,104			2,086,267			48,205			2,134,472

 

Consolidated Statements of Changes in Equity		Share capital			Foreign currency translation reserves			Cash flow hedge reserves			Reserve for (losses) gains from financial assets measured at fair value through other comprehensive income			Actuarial (losses) gains from defined benefit plans			Other miscellaneous reserves			Total Other reserves			Retained earnings			Equity attributable to owners of the Parent			Non-controlling interests			Total
		ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Equity as of January 1, 2018		477,386			(24,913	)		2,248			2,937			(5,953	)		11,332			(14,349	)		1,724,784			2,187,821			59,647			2,247,468
(Decrease) due to changes in accounting policies		-			-			-			-			-			-			-			(1,680	)		(1,680	)		-			(1,680	)
Restated initial equity		477,386			(24,913	)		2,248			2,937			(5,953	)		11,332			(14,349	)		1,723,104			2,186,141			59,647			2,245,788
Net profit		-			-			-			-			-			-			-			439,830			439,830			2,233			442,063
Other comprehensive income		-			(1,394	)		5,723			(4,048	)		(931	)		-			(650	)		-			(650	)		164			(486	)
Comprehensive income		-			(1,394	)		5,723			(4,048	)		(931	)		-			(650	)		439,830			439,180			2,397			441,577
Dividends (1)		-			-			-			-			-			-			-			(539,830	)		(539,830	)		(9,733	)		(549,563	)
Increase (decrease) in equity		-			(1,394	)		5,723			(4,048	)		(931	)		-			(650	)		(100,000	)		(100,650	)		(7,336	)		(107,986	)
Equity as of December 31, 2018		477,386			(26,307	)		7,971			(1,111	)		(6,884	)		11,332			(14,999	)		1,623,104			2,085,491			52,311			2,137,802

 

(1)

See Note 20.6

 

The accompanying notes form an integral part of these consolidated interim financial statements

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Glossary

 

The Following capitalized terms un these notes will have the following meaning:

 

“ADS” American Depositary Shares;

 

“CAM” Arbitration and Mediation Center of the Santiago Chamber of Commerce;

 

“CCHEN” Chilean Nuclear Energy Commission;

 

“CCS” cross currency swap;

 

“CINIIF” International Financial Reporting Interpretations Committee;

 

“CMF” Financial Market Commission;

 

“Directors’ Committee” The Company’s Directors’ Committee;

 

“Corporate Governance Committee” The Company’s Corporate Governance Committee;

 

“Health, Safety and Environment Committee” The Company’s Health, Safety and Environment Committee;

 

“Lease Agreement” the mining concessions lease agreement signed by SQM Salar and Corfo in 1993, as subsequently amended;

 

“Project Contract” project contract for Salar de Atacama undersigned by Corfo and SQM Salar in 1993, as subsequently amended”;

 

“CORFO” Chilean Economic Development Agency;

 

“DCV” Central Securities Depository;

 

“DGA” General Directorate of Water Resources;

 

“Board” The Company’s Board of Directors;

 

“DOJ” United States Department of Justice;

 

“Dollar” “USD” o “US$” Dollars of the United States of America;

 

“DPA” Deferred Prosecution Agreement;

 

“EIEP” Passive foreign investment company;

 

“United States” United States of America;

 

“FCPA” Foreign Corrupt Practices Act of the USA;

 

“Management” the Company’s management;

 

"SQM Group'' The corporate group composed of the Company and its subsidiaries

 

"Pampa Group'' Jointly the Sociedad de Inversiones Pampa Calichera S.A., Potasios de Chile S.A. and Inversiones Global Mining (Chile) Limitada;

 

“IASB” International Accounting Standards Board;

 

“SSI” Staff severance indemnities;

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

“IFRIC” International Financial Reporting Interpretations Committee;

 

“IPC” Consumer Price Index;

 

“Securities Market Law” Securities Market Law No. 18,045;

 

"Corporate Law'' Ley 18,046 on corporations;

 

"ThUS$'' thousands of Dollars;

 

"MUS$'' millions of Dollars;

 

“IAS” International Accounting Standard;

 

“IFRS” International Financial Reporting Standard;

 

“Pesos” “Ch$” o “CLP” Chilean pesos, legal tender in Chile;

 

“SEC” Securities and Exchange Commission;

 

“Sernageomin” National Geology and Mining Service;

 

“SIC” Standard Interpretations Committee;

 

“SII” Chilean Internal Revenue Service;

 

“SMA” Environmental Superintendant's Office;

 

“Company” Sociedad Química y Minera de Chile S.A.;

 

“SQM Industrial” SQM Industrial S.A.;

 

“SQM NA” SQM North America Corporation;

 

“SQM Nitratos” SQM Nitratos S.A.;

 

“SQM Potasio” SQM Potasio S.A.;

 

“SQM Salar” SQM Salar S.A.;

 

“Tianqi” Tianqi Lithium Corporation; and

 

“UF” Unidad de Fomento (a Chilean Peso based inflation indexed currency unit).

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 1

Identification and Activities of the Company and Subsidiaries

 

1.1

Historical background

 

Sociedad Química y Minera de Chile S.A. is an open stock corporation founded under the laws of the Republic of Chile and its Chilean Tax Identification Number is 93.007.000-9.

 

The Company was incorporated through a public deed dated June 17, 1968 by the public notary of Santiago Mr. Sergio Rodríguez Garcés. Its existence was approved by Decree No. 1,164 of June 22, 1968 of the Ministry of Finance, and it was registered on June 29, 1968 in the Registry of Commerce of Santiago, on page 4,537 No. 1,992, SQM’s headquarters are located at El Trovador 4285, Floor 6, Las Condes, Santiago, Chile, The Company's telephone number is +(56 2) 2425-2000.

 

The Company is registered in the CMF under number 184 of March 18, 1983 and is therefore subject to oversight by that entity.

 

1.2

Main domicile where the Company performs its production activities

 

The Company’s main domiciles are: Calle Dos Sur plot No. 5 - Antofagasta; Arturo Prat 1060 - Tocopilla; Administration Building w/n - Maria Elena; Administration Building w/n Pedro de Valdivia - María Elena, Anibal Pinto 3228 - Antofagasta, Kilometer 1378 Ruta 5 Norte Highway - Antofagasta, Coya Sur Plant w/n - Maria Elena, kilometer 1760 Ruta 5 Norte Highway - Pozo Almonte, Salar de Atacama (Atacama Saltpeter deposit) potassium chloride plant w/n - San Pedro de Atacama, potassium sulfate plant at Salar de Atacama w/n – San Pedro de Atacama, Minsal Mining Camp w/n CL Plant CL, Potassium– San Pedro de Atacama, formerly the Iris Saltpeter office w/n, Commune of Pozo Almonte, Iquique.

 

1.3

Codes of main activities

 

The codes of the main activities as established by the CMF, as follows:

 

-

1700 (Mining)

 

-

2200 (Chemical products)

 

-

1300 (Investment)

 

1.4

Description of the nature of operations and main activities

 

The products of the Company are mainly derived from mineral deposits found in northern Chile where mining takes place and caliche and brine deposits are processed.

 

(a)

Specialty plant nutrition: Four main types of specialty plant nutrients are produced: potassium nitrate, sodium nitrate, sodium potassium nitrate and specialty blends. In addition, other specialty fertilizers are sold including third party products.

 

(b)

Iodine: The Company produce iodine and iodine derivatives, which are used in a wide range of medical, pharmaceutical, agricultural and industrial applications, including x-ray contrast media, polarizing films for LCD and LED, antiseptics, biocides and disinfectants, in the synthesis of pharmaceuticals, electronics, pigments and dye components.

 

(c)

Lithium: The Company produces of lithium carbonate, which is used in a variety of applications, including electrochemical materials for batteries, frits for the ceramic and enamel industries, heat-resistant glass (ceramic glass), air conditioning chemicals, continuous casting powder for steel extrusion, primary aluminum smelting process, pharmaceuticals and lithium derivatives, We are also a leading supplier of lithium hydroxide, which is primarily used as an input for the lubricating greases industry and for certain cathodes for batteries.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(d)

Industrial chemicals: The Company produce three industrial chemicals: sodium nitrate, potassium nitrate and potassium chloride. Sodium nitrate is used primarily in the production of glass, explosives, and metal treatment. Potassium nitrate is used in the manufacturing of specialty glass, and it is also an important raw material to produce of frits for the ceramics and enamel industries. Solar salts, a combination of potassium nitrate and sodium nitrate, are used as a thermal storage medium in concentrated solar power plants. Potassium chloride is a basic chemical used to produce potassium hydroxide, and it is also used as an additive in oil drilling as well as in food processing, among other uses.

 

(e)

Potassium: The Company produce potassium chloride and potassium sulfate from brines extracted from the Salar de Atacama. Potassium chloride is a commodity fertilizer used to fertilize a variety of crops including corn, rice, sugar, soybean and wheat. Potassium sulfate is a specialty fertilizer used mainly in crops such as vegetables, fruits and industrial crops.

 

(f)

Other products and services: The Company also sell other fertilizers and blends, some of which we do not produce. Mainly potassium nitrate, potassium sulfate and potassium chloride. This business line also includes revenue from commodities, services, interests, royalties and dividends.

 

Our subsidiary SQM Salar holds exclusive rights to exploit the mineral resources in an area covering approximately 140,000 hectares of land in the Salar de Atacama in northern Chile, of which SQM Salar is only entitled to exploit the mineral resources in 81,920 hectares. These rights are owned by Corfo and leased to SQM Salar pursuant to the Lease Agreement. Corfo cannot unilaterally amend the Lease Agreement and the Project Agreement, and the rights to exploit the resources cannot be transferred. The Lease Agreement establishes that SQM Salar is responsible for making quarterly lease payments to Corfo according to specified percentages of the value of production of minerals extracted from the Salar de Atacama brines, maintaining Corfo’s rights over the Mining Exploitation Concessions and making annual payments to the Chilean government for such concession rights. The Lease Agreement was entered into in 1993 and expires on December 31, 2030. On January 17, 2018, SQM and CORFO reached an agreement to end an arbitration process directed by the arbitrator, Mr. Héctor Humeres Noguer, in case 1954-2014 of the Arbitration and Mediation Center of Santiago Chamber of Commerce (Centro de Arbitrajes y Mediación de la Cámara de Comercio de Santiago) and other cases related to it.

 

The agreement signed in January 2018, includes important amendments to the lease agreement and project agreement signed between CORFO and SQM in 1993. The main modifications became effective on April 10, 2018 and requires an increase in the lease payments by increasing the lease rates associated with the sale of the different products produced in the Salar de Atacama, including lithium carbonate, lithium hydroxide and potassium chloride. Regarding lithium carbonate, the former rate of 6.8% on FOB sales was changed to the following structure of progressive rates based on the final sale price:

 

Price US$/MT Li2CO3		Lease payment rate
$0 - $4,000			6.80	%
$4,000 - $5,000			8.00	%
$5,000 - $6,000			10.00	%
$6,000 - $7,000			17.00	%
$7,000 - $10,000			25.00	%
> $10,000			40.00	%

 

See Note 26.2 for the disclosure of lease payments made to CORFO for all periods presented.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Regarding potassium chloride, the former rate of 1.8% on FOB sales was changed to the following structure of progressive rates based on the final sale price:

 

 

Price US$/MT Li2CO3		Lease payment rate
$0 - $300			3.0	%
$300 - $400			7.0	%
$400 - $500			10.0	%
$500 - $600			15.0	%
> $600			20.0	%

 

Similarly, the lease rates associated with the other products (lithium hydroxide, potassium sulfate and others) shall have similar changes to those described in the previous products.

 

SQM Salar commits to contribute between US$ 10.8 million and US$ 18.9 million per year to research and development efforts, between US$ 10 to US$ 15 million per year to the communities in close proximity to the Salar de Atacama, and 1.7% of total annual sales of SQM Salar to regional development.

 

1.5

Other background

 

(a)

Staff

 

As of December 31, 2019, and 2018, the workforce was as follows:

 

		As of December 31, 2019												As of December 31, 2018
Employees		S.Q.M S.A.				Other subsidiaries				Total				S.Q.M S.A.				Other subsidiaries				Total
Executives			30				91				121				33				89				122
Professionals			110				1,170				1,280				115				1,078				1,193
Technicians and operators			282				3,481				3,763				260				3,287				3,547
Foreign employees			17				560				577				11				417				428
Overall total			439				5,302				5,741				419				4,871				5,290

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(b)

Main shareholders

 

As of December 2019, there were 1,413 shareholders.

 

following table shows information about the main shareholders of the Company’s Series A or Series B shares in circulation as of December 31, 2019 and December 31, 2018, in line with information provided by the DCV. The following table presents the information about the beneficial ownership of Series A and Series B shares of the Company as of December 31, 2019 and December 31, 2018, with respect to each shareholder that, to our knowledge, owns more than 5% of the outstanding Series A or Series B shares. The following information is derived from our registry and reports managed by the DCV and informed to the CMF and the Chilean Stock Exchanges. whose main shareholders are the following:

 

Shareholder as of December 31, 2019		No. of Series A				% of Series A shares				No. of Series B				% of Series B shares				% of total shares
Inversiones TLC SpA (1)			62,556,568				43.80	%			-				-				23.77	%
Sociedad de Inversiones Pampa Calichera S.A.			44,894,152				31.43	%			3,793,154				3.15	%			18.50	%
The Bank of New York Mellon, ADRs			-				-				38,311,788				31.83	%			14.56	%
Potasios de Chile S.A.			18,179,147				12.73	%			-				-				6.91	%
Inversiones Global Mining (Chile) Limitada			8,798,539				6.16	%			-				-				3.34	%
Banco Itau via foreign investor accounts			-				-				7,373,216				6.13	%			2.80	%
Banco de Chile non-resident third party accounts			109				-				6,842,746				5.68	%			2.60	%
Banco Santander via foreign investor accounts			-				-				6,618,416				5.50	%			2.51	%
Euroamerica C de B S.A.			3,056				-				4,863,467				4.04	%			1.85	%
Banchile C de B S. A.			491,729				0.34	%			4,285,696				3.56	%			1.82	%
Inversiones la Esperanza de Chile Limitada			4,147,263				2.90	%			46,500				0.04	%			1.59	%
Santiago stock exchange			30,590				0.02	%			3,077,930				2.56	%			1.18	%

 

(1) As reported by DCV, which records the Company's shareholders' register as of December 31, 2019 and December 31, 2018, Inversiones TLC SpA, a subsidiary of Tianqi, is the direct owner of 62,556,568 shares of SQM equivalent to 23.77% of SQM’s shares'' According to information provided to the CMF by Inversiones TLC SpA dated December 5, 2018, Inversiones TLC SpA owns 25.86% of SQM’s shares

 

Shareholder as of December 31, 2018		No. of Series A				% of Series A shares				No. of Series B				% of Series B shares				% of total shares
Inversiones TLC SpA (1)			62,556,568				43.80	%			-				-				23.77	%
Sociedad de Inversiones Pampa Calichera S.A.			44,894,152				31.43	%			10,093,154				8.38	%			20.89	%
The Bank of New York Mellon, ADRs			-				-				35,254,267				29.29	%			13.39	%
Potasios de Chile S.A.			18,179,147				12.73	%			-				-				6.91	%
Banco de Chile via non-resident third party accounts			15,687				0.01	%			10,703,812				8.89	%			4.07	%
Inversiones Global Mining (Chile) Limitada			8,798,539				6.16	%			-				-				3.34	%
Banco Itau via foreign investor accounts			-				-				8,085,730				6.72	%			3.07	%
Banco Santander via foreign investor accounts			-				-				7,138,685				5.93	%			2.71	%
Banchile C de B S. A.			528,092				0.37	%			4,028,611				3.35	%			1.73	%
Inversiones la Esperanza de Chile Limitada			3,711,598				2.60	%			46,500				0.04	%			1.43	%

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 2

Basis of presentation for the consolidated financial statements

 

2.1

Accounting period

 

These consolidated financial statements cover the following periods:

 

(a)

Consolidated Statements of Financial Position as of December 31, 2019 and, 2018.

(b)

Consolidated Statements of Income for the periods ended December 31, 2019 and 2018.

(c)

Consolidated Statements of Comprehensive Income for years ended December 31, 2019 and 2018.

(d)

Consolidated Statements of Changes in Equity for the years ended December 31, 2019 and 2018.

(e)

Consolidated Statements of Direct-Method Cash Flows for ended December 31, 2019 and 2018.

 

2.2

Consolidated financial statements

 

These consolidated financial statements of the company. and its subsidiaries were prepared in accordance with IFRS and represent its full, explicit and unreserved adoption.

 

These consolidated financial statements fairly reflect the Company’s financial position, as of December 31, 2019 and 2018 and, the comprehensive results of operations, changes in equity and cash flows occurring for the years ended December 31, 2019 and, 2018.

IFRS establish certain alternatives for their application, those applied by the Company are detailed in Notes 2 and 3.

 

The accounting policies used in the preparation of these consolidated annual accounts comply with each IFRS in force at their date of presentation.

 

As of December 31, 2019, at the close of these consolidated financial statements, certain reclassifications were made as of and for the year ended December 31, 2018, to correct the prior year presentation. These revisions were not considered material to the previously issued financial statements.

 

Items		Original balances reported as of December 31, 2018				Reclassification				Balances reclassified as of December 31, 2018
		ThUS$				ThUS$				ThUS$
Trade and other receivables, current			464,855				1,764				466,619
Trade receivables due from related parties, current			44,554				(1,764	)			42,790
Other non-financial assets, current			49,186				(1,214	)			47,972
Intangible assets other than goodwill			188,283				1,067				189,350
Goodwill			34,718				148				34,866
Cost of sales			(1,483,524	)			(2,107	)			(1,485,631	)
Finance costs			(59,914	)			2,107				(57,807	)

 

2.3

Basis of measurement

 

The consolidated financial statements have been prepared on the historical cost basis except for the following:

 

(a)

Inventories are recorded at the lower of cost and net realizable value.

(b)

Financial derivatives at fair value.

(c)

Certain financial investments classified as available for sale measured at fair value with an offsetting entry in other comprehensive income.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

2.4

Accounting pronouncements

 

New accounting pronouncements

 

(a)

The following standards, interpretations and amendments are mandatory for the first time for annual periods beginning on January 1, 2019:

 

Standards and Interpretations		Description		Mandatory for annual periods beginning on or after
IFRS 16 "Leases" - issued in January 2016		Establishes the standards to recognize, measure, present and disclose leases. IFRS 16 replaces IAS 17 and introduces a unique lessee accounting model that requires a lessee to recognize the assets and liabilities of all rental contracts with a term of over 12 months, unless the underlying asset is of low value. IFRS 16 is effective for annual periods beginning on or after January 1, 2019, and early implementation is permitted for entities that apply IFRS 15, or before the date that IFRS 16 is initially implemented.		01-01-2019
IFRIC 23 "Uncertainty over Income Tax Treatments". Published in June 2016		This interpretation clarifies how to apply the recognition and measurement requirements in IAS 12, when there is uncertainty over income tax treatments.		01-01-2019

 

Amendments and improvements		Description		Mandatory for annual periods beginning on or after
Amendment to IFRS 9 “Financial Instruments”.  Published in October 2017		The amendment permits more assets to be measured at amortized cost than under the previous version of IFRS 9, in particular some prepayable financial assets with negative compensation. The assets affected, which include some loans and debt securities, would otherwise have been measured at fair value through profit and loss (FVTPL). For them to qualify for amortized cost measurement, the negative compensation must be “reasonable compensation for early termination of the contract.”		01-01-2019
Amendment to IAS 28 “Investments in Associates and Joint Ventures” Published in October 2017		This amendment clarifies that companies should apply IFRS 9 to account for long-term interests in an associate or joint venture to which the equity method is not applied. The IASB Board has published an example that illustrates how companies should apply the requirements of IFRS 9 and IAS 28 to long-term interests in an associate or joint venture.		01-01-2019
Amendment to IFRS 3 “Business Combinations” - Published in December 2017		The amendment clarified that gaining control of a company that is a joint venture deals with a business combination that is achieved in stages. The acquirer must remeasure previously held interests in that business at fair value at the date of acquisition.		01-01-2019
Amendment to IFRS 11 “Joint Arrangements” - Published in December 2017.		The amendment clarified that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.		01-01-2019
Amendment to IAS 12 “Income Tax” - Published in December 2017.		This modification clarified that the income tax consequences of dividends on financial instruments classified as equity should be recognized when the past transactions or events that generated distributable profits were originally recognized.		01-01-2019
Amendment to IAS 23 Borrowing Costs - Published in December 2017.		This amendment clarifies that the borrowing costs of specific borrowings that remain outstanding after the related qualifying asset is ready for intended use or for sale will be considered as part of the general borrowing costs of the entity.		01-01-2019
Amendment to IAS 19 “Employee Benefits” - Published in February 2018		The amendment requires entities to use updated assumptions to determine the current service cost and net interest for the remainder of the period after a modification, reduction or settlement of the plan; and to recognize in profit or loss as part of the cost of the past service, or a profit or loss in the settlement, any reduction in a surplus, even if that surplus was not previously recognized because it did not exceed the upper limit of the asset		01-01-2019

 

Management considers that the adoption of the aforementioned standards, amendments and interpretations did not significantly impact the company’s consolidated financial statements, except for IFRS 16, detailed in notes 4.2 and 14.4 f).

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(b)

Standards, interpretations and amendments issued that had not become effective for financial statements beginning on January 1, 2019 and which the Company has not adopted early are as follows:

 

Standards and Interpretations		Description		Mandatory for annual periods beginning on or after
Amendment to IFRS 3 “Definition of a Business” - Published in October 2018		This amendment revises the definition of a business. Based on the feedback received by the IASB, the application of the current guidance is frequently seen as too complex, and results in too many transactions that qualify as business combinations.		01-01-2020
Amendment to IAS 1 “Presentation of Financial Statements” and “IAS 8” Accounting Policies, Changes in Accounting Estimates and Errors - Published in October 2018.		This amendment establishes a consistent definition of materiality in all the IFRCs and the Conceptual Framework for Financial Information; it clarifies the explanation of the definition of material; and it incorporates some of the guidelines in IAS 1 on immaterial information.		01-01-2020
Amendment to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures”, Published in September 2014		These amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not), A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.		Undetermined
Amendments to IFRS 9, IAS 39 and IFRS 7 “Reform to the referential interest rate” Published in September 2019		These amendments provide certain simplifications in relation to the reform to the referential interest rates. These simplifications relate to hedge accounting and affect the IBOR reform, which generally shouldn’t result in the finalization of hedge accounting. However, any hedge ineffectiveness should continue to be recorded in the results		01-01-2020

 

Management believes that the adoption of the above standards, amendments and interpretations will not have a significant impact on the Company’s financial statements.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

2.5

Basis of consolidation

 

(a)

Subsidiaries

 

The Company established control as the basis of consolidation of its financial statements. The Company controls a subsidiary when it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.

 

The consolidation of a subsidiary starts when the Group controls it and it is no longer included in the consolidation when this control is lost.

 

Subsidiaries are consolidated through a line by line method, adding items that represent assets, liabilities, income and expenses with a similar content, and eliminating operations between companies within the SQM Group.

 

Results for dependent companies acquired or disposed of during the period are included in the consolidated accounts from the date on which control is transferred to the SQM Group or until the date when this control ends, as relevant.

 

To account for an acquisition, of a business the Company uses the acquisition method. Under this method the acquisition cost is the fair value of assets delivered, equity securities issued, and incurred or assumed liabilities at the date of exchange. Assets, liabilities and contingencies identifiable assumed in a business combination are measured initially at fair value at the acquisition date. For each business combination, the Company will measure the non-controlling interest of the acquiree either at fair value or as proportional share of net identifiable assets of the acquire. For more information, please see Note 8.1.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(b)

Companies included in consolidation:

 

								Ownership interest
				Country of		Functional		As of December 31, 2019												As of December 31, 2018
TAX ID No.		Foreign subsidiaries		origin		currency		Direct				Indirect				Total				Total
Foreign		Nitratos Naturais Do Chile Ltda.		Brazil		US$			0.0000				100.0000				100.0000				100.0000
Foreign		Nitrate Corporation Of Chile Ltd.		United Kingdom		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM North America Corp.		USA		US$			40.0000				60.0000				100.0000				100.0000
Foreign		SQM Europe N.V.		Belgium		US$			0.5800				99.4200				100.0000				100.0000
Foreign		Soquimich S.R.L. Argentina		Argentina		US$			0.0000				100.0000				100.0000				100.0000
Foreign		Soquimich European Holding B.V.		Netherlands		US$			0.0000				100,0000				100.0000				100.0000
Foreign		SQM Corporation N.V.		Curacao		US$			0.0002				99.9998				100.0000				100.0000
Foreign		SQI Corporation N.V.		Curacao		US$			0.0159				99.98413				100.0000				100.0000
Foreign		SQM Comercial De México S.A. de C.V.		Mexico		US$			0.0100				99.9900				100.0000				100.0000
Foreign		North American Trading Company		USA		US$			0.0000				100.0000				100.0000				100.0000
Foreign		Administración Y Servicios Santiago S.A. de C.V.		Mexico		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Perú S.A.		Perú		US$			0.0091				99.99093				100.0000				100.0000
Foreign		SQM Ecuador S.A.		Ecuador		US$			0.0040				99.9960				100.0000				100.0000
Foreign		SQM Nitratos México S.A. de C.V.		Mexico		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQMC Holding Corporation L.L.P.		USA		US$			0.1000				99.9000				100.0000				100.0000
Foreign		SQM Investment Corporation N.V.		Curacao		US$			1.0000				99.0000				100.0000				100.0000
Foreign		SQM Brasil Limitada		Brazil		US$			0.8400				99.1600				100.0000				100.0000
Foreign		SQM France S.A.		France		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Japan Co. Ltd.		Japan		US$			0.1597				99.8403				100.0000				100.0000
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		US$			1.6700				98.3300				100.0000				100.0000
Foreign		SQM Oceania Pty Limited		Australia		US$			0.0000				100.0000				100.0000				100.0000
Foreign		Rs Agro-Chemical Trading A.V.V.		Aruba		US$			98.3333				1.6667				100.0000				100.0000
Foreign		SQM Colombia SAS		Colombia		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Australia PTY		Australia		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SACAL S.A. (1)		Argentina		ARS			0.0000				0.0000				0.0000				100.0000
Foreign		SQM Indonesia S.A.		Indonesia		US$			0.0000				80.0000				80.0000				80.0000
Foreign		SQM Virginia L.L.C.		USA		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Italia SRL		Italy		US$			0.0000				100.0000				100.0000				100.0000
Foreign		Comercial Caimán Internacional S.A.		Panama		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Africa Pty.		South Africa		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Lithium Specialties LLC		USA		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Iberian S.A.		Spain		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Beijing Commercial Co. Ltd.		China		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Thailand Limited.		Thailand		US$			0.0000				99.9960				99.9960				99.9960
Foreign		SQM International N.V.		Belgium		US$			0.5800				99.4200				100.0000				100.0000
Foreign		SQM (Shanghai) Chemicals Co. Ltd.		China		US$			0.0000				100.0000				100.0000				100.0000

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

 

								Ownership interest
				Country of		Functional		As of December 31, 2019												As of December 31, 2018
TAX ID No.		Domestic subsidiaries		origin		currency		Direct				Indirect				Total				Total
96.801.610-5		Comercial Hydro S.A.		Chile		US$			0.0000				60.6383				60.6383				60.6383
96.651.060-9		SQM Potasio S.A.		Chile		US$			99.9999				0.0000				99.9999				99.9999
96.592.190-7		SQM Nitratos S.A.		Chile		US$			99.9999				0.0001				100.0000				100.0000
96.592.180-K		Ajay SQM Chile S.A.		Chile		US$			51.0000				0.0000				51.0000				51.0000
86.630.200-6		SQMC Internacional Ltda. (2)		Chile		Ch$			0.0000				0.0000				0.0000				60.6381
79.947.100-0		SQM Industrial S.A.		Chile		US$			99.0470				0.9530				100.0000				100.0000
79.906.120-1		Isapre Norte Grande Ltda.		Chile		Ch$			1.0000				99.0000				100.0000				100.0000
79.876.080-7		Almacenes y Depósitos Ltda.		Chile		Ch$			1.0000				99.0000				100.0000				100.0000
79.770.780-5		Servicios Integrales de Tránsitos y Transferencias S.A.		Chile		US$			0.0003				99.9997				100.0000				100.0000
79.768.170-9		Soquimich Comercial S.A.		Chile		US$			0.0000				60.6383				60.6383				60.6383
79.626.800-K		SQM Salar S.A.		Chile		US$			18.1800				81.8200				100.0000				100.0000
78.053.910-0		Proinsa Ltda. (3)		Chile		Ch$			0.0000				0.0000				0.0000				60.5800
76.534.490-5		Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.		Chile		Ch$			0.0000				100.0000				100.0000				100.0000
76.425.380-9		Exploraciones Mineras S.A.		Chile		US$			0.2691				99.7309				100.0000				100.0000
76.064.419-6		Comercial Agrorama Ltda. (4)		Chile		Ch$			0.0000				42.4468				42.4468				42.4468
76.145.229-0		Agrorama S.A.		Chile		Ch$			0.0000				60.6387				60.6387				60.6387
76.359.919-1		Orcoma Estudios SPA		Chile		US$			51.0000				0.0000				51.0000				51.0000
76.360.575-2		Orcoma SPA		Chile		US$			100.0000				0.0000				100.0000				100.0000
76.686.311-9		SQM MaG SpA		Chile		US$			0.0000				100.0000				100.0000				100.0000

 

1) On June 26, 2019, SACAL was liquidated.

2) On March 01, 2019, SQMC Internacional merged with Soquimich Comercial S.A.

3) On April 01, 2019, Proinsa Ltda was liquidated.

4) Comercial Agrorama Ltda was consolidated as it is controlled through the subsidiary Soquimich Comercial S.A.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

2.6

Investments in associates and joint ventures

 

(a)

Joint ventures

 

Investments in joint arrangements are classified as joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement.

 

With respect to joint operations, the Company recognizes its direct right to the assets, liabilities, income and expenses of the joint operation and its share of the jointly owned or incurred assets, liabilities, income and expenses.

 

(b)

Joint ventures and investments in associates

 

Interests in companies over which joint control is exercised (joint ventures) or where an entity has significant influence (associates) are recognized using the equity accounting method. Significant influence is presumed when the investor owns over 20% of the investee’s share capital. The investment is recognized using this method in the statement of financial position at cost plus changes subsequent to acquisition and includes the proportional share of the associate’s equity. For these purposes, the percentage interest in the associate is used. The associated acquired goodwill is included in the investee’s book value and is not amortized. The debit or credit to the income statement reflects the proportional share of the profit or loss of the associate.

 

Unrealized gains from transactions with subsidiaries or associates are eliminated in accordance with the Company's percentage interest in such entities. Any unrealized losses are also eliminated, unless that transaction provides evidence that the transferred asset is impaired.

 

Changes in associate’s equity are recognized proportionally with a charge or credit to "Other Reserves" and are classified according to their origin. The reporting dates of the associate, the Company and related policies are similar for equivalent transactions and events in similar circumstances. In the event that significant influence is lost, or the investment is sold, or held for sale, the equity method is suspended, until the proportional part of the gain or loss is recognized. If the resulting value under the equity method is negative, the share of profit or loss is reflected as zero in the consolidated financial statements, unless there is a commitment by the Company to restore the capital position of the Company, in which case the related risk provision and expense are recorded.

 

Dividends received by these companies are recorded by reducing the value of the investment, and the proportional part of the gain or loss recognized in accordance with the equity method is included in the consolidated income statement under "Share of Gains (Losses) of Associates and Joint Ventures Accounted for Using the Equity Method''.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 3

Significant accounting policies

 

3.1

Classification of balances as current and non-current

 

In the attached consolidated statement of financial position, balances are classified in consideration of their recovery (maturity) dates; i.e., those maturing within a period equal to or less than 12 months are classified as current counted from the closing date of the consolidated financial statements and those with maturity dates exceeding the aforementioned period are classified as non-current.

 

The exception to the foregoing relates to deferred taxes, which are classified as non-current, regardless of the maturity they have.

 

3.2

Functional and presentation currency

 

The Company’s consolidated financial statements are presented in United States dollars, which is the Company’s functional and presentation currency and is the currency of the main economic environment in which it operates.

 

Consequently, the term foreign currency is defined as any currency other than the U.S. dollar.

 

The consolidated financial statements are presented in thousands of United States dollars without decimals.

 

3.3

Foreign currency translation

 

(a)

SQM group entities:

 

The revenue, expenses, assets and liabilities of all entities that have a functional currency other than the presentation currency are converted to the presentation currency as follows:

 

-

Assets and liabilities are converted at the closing exchange rate prevailing on the reporting date.

 

	-	Revenues and expenses of each profit or loss account are converted at monthly average exchange rates.

-

All resulting foreign currency translation gains and losses are recognized as a separate component in translation reserves.

 

In consolidation, foreign currency differences arising from the translation of a net investment in foreign entities are recorded in equity “other reserves”, At the date of disposal, such foreign currency translation differences are recognized in the statement of income as part of the gain or loss from the sale.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

The main exchange rates and UF used to translate monetary assets and liabilities, expressed in foreign currency at the end of each period in respect to U.S. dollars, are as follows:

 

Currencies		As of December 31, 2019				As of December 31, 2018
		US$				US$
Brazilian real			4.02				3.87
New Peruvian sol			3.31				3.37
Argentine peso			59.83				37.74
Japanese yen			108.9				110.38
Euro			0.89				0.87
Mexican peso			18.89				19.68
Australian dollar			1.43				1.42
Pound Sterling			0.76				0.79
South African rand			14.06				14.35
Ecuadorian dollar			1.00				1.00
Chilean peso			748.74				694.77
Chinese yuan			6.98				6.88
Indian rupee			71.31				69.93
Thai Baht			29.97				32.53
Turkish lira			5.94				5.27
Polish Zloty			3.79				-
UF(*)			37.81				39.68

 

(*) US$ per UF

 

(b)

Transactions and balances

 

Non-monetary transactions in currencies other than the functional currency (Dollar) are translated to the respective functional currencies of Group entities at the exchange rate on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. All differences are recorded in the statement of income except for all monetary items that provide an effective hedge for a net investment in a foreign operation. These items are recognized in other comprehensive income on the divestment, when they are recognized in the statement of income. Charges and credits attributable to foreign currency translation differences on those hedge monetary items are also recognized in other comprehensive income.

 

Non-monetary assets and liabilities that are measured at historical cost in a foreign currency are retranslated to the functional currency at the historical exchange rate of the transaction. Non-monetary items that are measured based on fair value in a foreign currency are translated using the exchange rate at the date on which the fair value is determined.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

3.4

Consolidated statement of cash flows

 

Cash equivalents correspond to highly liquid short-term investments that are easily convertible into known amounts of cash. and subject to insignificant risk of changes in their value and mature in less than three months from the date of acquisition of the instrument.

 

For the purposes of the statement of cash flows, cash and cash equivalents comprise cash and cash equivalents as defined above.

 

The statement of cash flows present cash transactions performed during the year, determined using the direct method.

 

3.5

Financial assets

 

Management determines the classification of its financial assets, in accordance with the provisions of IFRS 9, at fair value (either through other comprehensive income, or through profits or losses), and at amortized cost. The classification depends on the business model of the entity to manage the financial assets and the contractual terms of the cash flows.

 

In the initial recognition, the Company measures its financial assets at fair value more or less, in the case of a financial asset that is not accounted for at fair value through profit or loss, the transaction costs that are directly attributable to the acquisition of the financial asset. In the case account receivables and other accounts receivables, the transaction price at the initial recognition is measured in accordance with the provisions of IFRS 15.

 

After initial recognition, the Company measures its financial assets according to the Company's business model for managing its financial assets and the contractual terms of its cash flows:

 

(a)

Financial instruments measured at amortized cost, Financial assets that meet the following conditions are included in this category (i) the business model that supports it aims to maintain the financial assets to obtain the contractual cash flows and (ii) the Contractual conditions of the financial asset give place, on specified dates, to cash flows that are only payments of the principal and interest on the outstanding principal amount. The Company’s financial assets that meet these conditions are: (iii) cash equivalents; (iv) related entity receivables; (v) trade debtors; (vi) other receivables.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(b)

Financial instruments at fair value A financial asset should be measured at fair value through profit or loss or fair value through other comprehensive income, depending on the following:

 

(i)

"Fair Value Through Other Comprehensive Income": Assets held to collect contractual cash flows and to be sold, where the asset cash flows are only capital and interest payments, are measured at fair value through other comprehensive income. Changes in book values are through other comprehensive income, except for the recognition of impairment losses, interest income and exchange gains and losses, which are recognized in the income statement. When a financial asset is derecognized, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to the income statement. Interest income from these financial assets is included in financial income using the effective interest method. Exchange gains and losses are presented in the income statement and impairment losses are separately presented in the income statement.

(ii)

"Fair Value Through Profit and Loss": Assets that do not meet the amortized cost or "Fair Value Through Other Comprehensive Income" criteria are valued at "Fair Value Through Profit and Loss".

 

(c)

Financial equity assets at fair value through other comprehensive income. Equity instruments that are not classified as held for trading and which the Group has irrevocably chosen to recognize in this category

 

Prior to 2018, The Company evaluated at the date of each report, whether there was objective evidence that any asset or group of financial assets presented any impairment. An asset or group of financial assets presented a deterioration, if and only if, there was objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset or group of these. In order to recognize impairment, the loss event must have an impact on the estimation of future flows of the asset or groups of financial assets.

 

Beginnings 2018, The Company evaluates expected credit losses associated with its debt instruments carried at amortized cost and fair value through other comprehensive income. The impairment method used depends on whether there has been a significant increase in credit risk.

 

The Company applies the IFRS 9 simplified approach to measure expected credit losses using the lifetime expected loss on all trade receivables. Expected credit losses are measured by grouping receivables by their shared credit risk characteristics and days overdue.

 

Therefore, the Company has concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for these assets. Expected loss rates are based on sales payment profiles and historical credit losses within this period. Historical loss rates are adjusted to reflect current and expected information regarding macroeconomic factors that affect the ability of customers to meet their commitments.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

3.6

Accounting policy for financial liabilities

 

Management determines the classification of its financial liabilities, in accordance with the provisions of IFRS 9, at fair value or at amortized cost. The classification depends on the business model of the entity to manage the financial assets and the contractual terms of the cash flows.

 

At the initial recognition, the Company measures its financial liabilities by their fair value more or less, in the case of a financial liability that is not accounted for at fair value through profit or loss, the transaction costs that are directly attributable to the acquisition of the financial liability. After initial recognition, the Company measures its financial liabilities at amortized cost unless the Company, at the initial moment, irrevocably designates the financial liability as measured at fair value through profit or loss.

 

Financial liabilities measured at amortized cost are commercial accounts payable and other accounts payable and other financial liabilities.

 

Valuation at amortized cost is made using the effective interest rate method. Amortized cost is calculated by considering any premium or discount on the acquisition and includes transaction costs that are an integral part of the effective interest rate.

 

Financial liabilities are recorded as not current when they mature in more than 12 months and as current when they mature in less than 12 months. Interest expenses are recorded in the period in which they are accrued, according to a financial criterion.

 

3.7

Reclassification of financial instruments

 

When the Company changes its business model for managing financial assets, it will reclassify all its financial assets affected by the new business model. Financial liabilities cannot be reclassified.

 

3.8

Financial instrument derecognition

 

The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred; and the control of the financial assets has not been retained.

 

The Company derecognizes a financial liability when its contractual obligations or a part of these are discharged, paid to the creditor or legally extinguished.

 

3.9

Derivative and hedging financial instruments

 

Derivatives are recognized initially at fair value as of the date on which the derivatives contract is signed and, they are subsequently assessed at fair value. The method for recognizing the resulting gain or loss depends on whether the derivative has been designated as an accounting hedge instrument and, if so, it depends on the type of hedging, which may be as follows:

 

a)

Fair value hedge of assets and liabilities recognized (fair value hedges);

b)

Hedging of a single risk associated with an asset or liability recognized or a highly probable forecast transaction (cash flow hedge).

 

At the beginning of the transaction, the Company documents the relationship that exists between hedging instruments and those items hedged, as well as their objectives for risk management purposes and the strategy to conduct different hedging operations.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

The Company also documents its evaluation both at the beginning and at the end of each period if the derivatives used in hedging transactions are highly effective to offset changes in the fair value or in cash flows of hedged items.

 

The fair value of derivative instruments used for hedging purposes is shown in Note 14.3. Changes in the cash flow hedge reserve are classified as a non-current asset or liability if the remaining expiration period of the hedged item is more than 12 months, and as a current asset or liability if the remaining expiration period of the entry is less than 12 months.

 

Derivatives that are not designated or do not qualify as hedging derivatives are classified as current assets or liabilities, and changes in the fair value are directly recognized through profit or loss.

 

a)

Fair value hedge

 

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The gain or loss relating to the effective portion of interest rate swaps that hedge fixed rate borrowings is recognized in profit or loss within finance costs, together with changes in the fair value of the hedged fixed rate borrowings attributable to interest rate risk. The gain or loss relating to the ineffective portion is recognized in profit or loss within other income or other expenses. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortized to profit or loss over the period to maturity using a recalculated effective interest rate.

 

b)

Cash flow hedges

 

The effective portion of the gain or loss on the hedging instrument is initially recognized with a debit or credit to other comprehensive income, while any ineffective portion is immediately recognized with a debit or credit to income, as appropriate.

 

When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains in equity until the forecast transaction occurs, resulting in the recognition of a non-financial asset such as inventory. When the forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately reclassified to profit or loss.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

3.10

Derivative financial instruments not considered as hedges

 

Derivative financial instruments not considered as hedges are recognized at fair value with the effect in the results of the year. The Company has derivative financial instruments to hedge foreign currency risk exposure.

 

The Company continually evaluates the existence of embedded derivatives in both its contracts and in its financial instruments. As of December 31, 2019, and 2018, the Company does not have any embedded derivatives.

 

3.11

Deferred acquisition costs from insurance contracts

 

Acquisition costs from insurance contracts are classified as prepayments and correspond to insurance contracts in force, recognized using the straight-line method and on an accrual basis independent of payment date. These are recognized under other non-financial assets.

 

3.12

Classification Leases

 

Below are accounting policies applied by the Company prior to the adoption of IFRS 16:

 

(a)

Lease - Finance lease

 

Leases are classified as finance leases when the Company substantially owns all the risks and rewards inherent in the ownership of the asset. Finance leases are capitalized at the commencement of the lease term at the lower of the fair value of the leased asset and the present value of the minimum lease payments.

 

Each finance lease payment is apportioned between the liability and the finance charges so as to obtain the constant rate of interest on the remaining balance of the liability. The respective lease obligations, net of finance charges, are included in other non-current liabilities. The interest part of the finance cost is charged to the consolidated financial statements for the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each year.

 

(b)

Lease - Operating lease

 

Leases where the lessor retains a significant part of the risks and benefits derived from the property are classified as operating leases. Operating lease payments (net of any incentive received by the lessor) should be recognized as an expense in the income statement or capitalized (as appropriate) over the lease term on a straight-line basis.

 

Below are the Company’s new accounting policies after the adoption of IFRS 16 on January 1, 2019. These have been applied since the initial date of application:

 

(i)

Right-of-use assets

 

The Company recognizes right-of-use assets on the initial lease date (i.e., the date on which the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, adjusted by any new measurement of the lease liability. The cost of right-of-use assets includes the amount of recognized lease liabilities, direct initial costs incurred and lease payments made on the start date or sooner, less the lease incentives received. Unless the Company is reasonably sure it will take ownership of the leased asset at the end of the lease period, the assets recognized through right-of-use are depreciated in a straight line during the shortest period of their estimated useful life and lease period. Right-of-use assets are subject to impairment as per “IAS 36 Impairment of Assets”.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(ii)

Lease liabilities

 

On the lease start date, the Company recognizes lease liabilities measured at present value of lease payments that will be made during the lease period (which haven’t been paid by that date). Lease payments include fixed payments (including payments that are essentially fixed), less incentives for lease receivables, variable lease payments that are dependent on an index or rate and amounts that are expected to be paid as guaranteed residual value. Lease payments also include the exercise price of a purchase option if the Company is reasonably sure it will exercise this and penalty payments for terminating a lease, if the lease period reflects that the Company will exercise the option to terminate. Variable lease payments that are not dependent on an index or rate are recognized as expenses in the period that produces the event or condition that triggers payment.

 

When calculating the present value of lease payments, the Company uses the incremental borrowing rate on the initial lease date if the interest rate implicit in the lease cannot be determined easily. After the start date, the lease liability balance will increase to reflect the accumulation of interest and will diminish as lease payments are made. Furthermore, the book value of lease liabilities is remeasured in the event of an amendment, a change in the lease period, a change in the fixed lease payments in substance or a change in the assessment to buy the underlying asset.

 

(iii)

Short-term leases and low-value asset leases

 

The Company applies the short-term lease recognition exemption to leases with a lease term of 12 months or less starting on the start date and that don’t have a purchase option. It also applies the low-value asset lease recognition exemptions (i.e., when the underlying asset is below USD$ 5,000). Lease payments in short-term leases and low-value asset leases are recognized as lineal expenses during the lease term.

 

(iv) Significant judgments in the determination of the lease term for contracts with renewal options

 

The Company determines the lease term as the non-cancellable period of the lease, together with periods covered by an option to extend the lease if it is reasonably certain that this will be exercised, or any period covered by an option to terminate the lease, if it is reasonably certain that this will not be exercised.

 

The Company has the option, under some of its leases, to lease assets for additional terms. The Company applies its judgment when assessing whether it is reasonably certain that it will exercise the option to renovate. In other words, it considers all the relevant factors that create an economic incentive for it to exercise the option to renovate. After the start date, the Company reevaluates the lease term if there is a significant event or change in the circumstances that are under its control and affect its capacity to exercise (or not exercise) the option to renovate.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

3.13

Inventory measurement

 

The method used to determine the cost of inventories is the weighted average monthly cost of warehouse storage. In determining production costs for own products, the company includes the costs of labor, raw materials, materials and supplies used in production, depreciation and maintenance of the goods that participate in the production process, the costs of product movement necessary to maintain stock on location and in the condition in which they are found, and also includes the indirect costs of each task such as laboratories, process and planning areas, and personnel expenses related to production, among others.

 

For finished and in-process products, the company has four types of provisions, which are reviewed quarterly:

 

(a)

Provision associated with the lower value of stock: The provision is directly identified with the product that generates it and involves three types: (i) provision of lower realizable value, which corresponds to the difference between the inventory cost of intermediary or finished products, and the sale price minus the necessary costs to bring them to the same conditions and location as the product with which they are compared; (ii) provision for future uncertain use that corresponds to the value of those products in process that are likely not going to be used in sales based on the company’s long-term plans; (iii) reprocessing costs of products that are unfeasible for sale due to current specifications.

 

(b)

Provision associated with physical differences in inventory: A provision is made for differences that exceed the tolerance considered in the respective inventory process (production units in Chile and the port of Tocopilla carry out at least two inventories a year, the business subsidiaries depend on the last zero ground obtained, but in general it is at least once a year), these differences are recognized immediately.

 

(c)

Potential errors in the determination of stock: The company has an algorithm that is reviewed at least once a year and corresponds to diverse percentages assigned to each inventory based on the product, location, complexity involved in the associated measurement, rotation and control mechanisms.

 

(d)

Provisions undertaken by business subsidiaries: these are historical percentages that are adjusted as zero ground is attained based on normal inventory management.

 

Inventories of raw materials, materials and supplies for production are recorded at acquisition cost. Cyclical inventories are performed in warehouses, as well as general inventories every three years, Differences are recognized at the moment they are detected. The company has a provision that makes quarterly calculations from percentages associated with each type of material (classification by warehouse and rotation), these percentages use the lower value resulting from deterioration or obsolescence as well as potential losses. This provision is reviewed at least annually, and considers the historical profit and loss obtained in the inventory processes.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

3.14

Transactions with non-controlling interests

 

Non-controlling interests are recorded in the consolidated statement of financial position within equity but separate from equity attributable to the owners of the Parent.

 

3.15

Related party transactions

 

Transactions between the Company and its subsidiaries are part of the Company’s normal operations within its scope of business activities. Conditions for such transactions are those normally effective for those types of operations with regard to terms and market prices. These transactions have been eliminated in consolidation, and, the maturity conditions vary according to the originating transaction.

 

3.16

Property, plant and equipment

 

Property, plant and equipment assets are stated at acquisition cost, net of the related accumulated depreciation, amortization and impairment losses that they might have experienced.

 

In addition to the price paid for the acquisition of tangible property, plant and equipment, the Company has considered the following concepts as part of the acquisition cost, as applicable:

 

(a)

Accrued interest expenses during the construction period that are directly attributable to the acquisition, construction or production of qualifying assets, which are those that require a substantial period prior to being ready for use. The interest rate used is that related to the project’s specific financing or, should this not exist, the average financing rate of the investor company.

 

(b)

The future costs that the Company will have to experience, related to the closure of its facilities at the end of their useful life, are included at the present value of disbursements expected to be required to settle the and its subsequent variation is recorded directly in results.

 

Having initially recognized provisions for closure and refurbishment, the corresponding cost is capitalized as an asset in “Property, plant and equipment” and amortized in line with the amortization criteria for the associated assets.

 

Construction-in-progress is transferred to property, plant and equipment in operation once the assets are available for use and the related depreciation and amortization begins on that date.

 

Extension, modernization or improvement costs that represent an increase in productivity, ability or efficiency or an extension of the useful lives of property, plant and equipment are capitalized as a higher cost of the related assets. All the remaining maintenance, preservation and repair expenses are charged to expense as they are incurred.

 

The replacement of assets, which increase the asset’s useful life or its economic capacity, are recorded as a higher value of property, plant and equipment with the related derecognition of replaced or renewed elements.

 

Gains or losses which are generated from the sale or disposal of property, plant and equipment are recognized as income (or loss) in the period and calculated as the difference between the asset’s sales value and its net carrying value.

 

Costs derived from the daily maintenance of property, plant and equipment are recognized when incurred.

 

Right-of-use assets (IFRS 16) are recognized in the “property, plant and equipment” line item and are classified within this based on the underlying asset class.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

3.17

Depreciation of property, plant and equipment

 

Property, plant and equipment are depreciated through the straight-line distribution of cost over the estimated technical useful life of the asset, which is the period in which the Company expects to use the asset. When components of one item of property, plant and equipment have different useful lives, they are recorded as separate assets. Useful lives are reviewed on an annual basis.

 

Fixed assets associated with the Salar de Atacama consider useful life to be the lesser value between the technical useful life and the years remaining until 2030.

 

In the case of certain mobile equipment, depreciation is performed depending on the hours of operation.

 

The useful lives used for the depreciation and amortization of assets included in property, plant and equipment in years are presented below:

 

Classes of property, plant and equipment		Minimum life or rate (years)				Maximum life or rate (years)				life or average rate in years
Mining assets			3				10				5
Energy generating assets			5				10				6
Buildings			3				15				8
Supplies and accessories			2				10				3
Office equipment			5				5				5
Transport equipment			2				2				2
Network and communication equipment			2				10				5
IT equipment			2				8				5
Machinery, plant and equipment			1				15				7
Other property, plant and equipment			1				10				5

 

3.18

Goodwill

 

Goodwill acquired represents the excess in acquisition cost on the fair value of the Company's ownership of the net identifiable assets of the subsidiary on the acquisition date. Goodwill acquired related to the acquisition of subsidiaries is included in goodwill, which is subject to impairment tests annually or more frequently if events or changes in circumstances indicate that it might be impaired and is stated at cost less accumulated impairment losses. Gains and losses related to the sale of an entity include the carrying value of goodwill related to the entity sold.

 

This intangible asset is assigned to cash-generating units with the purpose of testing impairment losses. It is allocated based on cash-generating units expected to obtain benefits from the business combination from which the aforementioned goodwill acquired arose.

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

3.19

Intangible assets other than goodwill

 

Intangible assets other than goodwill mainly relate to water rights, emission rights, commercial brands, costs for rights of way for electricity lines, license costs and the development of computer software and mining property and concession rights, client portfolio and commercial agent.

 

(a)

Water rights

 

Water rights acquired by the Company relate to water from natural sources and are recorded at acquisition cost. Given that these assets represent legal rights granted in perpetuity to the Company, they are not amortized, but are subject to annual impairment tests.

 

(b)

Rights of way for electric lines

 

As required for the operation of industrial plants, the Company has paid rights of way in order to install wires for the different electric lines on third party land. These rights are presented under intangible asset. Amounts paid are capitalized at the date of the agreement and amortized in the statement of income, according to the life of the right of way.

 

(c)

Computer software

 

Licenses for IT programs acquired are capitalized based on their acquisition and customization costs. These costs are amortized over their estimated useful lives.

 

Expenses related to the development or maintenance of IT programs are recognized as an expense as and when incurred. Costs directly related to the production of unique and identifiable IT programs controlled by the Group, and which will probably generate economic benefits that are higher than its costs during more than a year, are recognized as intangible assets. Direct costs include the expenses of employees who develop information technology software and general expenses in accordance with corporate charges received.

 

The costs of development for IT programs are recognized as assets are amortized over their estimated useful lives.

 

(d)

Mining property and concession rights

 

The Company holds mining property and concession rights from the Chilean and Australian Governments. Property rights are usually obtained at no initial cost (other than the payment of mining patents and minor recording expenses) and once the rights on these concessions have been obtained, they are retained by the Company while annual patents are paid. Such patents, which are paid annually, are recorded as prepaid assets and amortized over the following twelve months. Amounts attributable to mining concessions acquired from third parties that are not from the Chilean Government are recorded at acquisition cost within intangible assets.

 

(e)

Client portfolio

 

The period for exploiting these portfolios is limited so they are considered assets with a definite useful life and are therefore subject to amortization.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

3.20

Research and development expenses

 

Research and development expenses are charged to profit or loss in the period in which the expenditure was incurred.

 

3.21

Exploration and evaluation expenses

 

The Company holds mining concessions for exploration and exploitation of ore, the Company gives the following treatment to expenses associated with exploration and assessment of these resources:

 

(a)

Caliche

 

Once the rights have been obtained, the Company records the disbursements directly associated with the exploration and assessment of the deposit as an at cost asset. These disbursements include the following items: Geological surveys, drilling, borehole extraction and sampling, activities related to the technical assessment and commercial viability of the extraction, and in general, any disbursement directly related to specific projects where the objective is to find ore resources.

 

If the technical studies determine that the ore grade is not economically viable, the asset is directly charged to profit and loss. If determined otherwise, the asset described above is associated with the extractable ore tonnage which is amortized as it is used. These assets are presented in the “other non-current assets category”, reclassifying the portion related to the area to by extracted that year as inventories.

 

(b)

Metal exploration

 

Expenses related to metal exploration are charged to profit or loss in the period in which they are recognized if the project assessed doesn't qualify for consideration as advanced exploration. Otherwise, these are amortized during the development stage.

 

(c)

Salar de Atacama exploration

 

Salar de Atacama exploration expenses are presented as non-current assets as the property, plant and equipment category and correspond mainly to wells that can also be used in the extraction of the deposit and/or monitoring. These are amortized over 10 years, otherwise, they are amortized during the development stage.

 

(d)

Mount Holland exploration

 

Mount Holland exploration expenses are presented as of December 31, 2018 in non-current assets under "Other Non-Financial Non-Current Assets". As of January 1, 2019 they have been incorporated into Property, Plant and Equipment, specifically in Constructions in progress and primarily consider exploration boreholes and complementary studies for the lithium ore study of the area. These expenses will begin to be amortized in the development stage.

 

3.22

Impairment of non-financial assets

 

Assets subject to depreciation and amortization are also subject to impairment testing, provided that an event or change in the circumstances indicates that the amounts in the accounting records may not be recoverable. An impairment loss is recognized for the excess of the book value of the asset over its recoverable amount.

 

For assets other than purchased goodwill, the Group annually assesses whether there is any indication that a previously recognized impairment loss may no longer exist or may have decreased. Should such indications exist, the recoverable amount is estimated.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

The recoverable amount of an asset is the higher between the fair value of an asset or cash generating unit (“CGU”) less costs of sales and its value in use, and is determined for an individual asset unless the asset does not generate any cash inflows that are clearly independent from other assets or groups of assets

 

In evaluating value in use, estimated future cash flows are discounted using a pre-tax discount rate that reflects current market assessment, the value of money over time and the specific asset risks.

 

To determine the fair value less costs to sell, an appropriate valuation model is used.

 

Impairment losses from continuing operations are recognized with a debit to profit or loss in the categories of expenses associated with the impaired asset function, except for properties reevaluated previously where the revaluation was taken to equity.

 

For assets other than acquired goodwill, an annual evaluation is carried out to determine whether any previously recognized impairment losses have already decreased or ceased to exist. If this should be the case, the recoverable amount is estimated. A previously recognized impairment loss is only reversed if there have been changes in the estimates used to determine the asset’s recoverable amount since the last time an impairment loss was recognized. If this is the case, the carrying value of the asset is increased to its recoverable amount. This increased amount cannot exceed the carrying value that would have been determined, net of depreciation, if an asset impairment loss had not been recognized in prior years. This reversal is recognized with a credit to profit or loss.

 

Assets with indefinite lives are assessed for impairment annually.

 

3.23

Minimum dividend

 

As required by Chilean law and regulations, our dividend policy is decided upon from time to time by our Board of Directors and is announced at the Annual Ordinary Shareholders’ Meeting, which is generally held in April of each year. Shareholder approval of the dividend policy is not required. However, each year the Board must submit the declaration of the final dividend or dividends in respect of the preceding year, consistent with the then-established dividend policy, to the Annual Ordinary Shareholders’ Meeting for approval. As required by the Chilean Companies Act, unless otherwise decided by unanimous vote of the holders of issued shares, we must distribute a cash dividend in an amount equal to at least 30% of our consolidated net income for that year (determined in accordance with CMF regulations), unless and to the extent the Company has a deficit in retained earnings. (See Note 20.4)

 

3.24

Earnings per share

 

The basic earnings per share amounts are calculated by dividing the profit for the year attributable to the ordinary owners of the parent by the weighted average number of ordinary shares outstanding during the year. (See Note 21)

 

The Company has not conducted any type of operation of potential dilutive effect that would entail the disclosure of diluted earnings per share.

 

3.25

Borrowing cost

 

The cost of interest is recognized as an expense in the year in which it is incurred, except for interest that is directly related to the acquisition and construction of tangible property, plant and equipment assets and that complies with the requirements of IAS 23.

 

The Company capitalizes all interest costs directly related to the construction or to the acquisition of property, plant and equipment, which require a substantial time to be suitable for use.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

3.26

Other provisions

 

Provisions are recognized when:

 

·

The Company has a present obligation or constructive obligation as the result of a past event.

·

It is more likely than not that certain resources must be used, including benefits, to settle the obligation.

·

A reliable estimate can be made of the amount of the obligation.

 

In the event that the provision or a portion of it is reimbursed, the reimbursement is recognized as a separate asset solely if there is certainty of income.

 

In the consolidated statement of income, the expense for any provision is presented net of any reimbursement.

 

Should the effect of the value of money over time be significant, provisions are discounted using a discount rate before tax that reflects the liability’s specific risks. When a discount rate is used, the increase in the provision over time is recognized as a finance cost.

 

The Company’s policy is to maintain provisions to cover risks and expenses based on a better estimate to deal with possible or certain and quantifiable responsibilities from current litigation, compensations or obligations, pending expenses for which the amount has not yet been determined, collaterals and other similar guarantees for which the Company is responsible. These are recorded at the time the responsibility or the obligation that determines the compensation or payment is generated.

 

3.27

Obligations related to employee termination benefits and pension commitments

 

Obligations towards the Company’s employees comply with the provisions of the collective bargaining agreements in force, which are formalized through collective employment agreements and individual employment contracts, except for the United States, which is regulated in accordance with employment plans in force up to 2002. (See more details in Note 18.4).

 

These obligations are valued using actuarial calculations, according to the projected unit credit method which considers such assumptions as the mortality rate, employee turnover, interest rates, retirement dates, effects related to increases in employees’ salaries, as well as the effects on variations in services derived from variations in the inflation rate. The criteria in force contained in the revised IAS 19 are also considered.

 

Actuarial gains and losses that may be generated by variations in defined, pre-established obligations are directly recorded in other comprehensive income.

 

Actuarial losses and gains have their origin in deviations between the estimate and the actual behavior of actuarial assumptions or in the reformulation of established actuarial assumptions.

 

The discount rate used by the Company for calculating the obligation was 3.680% and 4.642% for the periods ended December 31, 2019 and, 2018, respectively.

 

The Company’s subsidiary SQM North America has established pension plans for its retired employees that are calculated by measuring the projected obligation using a net salary progressive rate net of adjustments for inflation, mortality and turnover assumptions, deducting the resulting amounts at present value using a 4% interest rate for 2019 and 3.75% for 2018. The net balance of this obligation is presented under the non-current provisions for employee benefits (refer to Note 18.4).

 

3.28

Compensation plans

 

Compensation plans implemented through benefits provided in share-based payments settled in cash are recognized in the financial statements at their fair value, in accordance with International Financial Reporting Standards No. 2 "Share-based Payments”. Changes in the fair value of options granted are recognized with a charge to payroll on a straight-line basis during the period between the date on which these options are granted and the payment date (see Note 18.6).

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

3.29

Revenue recognition

 

Revenue includes the fair value of considerations received or receivable for the sale of goods and services during the performance of the Company's activities. Revenue is presented net of value added tax, estimated returns, rebates and discounts and after the elimination of sales among subsidiaries.

 

Revenues are recognized when the specific conditions for each income stream are met, as follows:

 

(a)

Sale of goods

 

The sale of goods is recognized when the Company has delivered products to the customer, and there is no obligation pending compliance that could affect the acceptance of products by the customer. The delivery does not occur until products have been shipped to the customer or confirmed as received by the customer, and the related risks of obsolescence and loss have been transferred to the customer and the customer has accepted the products in accordance with the conditions established in the sale, when the acceptance period has ended, or when there is objective evidence that those criteria required for acceptance have been met.

 

Sales are recognized in consideration of the price set in the sales agreement, net of volume discounts and estimated returns at the date of the sale. Volume discounts are evaluated in consideration of annual foreseen purchases and in accordance with the criteria defined in agreements.

 

(b)

Sale of services

 

Revenue associated with the rendering of services is recognized considering the degree of completion of the service as of the date of presentation of the consolidated classified statement of financial position, provided that the result from the transaction can be estimated reliably.

 

(c)

Income from dividends

 

Income from dividends is recognized when the right to receive the payment is established.

 

3.30

Finance income and finance costs

 

Finance income is mainly composed of interest income from financial instruments such as term deposits and mutual fund deposits. Interest income is recognized in profit or loss at amortized cost, using the effective interest rate method.

 

Finance costs are mainly composed of interest on bank borrowing expenses, interest on bonds issued and interest capitalized for borrowing costs for the acquisition, construction or production or qualifying assets. Borrowing costs and bonds issued are also recognized in profit or loss using the effective interest rate method.

 

For finance costs accrued during the construction period that are directly attributable to the acquisition, construction or production of qualifying assets, the effective interest rate related to the project’s specific financing is used. If none exists, the average financing rate of the subsidiary making the investment is used.

 

Borrowing and financing costs that are directly attributable to the acquisition, construction or production of an asset are capitalized as part of that asset’s cost.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

3.31

Current income tax and deferred

 

Corporate income tax for the year is determined as the sum of current taxes from the different consolidated companies.

 

Current taxes are based on the application of the various types of taxes attributable to taxable income for the year.

 

Differences between the book value of assets and liabilities and their tax basis generate the balance of deferred tax assets or liabilities, which are calculated using the tax rates expected to be applicable when the assets and liabilities are realized.

 

In conformity with current tax regulations, the provision for corporate income tax and taxes on mining activity is recognized on an accrual basis, presenting the net balances of accumulated monthly tax provisional payments for the fiscal period and associated credits. The balances of these accounts are presented in current income taxes recoverable or current taxes payable, as applicable.

 

Tax on companies and variations in deferred tax assets or liabilities that are not the result of business combinations are recorded in the statement of income accounts or equity accounts in the consolidated statement of financial position, considering the origin of the gains or losses which have generated them.

 

At each reporting period, the carrying amount of deferred tax assets has been reviewed and reduced to the extent where there will not be sufficient taxable income to allow the recovery of all or a portion of the deferred tax assets. Likewise, as of the date of the consolidated financial statements, deferred tax assets that are not recognized were evaluated and not recognized as it was more likely than not that future taxable income will allow for recovery of the deferred tax asset.

 

With respect to deductible temporary differences associated with investments in subsidiaries, associated companies and interest in joint ventures, deferred tax assets are recognized solely provided that it is more. likely than not that the temporary differences will be reversed in the near future and that there will be taxable income with which they may be used.

 

The deferred income tax related to entries directly recognized in equity is recognized with an effect on equity and not with an effect on profit or loss.

 

Deferred tax assets and liabilities are offset if there is a legally receivable right of offsetting tax assets against tax liabilities and the deferred tax is related to the same tax entity and authority.

 

3.32

Segment reporting

 

IFRS 8 requires that companies adopt a management approach to disclose information on the operations generated by its operating segments. In general, this is the information that management uses internally for the evaluation of segment performance and making the decision on how to allocate resources for this purpose.

 

An operating segment is a group of assets and operations responsible for providing products or services subject to risks and performance that are different from those of other business segments. A geographical segment is responsible for providing products or services in a given economic environment subject to risks and performance that are different from those of other segments operating in other economic environments.

 

Allocation of assets and liabilities, to each segment is not possible given that these are associated with more than one segment, except for depreciation, amortization and impairment of assets, which are directly allocated in accordance with the criteria established in the costing process for product inventories to the corresponding segments.

 

The following operating segments have been identified by the Company:

 

·

Specialty plant nutrients

·

Industrial chemicals

·

Iodine and derivatives

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

·

Lithium and derivatives

·

Potassium

·

Other products and services

 

3.33

Primary accounting criteria, estimates and assumptions

 

Management is responsible for the information contained in these consolidated financial statements, which expressly indicate that all the principles and criteria included in IFRS, as issued by the (IASB), have been applied in full.

 

In preparing the consolidated financial statements of Sociedad Química y Minera de Chile S.A. and its subsidiaries, Management has made judgments and estimates to quantify certain assets, liabilities, revenues, expenses and commitments included therein, Basically, these estimates refer to:

 

·

Estimated useful lives are determined based on current facts and past experience and take into consideration the expected physical life of the asset, the potential for technological obsolescence, and regulations. (See Notes 3.22, 15 and 16).

 

·

Impairment losses of certain assets - Assets, including property, plant and equipment, exploration assets, goodwill and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts exceed their recoverable amounts. If an impairment assessment is required, the assessment of value in use often requires estimates and assumptions such as discount rates, exchange rates, commodity prices, future capital requirements and future operating performance. Changes in such estimates could impact the recoverable values of these assets. Estimates are reviewed regularly by management (See Notes 15 and 16).

 

·

Assumptions used in calculating the actuarial amount of pension-related and severance indemnity payment benefit commitments (See Note 18).

 

·

Contingencies – The amount recognized as a provision, including legal, contractual, constructive and other exposures or obligations, is the best estimate of the consideration required to settle the related liability, including any related interest charges, considering the risks and uncertainties surrounding the obligation. In addition, contingencies will only be resolved when one or more future events occur or fail to occur. Therefore, the assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. The Company assesses its liabilities and contingencies based upon the best information available, relevant tax laws and other appropriate requirements (See Notes 19 and 22).

 

·

Provisions based on technical studies that cover the different variables affecting products in stock (density and moisture, among others), and related allowance.

 

·

Obsolescence to ensure that the carrying value of inventory is not in excess of the net realizable Inventory valuation requires judgment to determine obsolescence and estimates of provisions for value. (See Note 12).

 

Despite the fact that these estimates have been made on the basis of the best information available on the date of preparation of these consolidated financial statements, certain events may occur in the future and oblige their amendment (upwards or downwards) over the next few years, which would be made prospectively.

 

3.34

Environment

 

In general, the Company follows the criteria of considering amounts used in environmental protection and improvement as environmental expenses. However, the cost of facilities, machinery and equipment used for the same purpose are considered property, plant and equipment, as the case may be.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 4

Changes in accounting estimates and policies

 

4.1

Changes in accounting estimates

 

There have been no changes in the methodologies used to determine such estimates in the periods presented.

 

4.2

Changes in accounting policies

 

The accounting principles and criteria were applied consistently, except for the following:

 

(a)

The Company’s consolidated financial statements as of December 31, 2019, show changes in the accounting policies over the previous period due to the application of IFRS 16 as of January 1, 2019.

 

During 2018, management initially measured the impact of adopting IFRS 16 from the date the standard became effective, which it determined by evaluating its lease contracts. These assets should be recorded on the initial application date as right-of-use assets, depending on their nature and lease terms, and they will be amortized over the shorter of their contractual period or useful life.

 

Contracts were evaluated for evidence of a lease under IFRS 16, and right-of-use assets were identified that included: trucks, cranes, excavators, property (buildings, warehouses, storerooms, land), where SQM has the power to control them during the contract, without the supplier changing its operating instructions.

 

The Company constructed a debt curve based on the Company’s public debt instruments at the valuation date to determine the discount rate for the estimated initial measurement. The rates used to discount the right-of-use asset and the leasing liability were estimated according to the contract currencies (USD, EURO, Mexican peso, UF and CLP) and terms.

 

The Company chose to fully apply the modified retrospective approach of the retrospective application version B, where the right-of-use is equal to the liability and there is no equity adjustment.

 

The values of right-of-use assets and leasing liabilities for contracts classified under IFRS 16 total ThUS$ 45,115 as of January 1, 2019. The weighted average of the incremental lease loan rate applied to lease liabilities recognized in the statement of financial position on the adoption date is 8.08%.

 

The difference generated between operating lease commitments disclosed applying IAS 17 on December 31, 2018, and lease liabilities recognized on the date of initial application under IFRS 16 is primarily because most payment agreements with suppliers are negotiated on variable terms.

 

(b)

The Company’s consolidated financial statements as of December 31, 2018, show changes in the accounting policies since the previous period due to the application of IFRS 9 as of January 1, 2018.

 

The application of IFRS 9 had an impact of ThUS$ 2,301 (ThUS$ 1,680 net of deferred taxes) as of January 1, 2018 due to the application of the new impairment model, with balancing entries in equity in accordance with IAS 8.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 5

Financial risk management

 

5.1

Financial risk management policy

 

The Company’s financial risk management policy is focused on safeguarding the stability and sustainability of the Company and its subsidiaries with regard to all such relevant financial uncertainty components.

 

The Company’s operations are subject to certain financial risk factors that may affect its financial position or results. The most significant risk exposures are market risk, liquidity risk, currency risk, doubtful accounts risk, and interest rate risk, among others.

 

There could also be additional risks, which are either unknown or known but not currently deemed to be significant, which could also affect the Company’s business operations, its business, financial position, or profit or loss.

 

The financial risk management structure includes identifying, determining, analyzing, quantifying, measuring and controlling these events. Management and in particular, Finance Management, is responsible for constantly assessing the financial risk.

 

5.2

Risk Factors

 

(a)

Credit risk

 

A global economic downturn - and its potentially negative effects on the financial situation of our customers - could extend the payment terms of the Company's receivables by increasing its exposure to credit risk. Although measures are taken to minimize the risk, this global economic situation could mean losses with adverse material effects on the business, financial position or profit and loss of the Company's operations.

 

To mitigate these risks, the Company maintains active control of collection and uses measures such as the use of credit insurance, letters of credit and prepayments for a portion of receivables.

 

The concentration of credit risk with respect to sales debtors is reduced, due to the large number of companies that comprise the Company's customer base and their distribution throughout the world.

 

Financial investments correspond to time deposits whose maturity date is greater than 90 days and less than 360 days from the date of investment, so they are not exposed to excessive market risks.

 

The credit risk associated with receivables is analyzed in Note 14.2 and the associated accounting policy can be found in Note 3.5.

 

The credit quality of financial assets that are not past due or impaired can be evaluated by reference to external credit ratings (if available) or historical information on counterparty late payment rates:

 

Rating Institution

As of December 31, 2019

Financial institution

Financial assets

Moody´s

S&P

Fitch

ThUS$

Banco de Chile

Time deposits

P-1

A-1

-

50,221

Banco de Crédito e Inversiones

Time deposits

P-1

A-1

-

42,096

Banco Itau Corpbanca

Time deposits

P-2

A-2

-

39,093

Banco Santander

Time deposits

P-1

A-1

-

2,708

Scotiabank Sud Americano

Time deposits

-

-

F-1+

14,428

Banco Estado

Time deposits

P-1

A-1

-

500

BBVA Banco Francés

Time deposits

-

-

-

53

JP Morgan US dollar Liquidity Fund Institutional

Investment fund deposits

Aaa-mf

AAAm

AAAmmf

181,155

Legg Mason - Westen Asset Institutional cash reserves

Investment fund deposits

-

AAAm

AAAmmf

146,078

Total

476,332

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Rating Institution

As of December 31, 2019

Financial institution

Financial assets

Moody´s

S&P

Fitch

ThUS$

Banco Scotiabank Sud Americano

90 days to 1 year

P-2

-

-

54,180

Banco de Crédito e Inversiones (*)

90 days to 1 year

P-1

A-1

-

178,448

Banco Santander

90 days to 1 year

P-1

A-1

-

74,365

Banco Itau Corpbanca

90 days to 1 year

P-2

A-2

-

127,579

Banco Security

90 days to 1 year

-

A-2

F2

17,965

Banco de Chile

90 days to 1 year

-

-

-

18,026

Banco Estado

90 days to 1 year

P-1

A-1

-

15,126

Total

485,689

 

(*) This includes ThUS$ 1,870 associated with collateral in guarantee used to reduce the liquidity risk.

 

The following table presents comparative information as of December 2018:

 

				Rating Institution						As of December 31, 2018
Financial institution		Financial assets		Moody´s		S&P		Fitch		ThUS$
Banco de Chile		Time deposits		P-1		A-1		-			7,305
Banco de Crédito e Inversiones		Time deposits		P-1		A-1		-			27,428
Banco Itau Corpbanca		Time deposits		P-2		A-2		-			61,946
Banco Santander		Time deposits		-		-		-			432
Banco Estado		Time deposits		-		-		-			3,602
BBVA Banco Francés		Time deposits		-		-		-			84
Nedbank		Time deposits		P-3		B		-			647
Scotiabank Sud Americano		Time deposits		-		-		-			86,222
JP Morgan US dollar Liquidity Fund Institutional		Investment fund deposits		Aaa-mf		AAAm		AAAmmf			133,809
Legg Mason - Westen Asset Institutional cash reserves		Investment fund deposits		-		AAAm		AAAmmf			132,108
Total											453,583

 

Rating Institution

As of December 31, 2018

Financial institution

Financial assets

Moody´s

S&P

Fitch

ThUS$

Banco Scotiabank

90 days to 1 year

-

-

-

24,898

Banco de Crédito e Inversiones

90 days to 1 year

P-1

A-1

-

145,834

Banco Santander

90 days to 1 year

P-1

A-1

-

23,124

Banco Itau Corpbanca

90 days to 1 year

P-2

A-2

-

70,719

Banco Security

90 days to 1 year

-

-

-

27,215

Total

291,790

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(b)

Currency risk

 

The functional currency of the company is the US dollar, due to its influence on the determination of price levels, its relation to the cost of sales and considering that a significant part of the Company’s business is conducted in this currency. However, the global nature of the Company's business generates an exposure to exchange rate variations of several currencies with the US Dollar. Therefore, the Company maintains hedge contracts to mitigate the exposure generated by its main mismatches (net between assets and liabilities) in currencies other than the US dollar against the exchange rate variation, updating these contracts periodically depending on the amount of mismatching to be covered in these currencies. Occasionally, subject to the approval of the Board, the Company ensures short-term cash flows from certain specific line items in currencies other than the US Dollar.

 

A significant portion of the Company’s costs, especially salary payments, is associated with the Peso. Therefore, an increase or decrease in its exchange rate with the US Dollar would affect the Company's profit and loss. By the fourth quarter, approximately US$ 424 million accumulated in expenses are associated with the Peso.

 

As of December 31, 2019, the Company held derivative instruments classified as hedges of foreign exchange risks associated with 73% of all of the bond liabilities denominated in UF, for a fair value of US$ 18.9 million in favor of the Company. As of December 31, 2018, this value amounted to US$ 3.9 million against the company.

 

As of December 31, 2019, the exchange rate value for equivalent Pesos to US Dollars was Ch$ 748.74 per US Dollar, as of December 31, 2018, it was Ch$ 694.77 per Dollar.

 

(c)

Interest rate risk

 

Interest rate fluctuations, primarily due to the uncertain future behavior of markets, may have a material impact on the financial results of the Company. Significant increases in the rate could make it difficult to access financing at attractive rates for the Company's investment projects.

 

The Company maintains current and non-current financial debt at fixed rates and LIBOR rate plus spread.

 

As of December 31, 2019, the Company has around 4% of its financial liabilities linked to variations in the LIBOR rate. Therefore, significant rate increases could impact its financial position. A change of 100 basis points in this rate could result in changes to financial expenses of close to US$ 0.06 million. Nevertheless, significant rate increases could make it difficult to access financing at attractive rates for the Company's investment projects.

 

(d)

Liquidity risk

 

Liquidity risk relates to the funds needed to comply with payment obligations. The Company’s objective is to maintain financial flexibility through a comfortable balance between fund requirements and cash flows from regular business operations, bank borrowings, bonds, short term investments, and marketable securities, among others. For this purpose, the Company keeps a high liquidity ratio, which enables it to cover current obligations with clearance. On December 31, 2019, this was 3.45.

 

The Company has an important capital expense program which is subject to change over time.

 

On the other hand, world financial markets go through periods of contraction and expansion that are unforeseeable in the long-term and may affect SQM’s access to financial resources. Such factors may have a material adverse impact on the Company’s business, financial position and results of operations.

 

SQM constantly monitors the matching of its obligations with its investments, taking due care of maturities of both, from a conservative perspective, as part of this financial risk management strategy. As of December 31, 2019, the Company had unused, available revolving credit facilities with banks, for a total of US$ 477 million.

 

The position in other cash and cash equivalents are invested in highly liquid mutual funds with an AAA risk rating.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

		Nature of undiscounted cash flows
As of December 31, 2019 (in millions of US$)		Carrying amount				Less than 1 year				1 to 5 years				Over 5 years				Total
Bank borrowings			70.19				2.17				74.87				-				77.04
Unsecured obligations (1)			1,697.11				326.34				614.29				1,184,38				2,125.01
Sub total			1,767.30				328.51				689.16				1,184,38				2,202.05
Hedging liabilities			23.66				6.57				24.33				32.37				63.27
Derivative financial instruments			3.17				3.17				-				-				3.17
Sub total			26.83				9.74				24.33				32.37				66.44
Current and non-current lease liabilities			37.89				7.69				20.03				10.17				37.89
Trade accounts payable and other accounts payable			205.7				205.7				-				-				205.70
Total			2,037.72				551.64				733.52				1,226.92				2,512.08

 

(1)

Unsecured obligations are presented on a contractual basis and have no effects related to anticipated redemptions.

 

		Nature of undiscounted cash flows
As of December 31, 2018 (in millions of US$)		Carrying amount				Less than 1 year				1 to 5 years				Over 5 years				Total
Bank borrowings			70.25				4.10				79.66				-				83.76
Unsecured obligations			1,273.07				61.37				823.76				713.60				1,598.73
Sub total			1,343.32				65.47				903.42				713.60				1,682.49
Hedging liabilities			17.32				5.52				15.64				29.27				50.43
Derivative financial instruments			2.86				2.86				-				-				2.86
Sub total			20.18				8.38				15.64				29.27				53.29
Trade accounts payable and other accounts payable			163.75				163.17				0.58				-				163.75
Total			1,527.25				237.02				919.64				742.87				1,899.53

 

5.3

Risk measurement

 

The Company has methods to measure the effectiveness and efficiency of financial risk hedging strategies, both prospectively and retrospectively. These methods are consistent with the risk management profile of the SQM Group.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 6

Background of companies included in consolidation

 

6.1

Parent’s stand-alone assets and liabilities

 

Parent’s stand-alone assets and liabilities		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Assets			4,069,649				3,737,892
Liabilities			(1,983,382	)			(1,652,401	)
Equity			2,086,267				2,085,491

 

6.2

Parent entity

 

Pursuant to Article 99 of Law No. 18,045 of the Securities Market, the CMF may determine that a company does not have a controlling entity in accordance with the distribution and dispersion of its ownership. On November 30, 2018, the CMF issued the ordinary letter No. 32,131 whereby it determined that the Pampa Group, do not exert decisive power over the management of the Company since it does not have a predominance in the ownership that allows it to make management decisions. Therefore, the CMF has determined not to consider Pampa Group the controlling entity of the Company and that the Company does not have a controlling entity given its current ownership structure.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 7

Board of Directors, Senior Management and Key management personnel

 

7.1

Board of Directors and Senior Management

 

(a)

Board of directors

 

SQM S.A. is managed by a Board of Directors which is composed of 8 regular directors, who are elected for a three-year period. The Board of Directors was elected during the ordinary shareholders’ meeting held on April 25, 2019, which included the election of 2 independent directors.

 

As of December 31, 2019, the Company included the following committees and committee members:

 

-

Directors’ Committee: This committee is comprised by Georges de Bourguignon, Laurence Golborne Riveros y Alberto Salas Muñoz, and fulfills the functions established in Article 50 bis of Chilean Law on publicly-held corporations. This committee takes on the role of the audit committee in accordance with the US-based Sarbanes Oxley law.

-

The Company’s Health, Safety and Environment Committee: This committee is comprised of Gonzalo Guerrero Yamamoto, Patricio Contesse Fica y Robert J. Zatta.

-

Corporate Governance Committee: This committee is comprised of Hernán Büchi Buc, Patricio Contesse Fica y Francisco Ugarte Larrain.

 

During the periods covered by these financial statements, there are no pending receivable and payable balances between the Company, its directors or members of Senior Management, other than those related to remuneration, fee allowances and profit-sharing. In addition, there were no transactions conducted between the Company, its directors or members of Senior Management.

 

(b)

Board of Directors’ Compensation

 

Directors’ compensation differs according to the period during the corresponding year. Thus, from April 27, 2018 to April 24, 2019 (Period 2018-2019), Directors’ compensation was determined by the annual general shareholders' meeting held on April 27, 2018. While for the period from April 25, 2019 to the date of the next annual general shareholders' meeting (Period 2019-2020), Directors’ compensation was determined by the annual general shareholders' meeting held on April 25, 2019. For each of these periods, Directors’ compensation is detailed as follows:

 

Period 2018-2019

 

(i)

The payment of a fixed, gross and monthly amount of UF 400 in favor of the Chairman of the Board of Directors, of UF 350 in favor of the vice-president of the board of directors and of UF 350 in favor of the remaining six directors and regardless of the number of Board of Directors’ Meetings held or not held during the related month.

(ii)

A variable gross amount payable in national currency to the Chairman and Vice President of the Company equivalent to 0.12% of the net liquid income earned by the Company in 2018;

(iii)

A variable gross amount payable in local currency to each Company director, excluding the Chairman and Vice President of the Company, equivalent to 0.06% of the net liquid income earned by the Company in 2019.

 

Period 2019:

 

(i)

The payment of a fixed, gross and monthly amount of UF 800 in favor of the Chairman of the Board and of UF 700 in favor of the remaining seven directors and regardless of the number of Board of Directors’ Meetings held or not held during the related month.

(ii)

A variable gross amount payable in national currency to the Chairman and Vice President of the Company equivalent to 0.12% of the net liquid income earned by the Company in 2019;

(iii)

A variable gross amount payable in local currency to each Company director, excluding the Chairman and Vice President of the Company, equivalent to 0.06% of the net liquid income earned by the Company in 2019.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

These fixed and variable amounts for both periods shall not be challenged and those expressed in percentage terms shall be paid immediately after the respective annual general shareholders meeting approves the financial statements, the annual report, the account inspectors report and the external auditors report for the respective year. All amounts expressed in UF shall be paid in Chilean pesos at its value on the last day of the respective calendar month, as determined by the CMF (formerly Superintendence of Banks and Financial Institutions) the Chilean Central Bank or any other relevant institution that replaces them.

 

Accordingly, the compensation and profit sharing paid to members of the Directors' Committee and the directors as of December 31, 2019 amounted to ThUS$ 4,527 and as of December 31, 2018 to ThUS$ 3,791.

 

(c)

Directors’ Committee

 

Directors' Committee compensation differs according to the period during the corresponding year. Thus, for the Period 2018-2019, Directors’ Committee compensation was determined by the annual general shareholders' meeting held on April 27, 2018. While for the Period 2019-2020, Directors’ Committee compensation was determined by the annual general shareholders' meeting held on April 25, 2019. For each of these periods the compensation of the Directors Committee comprises:

 

Period 2018-2019

 

(i)

The payment of a fixed, gross and monthly amount of UF 113 in favor of each of the 3 directors who were members of the Directors’ Committee, regardless of the number of meetings of the Directors’ Committee that have or have not been held during the month concerned.

(ii)

The payment in domestic currency and in favor of each of the 3 directors of a variable and gross amount equivalent to 0.02% of total net profit that the Company effectively obtains during the 2018 fiscal year.

 

Period 2019

 

(i)

The payment of a fixed, gross and monthly amount of UF 200 in favor of each of the 3 directors who were members of the Directors’ Committee, regardless of the number of meetings of the Directors’ Committee that have or have not been held during the month concerned.

(ii)

The payment in domestic currency and in favor of each of the 3 directors of a variable and gross amount equivalent to 0.02% of total net profit that the Company effectively obtains during the 2019 fiscal year.

 

These fixed and variable amounts for both periods shall not be challenged and those expressed in percentage terms shall be paid immediately after the respective annual general shareholders meeting approves the financial statements, the annual report, the account inspectors report and the external auditors report for the respective year. All amounts expressed in UF shall be paid in Chilean pesos at its value on the last day of the respective calendar month, as determined by the CMF (formerly Superintendence of Banks and Financial Institutions) the Chilean Central Bank or any other relevant institution that replaces them.

 

(d)

Health, Safety and Environmental Matters Committee:

 

The remuneration of this committee for the 2018–2019 period was composed of the payment of a fixed, gross, monthly amount of UF 50 for each of the 3 directors on the committee regardless of the number of meetings it has held. For the 2019 period, the remuneration for the Health, Safety and Environment Committee corresponds to a fixed, gross, monthly amount of UF 100 for each of the three Directors on the committee regardless of the number of meetings it has held.

 

(e)

Corporate Governance Committee

 

The remuneration for this committee for the 2018–2019 period was composed of the payment of a fixed, gross, monthly amount of UF 50 for each of the 3 directors on the committees regardless of the number of meetings it has held. For the 2019 period, the remuneration for the Corporate Governance Committee corresponds to a fixed, gross, monthly amount of UF 100 for each of the three Directors on the committee regardless of the number of meetings it has held.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(f)

Guarantees constituted in favor of the directors

 

No guarantees have been constituted in favor of the directors.

 

(g)

Senior management compensation:

 

(i)

This includes monthly fixed salary and variable performance bonuses. (See Note 7.2)

(ii)

The Company has an annual bonus plan based on goal achievement and individual contribution to the Company’s results. These incentives are structured as a minimum and maximum number of gross monthly salaries and are paid once a year.

(iii)

The Company also has retention bonuses for its executives, the value of these bonuses is linked to the Company's stock price and is payable in cash during the first quarter of 2021 (see Note 18.6)

 

(h)

Guarantees pledged in favor of the Company’s management

 

No guarantees have been pledged in favor of the Company’s management.

 

(i)

Pensions, life insurance, paid leave, shares in earnings, incentives, disability loans, other than those mentioned in the above points.

 

The Company’s Management and Directors do not receive or have not received any benefit during the ended December 31, 2019 and the year ended December 31, 2018 or compensation for the concept of pensions, life insurance, paid time off, profit sharing, incentives, or benefits due to disability other than those mentioned in the preceding points.

 

7.2

Key management personnel compensation

 

As of December 31, 2019, there are 124 people occupying key management positions and 123 as of December 31, 2018.

 

Key management personnel compensation		For the year ended December 31, 2019				For the year ended December 31, 2018
		ThUS$				ThUS$
Key management personnel compensation			22,598				27,907

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 8

Background on companies included in consolidation and non-controlling interests

 

8.1

Background on companies included in consolidation

 

The following tables detail general information as of December 31, 2019 and, 2018, on the companies in which the group exercises control and significant influence:

 

										Ownership Interest
Subsidiaries		TAX ID No.		Address		Country of Incorporation		Functional Currency		Direct			Indirect			Total
SQM Nitratos S.A.		96.592.190-7		El Trovador 4285 Las Condes		Chile		US$		99.9999			0.0001			100.000
Proinsa Ltda. (1)		78.053.910-0		El Trovador 4285 Las Condes		Chile		Ch$		-			-			-
SQM Potasio S.A.		96.651.060-9		El Trovador 4285 Las Condes		Chile		US$		99.9999			-			100.000
Serv. Integrales de Tránsito y Transf. S.A.		79.770.780-5		Arturo Prat 1060, Tocopilla		Chile		US$		0.00034			99.99966			100.000
Isapre Norte Grande Ltda.		79.906.120-1		Anibal Pinto 3228, Antofagasta		Chile		Ch$		1.000			99.000			100.000
Ajay SQM Chile S.A.		96.592.180-K		Av. Pdte. Eduardo Frei 4900, Santiago		Chile		US$		51.000			-			51.000
Almacenes y Depósitos Ltda.		79.876.080-7		El Trovador 4285 Las Condes		Chile		Ch$		1.000			99.000			100.000
SQM Salar S.A.		79.626.800-K		El Trovador 4285 Las Condes		Chile		US$		18.18			81.820			100.000
SQM Industrial S.A.		79.947.100-0		El Trovador 4285 Las Condes		Chile		US$		99.047			0.953			100.000
Exploraciones Mineras S.A.		76.425.380-9		El Trovador 4285 Las Condes		Chile		US$		0.27			99.73			100.000
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.		76.534.490-5		Anibal Pinto 3228, Antofagasta		Chile		Ch$		-			100.000			100.000
Soquimich Comercial S.A.		79.768.170-9		El Trovador 4285 Las Condes		Chile		US$		-			60.638			60.638
Comercial Agrorama Ltda. (2)		76.064.419-6		El Trovador 4285 Las Condes		Chile		Ch$		-			42.447			42.447
Comercial Hydro S.A.		96.801.610-5		El Trovador 4285 Las Condes		Chile		US$		-			60.638			60.638
Agrorama S.A.		76.145.229-0		El Trovador 4285 Las Condes		Chile		Ch$		-			60.639			60.639
Orcoma Estudios SPA		76.359.919-1		Apoquindo 3721 OF 131 Las Condes		Chile		US$		51.000			-			51.000
Orcoma SPA		76.360.575-2		Apoquindo 3721 OF 131 Las Condes		Chile		US$		100.000			-			100.000
SQM MaG SpA		76.686.311-9		Los Militares 4290, Las Condes		Chile		US$		-			100.000			100.000
SQM North America Corp.		Foreign		2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA		United States of America		US$		40.000			60.000			100.000
RS Agro Chemical Trading Corporation A.V.V.		Foreign		Caya Ernesto O. Petronia 17, Orangestad		Aruba		US$		98.3333			1.6667			100.000
Nitratos Naturais do Chile Ltda.		Foreign		Al. Tocantis 75, 6° Andar, Conunto 608 Edif. West Gate, Alphaville Barureri, CEP 06455-020, Sao Paulo		Brasil		US$		-			100.000			100.000
Nitrate Corporation of Chile Ltd.		Foreign		1 More London Place London SE1 2AF		United Kingdom		US$		-			100.000			100.000
SQM Corporation N.V.		Foreign		Pietermaai 123, P.O. Box 897, Willemstad, Curacao		Curacao		US$		0.0002			99.9998			100.000
SQM Perú S.A.		Foreign		Avenida Camino Real N° 348 of. 702, San Isidro, Lima		Peru		US$		0.00907			99.99093			100.000

 

(1) On April 01, 2019 the company Proinsa Ltda ceased trading.

(2) SQM controls Soquimich Comercial, which in turn controls Comercial Agrorama Ltda, SQM has management control over Comercial Agrorama Ltda.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Ownership Interest

Subsidiaries

TAX ID No.

Address

Country of Incorporation

Functional Currency

Direct

Indirect

Total

SQM Ecuador S.A.

Foreign

Av. José Orrantia y Av. Juan Tanca Marengo Edificio Executive Center Piso 2 Oficina 211

Ecuador

US$

0.004

99.996

100.000

SQM Brasil Ltda.

Foreign

Al. Tocantis 75, 6° Andar, Conunto 608 Edif. West Gate, Alphaville Barureri, CEP 06455-020, Sao Paulo

Brazil

US$

0.840

99.160

100.000

SQI Corporation N.V.

Foreign

Pietermaai 123, P.O. Box 897, Willemstad, Curacao

Curacao

US$

0.01587

99,98413

100.000

SQMC Holding Corporation.

Foreign

2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta

United States of America

US$

0.100

99.900

100.000

SQM Japan Co. Ltd.

Foreign

From 1st Bldg 207, 5-3-10 Minami- Aoyama, Minato-ku, Tokio

Japan

US$

0.1597

99.8403

100.000

SQM Europe N.V.

Foreign

Houtdok-Noordkaai 25a B-2030 Amberes

Belgium

US$

0.580

99.420

100.000

SQM Italia SRL

Foreign

Via A. Meucci, 5 500 15 Grassina Firenze

Italy

US$

-

100.000

100.000

SQM Indonesia S.A.

Foreign

Perumahan Bumi Dirgantara Permai, Jl Suryadarma Blok Aw No 15 Rt 01/09 17436 Jatisari Pondok Gede

Indonesia

US$

-

80.000

80.000

North American Trading Company

Foreign

2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA

United States of America

US$

-

100.000

100.000

SQM Virginia LLC

Foreign

2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA

United States of America

US$

-

100.000

100.000

SQM Comercial de México S.A. de C.V.

Foreign

Av. Moctezuma 144-4  Ciudad del Sol. CP 45050, Zapopan, Jalisco México

Mexico

US$

0.01

99.990

100.000

SQM Investment Corporation N.V.

Foreign

Pietermaai 123, P.O. Box 897, Willemstad, Curacao

Curacao

US$

1.000

99.000

100.000

Royal Seed Trading Corporation A.V.V.

Foreign

Caya Ernesto O. Petronia 17, Orangestad

Aruba

US$

1.670

98.330

100.000

SQM Lithium Specialties Limited Partnership

Foreign

2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA

United States of America

US$

-

100.000

100.000

Soquimich SRL Argentina

Foreign

Espejo 65 Oficina 6 – 5500 Mendoza

Argentina

US$

-

100.000

100.000

Comercial Caimán Internacional S.A.

Foreign

Edificio Plaza Bancomer

Panama

US$

-

100.000

100.000

SQM France S.A.

Foreign

ZAC des Pommiers  27930   FAUVILLE

France

US$

-

100.000

100.000

Administración y Servicios Santiago S.A. de C.V.

Foreign

Av. Moctezuma 144-4  Ciudad del Sol. CP 45050, Zapopan, Jalisco México

Mexico

US$

-

100.000

100.000

SQM Nitratos México S.A. de C.V.

Foreign

Av. Moctezuma 144-4  Ciudad del Sol. CP 45050, Zapopan, Jalisco México

Mexico

US$

-

100.000

100.000

SQM Australia PTY

Foreign

Level 16, 201 Elizabeth Street Sydney

Australia

US$

-

100.000

100.000

SACAL S.A. (3)

Foreign

Av. Leandro N. Alem 882, piso 13 Buenos Aires

Argentina

Ars

-

0.000

0.000

 

(3) On June 26, 2019 SACAL S.A. ceased trading.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Ownership Interest

Subsidiaries

TAX ID No.

Address

Country of Incorporation

Functional Currency

Direct

Indirect

Total

Soquimich European Holding B.V.

Foreign

Loacalellikade 1 Parnassustoren 1076 AZ Amsterdan

Holland

US$

-

100.000

100.000

SQM Iberian S.A

Foreign

Provenza 251 Principal 1a CP 08008, Barcelona

Spain

US$

-

100.000

100.000

SQM Africa Pty Ltd.

Foreign

Tramore House, 3 Wterford Office Park, Waterford Drive, 2191 Fourways, Johannesburg

South Africa

US$

-

100.000

100.000

SQM Oceanía Pty Ltd.

Foreign

Level 9, 50 Park Street, Sydney NSW 2000, Sydney

Australia

US$

-

100.000

100.000

SQM Beijing Commercial Co. Ltd.

Foreign

Room 1001C, CBD International Mansion N 16 Yong an Dong Li, Jian Wai Ave Beijing 100022, P.R.

China

US$

-

100.000

100.000

SQM Thailand Limited

Foreign

Unit 2962, Level 29, N° 388, Exchange Tower Sukhumvit Road, Klongtoey Bangkok

Thailand

US$

-

99.996

99.996

SQM Colombia SAS

Foreign

Cra 7 No 32 – 33 piso 29 Pbx: (571) 3384904 Fax: (571) 3384905 Bogotá D.C. – Colombia.

Colombia

US$

-

100.000

100.000

SQM International N.V.

Foreign

Houtdok-Noordkaai 25a B-2030 Amberes

Belgium

US$

0.580

99.420

100.000

SQM (Shanghai) Chemicals Co. Ltd.

Foreign

Room 4703-33, 47F, No.300 Middle Huaihai Road, Huangpu district, Shanghai

China

US$

-

100.000

100.000

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

8.2       Assets, liabilities, results of consolidated subsidiaries as of December 31, 2019

 

		Assets								Liabilities
Subsidiaries		Currents				Non-currents				Currents				Non-currents				Revenue				Profit (loss)				Comprehensive income (loss)
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Nitratos S.A.			368,474				41,688				292,535				3,521				167,481				39,530				39,440
Proinsa Ltda.			-				-				-				-				-				-				-
SQM Potasio S.A.			14,983				978,525				116,734				23,317				3,350				125,975				125,334
Serv, Integrales de Tránsito y Transf. S.A.			19,317				36,025				50,229				2,075				30,061				(2,650	)			(2,703	)
Isapre Norte Grande Ltda.			809				604				684				153				3,816				25				(2	)
Ajay SQM Chile S.A.			17,780				1,259				1,284				374				24,883				1,510				1,510
Almacenes y Depósitos Ltda.			243				45				-				-				-				(8	)			(85	)
SQM Salar S.A.			734,837				886,099				549,726				201,273				775,010				153,550				152,781
SQM Industrial S.A.			833,283				766,097				497,377				120,741				752,107				105,198				103,894
Exploraciones Mineras S.A.			3,099				31,081				6,296				-				-				(213	)			(213	)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.			184				570				305				338				2,341				17				(14	)
Soquimich Comercial S.A.			134,808				15,448				41,104				12,349				124,787				5,079				5,072
Comercial Agrorama Ltda.			862				1,313				4,467				19				2,755				(836	)			(837	)
Comercial Hydro S.A.			4,791				21				12				6				28				18				18
Agrorama S.A.			669				-				6,133				9				3,146				(1,407	)			(1,376	)
Orcoma SpA			-				2,360				14				-				-				-				-
Orcoma Estudio SpA			156				4,522				29				-				-				-				-
SQM MaG SPA			1,955				615				1,888				2				2,888				412				412
SQM North America Corp.			115,924				19,656				98,332				2,751				241,102				537				(214	)
RS Agro Chemical Trading Corporation A.V.V.			5,155				-				64				-				-				(25	)			(25	)
Nitratos Naturais do Chile Ltda.			2				135				3,314				-				-				7				7
Nitrate Corporation of Chile Ltd.			5,076				-				-				-				-				-				-
SQM Corporation N.V.			7,696				160,381				3,594				-				-				12,376				12,308
SQM Peru S.A.			29				-				80				-				-				(141	)			(141	)
SQM Ecuador S.A.			31,603				712				28,508				70				38,131				818				818
SQM Brasil Ltda.			194				-				598				2,250				-				(231	)			(231	)
SQI Corporation N.V.			56				34				77				-				-				(3	)			(3	)
Subtotal			2,301,985				2,947,190				1,703,384				369,248				2,171,886				439,538				435,750

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

		Assets								Liabilities																Comprehensive income (loss)
Subsidiaries		Currents				Non-currents				Currents				Non-currents				Revenue				Profit (loss)				Currents
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQMC Holding Corporation L.L.P.			28,889				16,190				1,687				-				-				2,585				2,585
SQM Japan Co. Ltd.			68,805				228				66,015				201				168,557				270				270
SQM Europe N.V.			429,926				4,608				361,059				2,824				729,730				5,387				5,387
SQM Italia SRL			1,158				-				15				-				-				5				5
SQM Indonesia S.A.			3				-				1				-				-				-				-
North American Trading Company			157				145				39				-				-				-				-
SQM Virginia LLC			14,804				14,345				14,804				-				-				(1	)			(1	)
SQM Comercial de México S.A. de C.V.			102,068				7,597				72,023				2,387				216,185				2,983				2,983
SQM Investment Corporation N.V.			13,811				30,888				5,518				975				-				(74	)			(74	)
Royal Seed Trading Corporation A.V.V.			44				-				18,834				-				-				(42	)			(42	)
SQM Lithium Specialties LLP			15,752				3				1,264				-				-				(1	)			(1	)
Soquimich SRL Argentina			57				-				165				-				-				(24	)			(24	)
Comercial Caimán Internacional S.A.			256				-				1,122				-				-				(5	)			(5	)
SQM France S.A.			345				6				114				-				-				-				-
Administración y Servicios Santiago S.A. de C.V.			235				72				402				211				3,463				21				21
SQM Nitratos México S.A. de C.V.			140				18				97				18				1,008				13				13
Soquimich European Holding B.V.			5,851				174,968				1,299				30,802				-				11,750				11,682
SQM Iberian S.A.			52,750				2,350				41,680				4				105,634				361				361
SQM Africa Pty Ltd.			57,639				1,728				47,594				-				63,567				(939	)			(939	)
SQM Oceania Pty Ltd.			5,440				-				3,459				-				2,085				444				444
SQM Beijing Commercial Co. Ltd.			11,723				20				9,695				-				14,487				(148	)			(148	)
SQM Thailand Limited			4,912				11				1,081				-				5,354				369				369
SQM Colombia SAS			9,505				151				10,089				37				7,574				(439	)			(439	)
Sacal S.A.			-				-				-				-				-				-				-
SQM International			40,652				831				32,549				-				75,229				800				800
SQM Shanghai Chemicals Co. Ltd.			36,250				133				34,367				-				77,599				(73	)			(74	)
SQM Australia Pty Ltd.			12,113				108,068				5,661				56				-				(2,030	)			(2,030	)
Subtotal			913,285				362,360				730,633				37,515				1,470,472				21,212				21,143
Total			3,215,270				3,309,550				2,434,017				406,763				3,642,358				460,750				456,893

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

8.2       Assets, liabilities, results of consolidated subsidiaries as of December 31, 2018

 

		Assets								Liabilities																Comprehensive income (loss)
Subsidiaries		Currents				Non-currents				Currents				Non-currents				Revenue				Profit (loss)				Currents
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Nitratos S.A.			364,492				33,716				310,062				1,621				185,487				32,532				32,546
Proinsa Ltda.			52				-				-				-				-				-				-
SQMC Internacional Ltda.			193				-				-				-				-				(1	)			(1	)
SQM Potasio S.A.			38,237				935,027				123,838				23,180				3,270				271,247				270,514
Serv. Integrales de Tránsito y Transf. S.A.			62,355				37,594				92,154				2,054				33,392				134				118
Isapre Norte Grande Ltda.			553				754				551				152				3,444				30				(42	)
Ajay SQM Chile S.A.			18,259				1,298				1,497				389				32,758				2,400				2,400
Almacenes y Depósitos Ltda.			264				46				-				-				-				(10	)			(142	)
SQM Salar S.A.			671,086				849,377				512,964				189,267				1,035,046				326,152				325,263
SQM Industrial S.A.			904,802				702,606				489,063				100,914				779,692				82,638				82,267
Exploraciones Mineras S.A.			3,137				30,999				6,039				-				-				2,071				2,071
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.			270				571				417				292				2,341				2				(19	)
Soquimich Comercial S.A.			139,210				13,558				39,743				6,692				136,563				3,492				3,466
Comercial Agrorama Ltda.			3,966				1,560				7,099				30				7,639				(1,061	)			(1,062	)
Comercial Hydro S.A.			4,897				28				40				8				25				119				119
Agrorama S.A.			7,235				485				12,086				48				9,440				(1,716	)			(1,700	)
Orcoma SpA			-				2,360				14				-				-				-				-
Orcoma Estudio SpA			296				4,416				63				1				-				2				2
SQM MaG SPA			780				340				853				-				979				257				257
SQM North America Corp.			113,630				16,274				94,939				254				271,869				(1,342	)			(993	)
RS Agro Chemical Trading Corporation A.V.V.			5,155				-				39				-				-				(25	)			(25	)
Nitratos Naturais do Chile Ltda.			30				136				3,349				-				-				127				127
Nitrate Corporation of Chile Ltd.			5,076				-				-				-				-				-				-
SQM Corporation N.V.			7,696				148,464				3,586				-				-				22,131				22,162
SQM Perú S.A.			163				-				1,166				-				-				(107	)			(107	)
SQM Ecuador S.A.			24,529				144				21,773				72				32,181				766				766
SQM Brasil Ltda.			108				-				706				2,254				126				(32	)			(32	)
SQI Corporation N.V.			56				31				72				-				-				(6	)			(6	)
Subtotal			2,376,527				2,779,784				1,722,113				327,228				2,534,252				739,800				737,949

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

		Assets								Liabilities																Comprehensive income (loss)
Subsidiaries		Currents				Non-currents				Currents				Non-currents				Revenue				Profit (loss)				Currents
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQMC Holding Corporation L.L.P.			25,692				16,115				1,000				-				-				3,084				3,084
SQM Japan Co. Ltd.			78,457				210				75,948				171				204,313				208				208
SQM Europe N.V.			412,691				1,825				349,252				-				985,278				17,180				17,180
SQM Italia SRL			1,176				-				15				-				-				-				-
SQM Indonesia S.A.			3				-				1				-				-				-				-
North American Trading Company			157				145				39				-				-				(1	)			(1	)
SQM Virginia LLC			14,805				14,346				14,805				-				-				(2	)			(2	)
SQM Comercial de México S.A. de C.V.			110,558				3,040				81,325				-				198,180				1,327				1,327
SQM Investment Corporation N.V.			44,476				86				5,336				946				-				(624	)			(624	)
Royal Seed Trading Corporation A.V.V.			86				-				18,834				-				-				31				31
SQM Lithium Specialties LLP			15,753				3				1,264				-				-				(2	)			(2	)
Soquimich SRL Argentina			87				-				172				-				-				(79	)			(79	)
Comercial Caimán Internacional S.A.			261				-				1,122				-				-				(1	)			(1	)
SQM France S.A.			345				6				114				-				-				-				-
Administración y Servicios Santiago S.A. de C.V.			128				78				370				164				2,848				10				10
SQM Nitratos México S.A. de C.V.			90				7				56				10				763				12				12
Soquimich European Holding B.V.			4,999				164,484				32,047				-				-				25,437				25,468
SQM Iberian S.A.			68,754				2,235				57,931				-				138,855				2,995				2,995
SQM Africa Pty Ltd.			59,925				1,448				48,663				-				106,514				4,871				4,871
SQM Oceania Pty Ltd.			3,581				-				1,990				-				2,513				(527	)			(527	)
SQM Beijing Commercial Co. Ltd.			12,346				9				10,163				-				13,779				(121	)			(121	)
SQM Thailand Limited			8,302				7				4,835				-				8,348				485				485
SQM Colombia SAS			4,592				279				4,830				-				3,056				(887	)			(887	)
SQM Australia Pty Ltd.			29,856				88,587				5,005				26				-				562				562
Sacal S.A.			3				-				-				-				-				-				-
SQM International			10,854				781				3,502				-				3,539				102				102
SQM Shanghai Chemicals Co. Ltd.			8,437				36				6,212				-				6,059				(239	)			(239	)
Subtotal			916,414				293,727				724,831				1,317				1,674,045				53,821				53,852
Total			3,292,941				3,073,511				2,446,944				328,545				4,208,297				793,621				791,801

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

8.3       Background on non-controlling interests

 

		% of interests in the ownership				Profit (loss) attributable to non-controlling interest								Equity, non-controlling interests								Dividends paid to noncontrolling interests
Subsidiaries		held by non-controlling interest				As of December 31, 2019				As of December 31, 2018				As of December 31, 2019				As of December 31, 2018				As of December 31, 2019				As of December 31, 2018
						ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Proinsa Ltda.			0.1	%			-				-				-				-				-				-
SQM Potasio S.A.			0.00001	%			-				-				-				-				-				-
Ajay SQM Chile S.A.			49	%			740				1,176				8,517				8,659				882				823
Soquimich Comercial S.A.			39.3616784	%			1,999				1,375				38,103				41,855				5,935				8.910
Comercial Agrorama Ltda.			30	%			(251	)			(318	)			(693	)			(481	)			-				-
Agrorama S.A.			0.001	%			-				-				-				-				-				-
Orcoma Estudios SPA			49	%			-				-				2,277				2,277				-				-
SQM Indonesia S.A.			20	%			-				-				1				1				-				-
Total							2,488				2,233				48,205				52,311				6,817				9,733

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 9

Equity-accounted investees

 

9.1

Investments in associates recognized according to the equity method of accounting

 

As of December 31, 2019 and 2018, in accordance with criteria established in Note 2,

 

		Equity-accounted investees								Share in profit (loss) of associates and joint ventures accounted for using the equity method								Share in other comprehensive income of associates and joint ventures accounted for using the equity method, net of tax								Share in total other comprehensive income of associates and joint ventures accounted for using the equity method
		As of December 31, 2019				As of December 31, 2018				As of December 31, 2019				As of December 31, 2018				As of December 31, 2019				As of December 31, 2018				As of December 31, 2019				As of December 31, 2018
Associates		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Abu Dhabi Fertilizer Industries WWL			11,609				10,821				634				596				1				-				635				596
Doktor Tarsa Tarim Sanayi AS			26,001				21,582				3,912				241				198				489				4,110				730
Ajay North America			14,669				14,951				2,871				3,728				-				-				2,871				3,728
Ajay Europe SARL			7,451				7,845				1,165				1,373				(179	)			(439	)			986				934
Charlee SQM Thailand Co Ltd			-				-				-				316				-				-				-				316
SQM Eastmed Turkey			623				310				354				370				(42	)			(21	)			312				349
Kore Potash PLC			24,739				20,467				(534	)			(1,543	)			(549	)			(1,206	)			(1,083	)			(2,749	)
Total			85,092				75,976				8,402				5,081				(571	)			(1,177	)			7,831				3,904

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

												Dividends received
						Country of		Share of ownership in				For the year ended December 31, 2019				For the year ended December 31, 2018
Associate		Description of the nature of the relationship		Domicile		incorporation		associates				ThUS$				ThUS$
Abu Dhabi Fertilizer Industries WWL		Distribution and commercialization of specialty plant nutrients in the Middle East.		PO Box 71871, Abu Dhabi		United Arab Emirates			37	%			-				6,632
Doktor Tarsa Tarim Sanayi AS		Distribution and commercialization of specialty plant nutrients in Turkey.		Organize Sanayi Bolgesi, Ikinci Kisim, 22 cadde TR07100 Antalya		Turkey			50	%			-				-
Ajay North America		Production and distribution of iodine derivatives.		1400 Industry RD Power Springs GA 30129		United States of America			49	%			2,796				2,807
Ajay Europe SARL		Production and distribution of iodine derivatives.		Z.I. du Grand Verger BP 227 53602 Evron Cedex		France			50	%			1,055				811
Charlee SQM Thailand Co Ltd		Distribution and commercialization of specialty plant nutrients.		31 Soi 138 (Meesuk) LLapdrawrd, Bangkapi, 10240 Bangkok		Thailand			40	%			-				362
SQM Eastmed Turkey		Production and commercialization of specialty products.		Organize Sanayi Bolgesi, Ikinci Kisim, 22 cadde TR07100 Antalya		Turkey			50	%			-				-
Kore Potash Ltd		Prospection, exploration and mining development.		L 3 88 William ST Perth, was 6000		Australia			19.67	%			-				-
Total													3,851				10,612

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

The companies described in the table below are related parties of the following associates:

 

(1) Doktor Tarsa Tarim Sanayi AS

(2) Terra Tarsa B.V.

(3) Abu Dhabi Fertilizer Industries WWL

 

												Dividends received
						Country of		Share of ownership in associates				For the year ended December 31, 2019				For the year ended December 31, 2018
Associate		Description of the nature of the relationship		Domicile		incorporation		(*)				ThUS$				ThUS$
Terra Tarsa Ukraine LLC (2)		Distribution and trading of specialty plant nutrients.		74800 Ukraine, Kakhovka, 4 Yuzhnaya Str.		Ukraine			100	%			-				-
Terra Tarsa BV (1)		Distribution and trading of specialty plant nutrients.		Herikerbergweg 238, Luna Arena, 1101CM Amsterdam PO Box 23393, 1100DW Amsterdam Zuidoost		Holland			50	%			-				-
Plantacote NV (1)		Sale of CRF and production and sales of WSNPK.		Houtdok-Noordkaai 25a, 2030 Antwerpen, Belgium		Belgium			100	%			-				-
Doctochem Tarim Sanayai Ticaret LTD (1)		Production, distribution and trading of specialty plant nutrition.		Eski Büyükdere Cad No: 7 GIZ 2000 Plaza K:17 D:67-68 Maslak Sariyer Ístambul.		Turkey			100	%			-				-
Terra Tarsa Don LLC		Distribution and sale of specialty fertilizers		Zorge Street, house 17, 344090, Rostov-on-Don		Russian Federation			100	%			-				-
Doktolab Tarim Arastirma San. (1)		Laboratory services.		27. Cd. No:2, 07190 Aosb 2. Kısım/Döşemealtı, Antalya, Turkey		Turkey			100	%			-				-
International Technical and Trading Agencies Co WLL (3)		Distribution and trading of specialty plant nutrients, in the Middle East.		P.O Box: 950918 Amman 11195		Jordan			50	%			-				-
Total													-				-

 

(*) This percentage does not consider the shareholdings of the holders of these subsidiaries.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

9.2

Assets, liabilities, revenue and expenses of associates

 

		As of December 31, 2019
		Assets								Liabilities												Gain (loss) from continuing				Other comprehensive				Comprehensive e
		Currents				Non-currents				Currents				Non-currents				Revenue				operations				income				income
Associate		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Abu Dhabi Fertilizer Industries WWL			28,543				9,971				7,133				-				31,588				1,713				4				1,717
Doktor Tarsa Tarim Sanayi AS			97,797				15,196				22,420				38,522				93,768				7,824				396				8,220
Ajay North America			19,748				13,250				3,061				-				38,833				5,860				-				-
Ajay Europe SARL			19,589				1,456				6,144				-				35,709				2,329				(358	)			1,971
SQM Eastmed Turkey			2,718				1,833				2,600				704				3,086				709				(84	)			625
Kore Potash PLC			7,938				119,362				2,214				-				-				(2,716	)			(2,791	)			(5,507	)
Total			176,333				161,068				43,572				39,226				202,984				15,719				(2,833	)			7,026

 

		As of December 31, 2018
		Assets								Liabilities												Gain (loss) from continuing				Other comprehensive				Comprehensive e
		Currents				Non-currents				Currents				Non-currents				Revenue				operations				income				income
Associate		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Abu Dhabi Fertilizer Industries WWL			23,496				11,444				5,695				-				33,098				1,611				(1	)			1,610
Doktor Tarsa Tarim Sanayi AS			66,498				12,242				27,067				8,509				74,144				481				978				1,459
Ajay North America			21,644				12,409				3,542				-				40,290				7,608				-				7,608
Ajay Europe SARL			21,219				1,214				6,743				-				36,337				2,747				(878	)			1,869
SQM Eastmed Turkey			1,724				2,160				1,829				1,434				3,192				740				(42	)			698
Kore Potash PLC			6,659				148,426				2,180				-				-				(8,198	)			(6,882	)			(15,080	)
Total			141,240				187,895				47,056				9,943				187,061				4,989				(6,825	)			(1,836	)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

9.3

Other information

 

The Company has no participation in unrecognized losses in investments in associates.

 

The Company has no investments that are not accounted for according to the equity method.

 

The basis of preparation of the financial information of associates corresponds to the amounts included in the financial statements in conformity with IFRS.

 

The equity method was applied to the Statement of Financial Position as of December 31, 2019 and 2018.

 

9.4

Disclosures on interest in associates

 

(a)

Transactions conducted in 2019:

 

·

In the fourth quarter of 2019, Ajay North America paid total dividends of ThUS$ 5,706.

·

In the first quarter of 2019, Ajay Europe SARL paid total dividends of ThUS$ 2,107.

·

In July 2019, the Company a capital increase in Kore Potash PLC for ThUS$ 2,600, increasing the share to 19.67% of investment shareholdings.

·

On December 11, 2019, Doktor Tarsa Tarim Sanayi AS acquired 100% of shares in Doctochem Tarim Sanayi Ticaret LTD.

 

(b)

Transactions conducted in 2018:

 

·

During the first quarter, the Company increased its capital in Kore Potash PLC by ThUS$ 3,000.

·

In March 2018 Abu Dhabi Fertilizer Industries WLL paid dividends of ThUS$ 10,890. 50% of the distributed dividend was charged to retained earnings generated subsequent to 2014, in line with the Company’s statutes that establish that 37% of the distributed dividend corresponds to SQM. The remaining 50% was charged to retained earnings generated between 2004 and 2014, in line with the entity’s statutes that establish that 50% of the distributed dividend corresponds to SQM.

·

In March 2018 Ajay North America paid dividends of ThUS$ 1,432.

·

In June 2018 Abu Dhabi Fertilizer Industries WLL paid dividends of ThUS$ 7,034. 50% of the distributed dividend was charged to retained earnings generated subsequent to 2014, in line with the Company’s statutes that establish that 37% of the distributed dividend corresponds to SQM. The remaining 50% was charged to retained earnings generated between 2004 and 2014, in line with the Company’s statutes that establish that 50% of the distributed dividend corresponds to SQM.

·

At the close of the second quarter of 2018, Ajay North America paid dividends of ThUS$ 5,728.

·

In June 2018 Ajay North Europe SARL paid dividends of ThUS$ 1,622.

·

In June 2018 Charlee SQM Thailand Co. Ltd. paid dividends of ThUS$ 906.

·

On November 14, 2018, Soquimich European Holdings B.V. sold its share in Charlee SQM Thailand Co. Ltd., generating a loss of ThUS$ 759.

·

In 2018, Doktor Tarsa Tarim Sanayi Ve Ticaret A.S., changed its functional currency from Turkish Lira to the United States Dollar.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 10

Joint Ventures

 

10.1

Policy for the accounting of equity accounted investment in joint ventures

 

The method for recognizing joint ventures is that in which participation is initially recorded at cost, and subsequently adjusted, considering changes after the acquisition in the portion of the entity’s net assets that correspond to the investor. Profit or loss for the period will include the portion of the entity’s entire profit or loss that correspond to the investor. For these joint ventures there is no quoted market price to measure these investments. (See Note 2.6)

 

At the date of issuance of these financial statements, SQM is not aware of the existence of any significant contingent liabilities associated with the partnerships in joint ventures.

 

10.2

Disclosures of interest in joint ventures

 

a)

Operations conducted in 2019

 

·

On January 01, 2019, SQM Vitas Perú changed its functional currency from the Peruvian sol to USD (United States dollar).

 

·

During the fourth quarter del 2019 SQM Vitas Fzco paid dividends of ThUS$ 21,196.

 

b)

Operations conducted in 2018

 

·

During the first quarter of 2018, Minera Exar S.A. increased its capital by ThUS$ 13,000. The entity is a joint venture and contributions were made on January 25, 2018 (ThUS$ 6,000) and February 14, 2018 (ThUS$ 7,000) by SQM Potasio S.A. and Lithium Americas Corporation (LAC). Both partners share 50% ownership of the respective company, each contributing the same share in these capital increases.

 

·

On March 14, 2018, the company SQM Vitas Plantacote B.V. was closed.

 

·

As of the date, Minera Exar S.A. has changed its functional currency from the Argentine peso to the United States dollar.

 

·

In April 2018, Minera Exar made a new capital increase of ThUS$ 7,000, which was contributed in equal parts by its partners.

 

·

On May 15, 2018, the subsidiary Soquimich European Holdings BV, signed a joint venture agreement with PAVONI & C., SpA in Italy, EUR 5.5 million were paid for a 50% share, generating a lower value of EUR 2.6 million. The functional currency of the joint venture is the Euro.

 

·

On December 31, 2018, the conditions were met for Covalent Lithium Pty Ltd, to be recognized as a separate joint venture. In previous years, the financial statements for this entity were included as part of SQM Australia Pty.

 

·

On December 31, 2018, as part of the investment in Pavoni & C., SpA. the goodwill generated in the purchase of this joint venture by an amount, of ThUS$ 3,206.

 

·

The subsidiary SQM Industrial S.A., recorded an impairment loss of ThUS$ 8,802, corresponding to its Sichuan SQM-Migao Chemical Fertilizer Co, Ltd, joint venture. The impairment is disclosed by netting the value of the aforementioned investment, in the caption “Equity method investments".

 

·

During December 2018, the Company sold its shares in Minera Exar S.A. and generated a profit before taxes of ThUS$ 14,507.

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

10.3	Investment in joint ventures accounted for under the equity method of accounting

 

													Dividends received
Joint venture		Description of the nature of the relationship		Domicile		Country of incorporation			Share of interest in ownership				For the year ended December 31, 2019				For the year ended December 31, 2018
													ThUS$				ThUS$
Sichuan SQM Migao Chemical Fertilizers Co Ltd.		Production and distribution of soluble fertilizers.		Huangjing Road, Dawan Town, Qingbaijiang Dristrict, Chengdu Municipality, Sichuan Province		China			50	%			-				-
Coromandel SQM India		Production and distribution of potassium nitrate.		1-2-10, Sardar Patel Road, Secunderabad – 500003 Andhra Pradesh		India			50	%			-				-
SQM Vitas Fzco.		Production and commercialization of specialty plant and animal nutrition and industrial hygiene.		Jebel ALI Free Zone P.O. Box 18222, Dubai		United Arab Emirates			50	%			10,598				-
SQM Qingdao Star Corp Nutrition Co. Ltd.		Production and distribution of nutrient plant solutions with specialties NPK soluble.		Longquan Town, Jimo City, Qingdao Municipality, Shangdong Province		China			50	%			-				-
SQM Vitas Holland		Without information production of specialized fertilizers and other products for distribution in Italy and other countries.		Herikerbergweg 238, 1101 CM Amsterdam Zuidoost		Holland			50	%			-				-
Pavoni & C. Spa		products for distribution in Italy and other countries.		Corso Italia 172, 95129 Catania (CT), Sicilia		Italy			50	%			-				-
Covalent Lithium Pty Ltd.		Development and operation of the Mt Holland Lithium project, which will include the construction of a lithium extraction and refining mine		L18, 109 St Georges Tce Perth WA 6000 |PO Box Z5200 St Georges Tce Perth WA 6831		Australia			50	%			-				-
Total													10,598				-

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

The companies described in the following table are related to the following joint ventures:

 

(1)

SQM Vitas Fzco.

(2)

Pavoni & C Spa

 

Dividends received

Joint venture

Description of the nature of the relationship

Domicile

Country of incorporation

Share of interest in ownership (*)

For the year ended December 31, 2019

For the year ended December 31, 2018

ThUS$

ThUS$

SQM Vitas Brasil Agroindustria (1)

Production and trading of specialty vegetable and animal nutrition and industrial hygiene.

Via Cndeias, Km. 01 Sem Numero, Lote 4, Bairro Cia Norte, Candeias, Bahia.

Brazil

49.99

%

-

-

SQM Vitas Perú S.A.C. (1)

Production and trading of specialty vegetable and animal nutrition and industrial hygiene

Av. Juan de Arona 187, Torre B, Oficina 301-II, San Isidro, Lima

Perú

50

%

-

-

Arpa Speciali S.R.L. (2)

Production of specialty fertilizers and others for distribution in Italy and other countries.

Mantova (MN) Via Cremona 27 Int. 25

Italy

50.48

%

-

-

Total

-

-

 

(*) The percentages presented correspond to the ownership used in the consolidation of the company.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

		Equity-accounted investees				Share in profit (loss) of associates and joint ventures accounted for using the equity method				Share on other comprehensive income of associates and joint ventures accounted for using the equity method, net of tax				Share on total other comprehensive income of associates and joint ventures accounted for using the equity method
Joint Venture		For the year ended December 31, 2019		For the year ended December 31, 2018		For the year ended December 31, 2019		For the year ended December 31, 2018		For the year ended December 31, 2019		For the year ended December 31, 2018		For the year ended December 31, 2019		For the year ended December 31, 2018
		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
Sichuan SQM Migao Chemical Fertilizers Co Ltd.		1,992		1,992		(632	)	(650	)	-		-		(631	)	(650	)
Coromandel SQM India		1,568		1,729		(98	)	174		(38	)	(159	)	(136	)	15
SQM Vitas Fzco.		9,111		20,202		1,797		1,781		437		(903	)	2,234		878
SQM Qingdao Star Corp Nutrition Co. Ltd.		3,464		3,168		296		188		-		-		296		188
SQM Vitas Holland		1,304		1,345		(15	)	(14	)	(27	)	(70	)	(42	)	(84	)
Minera Exar S.A. (1)		-		-		-		(206	)	-		-		-		(206	)
Pavoni & C. Spa		6,864		7,084		36		(39	)	(255	)	70		(219	)	31
Covalent Lithium Pty Ltd.		40		53		-		36		(13	)	-		(13	)	36
Total		24,343		35,573		1,384		1,270		104		(1,062	)	1,489		208

  

(1)	Minera Exar S.A. was sold in December 2018,

 

The amounts described in the following box represent numbers used in the consolidation of the company:

  

		Equity-accounted investees				Share in profit (loss) of associates and joint ventures accounted for using the equity method				Share on other comprehensive income of associates and joint ventures accounted for using the equity method, net of tax				Share on total other comprehensive income of associates and joint ventures accounted for using the equity method
Joint Venture		For the year ended December 31, 2019		For the year ended December 31, 2018		For the year ended December 31, 2019		For the year ended December 31, 2018		For the year ended December 31, 2019		For the year ended December 31, 2018		For the year ended December 31, 2019		For the year ended December 31, 2018
		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
SQM Vitas Brasil Agroindustria (1)		5,347		5,915		564		1,439		225		(792	)	338		647
SQM Vitas Perú S.A.C. (1)		1,955		2,671		211		(275	)	661		(112	)	872		(387	)
Arpa Speciali S.R.L. (2)		92		62		31		(44	)	(1	)	-		30		(44	)
Total		7,394		8,648		806		1,120		435		(904	)	1,240		216

 

The following companies are subsidiaries of:

 

(1)	SQM Vitas Fzco.

(2)	Pavoni & C. Spa

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

10.4

Assets, liabilities, revenue and expenses from joint ventures:

  

			As of December 31, 2019
			Assets								Liabilities												Gain (loss) from continuing				Other comprehensive				Comprehensive
Joint Venture			Current				Non-current				Current				Non-current				Revenue				operations				income				income
			ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Sichuan SQM Migao Chemical Fertilizers Co Ltd.			28,668				5,129				13,472				-				7				(1,262	)			-				(1,262	)
Coromandel SQM India			4,504				633				1,704				-				8,197				(197	)			(77	)			(274	)
SQM Vitas Fzco.			9,695				20,014				1,136				-				36				3,595				(876	)			2,719
SQM Qingdao Star Corp Nutrition Co. Ltd.			7,534				26				632				-				12,003				592				-				592
SQM Vitas Holland			2,609				-				2				-				-				(30	)			(53	)			(83	)
SQM Vitas Brasil Agroindustria			46,118				7,299				40,334				-				87,901				1,128				(451	)			677
SQM Vitas Perú S.A.C.			29,452				8,378				24,855				6,044				28,590				421				1,322				1,743
Pavoni & C. Spa			9,444				7,074				8,466				735				14,296				71				(510	)			(439	)
Covalent Lithium Pty Ltd.			1,616				958				2,111				383				-				-				(25	)			(25	)
Total			139,640				49,511				92,712				7,162				151,030				4,318				(670	)			3,648

 

			As of December 31, 2018
			Assets								Liabilities												Gain (loss) from continuing				Other comprehensive				Comprehensive
Joint Venture			Current				Non-current				Current				Non-current				Revenue				operations				income				income
			ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Sichuan SQM Migao Chemical Fertilizers Co Ltd.			28,577				5,913				12,902				-				16				(1,301	)			-				(1,301	)
Coromandel SQM India			5,905				852				3,050				-				11,605				348				(318	)			30
SQM Vitas Fzco.			30,430				17,592				2,678				-				16,583				3,561				(1,806	)			1,755
SQM Qingdao Star Corp Nutrition Co. Ltd.			7,754				114				1,533				-				13,004				377				-				377
SQM Vitas Holland			2,692				-				1				-				-				(28	)			(139	)			(167	)
SQM Vitas Brasil Agroindustria			36,648				7,566				31,808				-				82,625				2,879				(1,585	)			1,294
SQM Vitas Perú S.A.C.			22,365				7,785				18,996				5,966				28,619				(550	)			(223	)			(773	)
Pavoni & C. Spa			10,062				6,490				8,098				698				15,461				(79	)			140				61
Covalent Lithium Pty Ltd.			239				100				233				-				-				106				-				106
Total			144,672				46,412				79,299				6,664				167,913				5,313				(3,931	)			1,382

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

10.5	Other Joint Venture disclosures:

  

		Cash and cash equivalents					Other current financial liabilities				Other non-current financial liabilities
Joint Venture		As of December 31, 2019			As of December 31, 2018		As of December 31, 2019		As of December 31, 2018		As of December 31, 2019		As of December 31, 2018
		ThUS$			ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
Sichuan SQM Migao Chemical Fertilizers Co Ltd.		33			106		-		-		-		-
Coromandel SQM India		2,240			308		-		-		-		-
SQM Vitas Fzco.		3,071			19,312		-		-		-		-
SQM Qingdao Star Corp Nutrition Co. Ltd.		4,640			4,543		-		-		-		-
SQM Vitas Holland		2,609			2,692		-		-		-		-
SQM Vitas Brasil Agroindustria		2,101			1,869		9,106		13,380		-		-
SQM Vitas Perú S.A.C.		225			371		258		3,819		895		801
Pavoni & C. Spa		314			407		5,509		5,464		-		-
Covalent Lithium Pty Ltd.		693			156		472		-		-		-
Total		15,926			29,764		15,345		22,663		895		801

  

		Depreciation and amortization expense					Interest expense				Income tax benefit (expense) from continuing operations
Joint Venture		For the year ended as of December 31, 2019			For the year ended as of December 31, 2018		For the year ended as of December 31, 2019		For the year ended as of December 31, 2018		For the year ended as of December 31, 2019		For the year ended as of December 31, 2018
		ThUS$			ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
Sichuan SQM Migao Chemical Fertilizers Co Ltd.		(743	)		(948	)	-		(1	)	153		97
Coromandel SQM India		(291	)		445		(4	)	(9	)	(27	)	(38	)
SQM Vitas Fzco.		-			(509	)	(7	)	(8	)	-		-
SQM Qingdao Star Corp Nutrition Co. Ltd.		(62	)		(67	)	-		-		(241	)	(187	)
SQM Vitas Holland		-			-		(1	)	-		-		-
SQM Vitas Brasil Agroindustria		(33	)		(408	)	(1,176	)	(886	)	181		(117	)
SQM Vitas Perú S.A.C.		(287	)		(347	)	(435	)	(425	)	(316	)	(230	)
Pavoni & C. Spa		(149	)		(542	)	-		(335	)	(214	)	-
Covalent Lithium Pty Ltd.		(126	)		(16	)	(32	)	(5	)	-		(46	)
Total		(1,691	)		(2,392	)	(1,655	)	(1,669	)	(464	)	(521	)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

10.6	Joint Ventures

 

In 2017, we continued to expand our operations outside Chile and, together with our subsidiary SQM Australia Pty, we entered into an agreement to acquire 50% of the assets of the Mount Holland lithium project in Western Australia. We entered into a 50/50 unincorporated joint operation with Kidman Resources Limited (“Kidman”), the Mt Holland Lithium Project, to design, construct and operate a mine, concentrator and refinery to produce approximately 45,000 metric tons of lithium hydroxide per year. Kidman retained the exclusive right to exploit gold within the project area. SQM Australia Pty committed to pay a price of US$ 70 million for the 50% of the Mt Holland assets, which was split into an initial payment of US$15 million and a deferred payment of US$ 55 million, both payments subject to certain conditions precedent. As agreed by the parties, US$ 40 million of a total of US$70 million paid to Kidman was provided directly to the project and SQM Australia paid an additional (i) US$ 10 million as part of the initial payment, and (ii) US$ 30 million once the deferred payment took place. An additional US$ 5 million for Kidman for resolution of legal disputes.

 

All payments subject to conditions under the purchase agreement with Kidman were executed by December 2018.

 

This business meets the conditions stipulated in IFRS 11 to be considered a "joint operation", since management has agreed that the rights of the related assets and liabilities relate to a joint arrangement, which states that the joint operators share all interests in the related assets and liabilities in specific proportions. Please refer to material events as of December 31, 2019.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 11

Cash and cash equivalents

 

11.1

Types of cash and cash equivalents

 

As of December 31, 2019, and 2018, cash and cash equivalents are detailed as follows:

 

Cash		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Cash on hand			71				75
Cash in banks			105,141				101,662
Other demand deposits			6,986				746
Total cash			112,198				102,483

 

Cash equivalents		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Short-term deposits, classified as cash equivalents			149,099				187,666
Short-term investments, classified as cash equivalents			327,233				265,917
Total cash equivalents			476,332				453,583
Total cash and cash equivalents			588,530				556,066

 

11.2

Short-term investments, classified as cash equivalents

 

As of December 31, 2019 and 2018, the short-term investments classified as cash and cash equivalents relate to mutual funds (investment liquidity funds) for investments in:

 

Institution		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Legg Mason - Western Asset Institutional Cash Reserves			181,155				132,108
JP Morgan US dollar Liquidity Fund Institutional			146,078				133,809
Total			327,233				265,917

 

Short-term investments are highly liquid mutual funds that are basically invested in short-term fixed rate notes in the U.S. market.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

11.3

Information on cash and cash equivalents by currency

 

As of December 31, 2019 and 2018, information on cash and cash equivalents by currency is detailed as follows:

 

Original currency		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Chilean Peso (*)			8,240				157,500
US Dollar			558,572				353,674
Euro			3,131				4,738
Mexican Peso			2,103				1,242
South African Rand			3,929				5,219
Japanese Yen			1,559				1,786
Peruvian Sol			4				1
Indian rupee			6				-
Chinese Yuan			2,484				2,305
Dirham United Arab Emirates			-				1
Indonesian rupee			3				-
Argentine Peso			3				2
Pound Sterling			3				-
Australian dollar			8,492				29,598
Polish Zloty			1				-
Total			588,530				556,066

 

(*) The Company maintains financial derivative instruments policies which allow management to convert term deposits denominated in pesos and UF to US dollars.

 

11.4

Amount restricted (unavailable) cash balances

 

Cash on hand and cash in banks are available resources, and their carrying value is equal to their fair value.

 

Financial assets pledged as collateral

 

On November 4, 2004, Isapre Norte Grande has a guarantee equivalent to the total amount owed to its subsidiaries and medical suppliers, which is administered and maintained by Banco de Chile.

 

As of December 31, 2019 and, 2018 pledged assets are as follows

 

Restricted cash balances		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Isapre Norte Grande Ltda.			551				712
Total			551				712

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

11.5

Short-term deposits, classified as cash equivalents

 

The detail at the end of each period is as follows:

 

Receiver of the deposit		Type of deposit		Original currency		Interest rate				Placement date		Maturity		Principal				Interest accrued to-date				As of December 31, 2019
														ThUS$				ThUS$				ThUS$
Banco crédito e inversiones		Fixed term		US$			3.45	%		11-18-2019		02-13-2020			18,000				74				18,074
Banco crédito e inversiones		Fixed term		US$			2.85	%		12-26-2019		02-20-2020			20,000				8				20,008
Banco de Chile		Fixed term		US$			3.45	%		11-15-2019		01-23-2020			14,000				62				14,062
Banco de Chile		Fixed term		US$			3.50	%		11-15-2019		01-09-2020			18,000				80				18,080
Banco de Chile		Fixed term		US$			3.45	%		11-15-2019		01-16-2020			18,000				79				18,079
Banco Itau Chile		Fixed term		US$			2.90	%		12-26-2019		02-20-2020			33,000				13				33,013
Scotiabank Sud Americano		Fixed term		Ch$			2.16	%		12-30-2019		08-08-2020			6,812				-				6,812
Banco crédito e inversiones		Fixed term		US$			3.51	%		11-21-2019		01-28-2020			1,000				4				1,004
Banco crédito e inversiones		Fixed term		US$			3.75	%		12-02-2019		02-27-2020			2,000				6				2,006
Banco crédito e inversiones		Fixed term		US$			3.60	%		11-25-2019		01-28-2020			1,000				4				1,004
Banco Estado		Fixed term		US$			2.15	%		12-16-2019		01-06-2020			500				-				500
Banco Santander - Santiago		Fixed term		US$			2.55	%		12-09-2019		02-04-2020			1,700				3				1,703
Corpbanca		Fixed term		US$			2.55	%		12-16-2019		01-06-2020			2,500				3				2,503
Corpbanca		Fixed term		US$			3.64	%		11-29-2019		02-13-2020			1,500				5				1,505
Corpbanca		Fixed term		US$			2.80	%		12-11-2019		01-28-2020			2,000				8				2,008
Banco Santander - Santiago		Fixed term		US$			2.33	%		10-16-2019		01-12-2020			1,000				5				1,005
Scotiabank Sud Americano		Fixed term		US$			2.45	%		12-17-2019		01-13-2020			3,600				3				3,603
Scotiabank Sud Americano		Fixed term		US$			3.20	%		11-13-2019		01-30-2020			500				2				502
Scotiabank Sud Americano		Fixed term		US$			3.40	%		12-02-2019		02-27-2020			2,000				5				2,005
Scotiabank Sud Americano		Fixed term		US$			3.45	%		11-18-2019		01-30-2020			1,500				6				1,506
BBVA Banco Francés		Fixed term		US$			39	%		12-26-2019		01-27-2020			52				1				53
Banco Itaú S.A.		On demand		US$			8	%		10-17-2019		12-31-2019			64				-				64
															148,728				371				149,099

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Receiver of the deposit		Type of deposit		Original currency		Interest rate				Placement date		Maturity		Principal				Interest accrued to-date				As of December 31, 2018
														ThUS$				ThUS$				ThUS$
Scotiabank		Fixed term		Ch$			2.50	%		10-18-2018		01-16-2019			14,606				90				14,696
Banco Crédito e Inversiones		Fixed term		Ch$			2.55	%		11-06-2018		01-09-2019			19,632				92				19,724
Scotiabank		Fixed term		Ch$			2.55	%		11-30-2018		01-03-2019			14,393				38				14,431
Scotiabank		Fixed term		Ch$			2.55	%		12-03-2018		01-03-2019			11,515				27				11,542
Itau-Corpbanca		Fixed term		Ch$			2.50	%		12-03-2018		01-03-2019			14,393				34				14,427
Itau-Corpbanca		Fixed term		Ch$			2.50	%		12-07-2018		01-09-2019			14,393				29				14,422
Itau-Corpbanca		Fixed term		Ch$			2.50	%		12-10-2018		01-09-2019			12,954				23				12,977
Scotiabank		Fixed term		Ch$			2.35	%		12-10-2018		01-09-2019			12,954				21				12,975
Itau-Corpbanca		Fixed term		US$			3.06	%		12-11-2018		01-11-2019			1,300				2				1,302
Banco Estado		Fixed term		US$			2.75	%		12-12-2018		01-15-2019			1,000				1				1,001
Itau-Corpbanca		Fixed term		Ch$			2.50	%		12-14-2018		01-09-2019			14,392				20				14,412
Scotiabank		Fixed term		Ch$			2.65	%		12-17-2018		01-17-2019			14,393				18				14,411
Scotiabank		Fixed term		Ch$			2.60	%		12-17-2018		01-17-2019			10,892				13				10,905
Banco Crédito e Inversiones		Fixed term		US$			2.93	%		12-17-2018		01-31-2019			1,400				2				1,402
Itau-Corpbanca		Fixed term		US$			3.30	%		12-17-2018		01-31-2019			1,400				2				1,402
Itau-Corpbanca		Fixed term		US$			3.40	%		12-17-2018		01-31-2019			3,000				4				3,004
Banco de Chile		Fixed term		US$			3.06	%		12-17-2018		01-31-2019			1,700				2				1,702
Scotiabank Sud Americano		Fixed term		US$			2.95	%		12-17-2018		01-31-2019			1,500				2				1,502
Banco de Chile		Fixed term		US$			3.26	%		12-19-2018		01-31-2019			800				1				801
Banco Crédito e Inversiones		Fixed term		US$			3.42	%		12-26-2018		02-26-2019			2,800				1				2,801
Banco de Chile		Fixed term		US$			3.26	%		12-26-2018		02-26-2019			2,800				1				2,801
Scotiabank Sud Americano (*)		Fixed term		Ch$			0.26	%		12-27-2018		01-07-2019			1,439				1				1,440
Scotiabank Sud Americano (*)		Fixed term		Ch$			0.26	%		12-27-2018		01-14-2019			2,879				1				2,880
Scotiabank Sud Americano (*)		Fixed term		Ch$			0.26	%		12-27-2018		01-21-2019			1,439				1				1,440
Banco Estado		Fixed term		US$			3.15	%		12-28-2018		01-28-2019			2,000				1				2,001
Banco Estado		Fixed term		US$			3.15	%		12-28-2018		01-28-2019			600				-				600
Banco de Chile		Fixed term		US$			3.16	%		12-28-2018		01-28-2019			2,000				1				2,001
Banco Crédito e Inversiones		Fixed term		US$			2.53	%		12-28-2018		01-08-2019			1,000				-				1,000
Banco Crédito e Inversiones		Fixed term		US$			3.08	%		12-28-2018		01-28-2019			2,500				1				2,501
Banco Santander- Santiago (*)		Fixed term		Ch$			0.20	%		12-18-2018		01-04-2019			432				-				432
BBVA Banco Francés		Fixed term		US$			-			12-31-2018		01-21-2019			81				3				84
Nedbank		On demand		US$			-			12-31-2018		01-01-2019			647				-				647
Total															187,234				432				187,666

 

(*) Corresponds to a monthly rate.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

11.6

Net Debt reconciliation

 

This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.

 

 

Net debt		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Cash and cash equivalents			588,530				556,066
Other current financial assets			505,490				312,721
Other non-current financial hedge assets			3,918				13,425
Other current financial liabilities			(298,822	)			(23,585	)
Other non-current financial liabilities			(1,518,926	)			(1,330,382	)
Total			(719,810	)			(471,755	)

 

						Adjustment to				Monetary												Non-monetary
Cash and cash equivalents		As of December 31, 2018				initial balances by adoption of IFRS 16				Amounts from loans				Amounts from interest				Other cash income/expenses				Hedging and non-hedging instruments				Exchange rate differences				Other				As of December 31, 2019
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Obligations with the public and bank loans			(1,333,793	)			-				(442,465	)			65,754				6,816				-				20,839				(70,179	)			(1,753,028	)
Current and non-current lease liabilities			-				(45,115	)			7,221				1,537				-				-				-				(1,540	)			(37,897	)
Financial instruments derived from hedging			(17,318	)			-				(439	)			5,209				-				(12,014	)			-				907				(23,655	)
Financial instruments derived from non-hedging			(2,856	)			-				-				-				-				(313	)			-				-				(3,169	)
Subtotal			(1,353,967	)			(45,115	)			(435,683	)			72,500				6,816				(12,327	)			20,839				(70,812	)			(1,817,749	)
Cash and cash equivalents			556,066				-				-				-				47,396				-				(14,932	)			-				588,530
Deposits that do not qualify as cash and cash equivalents			291,790				-				-				(25,809	)			224,499				-				(31,080	)			26,289				485,689
Derivatives from hedge assets			31,663				-				-				-				(34,434	)			23,034				-				925				21,188
Derivatives from other financial non-hedge assets			2,693				-				-				-				(1,403	)			1,242				-				-				2,532
Total			(471,755	)			(45,115	)			(435,683	)			46,691				242,874				11,949				(25,173	)			(43,598	)			(719,810	)

 

The definition of debt is described in Note 14.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 12

Inventories

 

The composition of inventory at each period-end is as follows:

 

Type of inventory		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Raw material			7,287				6,764
Supplies for production			26,064				26,84
Products-in-progress			457,563				423,621
Finished product			492,424				456,449
Total			983,338				913,674

 

As of December 31, 2019 and 2018, the Company held caliche stockpiles, solutions in solar ponds and intermediary salts amounting ThUS$ 393,600 and ThUS$ 347,100, respectively (including products in progress).

 

As of December 31, 2019 and 2018, inventory allowances recognized, amounted to ThUS$ 88,174 and ThUS$ 105,282, respectively. For finished and in-process products, recognized allowances include the provision associated with the lower value of stock (considers lower realizable value, uncertain future use, reprocessing costs of off-specification products, etc.), provision for inventory differences and the provision for potential errors in the determination of inventories (e.g., errors in topography, grade, porosity, etc.), (see Note 3.13).

 

For raw materials, supplies, materials and parts, the lower value provision was associated to the proportion of obsolete, defective or slow-moving materials and potential differences.

 

The breakdown of inventory allowances is detailed as follows:

 

Type of inventory		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Raw material and supplies for production			2,488				1,838
Products-in-progress			71,468				82,673
Finished product			14,218				20,771
Total			88,174				105,282

 

The Company has not pledged inventory as collateral for the periods indicated above.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

As of December 31, 2019 and December 31, 2018, movements in provisions are detailed as follows:

 

Conciliation		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Beginning balance			105,282				96,284
Increase (decrease) in lower value provision (1)			(6,987	)			7,845
Increase (decrease) in provision relating to differences of inventory (2)			(123	)			3,176
Increase / decrease in provision relating to eventual differences and others (3)			(6,262	)			2,436
Provision used			(3,736	)			(4,459	)
Total changes			(17,108	)			8,998
Final balance			88,174				105,282

 

(1)

There are three types of Lower Value Provisions: (a) Economic Realizable Lower Value, (b) Potential Inventory with Uncertain Future Use and (c) Reprocessing Costs of Off-Specification Products.

(2)

Provisions for Inventory Differences generated when physical differences are detected when taking inventory, which exceed the tolerance levels for this process, At least two annual inventories are taken in the production sites and in the port in Chile (“zero sum” systems have immediate potential adjustments).

(3)

This algorithm corresponds to the provision of diverse percentages based on the complexity in the measurement and rotation of stock, as well as standard differences based on previous results, as is the case with provisions relating to Commercial Offices.

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 13

Related party disclosures

 

13.1

Related party disclosures

 

Balances pending at period-end are not guaranteed, accrue no interest and are settled in cash. No guarantees have been delivered or received for trade and other receivables due from related parties or trade and other payables due to related parties.

 

13.2

Relationships between the parent and the entity

 

Pursuant to Article 99 of Law of the Securities Market Law, the CMF may determine that a company does not have a controlling entity in accordance with the distribution and dispersion of its ownership, On November 30, 2018, the CMF issued the ordinary letter No. 32,131 whereby it determined that Pampa Group, do not exert decisive power over the management of the Company since it does not have a predominance in the ownership that allows it to make management decisions. Therefore, the CMF has determined not to consider Pampa Group as the controlling entity of the Company and that the Company does not have a controlling entity given its current ownership structure.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

13.3

Detailed identification of related parties and subsidiaries

 

As of December 31, 2019 and 2018, the detail of entities that are identified as subsidiaries or related parties of the Company is as follows:

 

Tax ID No.		Name		Country of origin		Functional currency		Nature
Foreign		Nitratos Naturais Do Chile Ltda.		Brazil		US$		Subsidiary
Foreign		Nitrate Corporation Of Chile Ltd.		United Kingdom		US$		Subsidiary
Foreign		SQM North America Corp.		United States of America		US$		Subsidiary
Foreign		SQM Europe N.V.		Belgium		US$		Subsidiary
Foreign		Soquimich S.R.L. Argentina		Argentina		US$		Subsidiary
Foreign		Soquimich European Holding B.V.		Holland		US$		Subsidiary
Foreign		SQM Corporation N.V.		Curacao		US$		Subsidiary
Foreign		SQI Corporation N.V.		Curacao		US$		Subsidiary
Foreign		SQM Comercial De México S.A. de C.V.		México		US$		Subsidiary
Foreign		North American Trading Company		United States of America		US$		Subsidiary
Foreign		Administración y Servicios Santiago S.A. de C.V.		México		US$		Subsidiary
Foreign		SQM Perú S.A.		Perú		US$		Subsidiary
Foreign		SQM Ecuador S.A.		Ecuador		US$		Subsidiary
Foreign		SQM Nitratos México S.A. de C.V.		México		US$		Subsidiary
Foreign		SQMC Holding Corporation L.L.P.		United States of America		US$		Subsidiary
Foreign		SQM Investment Corporation N.V.		Curacao		US$		Subsidiary
Foreign		SQM Brasil Limitada		Brazil		US$		Subsidiary
Foreign		SQM France S.A.		France		US$		Subsidiary
Foreign		SQM Japan Co. Ltd.		Japan		US$		Subsidiary
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		US$		Subsidiary
Foreign		SQM Oceania Pty Limited		Australia		US$		Subsidiary
Foreign		Rs Agro-Chemical Trading Corporation A.V.V.		Aruba		US$		Subsidiary
Foreign		SQM Indonesia S.A.		Indonesia		US$		Subsidiary
Foreign		SQM Virginia L.L.C.		United States of America		US$		Subsidiary
Foreign		SQM Italia SRL		Italy		US$		Subsidiary
Foreign		Comercial Caimán Internacional S.A.		Panama		US$		Subsidiary
Foreign		SQM África Pty. Ltd.		South Africa		US$		Subsidiary
Foreign		SQM Colombia SAS		Colombia		US$		Subsidiary
Foreign		SQM Internacional N.V.		Belgium		US$		Subsidiary
Foreign		SQM (Shanghai) Chemicals Co. Ltd.		China		US$		Subsidiary
Foreign		SQM Lithium Specialties LLC		United States of America		US$		Subsidiary
Foreign		SQM Iberian S.A.		Spain		US$		Subsidiary
Foreign		SQM Beijing Commercial Co. Ltd.		China		US$		Subsidiary
Foreign		SQM Thailand Limited		Thailand		US$		Subsidiary
Foreign		SQM Australia PTY		Australia		US$		Subsidiary
Foreign		SACAL S.A. (1)		Argentina		Ars		Subsidiary
96.801.610-5		Comercial Hydro S.A.		Chile		US$		Subsidiary
96.651.060-9		SQM Potasio S.A.		Chile		US$		Subsidiary
96.592.190-7		SQM Nitratos S.A.		Chile		US$		Subsidiary
96.592.180-K		Ajay SQM Chile S.A.		Chile		US$		Subsidiary
86.630.200-6		SQMC Internacional Ltda. (2)		Chile		US$		Subsidiary
79.947.100-0		SQM Industrial S.A.		Chile		US$		Subsidiary
79.906.120-1		Isapre Norte Grande Ltda.		Chile		Ch$		Subsidiary
79.876.080-7		Almacenes y Depósitos Ltda.		Chile		Ch$		Subsidiary
79.770.780-5		Servicios Integrales de Tránsitos y Transferencias S.A.		Chile		US$		Subsidiary
79.768.170-9		Soquimich Comercial S.A.		Chile		US$		Subsidiary
79.626.800-K		SQM Salar S.A.		Chile		US$		Subsidiary
78.053.910-0		Proinsa Ltda. (3)		Chile		Ch$		Subsidiary

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Tax ID No.		Name		Country of origin		Functional currency		Nature
76.534.490-5		Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.		Chile		Ch$		Subsidiary
76.425.380-9		Exploraciones Mineras S.A.		Chile		US$		Subsidiary
76.064.419-6		Comercial Agrorama Ltda.		Chile		Peso		Subsidiary
76.145.229-0		Agrorama S.A.		Chile		Peso		Subsidiary
76.359.919-1		Orcoma Estudios SPA		Chile		US$		Subsidiary
76.360.575-2		Orcoma SPA		Chile		US$		Subsidiary
76.686.311-9		SQM MaG SpA		Chile		US$		Subsidiary
Foreign		Abu Dhabi Fertilizer Industries WWL		Arab Emirates united		Arab Emirates dirham		Associate
Foreign		Doktor Tarsa Tarim Sanayi AS		Turkey		US$		Associate
Foreign		Ajay North America		United States of America		US$		Associate
Foreign		Ajay Europe SARL		France		Euro		Associate
Foreign		SQM Eastmed Turkey		Turkey		Euro		Associate
Foreign		Kore Potash PLC		United Kingdom		US$		Associate
Foreign		Sichuan SQM Migao Chemical Fertilizers Co Ltda.		China		US$		Joint venture
Foreign		Coromandel SQM India		India		Indian rupee		Joint venture
Foreign		SQM Vitas Fzco.		Arab Emirates united		Arab Emirates dirham		Joint venture
Foreign		SQM Star Qingdao Corp Nutrition Co., Ltd.		China		US$		Joint venture
Foreign		SQM Vitas Holland B.V.		Holland		Euro		Joint venture
Foreign		Covalent Lithium Pty Ltd.		Australia		Australian dollar		Joint venture
Foreign		Pavoni & C. SPA		Italy		Euro		Joint venture
96.511.530-7		Sociedad de Inversiones Pampa Calichera		Chile		US$		Other related parties
96.529.340-K		Norte Grande S.A.		Chile		Peso		Other related parties
79.049.778-9		Callegari Agrícola S.A.		Chile		Peso		Other related parties
Foreign		SQM Vitas Brasil Agroindustria (4)		Brazil		Brazilian real		Other related parties
Foreign		SQM Vitas Perú S.A.C. (4)		Peru		US$		Other related parties
Foreign		Terra Tarsa B.V. (5)		Holland		Euro		Other related parties
Foreign		Plantacote N.V. (5)		Belgium		Euro		Other related parties
Foreign		Doktolab Tarim Arastima San. Tic As (5)		Turkey		Turkish Lira		Other related parties
Foreign		Doctochem Tarim Sanayai Ticaret LTD (5)		Turkey		Turkish Lira		Other related parties
Foreign		Terra Tarsa Ukraine LLC (5)		Ukraine		Ukrainian grivna		Other related parties
Foreign		Terra Tarsa Don LLC (5)		Russian Federation		Russian ruble		Other related parties
Foreign		Abu Dhabi Fertilizer Industries WWL (6)		Oman		Arab Emirates dirham		Other related parties
Foreign		International Technical and Trading Agencies CO WLL (6)		Jordan		Arab Emirates dirham		Other related parties
Foreign		Arpa Speciali S.R.L (7)		Italy		Euro		Other related parties

 

(1)

On 06/26/2019 the company SACAL S.A. ceased trading.

(2)

On March 1, 2019, Soquimich Comercial S.A. has obtained ownership of 100% of corporate rights in SQMC International Ltda.

(3)

On 04/01/2019 the company Proinsa Ltda ceased trading.

(4)

These Companies are subsidiaries of the joint venture SQM Vitas Fzco.

(5)

These Companies are subsidiaries of the associate Doktor Tarsa Tarim Sanayi AS.

(6)

These Companies are subsidiaries of the joint venture Abu Dhabi Fertilizer Industries WWL.

(7)

These Companies are subsidiaries of the joint venture Pavoni & C. SPA.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

The following other related parties correspond to mining contractual corporations.

 

Tax ID No.		Name		Country of origin		Functional currency		Relationship
N/A		Ara Dos Primera del Salar de Pampa Blanca, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Ara Tres Primera del Salar de Pampa Blanca, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Ara Cuatro Primera del Salar de Pampa Blanca, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Ara Cinco Primera del Salar de Pampa Blanca, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Curicó Dos Primera del Salar de Pampa Alta, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Curicó Tres Primera del Sector de Pampa Alta, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Evelyn Veinticuatro Primera de Sierra Gorda		Chile		Ch$		Other related parties
N/A		Filomena Tres Primera de Oficina Filomena, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Filomena Cuatro Primera de Oficina Filomena, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Francis Cuatro Primera de Pampa Blanca, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Francis Cuatro Segunda del Salar de Pampa Blanca, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Francis Cuatro Tercera de Pampa Blanca, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Francis Cuatro Cuarta de Pampa Blanca, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Francis Cuatro Quinta de Pampa Blanca, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Francis Primera del Salar de Pampa Blanca de Sierra Gorda		Chile		Ch$		Other related parties
N/A		Francis Segunda del Salar de Pampa Blanca de Sierra Gorda		Chile		Ch$		Other related parties
N/A		Francis Tercera del Salar de Pampa Blanca de Sierra Gorda		Chile		Ch$		Other related parties
N/A		Ivon Primera de Sierra Gorda		Chile		Ch$		Other related parties
N/A		Ivon Décima Segunda de Sierra Gorda		Chile		Ch$		Other related parties
N/A		Ivon Sexta de Sierra Gorda		Chile		Ch$		Other related parties
N/A		Julia Primera de Sierra Gorda		Chile		Ch$		Other related parties
N/A		Lorena Trigésimo Quinta de Sierra Gorda		Chile		Ch$		Other related parties
N/A		Perseverancia Primera de Sierra Gorda		Chile		Ch$		Other related parties
N/A		Tamara 40 Primera del Sector S.E. OF. Concepción, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Tamara Tercera de Oficina Concepción, Sierra Gorda		Chile		Ch$		Other related parties
N/A		Tamara 40 Segunda del Sector S.E. OF Concepción, Sierra Gorda		Chile		Ch$		Other related parties

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

13.4

Detail of related parties and related party transactions

 

Transactions between the Parent and its subsidiaries, associated businesses, joint ventures and other related parties are part of the Company's common transactions. Their conditions are those customary for this type of transactions in respect of terms and market prices. In addition, these have been eliminated in consolidation and are not detailed in this note. Maturity terms for each case vary by virtue of the transaction giving rise to them.

 

As of December 31, 2019 and 31, 2018, the detail of significant transactions with related parties is as follows

 

Tax ID No.

Company

Nature

Country of origin

Transaction

For the year ended December 31, 2019

For the year ended December 31, 2018

ThUS$

ThUS$

Foreign

Doktor Tarsa Tarim Sanayi AS

Associate

Turkey

Sale of products

14,767

16,726

Foreign

Ajay Europe S.A.R.L.

Associate

France

Sale of products

21,348

19,470

Foreign

Ajay Europe S.A.R.L.

Associate

France

Dividends

1,055

811

Foreign

Ajay North America LL.C.

Associate

United States of America

Sale of products

16,932

16,810

Foreign

Ajay North America LL.C.

Associate

United States of America

Dividends

2,796

2,807

Foreign

Abu Dhabi Fertilizer Industries WWL

Associate

Arab Emirates

Sale of products

3,749

5,811

Foreign

Abu Dhabi Fertilizer Industries WWL

Associate

Arab Emirates

Dividends

-

6,632

Foreign

Charlee SQM Thailand Co Ltd. (1)

Associate

Thailand

Sale of products

-

4,960

Foreign

Charlee SQM Thailand Co Ltd. (1)

Associate

Thailand

Dividends

-

362

Foreign

SQM Vitas Brasil Agroindustria

Other related parties

Brazil

Sale of products

46,876

44,827

Foreign

SQM Vitas Perú S.A.C.

Other related parties

Peru

Sale of products

24,138

17,204

Foreign

SQM Vitas Fzco

Joint venture

Arab Emirates

Dividends

10,598

-

Foreign

Coromandel SQM India

Joint venture

India

Sale of products

3,955

7,696

Foreign

SQM Star Qingdao Corp Nutrition Co. Ltd.

Joint venture

China

Sale of products

1,929

-

Foreign

Terra Tarsa Ukraine LLC

Other related parties

Ukraine

Sale of products

1,280

1,674

Foreign

Terra Tarsa Don LLC

Other related parties

Federation of Russia

Sale of products

40

187

Foreign

Plantacote NV

Other related parties

Belgium

Sale of products

4,096

4,554

Foreign

Pavoni & C. SpA

Joint venture

Italy

Sale of products

3,152

201

Foreign

SQM Eastmed Turkey

Associate

Turkey

Sale of products

47

30

Foreign

Arpa Speciali S.R.L.

Other related parties

Italy

Sale of products

2,359

207

Total

159,117

150,969

 

(1)

During November 2018, shares held in Charlee SQM Thailand were sold.

(2)

During December 2018, shares held in Minera Exar S.A. were sold.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

13.5

Trade receivables due from related parties, current:

 

Transactions between the Company, its subsidiaries, joint ventures and other related parties are considered customary transactions. These transactions are carried out under arm’s length conditions, or those that are normally in effect for this type of transaction in terms of time frames and market prices

 

Tax ID No

Company

Nature

Country of origin

As of December 31, 2019

As of December 31, 2018

ThUS$

ThUS$

Foreign

Doktor Tarsa Tarim Sanayi AS

Associate

Turkey

110

6,497

Foreign

Ajay Europe S.A.R.L.

Associate

France

3,712

3,756

Foreign

Ajay North America LL.C.

Associate

United States of America

2,290

2,080

Foreign

Abu Dhabi Fertilizer Industries WWL

Associate

United Arab Emirates

803

857

96.511.530-7

Soc. de Inversiones Pampa Calichera

Other related parties

Chile

6

6

Foreign

SQM Vitas Brasil Agroindustria

Other related parties

Brazil

27,275

15,818

Foreign

SQM Vitas Perú S.A.C.

Other related parties

Peru

23,475

12,767

Foreign

Coromandel SQM India

Joint venture

India

1,792

2,025

Foreign

SQM Vitas Fzco

Joint venture

United Arab Emirates

234

105

Foreign

SQM Star Qingdao Corp Nutrition Co. Ltd.

Joint venture

China

-

248

Foreign

Terra Tarsa Ukraine LLC

Other related parties

Ukraine

7

-

Foreign

Terra Tarsa Don LLC

Other related parties

Federation of Russia

13

41

Foreign

Plantacote NV

Other related parties

Belgium

657

312

Foreign

SQM Eastmed Turkey

Associate

Turkey

47

30

Foreign

Pavoni & C. SpA

Joint venture

Italy

1,028

12

Foreign

Arpa Speciali S.R.L.

Other related parties

Italy

134

-

Allowance

(356

)

(1,764

)

Total

61,227

42,790

 

The receivables for Sichuan SQM Migao Chemical Fertilizers Co Ltda. are presented net of provisions (provisions as of December 31, 2019 ThUS$ 10,965 and December 31, 2018 ThUS$ 10,965).

 

13.6

Trade payables due to related parties, current:

 

Tax ID No

Company

Nature

Country of origin

Currency

As of December 31, 2019

As of December 31, 2018

ThUS$

ThUS$

Foreign

SQM Star Qingdao Corp Nutrition Co., Ltd.

Joint venture

China

USD

243

-

Foreign

Covalent Lithium Pty Ltd

Joint venture

Australia

Australian dollar

232

9

Total

475

9

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 14

Financial instruments

 

Financial instruments in accordance with IFRS 9 are detailed as follows, except for liabilities under IFRS 16 in number 14.4 f):

 

14.1

Types of other financial assets

 

Description of other financial assets		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Financial assets at amortized cost (1))			485,689			291,790
Derivative financial instruments
- For hedging			17,270			18,238
- Non-hedging (2)			2,531			2,693
Total other current financial assets			505,490			312,721
Financial assets at fair value through other comprehensive income			4,785			3,631
Derivative financial instruments
- For hedging			3,918			13,425
Financial assets at amortized cost			75			75
Total other non-current financial assets			8,778			17,131

 

Institution		As of December 31, 2019			As of December 31, 2018
		ThUS$			ThUS$
Banco de Crédito e Inversiones		185,400			145,834
Banco Santander (3)		74,365			23,124
Banco Itaú CorpBanca		120,628			70,719
Banco Security		17,964			27,215
Banco de Chile		18,026			-
Banco Estado		15,126			-
Scotiabank Sud Americano		54,180			24,898
Total		485,689			291,790

 

(1)

Corresponds to term deposits whose maturity date is greater than 90 days and less than 360 days from the investment date constituted in the aforementioned financial institutions:

 

(2)

Correspond to forwards and options that were not classified as hedging instruments (See detail in Note 14.3).

 

(3)

This balance includes ThUS$ 1,870 corresponding to margin calls, which are considered as collateral guarantees.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

14.2

Trade and other receivables

 

		As of December 31, 2019									As of December 31, 2018
Trade and other receivables		Currents			Non-current			Total			Currents			Non-current			Total
		ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Trade receivables, current		367,583			-			367,583			430,914			-			430,914
Prepayments, current		20,309			-			20,309			16,147			-			16,147
Other receivables, current		11,250			1,710			12,960			19,558			2,275			21,833
Total trade and other receivables		399,142			1,710			400,852			466,619			2,275			468,894

 

		As of December 31, 2019									As of December 31, 2018
Trade and other receivables		Assets before allowances			Allowance for doubtful trade receivables			Assets for trade receivables, net			Assets before allowances			Allowance for doubtful trade receivables			Assets for trade receivables, net
		ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Receivables related to credit operations. current		383,775			(16,192	)		367,583			445,670			(14,756	)		430,914
Trade receivables, current		383,775			(16,192	)		367,583			445,670			(14,756	)		430,914
Prepayments, current		21,092			(783	)		20,309			16,990			(843	)		16,147
Other receivables, current		15,659			(4,409	)		11,250			23,863			(4,305	)		19,558
Current other receivables		36,751			(5,192	)		31,559			40,853			(5,148	)		35,705
Other receivables. non-current		1,710			-			1,710			2,275			-			2,275
Non-current receivables		1,710			-			1,710			2,275			-			2,275
Total trade and other receivables		422,236			(21,384	)		400,852			488,798			(19,904	)		468,894

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(a)

Portfolio stratification

 

The Company’s policy is to require guarantees (such as letters of credit, guarantee clauses and others) and/or maintaining insurance policies for certain account receivables as deemed necessary by management.

 

(b)

Uncollateralized portfolio

 

As of December 31, 2019 and December 31, 2018 the detail of the uncollateralized portfolio is as follows:

 

As of December 31, 2019
Total uncollateralized portfolio
Past due segments		Number of customers with non-renegotiated portfolio				Gross non-renegotiated portfolio ThUS$				Number of customers with renegotiated portfolio				Gross renegotiated portfolio ThUS$
Current			1,486				351,931				69				892
1 - 30 days			166				20,195				72				526
31 - 60 days			26				1,279				4				10
61 - 90 days			12				519				3				54
91 - 120 days			5				1,026				2				66
121 - 150 days			5				361				7				49
151 - 180 days			7				190				2				33
181 - 210 days			4				51				-				-
211 - 250 days			6				48				8				11
>250 days			144				5,449				137				1,085
Total			1,861				381,049				304				2,726

 

As of December 31, 2018
Total uncollateralized portfolio
Past due segments		Number of customers with non-renegotiated portfolio				Gross non-renegotiated portfolio ThUS$				Number of customers with renegotiated portfolio				Gross renegotiated portfolio ThUS$
Current			1,390				404,670				136				668
1 - 30 days			1,229				19,422				390				596
31 - 60 days			801				5,705				154				118
61 - 90 days			648				2,279				41				75
91 - 120 days			489				1,220				27				47
121 - 150 days			80				423				16				29
151 - 180 days			43				186				21				176
181 - 210 days			7				1,291				41				231
211 - 250 days			7				108				101				242
>250 days			140				7,036				305				1,148
Total			4,834				442,340				1,232				3,330

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

As of December 31, 2019
		Trade accounts receivable days past due																								Trade receivables due
Trade and other receivables		Current				1 to 30 days				31 to 60 days				61 to 90 days				Over 90 days				Trade				from related parties
																						ThUS$				ThUS$
Expected loss rate			1	%			18	%			34	%			44	%			78	%			-				-
Total gross carrying amount			352,823				20,721				1,288				573				8,370				383,775				72,859
Impairment estimate			5,285				3,664				440				251				6,552				16,192				11,323

 

As of December 31, 2018
		Trade accounts receivable days past due																								Trade receivables due
Trade and due from related parties receivables		Current				1 to 30 days				31 to 60 days				61 to 90 days				Over 90 days				Trade				from related parties
																						ThUS$				ThUS$
Expected loss rate			1	%			9	%			5	%			4	%			65	%			-				-
Total gross carrying amount			408,300				20,018				2,861				2,354				12,137				445,670				55,520
Allowance for doubtful accounts			4,811				1,858				146				89				7,852				14,756				12,730

 

 

As of December 31, 2019 and 2018, movements in provisions are as follows:

 

Provisions		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Allowance for doubtful accounts at the beginning of the Period			32,634				34,936
Adjustment to initial balance derived from the adoption of IFRS 9			-				2,301
Increase / (decrease) of impairment provision			1,057				(2,967	)
Provision used			(984	)			(1,636	)
Allowance for doubtful accounts at the end of the year			32,707				32,634
(1) Trade and Other Receivables allowance current			16,192				14,756
(2) Other receivables allowance current			5,192				5,148
(3) Related party receivables allowance current			11,323				12,730
Recovery of Insurance			320				827
Total allowance for doubtful accounts			32,707				32,634
Renegotiated allowance			1,905				2,056
Non-renegotiated allowance			30,802				30,578

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

14.3

Hedging assets and liabilities

 

The balance represents derivative financial instruments measured at fair value which have been classified as hedges for exchange and interest rate risks relating to the total obligations with the public associated with bonds in UF and investments in Chilean pesos. As of December 31, 2019 and 2018, the notional amount of cash flows agreed upon in US dollars of the cross-currency swap contracts amounted to ThUS$ 435,167 and ThUS$ 461,659, respectively.

 

ThUS$		Assets / (Liabilities) Derivative financial instruments				Total Realized				Hedging Reserve in Gross Equity
Hedging of underlying debt at December 31, 2019
Hedging Assets			3,918				(4,194	)			8,112
Hedging Liabilities			(22,771	)			(25,363	)			2,592
Hedge of underlying Debit			(18,853	)			(29,557	)			10,704
Hedge of underlying investment at December 31, 2019
Hedging Assets			17,270				17,857				(587	)
Hedging Liabilities			(889	)			(711	)			(178	)
Hedge of underlying Investments			16,381				17,146				(765	)

 

 

Expressed in ThUS$		Assets / (Liabilities) Derivative financial instruments				Total Realized				Hedging Reserve in Gross Equity
Hedge of underlying debt at December 31, 2018
Hedging Assets			13,425				5,244				8,181
Hedging Liabilities			(17,318	)			(18,859	)			1,541
Underlying Debt Coverage			(3,893	)			(13,615	)			9,722
Hedge of underlying investment at December 31, 2018
Hedging Assets			18,146				19,911				(1,765	)
Hedge of Underlying Investments			18,146				19,911				(1,765	)

 

 

Hedging effect in profit and loss and equity for the year ended December 31, 2019		Total variation				Profit and loss				Hedging reserve due to variation of hedge gross
Analysis effect by type of hedging
Hedge of underlying debt			(14,960	)			(15,942	)			982
Hedge of underlying investments			(1,765	)			(2,765	)			1,000
Total hedging effect on profit or loss and equity for the year			(16,725	)			(18,707	)			1,982
Analysis Effect by type of asset
Hedging in Current and Non-Current Assets			(10,383	)			(11,492	)			1,109
Hedging in Current and Non-Current Liabilities			(6,342	)			(7,215	)			873
Total hedging effect in Profit or Loss and Shareholders' Equity for the year			(16,725	)			(18,707	)			1,982

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

The balances in the “total realized” column consider the intermediate effects of the contracts in force from January 1 to December 31, 2019 and from January 1 to December 31, 2018.

 

Derivative contract maturities are detailed as follows:

 

Series		Contract amount				Currency		Maturity date
		ThUS$
H			148,159			UF		01-04-2023
O			58,748			UF		02-01-2022
P			134,228			UF		01-15-2028

 

The Company uses cross currency swap derivative instruments to hedge the possible financial risk associated with the volatility of the exchange rate associated with Chilean pesos and UF. The objective is to hedge the exchange rate financial risks associated with bonds payable. Hedges are documented and tested to measure their effectiveness.

 

Based on a comparison of critical terms, hedging is highly effective, given that the hedged amount is consistent with obligations maintained for bonds denominated in UF. Likewise, hedging contracts are denominated in the same currencies and have the same maturity dates of bond principal and interest payments.

 

Effectiveness

 

Effectiveness tests have verified that hedges are effective as of the reporting date. This note describes the fair values of derivative instruments classified as hedges.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

14.4

Financial liabilities

 

Other current and non-current financial liabilities

 

As of December 31, 2019 and 2018, the detail is as follows:

 

Other current and non-current financial		As of December 31, 2019												As of December 31, 2018
liabilities		Current				Non-current				Total				Current				Non-current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Liabilities at amortized cost
Bank borrowings			199				69,138				69,337				300				68,870				69,170
Obligations with the public (bonds)			280,578				1,403,108				1,683,686				15,145				1,249,479				1,264,624
Derivative financial instruments
For hedging			7,183				16,477				23,660				5,285				12,033				17,318
Non-Hedging liabilities			3,168				-				3,168				2,855				-				2,855
Liabilities for lease			7,694				30,203				37,897				-				-				-
Total			298,822				1,518,926				1,817,748				23,585				1,330,382				1,353,967

 

Current and non-current bank borrowings

 

As of December 31, 2019 and 2018, the detail is as follows:

 

Current and non-current bank borrowings		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Long-term bank borrowings			69,138				68,870
Current portion of long-term loans			199				300
Short-term borrowings and current portion of long-term borrowings			69,337				69,170

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

a)

Bank borrowings, current:

 

As of December 31, 2019 and 2018, the detail of this caption is as follows:

 

Debtor

Creditor

Currency or adjustment

Tax ID No

Company

Country

Tax ID No

Financial institution

Country

index

Repayment

maturity

Effective rate

Nominal rate

93.007.000-9

SQM S.A.

Chile

Foreign

Scotiabank Cayman

USA

US$

Upon maturity

05-29-2023

2.11

%

3.01

%

Foreign

Nitratos Naturais do Chile Lim.

Brazil

Foreign

Banco Itau Brasil

Brazil

BRL

Upon maturity

12-31-2019

13.57

%

4.25

%

 

Debtor		Creditor		Nominal amounts as of December 31, 2019												Current amounts as of December 31, 2019
Company		Financial institution		Up to 90 days				90 days to 1 year				Total				Up to 90 days				90 days to 1 year				Subtotal				Borrowing costs				Total
				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM S.A.		Scotiabank Cayman			-				-				-				-				187				187				-				187
Nitratos Naturais do Chile		Banco Itau Brasil			-				-				-				12				-				12				-				12
Total					-				-				-				12				187				199				-				199

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Debtor

Creditor

Currency or adjustment

Tax ID No

Company

Country

Tax ID No

Financial institution

Country

index

Repayment

maturity

Effective rate

Nominal rate

93.007.000-9

SQM S.A.

Chile

Foreign

Scotiabank Cayman

USA

US$

Upon maturity

05-29-2023

3.60

%

3.98

%

Foreign

Nitratos Naturais do Chile Lim

Brazil

Foreign

Banco ITAU Brasil

Brazil

BRL

Upon maturity

01-31-2019

5.17

%

5.17

%

Foreign

SQM Brasil Limitada

Brazil

Foreign

Banco ITAU Brasil

Brazil

BRL

Upon maturity

01-31-2019

5.5

%

5.5

%

 

 

Debtor		Creditor		Nominal amounts as of December 31, 2018												Current amounts as of December 31, 2018
Company		Financial institution		Up to 90 days				90 days to 1 year				Total				Up to 90 days				90 days to 1 year				Subtotal				Borrowing costs				Total
				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM S.A.		Scotiabank Cayman			-				-				-				-				248				248				-				248
Nitratos Naturais do Chile Lim		Banco ITAU Brasil			-				-				-				11				-				11				-				11
SQM Brasil Limitada		Banco ITAU Brasil			-				-				-				41				-				41				-				41
Total					-				-				-				52				248				300				-				300

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

b)

Unsecured obligations, current:

 

As of December 31, 2019 and 2018, the detail of current unsecured interest-bearing obligations is composed of promissory notes and bonds, as follows:

 

Debtor						Number of										Periodicity
Tax ID No.		Company		Country		registration or ID of the instrument				Series		Maturity date		Currency or adjustment index		Payment of interest		Repayment		Effective rate				Nominal rate
93.007.000-9		SQM S.A.		Chile			-			MUS$250		04-21-2020		US$		Semiannual		Upon maturity			0.43	%			5.50	%
93.007.000-9		SQM S.A.		Chile			-			MUS$250		01-28-2020		US$		Semiannual		Upon maturity			2.35	%			4.38	%
93.007.000-9		SQM S.A.		Chile			-			MUS$300		04-03-2020		US$		Semiannual		Upon maturity			1.42	%			3.63	%
93.007.000-9		SQM S.A.		Chile			-			MUS$450		05-07-2020		US$		Semiannual		Upon maturity			4.07	%			4.25	%
93.007.000-9		SQM S.A.		Chile			564			H		01-05-2020		UF		Semiannual		Semiannual			1.36	%			4.90	%
93.007.000-9		SQM S.A.		Chile			699			O		02-01-2020		UF		Semiannual		Upon maturity			2.41	%			3.80	%
93.007.000-9		SQM S.A.		Chile			563			P		01-15-2020		UF		Semiannual		Upon maturity			2.71	%			3.25	%
93.007.000-9		SQM S.A.		Chile			700			Q		06-01-2020		UF		Semiannual		Upon maturity			3.11	%			3.45	%

 

						Nominal maturities as of December 31, 2019												Current maturities as of December 31, 2019
Company		Country		Series		Up to 90 days				91 days to 1 year				Total				Up to 90 days				91 days to 1 year				Subtotal				Bond issuance costs				Total
						ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM S.A.		Chile		MUS$250			-				252,674				252,674				-				252,674				252,674				(386	)			252,288
SQM S.A.		Chile		MUS$250			4,648				-				4,648				4,648				-				4,648				(433	)			4,215
SQM S.A.		Chile		MUS$300			-				2,658				2,658				-				2,658				2,658				(614	)			2,044
SQM S.A.		Chile		MUS$450			-				2,869				2,869				-				2,869				2,869				(679	)			2,190
SQM S.A.		Chile		H			17,166				-				17,166				17,166				-				17,166				(139	)			17,027
SQM S.A.		Chile		O			890				-				890				890				-				890				(67	)			823
SQM S.A.		Chile		P			1,686				-				1,686				1,686				-				1,686				(12	)			1,674
SQM S.A.		Chile		Q			-				323				323				-				323				323				(6	)			317
Total							24,390				258,524				282,914				24,390				258,524				282,914				(2,336	)			280,578

 

Effective rates of bonds in Chilean pesos and UF are expressed and calculated in U.S. dollars based on the flows agreed in Cross Currency Swap Agreements.

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

 

Debtor						Number of										Periodicity
Tax I No.		Company		Country		registration or ID of the instrument				Series		Maturity date		Currency or adjustment index		Payment of interest		Repayment		Effective rate				Nominal rate
93.007.000-9		SQM S.A.		Chile			-			MUS$250		04-21-2019		US$		Semiannual		Upon maturity			0.95	%			5.50	%
93.007.000-9		SQM S.A.		Chile			-			MUS$250		01-28-2019		US$		Semiannual		Upon maturity			2.75	%			4.38	%
93.007.000-9		SQM S.A.		Chile			-			MUS$300		04-03-2019		US$		Semiannual		Upon maturity			1.77	%			3.63	%
93.007.000-9		SQM S.A.		Chile			564			H		01-05-019		UF		Semiannual		Semiannual			1.90	%			4.90	%
93.007.000-9		SQM S.A.		Chile			699			O		02-01-2019		UF		Semiannual		Upon maturity			2.60	%			3.80	%
93.007.000-9		SQM S.A.		Chile			563			P		01-15-2019		UF		Semiannual		Upon maturity			3.07	%			3.25	%
93.007.000-9		SQM S.A.		Chile			700			Q		06-01-2019		UF		Semiannual		Upon maturity			3.34	%			3.45	%

 

 

						Nominal maturities as of December 31, 2018												Current maturities as of December 31, 2018
Company		Country		Series		Up to 90 days				91 days to 1 year				Total				Up to 90 days				91 days to 1 year				Subtotal				Bond issuance costs				Total
						ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM S.A.		Chile		MUS$250			2,674				-				2,674				2,674				-				2,674				(386	)			2,288
SQM S.A.		Chile		MUS$250			-				4,648				4,648				-				4,648				4,648				(433	)			4,215
SQM S.A.		Chile		MUS$300			2,658				-				2,658				2,658				-				2,658				(614	)			2,044
SQM S.A.		Chile		H			-				3,756				3,756				-				3,756				3,756				(139	)			3,617
SQM S.A.		Chile		O			-				934				934				-				934				934				(67	)			867
SQM S.A.		Chile		P			-				1,784				1,784				-				1,784				1,784				(12	)			1,772
SQM S.A.		Chile		Q			342				-				342				342				-				342				-				342
Total							5,674				11,122				16,796				5,674				11,122				16,796				(1,651	)			15,145

 

Effective rates of bonds in Chilean pesos and UF are expressed and calculated in U.S. dollars based on the flows agreed in Cross Currency Swap Agreements.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

c)

Classes of interest-bearing loans, non-current

 

The following table shows the details of bank loans that accrue non-current interest as of December 31, 2019. As of December 31, 2018 there were no loans:

 

Debtor

Creditor

Currency or  adjustment

Type of

Effective

Nominal

Tax ID No.

Company

Country

Tax ID No.

Financial institution

Country

index

amortization

rate

rate

93.007.000-9

SQM S.A.

Chile

Foreign

Scotiabank Cayman

USA

USD

Maturity

2.84

%

3.01

%

 

Debtor		Creditor		Nominal non-current maturities as of December 31, 2019																Non-current maturities as of December 31, 2019
Company		Financial institution		Between 1 and 2				Between 2 and 3				Between 3 and 4				Total				Between 1 and 2				Between 2 and 3				Between 3 and 4				Subtotal				Costs of obtaining loans				Total
				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM S.A.		Scotiabank Cayman			-				-				70,000				70,000				-				-				70,000				70,000				(862	)			69,138
Total					-				-				70,000				70,000				-				-				70,000				70,000				(862	)			69,138

 

Debtor

Creditor

Currency or adjustment

Type of

Effective

Nominal

Tax ID No.

Company

Country

Tax ID No.

Financial institution

Country

index

amortization

rate

rate

93.007.000-9

SQM S.A.

Chile

Foreign

Scotiabank Cayman

USA

USD

Maturity

3,98

%

3,98

%

 

Debtor		Creditor		Nominal non-current maturities as of December 31, 2018																Non-current maturities as of December 31, 2018
Company		Financial institution		Between 1 and 2				Between 2 and 3				Between 3 and 4				Total				Between 1 and 2				Between 2 and 3				Between 3 and 4				Subtotal				Costs of obtaining loans				Total
				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM S.A.		Scotiabank Cayman			-				-				70,000				70,000				-				-				70,000				70,000				(1,130	)			68,870
Total					-				-				70,000				70,000				-				-				70,000				70,000				(1,130	)			68,870

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

d)

Non-current unsecured interest-bearing bonds

 

The following table shows the details of bank loans that accrue non-current interest as of December 31, 2019, As of December 31, 2018 there were no loans:

 

Debtor						Number of										Periodicity
Tax ID No.		Company		Country		registration or ID of the instrument				Series		Maturity date		Currency or  adjustment index		Payment of interest		Repayment		Effective rate				Nominal rate
93.007.000-9		SQM S.A.		Chile			-			MUS$250		01-28-2025		US$		Semiannual		Upon maturity			4.08	%			4.38	%
93.007.000-9		SQM S.A.		Chile			-			MUS$300		04-03-2023		US$		Semiannual		Upon maturity			3.43	%			3.63	%
93.007.000-9		SQM S.A.		Chile			-			MUS$450		05-07-2029		US$		Semiannual		Upon maturity			4.19	%			4.25	%
93.007.000-9		SQM S.A.		Chile			564			H		01-05-2030		UF		Semiannual		Semiannual			4.78	%			4.90	%
93.007.000-9		SQM S.A.		Chile			699			O		02-01-2033		UF		Semiannual		Upon maturity			3.70	%			5.50	%
93.007.000-9		SQM S.A.		Chile			563			P		01-15-2028		UF		Semiannual		Upon maturity			3.24	%			3.25	%
93.007.000-9		SQM S.A.		Chile			700			Q		06-01-2038		UF		Semiannual		Upon maturity			3.45	%			3.45	%

 

			Nominal non-current maturities as of December 31, 2019																								Non-current maturities as of December 31, 2019
Series			Over 1 year to 2				Over 2 years to 3				Over 3 Years to 4				Over 4 Years to 5				Over 5 years				Total				Over 1 year to 2				Over 2 years to 3				Over 3 Years to 4				Over 4 Years to 5				Over 5 years				Subtotal				Bond issuance costs				Total
			ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$$				ThUS$				ThUS$				ThUS$
MUS$250				-				-				-				-				250,000				250,000				-				-				-				-				250,000				250,000				(1,514	)			248,486
MUS$300				-				-				300,000				-				-				300,000				-				-				300,000				-				-				300,000				(1,393	)			298,607
MUS$450				-				-				-								450,000				450,000				-				-				-				-				450,000				450,000				(5,923	)			444,077
H				13,749				13,749				13,749				13,749				75,621				130,617				13,749				13,749				13,749				13,749				75,621				130,617				(1,253	)			129,364
O				-				-				-				-				56,715				56,715				-				-				-				-				56,715				56,715				(811	)			55,904
P				-				-				-				-				113,430				113,430				-				-				-				-				113,430				113,430				(89	)			113,341
Q				-				-				-				-				113,430				113,430				-				-				-				-				113,430				113,430				(101	)			113,329
Total				13,749				13,749				313,749				13,749				1,059,196				1,414,192				13,749				13,749				313,749				13,749				1,059,196				1,414,192				(11,084	)			1,403,108

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Debtor						Number of										Periodicity
Tax ID No.		Company		Country		registration or ID of the instrument				Series		Maturity date		Currency or adjustment index		Payment of interest		Repayment		Effective rate				Nominal rate
93.007.000-9		SQM S.A.		Chile			-			MUS$250		04-21-2020		US$		Semiannual		Upon maturity			5.50	%			5.50	%
93.007.000-9		SQM S.A.		Chile			-			MUS$250		01-28-2025		US$		Semiannual		Upon maturity			4.38	%			4.38	%
93.007.000-9		SQM S.A.		Chile			-			MUS$300		04-03-2023		US$		Semiannual		Upon maturity			3.63	%			3.63	%
93.007.000-9		SQM S.A.		Chile			564			H		01-05-2030		UF		Semiannual		Semiannual			4.90	%			4.90	%
93.007.000-9		SQM S.A.		Chile			699			O		02-01-2033		UF		Semiannual		Upon maturity			3.80	%			5.50	%
93.007.000-9		SQM S.A.		Chile			563			P		01-15-2028		UF		Semiannual		Upon maturity			3.25	%			3.25	%
93.007.000-9		SQM S.A.		Chile			700			Q		06-01-2038		UF		Semiannual		Upon maturity			3.45	%			3.45	%

 

 

			Nominal non-current maturities as of December 31, 2018																								Non-current maturities as of December 31, 2018
Series			Over 1 year to 2				Over 2 years to 3				Over 3 Years to 4				Over 4 Years to 5				Over 5 years				Total				Over 1 year to 2				Over 2 years to 3				Over 3 Years to 4				Over 4 Years to 5				Over 5 years				Subtotal				Bond issuance costs				Total
			ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$$				ThUS$				ThUS$				ThUS$
MUS$250				250,000				-				-				-				-				250,000				250,000				-				-				-				-				250,000				(131	)			249,869
MUS$250				-				-				-				-				250,000				250,000				-				-				-				-				250,000				250,000				(2,202	)			247,798
MUS$300				-				-				300,000				-				-				300,000				-				-				300,000				-				-				300,000				(2,006	)			297,994
H				14,428				14,428				14,428				14,428				100,992				158,704				14,428				14,428				14,428				14,428				100,992				158,704				(1,392	)			157,312
O				-				-				-				-				59,514				59,514				-				-				-				-				59,514				59,514				(878	)			58,636
P				-				-				-				-				119,028				119,028				-				-				-				-				119,028				119,028				(101	)			118,927
Q				-				-				-				-				119,028				119,028				-				-				-				-				119,028				119,028				(85	)			118,943
Total				264,428				14,428				314,428				14,428				648,562				1,256,274				264,428				14,428				314,428				14,428				648,562				1,256,274				(6,795	)			1,249,479

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

  

e)

Additional information

 

Bonds

 

As of December 31, 2019 and, 2018, the details of each issuance are as follows:

 

(i)

Series “H” bonds

 

On January 13, 2009, the Company placed the Series H bond for UF 4,000,000 (ThUS$ 139,216) at an annual interest rate of 4.9%, with a term of 21 years and amortizations of principal beginning in 2019.

 

On July 5, 2019, amortization of principal amounted to UF 181,818.18. (ThUS$ 7.494) with an associated cross currency swap hedge income of ThUS$ 439.

As of December 31, 2019, and December 31, 2018, the Company has made the following payments with a charge to the Series H bonds:

 

Payments made		For the year ended December 31, 2019				For the year ended December 31, 2018
		ThUS$				ThUS$
Payments of interest, Series H bonds			7,868				8,325
CCS Coverage			1,952				495

  

(ii)

Single series bonds, second issue ThUS$ 250,000

 

On April 21, 2010, the Company informed the CMF of its placement in international markets of an unsecured bond of ThUS$ 250,000 with a maturity of 10 years beginning on the aforementioned date with an annual interest rate of 5.5% and destined to refinance long-term liabilities.

 

As of December 31, 2019, and December 31, 2018, the detail of payments charged to the line of single series bonds, second issue is as follows

 

Payments made		For the year ended December 31, 2019				For the year ended December 31, 2018
		ThUS$				ThUS$
Interest payment			13,750				13,750

  

  

Notes to the Consolidated Financial Statement December 31, 2019

  

(iii)

Series “O” bonds

 

On April 4, 2012, the Company issued “Series O” for UF 1,500,000 (ThUS$ 69,901) was placed at a term of 21 years with a single payment at the maturity of the term and an annual interest rate of 3.80%.

 

As of December 31, 2019, and December 31, 2018, the Company has made the following payments with a charge to Series O bonds and their associated CCS hedging:

 

Payments made		For the year ended December 31, 2019				For the year ended December 31, 2018
		ThUS$				ThUS$
Payment of interest, Series O bonds			2,308				2,457
CCS Coverage			354				205

  

(iv)

Single series bonds, third issue MUS$ 300

  

On April 3, 2013, the Company issued a non-secured bond in the United States with a value of US$ 300 million. The bond is for a 10-year term with an annual coupon rate of 3.625%. The funds raised were used to refinance long term liabilities and finance general corporate objectives.

 

As of December 31, 2019, and December 31, 2018, the following payments have been made with a debit to the line of single-series bonds, third issue:

 

Payments made		For the year ended December 31, 2019				For the year ended December 31, 2018
		ThUS$				ThUS$
Payment of interest			10,875				10,875

 

  

Notes to the Consolidated Financial Statement December 31, 2019

 

(v)

Single series bonds, fourth issuance ThUS $250,000

 

On October 23, 2014, the Company informed the CMF the issuance and placement of unsecured bonds amounting ThUS$ 250,000 in international markets. These bonds mature in 2025 and have annual interest rate of 4.375%, which were offered to investors at a price of 99.410% with respect to capital. The aforementioned agreement was performed in conformity with the provisions of Rule 144A of the US Securities Act of 1933 and these bonds were publicly offered in Chile.

 

For the years ended December 31, 2019, and 2018, the following payments have been made.

 

Payments made		For the year ended December 31, 2019				For the year ended December 31, 2018
		ThUS$				ThUS$
Payment of interest			10,938				10,938

 

(vi)

Series “P” bonds

 

On April 5, 2018, the Company informed the CMF that on March 29, 2018, it was authorized the placement on the stock market of the Series “P” bond with a value of UF 3,000,000, with a charge to the 10 year Bonds Line registered in the CMF Securities Registry under number 563.

 

The bonds Series P (i) mature on January 15, 2028; (ii) will accrue on the unpaid principal, expressed in UF, at an annual interest rate of 3.25% from January 15, 2018; and (iii) can be early redeemed by the Company starting from the date of placement, that was, as of April 5, 2018.

 

For the years ended December 31, 2019 and 2018, the following payments and their associated CCS have been made:

 

Payments made		For the year ended December 31, 2019				For the year ended December 31, 2018
		ThUS$				ThUS$
Payment of interest			3,960				1,085
CCS Coverage			2,995				1,421

 

  

Notes to the Consolidated Financial Statement December 31, 2019

 

(vii)

Series Q bonds

 

On October 31, 2018, the issuance of Series Q bonds (the "Bonds “Series Q) was authorized in the general stock market for the amount of UF 3,000,000, which were registered in the Securities Registry of your Commission on February 14, 2012 under number 700.

 

The bonds Series Q (i) mature on the first day of June 2038; (ii) will earn an interest rate of 3.45% per annum on the outstanding capital, expressed in Unidades de Fomento, from June 1, 2018 thereon; and (iii) may be early redeemed by the Company starting from the placement date, that was, as of November 8, 2018.

 

On November 8, 2018, all the Series Q Bonds have been placed and sold to Euroamerica S.A. for a total amount of $ 83,567,623,842, which was paid in full and in cash by Euroamerica S.A. to the Company.

 

The funds obtained from the aforementioned placement will be used approximately 90% to finance the expansion program of lithium, potassium nitrate and iodine plants in Chile; the remainder will be used for the investment plan of the Company and its subsidiaries, and to finance working capital.

 

For the years ended December 31, 2019 and 2018, the following payments have been made:

 

Payments made		For the year ended December 31, 2019				For the year ended December 31, 2018
		ThUS$				ThUS$
Payment of interest			3,791				319

 

(viii)

Single series fifth issue bonds ThUS$ 450,000

 

On May 7, 2019 the CMF was informed that the Company issued and placed unsecured bonds for ThUS$ 450,000 on international markets. Essentially, these bonds will mature in 2029, carry an interest rate of 4.25% per annum, and were offered to investors at a price of 99.984% with respect to the capital. This agreement was signed on May 7, 2019 and the bonds were issued and placed in accordance with the provisions of Rule 144A of the US Securities Act of 1933 and they will not be traded in Chile.

 

Payments made		For the year ended December 31, 2019				For the year ended December 31, 2018
		ThUS$				ThUS$
Payment of interest			9,563				-

 

  

Notes to the Consolidated Financial Statement December 31, 2019

 

f)

Current and non-current lease liabilities

 

		Currents																Non-Currents												Balance as of
Associated leasing		Up to 1 month				1 to 3 months				3 to 12 months				Total				1 to 5 years				5 or more years				Total				December 31, 2019
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Buildings			262				795				1,830				2,887				13,507				9,792				23,299				26,186
Transport equipment			70				211				571				852				2,530				-				2,530				3,382
Machinery, plant and equipment			327				993				2,635				3,955				3,993				381				4,374				8,329
Total			659				1,999				5,036				7,694				20,030				10,173				30,203				37,897

 

		As of December 31,				Adoption of				Monetary								Non- Monetary				Balance as of
Changes in Lease Liabilities		2018				IFRS 16				Principal l paid				Interest paid				Interest accrued				December 31, 2019
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Buildings			-				29,289				(3,101	)			(840	)			838				26,186
Machinery, plant and equipment			-				11,933				(3,605	)			(635	)			636				8,329
Transport equipment			-				3,893				(515	)			(62	)			66				3,382
Total			-				45,115				(7,221	)			(1,537	)			1,540				37,897

 

Lease amounts that were not included in liabilities under IFRS 16

 

The weighted average of the incremental lease loan rate applied to lease liabilities recognized in the statement of financial position on December 31, 2019 is 8.08%. Total related expenses with lease payments under 1 year and low-value asset leases together with variable payments not included in the measurement of lease liabilities were ThUS$ 50,660 for the period ended December 31, 2019.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

14.5

Trade and other payables

 

a)

Details trade and other payables

 

		As of December 31, 2019												As of December 31, 2018
Details trade and Other payables		Current				Non-current				Total				Current				Non-current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Accounts payable			205,414				-				205,414				163,373				-				163,373
Other accounts payable			376				-				376				378				-				378
Total			205,790				-				205,790				163,751				-				163,751

 

As of December 31, 2019 and 2018, the balance of current and past due suppliers is as follows:

 

Suppliers current on all payments

 

		Amounts according to payment periods as of December 31, 2019
																		121 - 365				366 and				Total
Type of Supplier		Up to 30 days				31-60 days				61-90 days				91 - 120 days				days				more days				ThUS$
Goods			126,577				4,655				128				116				2,019				-				133,495
Services			51,785				168				-				-				87				-				52,040
Others			8,741				146				-				-								-				8,887
Total			187,103				4,969				128				116				2,106				-				194,422

 

		Amounts according to payment periods as of December 31, 2018
																		121 - 365				366 and				Total
Type of Supplier		Up to 30 days				31-60 days				61-90 days				91 - 120 days				days				more days				ThUS$
Goods			48,969				1,919				912				25				280				-				52,105
Services			37,376				314				157				107				54				-				38,008
Others			54,978				161				20				-				3				-				55,162
Total			141,323				2,394				1,089				132				337				-				145,275

 

Suppliers past due on payments

 

		Amounts according to payment periods as of December 31, 2019
																		121 - 365				366 and				Total
Type of Supplier		Up to 30 days				31-60 days				61-90 days				91 - 120 days				days				more days				ThUS$
Goods			2,086				264				35				65				1,060				-				3,510
Services			3,073				329				116				387				580				-				4,485
Others			1,918				45				311				215				508				-				2,997
Total			7,077				638				462				667				2,148				-				10,992

 

 

		Amounts according to payment periods as of December 31, 2018
																		121 - 365				366 and				Total
Type of Supplier		Up to 30 days				31-60 days				61-90 days				91 - 120 days				days				more days				ThUS$
Goods			1,533				209				210				255				462				-				2,669
Services			12,229				838				109				111				450				-				13,737
Others			1,039				385				92				6				170				-				1,692
Total			14,801				1,432				411				372				1,082				-				18,098

 

Purchase commitments held by the Company are recognized as liabilities when the goods and services are received by the Company. As of December 31, 2019, the Company has purchase orders amounting to ThUS$ 101,280 (ThUS$ 59,919 as of December 31, 2018).

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

14.6

Financial liabilities at fair value through profit or loss

 

This balance relates to derivative instruments measured at their fair value, which have generated balances against the Company. The detail of this type of instrument is as follows:

 

Financial liabilities at fair value with an impact on profit or loss		As of December 31, 2019				Effect on profit or loss for the year ended December 31, 2019				As of December 31, 2018				Effect on profit or loss for the year ended December 31, 2018
		ThUS$				ThUS$				ThUS$				ThUS$
Current
Derivative instruments (IRS)			-				(16	)			91				16
Total			-				(16	)			91				16

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

14.7

Financial asset and liability categories

 

a)

Financial Assets

 

		As of December 31, 2019												As of December 31, 2018
Description of financial assets		Current				Non-current				Total				Current				Non-current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Cash and cash equivalent			588,530				-				588,530				556,066				-				556,066
Trade receivables due from related parties			61,227				-				61,227				42,790				-				42,790
Financial assets measured at amortized cost			485,689				75				485,764				291,790				75				291,865
Loans and receivables measured at amortized cost			399,142				1,710				400,852				466,619				2,275				468,894
Total financial assets measured at amortized cost			1,534,588				1,785				1,536,373				1,357,265				2,350				1,359,615
For hedging purposes			17,270				3,918				21,188				18,238				13,425				31,663
Held for trading at fair value through profit or loss			2,531				-				2,531				2,693				-				2,693
Financial assets classified as available for sale at fair value through equity			-				4,785				4,785				-				3,631				3,631
Total financial assets at fair value			19,801				8,703				28,504				20,931				17,056				37,987
Total financial assets			1,554,389				10,488				1,564,877				1,378,196				19,406				1,397,602

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

b)

Financial Liabilities

 

		As of December 31, 2019												As of December 31, 2018
Description of financial liabilities		Current				Non-current				Total				Current				Non-current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
For hedging purposes			7,183				16,477				23,660				5,285				12,033				17,318
Held for trading at fair value through profit or loss			3,168				-				3,168				2,855				-				2,855
Financial liabilities at fair value through profit or loss			10,351				16,477				26,828				8,140				12,033				20,173
Bank loans			199				69,138				69,337				300				68,870				69,170
Obligations to the public			280,578				1,403,108				1,683,686				15,145				1,249,479				1,264,624
Lease Liabilities			7,694				30,203				37,897				-				-				-
Financial liabilities at amortized cost (trade and other payables)			205,790				-				205,790				163,751				-				163,751
Trade payables due to related parties			475				-				475				9				-				9
Total financial liabilities at amortized cost			494,736				1,502,449				1,997,185				179,205				1,318,349				1,497,554
Total financial liabilities			505,087				1,518,926				2,024,013				187,345				1,330,382				1,517,727

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

14.8

Fair value measurement of assets and liabilities

 

Financial assets and liabilities measured at fair value consist of Options and Forwards hedging the mismatch in the balance sheet and cash flows, CCS to hedge bonds issued in local currency (Peso/UF).

 

The value of the Company’s assets and liabilities recognized by CCS contracts is calculated as the difference between the present value of discounted cash flows of the asset (Ch/UF) and liability (US$) parts of the derivative. In the case of the IRS, the asset value recognized is calculated as the difference between the discounted cash flows of the asset (variable rate) and liability (fixed rate) parts of the derivative. Forwards are calculated as the difference between the strike price of the contract and the spot price plus the forwards points at the date of the contract, financial options: the value recognized is calculated using the Black-Scholes method.

 

In the case of CCS, the entry data used for the valuation models are UF, peso, USD and basis swap rates. In the case of fair value calculations for IRS, the Forward Rate Agreement rate and ICVS 23 Curve (Bloomberg: cash/deposits rates, futures, swaps). In the case of forwards, the forwards curve for the currency in question is used, Finally, with options, the spot price, risk-free rate and volatility of exchange rate are used, all in accordance with the currencies used in each valuation. The financial information used as entry data for the Company’s valuation models is obtained from Bloomberg, the well-known financial software company. Conversely, the fair value provided by the counterparties of derivatives contracts is used only as a control and not for valuation.

 

The effects on profit or loss of movements in these amounts may be recognized in the caption Finance costs, foreign currency translation gain (loss) or cash flow hedges in the statement of comprehensive income, depending on each particular case.

 

The fair value measurement of debt is only performed to determine the present market value of secured and unsecured long-term obligations; bonds denominated in local currency (Ch$/UF) and foreign currency (US$), credits denominated in foreign currency (US$), which is classified under Level 2 in the fair value hierarchy established by IFRS.

 

The value of the Company’s reported liabilities is calculated as the present value of discounted cash flows at market rates at the time of valuation, considering the maturity date and exchange rate. The entry data used for the model includes the UF and peso rates, which are obtained using Bloomberg, the well-known financial software company and Association of Banks and Financial Institutions.

 

The fair value hierarchy is detailed as follows:

 

(a)

Level 1: using quoted prices (unadjusted) only in active markets.

 

(b)

Level 2: when in any phase in the valuation process inputs other than quoted prices have been used in Level 1 that are observable directly in markets.

 

(c)

Level 3: inputs for the asset or liability that are not based on observable market data.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

		As of December 31, 2019												Measurement Methodology
Fair value measurement of assets and liabilities		Carrying Amount at Amortized				Fair value (informative)				Fair value				Level 1				Level 2				Level 3
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Financial Assets
Cash and cash equivalents			588,530				588,530				-				-				588,530				-
Trade and other receivables, current			399,142				399,142				-				-				-				399,142
Trade receivables due from related parties, current			61,227				61,227				-				-				-				61,227
Other current financial assets:
- Time deposits			485,689				485,689				-				-				485,689				-
- Derivative instruments			-				-				-				-				-				-
- Forwards			-				-				2,420				-				2,420				-
- Options			-				-				111				-				111				-
- Hedging assets			-				-				-				-				-				-
- Investment hedge swaps			-				-				17,270				-				17,270				-
Non-current accounts receivable			1,710				1,710				-				-				-				-
Other non-current financial assets:
- Other			94				94				-				-				94				-
- Actions			-				-				4,785				4,785				-				-
- Hedging assets – Swaps			-				-				3,918				-				3,918				-
Other current financial liabilities																							-
- Bank loans			199				199				-				-				199				-
- Derivative instruments			-				-				-				-				-				-
- Forwards			-				-				2,837				-				2,837				-
- Options			-				-				289				-				289				-
- Hedging liabilities			-				-				7,183				-				7,183				-
- Investments			-				-				-				-				-				-
- Unsecured obligations			280,578				280,578				-				-				280,578				-
- Current lease liabilities			7,694				7,694				-				-				7,694				-
Trade and other payables, current and non-current			205,790				205,790				-				-				205,790				-
Trade payables due to related parties, current			475				475				-				-				475				-
Other non-current financial liabilities:
- Bank loans			69,138				71,033				-				-				71,033				-
- Unsecured obligations			1,403,108				1,658,506				-				-				1,658,506				-
- Non-current hedging liabilities			-				-				16,477				-				16,477				-
- Non-current lease liabilities			30,203				33,187				-				-				33,187				-

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

		As of December 31, 2018												Measurement Methodology
Fair value measurement of assets and liabilities		Carrying Amount at Amortized				Fair value (informative)				Fair value				Level 1				Level 2				Level 3
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Financial Assets
Cash and cash equivalents			556,066				556,066				-				-				556,066				-
Trade and other receivables, current			466,619				466,619				-				-				-				466,619
Trade receivables due from related parties, current			42,790				42,790				-				-				-				42,790
Other current financial assets:
- Time deposits			291,790				291,790				-				-				291,790				-
- Forwards			-				-				2,637				-				2,637				-
- Options			-				-				56				-				56				-
- Hedging assets			-				-				-				-				-				-
- Investment hedge swaps			-				-				18,238				-				18,238				-
Non-current accounts receivable			2,275				2,275				-				-				-				-
Other non-current financial assets:
- Other			75				75				-				-				75				-
- Actions			-				-				3,631				-				-				-
- Hedging assets - Swaps			-				-				13,425				-				13,425				-
Other current financial liabilities																							-
- Bank loans			300				300				-				-				300				-
- Forwards			-				-				2,723				-				2,723				-
- Options			-				-				132				-				132				-
- Hedging liabilities - Swaps			-				-				5,285				-				5,285				-
- Unsecured obligations			15,145				15,145				-				-				15,145				-
Trade and other payables, current and non-current			163,751				163,751				-				-				163,751				-
Trade payables due to related parties, current			9				9				-				-				9				-
Other non-current financial liabilities:
- Bank loans			68,870				71,826				-				-				71,826				-
- Unsecured obligations			1,249,479				1,357,640				-				-				1,357,640				-
- Non-current hedging liabilities			-				-				12,033				-				12,033				-

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

14.9

Estimated fair value of financial instruments and financial derivatives

 

As required by IFRS 7, the following information is presented for the disclosure of the estimated fair value of financial assets and liabilities.

 

Although inputs represent Management's best estimate, they are subjective and involve significant estimates related to the current economic and market conditions, as well as risk features.

 

Methodologies and assumptions used depend on the risk terms and characteristics of instruments and include the following as a summary:

 

·

Cash equivalent approximates fair value due to the short-term maturities of these instruments.

 

·

The fair value of trade receivables, current is considered to be equal to the carrying amount due to the maturity of such accounts at short-term.

 

·

The fair value of other current financial liabilities is considered to be equal to their carrying values.

 

·

For interest-bearing liabilities with original maturity of more than a year, fair values are calculated by discounting contractual cash flows at their original current market rates with similar terms.

 

·

The fair value of debt is considered in Level 2.

 

·

For forward and swap contracts, fair value is determined using quoted market prices of financial instruments with similar characteristics.

 

As indicated in paragraphs 33 to 42 of IFRS 7 the disclosure of information associated with the nature and scope of risks arising from financial instruments is presented in Note 5.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 15

Intangible assets and goodwill

 

15.1

Balances

 

Balances		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Intangible assets other than goodwill			188,358				189,350
Goodwill			34,726				34,866
Total			223,084				224,216

 

15.2

Disclosures on intangible assets and goodwill

 

Intangible assets relate to goodwill, water rights, trademarks, industrial patents, rights of way, software, and mining claims which correspond to exploitation rights acquired from third parties.

 

Balances and movements in the main classes of intangible assets as of December 31, 2019 and December 31, 2018 are detailed as follows:

 

				As of December 31, 2019
Intangible assets and goodwill		Useful life		Gross Value				Accumulated amortization				Accumulated impairment				Net value
				ThUS$				ThUS$				ThUS$				ThUS$
IT programs		Finite			34,471				(28,460	)			-				6,011
Intellectual property rights, patents and other industrial property rights, service		Finite			1,259				(1,131	)			(7	)			121
Mining claims, water rights and rights of way		Indefinite			182,260				-				(2,642	)			179,618
Mining claims		Finite			1,500				(206	)			-				1,294
Customer-related intangible assets		Finite			1,778				(505	)			-				1,273
Other intangible assets		Finite			929				(888	)			-				41
Intangible assets other than goodwill					222,197				(31,190	)			(2,649	)			188,358
Goodwill		Indefinite			38,120				-				(3,394	)			34,726
Total Intangible Assets					260,317				(31,190	)			(6,043	)			223,084

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

				As of December 31, 2018
Intangible assets and goodwill		Useful life		Gross Value				Accumulated amortization				Accumulated impairment				Net value
				ThUS$				ThUS$				ThUS$				ThUS$
IT programs		Finite			29,137				(24,569	)			-				4,568
Intellectual property rights, patents and other industrial property rights, service		Finite			1,254				(1,096	)			(7	)			151
Mining claims, water rights and rights of way		Indefinite			183,349				-				(1,729	)			181,620
Mining claims		Finite			1,500				(88	)			-				1,412
Customer-related intangible assets		Indefinite			1,778				(205	)			-				1,573
Other intangible assets		Indefinite			911				(885	)			-				26
Intangible assets other than goodwill					217,929				(26,843	)			(1,736	)			189,350
Goodwill		Indefinite			38,120				-				(3,254	)			34,866
Total Intangible Assets					256,049				(26,843	)			(4,990	)			224,216

 

a)

Estimated useful lives or amortization rates used for finite identifiable intangible assets

 

Finite useful life measures the length of, or number of production or similar units constituting that useful life.

 

The estimated useful life for software which they are amortized corresponds to the periods defined by the contracts or rights from which they originate.

 

Intellectual property rights, patents and other industrial property, service and exploitation rights, mainly relate to water rights and have a finite useful life to the extent to which they are subject to a fixed-term contract or otherwise they are considered to be indefinite.

 

The company owns mining claims granted by Corfo, which correspond to assets subject to restitution. For this reason, they are considered assets with a finite useful life and their useful life is assigned until the year 2030 when the contract ends.

 

b)

Method used to assess identifiable intangible assets with indefinite useful life

 

The recoverable value of the cash-generating unit has been determined based on a calculation of value-in-use using cash flow projections for a period of 5 years, plus perpetuity annually on December 31.

 

The current value of future cash flows generated by these assets has been estimated given the variation in sales volumes, market prices and costs, discounted at a weighted average cost of capital (WACC) rate of 8.48% as of December 31, 2019.

 

This group of intangible assets includes water rights acquired in Chile, and mining concessions held by the company in Chile and Australia, and these rights are recorded at acquisition cost.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

c)

Minimum and maximum amortization lives or rates of intangible assets:

 

Estimated useful life or amortization rate		Minimum Life or Rate		Maximum Life or Rate
Mining property, water rights and rights of way		Indefinite		Indefinite
Mining claims		1 year		11 years
Intellectual property rights, patents and other industrial property rights, service		1 year		16 years
Commercial trademarks		1 year		5 years
IT programs		2 years		6 years

 

The following table shows the movements in goodwill as of December 31, 2019:

 

		Gross value								Accumulated				Net value
Company		As of December 31, 2018				Additional recognition				impairment losses				As of December 31, 2019
		ThUS$				ThUS$				ThUS$				ThUS$
SQM Industrial S.A.			3,214				-				(3,214	)			-
SQM S.A.			22,255				-				-				22,255
SQM Iberian S.A.			148				-				-				148
SQM Investment Corporation			86				-				-				86
Soquimich Comercial S.A.			320				-				(180	)			140
Soquimich European Holding			11,373				-				-				11,373
SQM Potasio S.A.			724				-				-				724
Total			38,120				-				(3,394	)			34,726

 

d)

Information to be disclosed on assets generated internally

 

The Company has no intangible assets generated internally.

 

Impairment of goodwill and intangible value

 

As of December 31, 2019 an intangible asset impairment of ThUS$ 913 was generated and a goodwill impairment of ThUS$ 140 was generated.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

e)

Movements in identifiable intangible assets as of December 31, 2019:

 

Gross Value Movements in identifiable intangible assets		IT programs				Intellectual property rights, patents and other industrial property rights, service, Finite				Mining claims property, water rights, and rights of way, Indefinite				Mining claims finite				Customer-related intangible assets				Other intangible assets				Goodwill				Identifiable intangible assets
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening Balance			29,137				1,254				183,349				1,500				1,778				911				38,120				256,049
Additions			2,606				5				227				-				-				18				-				2,856
Other increases / decreases for foreign currency			(7	)			-				(2	)			-				-				-				-				(9	)
Decreases through sale			-				-				(1,314	)			-				-				-				-				(1,314	)
Other increases (decreases)			2,735				-				-				-				-				-				-				2,735
Total increases (decreases)			5,334				5				(1,089	)			-				-				18				-				4,268
Closing balance			34,471				1,259				182,260				1,500				1,778				929				38,120				260,317

 

Accumulated amortization and impairment Movements in identifiable intangible assets		IT programs				Intellectual property rights, patents and other industrial property rights, service, Finite				Mining claims property, water rights, and rights of way, Indefinite				Mining claims finite				Customer-related intangible assets				Other intangible assets				Goodwill				Identifiable intangible assets
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening Balance			(24,569	)			(1,103	)			(1,729	)			(88	)			(205	)			(885	)			(3,254	)			(31,833	)
Other increases / decreases for foreign currency			3				-				-				-				-				-				-				3
Other increases (decreases)			(256	)			-				-				-				-				-				-				(256	)
Impairment losses recognized in profit or loss for the year			-				-				(913	)			-				-				-				(140	)			(1,053	)
Amortization			(3,638	)			(35	)			-				(118	)			(300	)			(3	)			-				(4,094	)
Total increases (decreases)			(3,891	)			(35	)			(913	)			(118	)			(300	)			(3	)			(140	)			(5,400	)
Closing balance			(28,460	)			(1,138	)			(2,642	)			(206	)			(505	)			(888	)			(3,394	)			(37,233	)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Net value Movements in Identifiable intangible assets		IT programs				Intellectual property rights, patents and other industrial property rights, service, Finite				Mining claims property, water rights, and rights of way, Indefinite				Mining property finite				Customer-related intangible assets				Other intangible assets				Goodwill				Identifiable intangible assets
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening Balance			4,568				151				181,620				1,412				1,573				26				34,866				224,216
Additions			2,606				5				227				-				-				18				-				2,856
Amortization			(3,638	)			(35	)			-				(118	)			(300	)			(3	)			-				(4,094	)
Impairment losses recognized in profit or loss for the year			-				-				(913	)			-				-				-				(140	)			(1,053	)
Other increases / decreases for foreign currency			(4	)			-				(2	)			-				-				-				-				(6	)
Decreases through sale			-				-				(1,314	)			-				-				-				-				(1,314	)
Other increases (decreases)			2,479				-				-				-				-				-				-				2,479
Total increases (decreases)			1,443				(30	)			(2,002	)			(118	)			(300	)			15				(140	)			(1,132	)
Closing balance			6,011				121				179,618				1,294				1,273				41				34,726				223,084

 

Movements in identifiable intangible assets as of December 31, 2018:

 

Gross Value Movements in identifiable intangible assets		IT programs				Intellectual property rights, patents and other industrial property rights, service, Finite				Mining claims property, water rights, and rights of way, Indefinite				Mining property finite				Customer-related intangible assets				Other intangible assets				Goodwill				Identifiable intangible assets
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening Balance			25,060				1,250				104,858				1,500				1,778				171				37,972				172,589
Additions			1,159				5				77,201				-				-				11				-				78,376
Other increases / decreases for foreign currency			(5	)			(1	)			(4	)			-				-				-				-				(10	)
Other increases (decreases)			2,923				-				1,294				-				-				729				148				5,094
Total increases (decreases)			4,077				4				78,491				-				-				740				148				83,460
Closing balance			29,137				1,254				183,349				1,500				1,778				911				38,120				256,049

  

  

Notes to the Consolidated Financial Statement December 31, 2019

  

Accumulated amortization and impairment Movements in identifiable intangible assets		IT programs				Intellectual property rights, patents and other industrial property rights, service, Finite				Mining claims property, water rights, and rights of way, Indefinite				Mining claims finite				Customer-related intangible assets				Other intangible assets				Goodwill				Identifiable intangible assets
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening Balance			(19.769	)			(1.061	)			-				-				-				-				-				(20.830	)
Other increases / decreases for foreign currency exchange rates			4				-				-				-				-				-				-				4
Impairment losses recognized in profit or loss for the year			-				(7	)			(1,729	)			-				-				-				(3,254	)			(4,990	)
Amortization			(2,880	)			(35	)			-				(88	)			(205	)			-				-				(3,208	)
Reclassification of/for construction in progress			(1,924	)			-				-				-				-				(885	)			-				(2,809	)
Total increases (decreases)			(4,800	)			(42	)			(1,729	)			(88	)			(205	)			(885	)			(3,254	)			(11,003	)
Closing balance			(24,569	)			(1,103	)			(1,729	)			(88	)			(205	)			(885	)			(3,254	)			(31,833	)

  

Net value Movements in Identifiable intangible assets		IT programs				Intellectual property rights, patents and other industrial property rights, service, Finite				Mining claims property, water rights, and rights of way, Indefinite				Mining claims finite				Customer-related intangible assets				Other intangible assets				Goodwill				Identifiable intangible assets
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening Balance			5,291				189				104,858				1,500				1,778				171				37,972				151,759
Additions			1,159				5				77,201				-				-				11				-				78,376
Amortization			(2,880	)			(35	)			-				(88	)			(205	)			-				-				(3,208	)
Impairment losses recognized in profit or loss for the year			-				(7	)			(1,729	)			-				-				-				(3,254	)			(4,990	)
Other increases / decreases for foreign currency exchange rates			(1	)			(1	)			(4	)			-				-				-				-				(6	)
Reclassification of/for construction in progress			999				-				1,294				-				-				(156	)			148				2,285
Total increases (decreases)			(723	)			(38	)			76,762				(88	)			(205	)			(145	)			(3,106	)			72,457
Closing balance			4,568				151				181,620				1,412				1,573				26				34,866				224,216

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

g)

Movements in identifiable goodwill as of December 31, 2019:

 

Gross Value Movements in identifiable goodwill		Goodwill at the start of the period January 01, 2019				Additional recognition				Recognition subsequent to deferred tax assets (-)				Decreases for classification as held for sale (-)				Goodwill write-off without having been included previously in disposal groups classified as held for sale (-)				Impairment losses recognized in profit or loss for the year (-)				Increase (decrease) for net exchange differences				Increase (decrease) due to other changes				Total increase (decrease)				Goodwill at end of period
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Industrial S.A.			3,214				-				-				-				-				-				-				-				-				3,214
SQM S.A.			22,255				-				-				-				-				-				-				-				-				22,255
SQM Iberian S.A.			148				-				-				-				-				-				-				-				-				148
SQM Investment Corporation			86				-				-				-				-				-				-				-				-				86
Soquimich Comercial S.A.			320				-				-				-				-				-				-				-				-				320
Soquimich European Holding B.V.			11,373				-				-				-				-				-				-				-				-				11,373
SQM Potasio S.A.			724				-				-				-				-				-				-				-				-				724
Total increases (decreases)			38,120				-				-				-				-				-				-				-				-				38,120
Closing balance			38,120				-				-				-				-				-				-				-				-				38,120

 

Accumulated impairment Movements in identifiable goodwill		Goodwill at the start of the period January 01, 2019				Additional recognition				Recognition subsequent to deferred tax assets (-)				Decreases for classification as held for sale (-)				Goodwill write-off without having been included previously in disposal groups classified as held for sale (-)				Impairment losses recognized in profit or loss for the year (-)				Increase (decrease) for net exchange differences				Increase (decrease) due to other changes				Total increase (decrease)				Goodwill at end of period
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Industrial S.A.			(3,214	)			-				-				-				-				-				-				-				-				(3,214	)
SQM S.A.			-				-				-				-				-				-				-				-				-				-
SQM Iberian S.A.			-				-				-				-				-				-				-				-				-				-
SQM Investment Corporation			-				-				-				-				-				-				-				-				-				-
Soquimich Comercial S.A.			(40	)			-				-				-				-				(140	)			-				-				(140	)			(180	)
Soquimich European Holding B.V.			-				-				-				-				-				-				-				-				-				-
SQM Potasio S.A.			-				-				-				-				-				-				-				-				-				-
Total increases (decreases)			(3,254	)			-				-				-				-				(140	)			-				-				(140	)			(3,394	)
Closing balance			(3,254	)			-				-				-				-				(140	)			-				-				(140	)			(3,394	)

  

  

Notes to the Consolidated Financial Statement December 31, 2019

  

Net Value Movements in identifiable goodwill		Goodwill at the start of the period January 01, 2019				Additional recognition				Recognition subsequent to deferred tax assets (-)				Decreases for classification as held for sale (-)				Goodwill write-off without having been included previously in disposal groups classified as held for sale (-)				Impairment losses recognized in profit or loss for the year (-)				Increase (decrease) for net exchange differences				Increase (decrease) due to other changes				Total increase (decrease)				Goodwill at end of period
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Industrial S.A.		-				-				-				-				-				-				-				-				-				-
SQM S.A.			22,255				-				-				-				-				-				-				-				-				22,255
SQM Iberian S.A.			148				-				-				-				-				-				-				-				-				148
SQM Investment Corporation			86				-				-				-				-				-				-				-				-				86
Soquimich Comercial S.A.			280				-				-				-				-				(140	)			-				-				(140	)			140
Soquimich European Holding B.V.			11,373				-				-				-				-				-				-				-				-				11,373
SQM Potasio S.A.			724				-				-				-				-				-				-				-				-				724
Total increases (decreases)			34,866				-				-				-				-				(140	)			-				-				(140	)			34,726
Closing balance			34,866				-				-				-				-				(140	)			-				-				(140	)			34,726

 

h)

Movements in identifiable goodwill as of December 31, 2018:

  

Gross Value Movements in identifiable goodwill		Goodwill at the start of the period January 01, 2018				Additional recognition				Recognition subsequent to deferred tax assets (-)				Decreases for classification as held for sale (-)				Goodwill write-off without having been included previously in disposal groups classified as held for sale (-)				Impairment losses recognized in profit or loss for the year (-)				Increase (decrease) for net exchange differences				Increase (decrease) due to other changes				Total increase (decrease)				Goodwill at end of period
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Industrial S.A.			3,214				-				-				-				-				-				-				-				-				3,214
SQM S.A.			22,255				-				-				-				-				-				-				-				-				22,255
SQM Iberian S.A.			-				-				-				-				-				-				-				148				148				148
SQM Investment Corporation			86				-				-				-				-				-				-				-				-				86
Soquimich Comercial S.A.			320				-				-				-				-				-				-				-				-				320
Soquimich European Holding B.V.			11,373				-				-				-				-				-				-				-				-				11,373
SQM Potasio S.A.			724				-				-				-				-				-				-				-				-				724
Total increases (decreases)			37,972				-				-				-				-				-				-				148				148				38,120
Closing balance			37,972				-				-				-				-				-				-				148				148				38,120

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Accumulated impairment Movements in identifiable goodwill		Goodwill at the start of the period January 01, 2018				Additional recognition				Recognition subsequent to deferred tax assets (-)				Decreases for classification as held for sale (-)				Goodwill released without having been included previously in disposal groups classified as held for sale (-)				Impairment losses recognized in profit or loss for the year (-)				Increase (decrease) for net exchange differences				Increase (decrease) due to other changes				Total increase (decrease)				Goodwill at end of period
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Industrial S.A.			-				-				-				-				-				-				-				(3,214	)			(3,214	)			(3,214	)
SQM S.A.			-				-				-				-				-				-				-				-				-				-
SQM Iberian S.A.			-				-				-				-				-				-				-				-				-				-
SQM Investment Corporation			-				-				-				-				-				-				-				-				-				-
Soquimich Comercial S.A.			-				-				-				-				-				-				-				(40	)			(40	)			(40	)
Soquimich European Holding B.V.			-				-				-				-				-				-				-				-				-				-
SQM Potasio S.A.			-				-				-				-				-				-				-				-				-				-
Total increases (decreases)			-				-				-				-				-				-				-				(3,254	)			(3,254	)			(3,254	)
Closing balance			-				-				-				-				-				-				-				(3,254	)			(3,254	)			(3,254	)

  

Net Value Movements in identifiable goodwill		Goodwill at the start of the period January 01, 2018				Additional recognition				Recognition subsequent to deferred tax assets (-)				Decreases for classification as held for sale (-)				Goodwill released without having been included previously in disposal groups classified as held for sale (-)				Impairment losses recognized in profit or loss for the year (-)				Increase (decrease) for net exchange differences				Increase (decrease) due to other changes				Total increase (decrease)				Goodwill at end of period
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Industrial S.A.			3,214				-				-				-				-				-				-				(3,214	)			(3,214	)			-
SQM S.A.			22,255				-				-				-				-				-				-				-				-				22,255
SQM Iberian S.A.			-				-				-				-				-				-				-				148				148				148
SQM Investment Corporation			86				-				-				-				-				-				-				-				-				86
Soquimich Comercial S.A.			320				-				-				-				-				-				-				(40	)			(40	)			280
Soquimich European Holding B.V.			11,373				-				-				-				-				-				-				-				-				11,373
SQM Potasio S.A.			724				-				-				-				-				-				-				-				-				724
Total increases (decreases)			37,972				-				-				-				-				-				-				(3,106	)			(3,106	)			34,866
Closing balance			37,972				-				-				-				-				-				-				(3,106	)			(3,106	)			34,866

  

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 16    Property, plant and equipment

 

As of December 31, 2019 and December 31, 2018, the detail of property, plant and equipment is as follows:

 

16.1 Types of property, plant and equipment

 

Description of types of property, plant and equipment		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Property, plant and equipment, net
Land			23,620				24,695
Buildings (1)			252,969				238,808
Other property, plant and equipment			32,604				28,175
Transport equipment (2)			6,042				2,892
Supplies and accessories			4,579				4,722
Office equipment			420				513
Network and communication equipment			663				692
Mining assets			23,174				11,501
IT equipment			4,359				4,980
Energy generating assets			5,998				6,117
Constructions in progress			375,316				207,830
Machinery, plant and equipment (3)			877,326				923,898
Total			1,607,070				1,454,823

 

(1) The buildings line item includes ThUS$ 25,742 corresponding to right-of-use assets; (2) The line item “Transport equipment” Includes ThUS$ 3,356. corresponding to right-of-use assets; (3) the property, plant and equipment line item includes ThUS$ 8,066 corresponding to right-of-use assets; the total includes ThUS$ 37,164. corresponding to right-of-use assets (IFRS 16)  

 

Property, plant and equipment, gross
Land			23,620				24,695
Buildings (1)			695,316				648,719
Other property, plant and equipment			257,206				245,731
Transport equipment (2)			16,036				11,668
Supplies and accessories			25,531				24,456
Office equipment			11,441				11,377
Network and communication equipment			8,009				7,505
Mining assets			161,619				132,309
IT equipment			28,693				29,955
Energy generating assets			38,495				36,930
Constructions in progress			375,316				207,830
Machinery, plant and equipment (3)			3,154,435				3,068,862
Total			4,795,717				4,450,037

 

(1) The buildings line item includes ThUS$ 29,289 corresponding to right-of-use assets; (2) The line item “Transport equipment” Includes ThUS$ 3,893 corresponding to right-of-use assets; (3) the property, plant and equipment line item includes ThUS$ 11,933 corresponding to right-of-use assets; the total includes ThUS $45,115 corresponding to right-of-use assets (IFRS 16)  

 

Accumulated depreciation and value impairment of property, plant and equipment, total
Accumulated depreciation and impairment of buildings (1)			(442,347	)			(409,911	)
Accumulated depreciation and impairment of other property, plant and equipment			(224,602	)			(217,556	)
Accumulated depreciation and impairment of transport equipment (2)			(9,994	)			(8,776	)
Accumulated depreciation and impairment of supplies and accessories			(20,952	)			(19,734	)
Accumulated depreciation and impairment of office equipment			(11,021	)			(10,864	)
Accumulated depreciation and impairment of network and communication equipment			(7,346	)			(6,813	)
Accumulated depreciation and impairment of mining assets			(138,445	)			(120,808	)
Accumulated depreciation and impairment of IT equipment			(24,334	)			(24,975	)
Accumulated depreciation and impairment of energy generating assets			(32,497	)			(30,813	)
Accumulated depreciation and impairment of machinery, plant and equipment (3)			(2,277,109	)			(2,144,964	)
Total			(3,188,647	)			(2,995,214	)

 

(1) The buildings line item includes ThUS$ (3,547) corresponding to depreciation of right-of-use assets; (2) The line item “Transport equipment”. Includes ThUS$ (537) corresponding to right-of-use assets; (3) The property, plant and equipment line item includes ThUS$ (3,867) corresponding to depreciation of right-of-use assets; the total includes ThUS$ (7,951) corresponding to depreciation of right-of-use assets (IFRS 16).  

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Description of types of property, plant and equipment		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Property, plant and equipment, net
Pumps			32,525				34,145
Conveyor Belt			21,911				22,082
Crystallizer			24,102				27,112
Plant Equipment			170,263				188,934
Tanks			14,159				14,876
Filter			27,080				29,300
Electrical equipment/facilities			92,090				96,179
Other Property, Plant & Equipment			53,396				58,997
Site Closure			12,056				12,967
Right-of-use assets			8,066				-
Piping			96,402				98,498
Well			238,670				250,045
Pond			41,319				42,903
Spare Parts			45,287				47,860
Total			877,326				923,898

  

 

Notes to the Consolidated Financial Statement December 31, 2019

 

16.2

Conciliation of changes in property, plant and equipment by type:

 

Conciliation of changes in property, plant and equipment by class as of December 31, 2019 and December 31, 2018:

 

Conciliation of changes in property, plant and equipment by class as of December 31, 2019, gross amount		Land				Buildings				Other property, plant and equipment				Transport equipment				Supplies and accessories				Equipment office				Network and communication equipment				Mining assets				IT equipment				Energy generating assets				Assets under construction				Machinery, plant and equipment				Property, plant and equipment
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance			24,695				648,719				245,731				11,668				24,456				11,377				7,505				132,309				29,955				36,930				207,830				3,068,862				4,450,037
Initial recognition of IFRS 16			-				29,289				-				3,893				-				-				-				-				-				-				-				11,933				45,115
Balance with recognition NIIF 16			24,695				678,008				245,731				15,561				24,456				11,377				7,505				132,309				29,955				36,930				207,830				3,080,795				4,495,152
Additions			-				290				332				-				37				43				159				-				492				-				314,236				6,077				321,666
Disposals			-				-				(858	)			-				-				-				-				-				(3	)			-				-				(17	)			(878	)
Increase (decrease) in foreign currency translation difference			(35	)			(72	)			(4	)			(2	)			(9	)			(3	)			-				-				(6	)			-				-				(72	)			(203	)
Reclassifications			132				18,526				12,456				477				745				-				89				16,901				1,289				1,565				(140,104	)			88,088				164
Other increases (decreases)			-				-				(451	)			-				302				24				256				12,409				(3,034	)			-				(6,646	)			(20,436	)			(17,576	)
Decreases for classification as held for sale			(1,172	)			(1,436	)			-				-				-				-				-				-				-				-				-				-				(2,608	)
Total changes			(1,075	)			17,308				11,475				475				1,075				64				504				29,310				(1,262	)			1,565				167,486				73,640				300,565
Closing balance			23,620				695,316				257,206				16,036				25,531				11,441				8,009				161,619				28,693				38,495				375,316				3,154,435				4,795,717

 

Conciliation of changes in property, plant and equipment by class as of December 31, 2019, accumulated depreciation		Land				Buildings				Other property, plant and equipment				Transport equipment				Supplies and accessories				Equipment office				Network and communication equipment				Mining assets				IT equipment				Energy generating assets				Assets under construction				Machinery, plant and equipment				Property, plant and equipment
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance			-				(409,911	)			(217,556	)			(8,776	)			(19,734	)			(10,864	)			(6,813	)			(120,808	)			(24,975	)			(30,813	)			-				(2,144,964	)			(2,995,214	)
Changes
Disposals			-				-				858				-				-				-				-				-				1				-				-				-				859
Depreciation expense			-				(32,547	)			(8,013	)			(1,220	)			(1,144	)			(161	)			(426	)			(7,033	)			(1,158	)			(1,676	)			-				(142,866	)			(196,244	)
Impairment			-				(49	)			-				-				-				-				-				-				-				-				-				-				(49	)
Increase (decrease) in foreign currency translation difference			-				28				3				1				7				1				-				-				5				-				-				34				79
Reclassifications			-				7				(6	)			1				6				-				1				-				(5	)			-				-				(207	)			(203	)
Other increases (decreases) (*)			-				(155	)			112				-				(87	)			3				(108	)			(10,604	)			1,798				(8	)			-				10,894				1,845
Decreases for classification as held for sale			-				280				-				-				-				-				-				-				-				-				-				-				280
Total changes			-				(32,436	)			(7,046	)			(1,218	)			(1,218	)			(157	)			(533	)			(17,637	)			641				(1,684	)			-				(132,145	)			(193,433	)
Closing balance			-				(442,347	)			(224,602	)			(9,994	)			(20,952	)			(11,021	)			(7,346	)			(138,445	)			(24,334	)			(32,497	)			-				(2,277,109	)			(3,188,647	)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Conciliation of changes in property, plant and equipment by class as of December 31, 2019, net amount		Land				Buildings				Other property, plant and equipment				Transport equipment				Supplies and accessories				Equipment office				Network and communication equipment				Mining assets				IT equipment				Energy generating assets				Assets under construction				Machinery, plant and equipment				Property, plant and equipment
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance			24,695				238,808				28,175				2,892				4,722				513				692				11,501				4,980				6,117				207,830				923,898				1,454,823
Initial recognition of IFRS 16			-				29,289				-				3,893				-				-				-				-				-				-				-				11,933				45,115
Balance with recognition NIIF 16			24,695				268,097				28,175				6,785				4,722				513				692				11,501				4,980				6,117				207,830				935,831				1,499,938
Additions			-				290				332				-				37				43				159				-				492				-				314,236				6,077				321,666
Disposals			-				-				-				-				-				-				-				-				(2	)			-				-				(17	)			(19	)
Depreciation expense			-				(32,547	)			(8,013	)			(1,220	)			(1,144	)			(161	)			(426	)			(7,033	)			(1,158	)			(1,676	)			-				(142,866	)			(196,244	)
Impairment			-				(49	)			-				-				-				-				-				-				-				-				-				-				(49	)
Increase (decrease) in foreign currency translation difference			(35	)			(44	)			(1	)			(1	)			(2	)			(2	)			-				-				(1	)			-				-				(38	)			(124	)
Reclassifications			132				18,533				12,450				478				751				-				90				16,901				1,284				1,565				(140,104	)			87,881				(39	)
Other increases (decreases) (1)			-				(155	)			(339	)			-				215				27				148				1,805				(1,236	)			(8	)			(6,646	)			(9,542	)			(15,731	)
Decreases for classification as held for sale (2)			(1,172	)			(1,156	)			-				-				-				-				-				-				-				-				-				-				(2,328	)
Total changes			(1,075	)			(15,128	)			4,429				(743	)			(143	)			(93	)			(29	)			11,673				(621	)			(119	)			167,486				(58,505	)			107,132
Closing balance			23,620				252,969				32,604				6,042				4,579				420				663				23,174				4,359				5,998				375,316				877,326				1,607,070

 

(1) The net balance of “Other Increases (Decreases)” corresponds to all those items that are reclassified to or from “Property, Plant and Equipment”, They can have the following origin: (i) work in progress which is expensed to profit or loss, forming part of operating costs or other expenses per function, as appropriate; (ii) the variation representing the purchase and use of materials and spare parts; (iii) projects corresponding mainly to exploration expenditures and ground studies that are reclassified to the item other non-current financial assets; (iv) software that is reclassified to “Intangibles”.

 

(2) The Company classifies as non-current held for sale property, plant and equipment (disposal group) that, at the closing date of the financial statements, is subject to a commitment for sale or where the sales process has been initiated and where the sale is expected to occur within twelve months of that date, is classified by the Company as non-current assets held for sale.

 

These assets or disposal groups are valued at the lower of carrying amount or the estimated sales value less the costs to sell and stop being amortized from the moment they are classified as non-current assets held for sale.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Conciliation of changes in property, plant and equipment by class as of December 31, 2018, gross amount		Land				Buildings				Other property, plant and equipment				Transport equipment				Supplies and accessories				Equipment office				Network and communication equipment				Mining assets				IT equipment				Energy generating assets				Assets under construction				Machinery, plant and equipment				Property, plant and equipment
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance			24,900				610,264				244,831				11,195				19,498				11,105				7,356				129,028				27,038				36,643				165,054				2,938,287				4,225,199
Additions			-				28				833				-				41				15				-				-				489				-				263,290				1,448				266,144
Disposals			-				(38	)			(7,811	)			(51	)			-				-				-				-				(10	)			-				(6,582	)			(1,666	)			(16,158	)
Increase (decrease) in foreign currency translation difference			(64	)			(134	)			(8	)			(3	)			(19	)			(6	)			-				-				(11	)			-				-				(153	)			(398	)
Reclassifications			-				38,746				10,330				529				4,889				268				150				3,281				2,100				75				(184,095	)			123,726				(1	)
Other increases (decreases)			-				(147	)			(2,444	)			(2	)			47				(5	)			(1	)			-				349				212				(29,837	)			7,220				(24,608	)
Decreases for classification as held for sale			(141	)			-				-				-				-				-				-				-				-				-				-				-				(141	)
Total changes			(205	)			38,455				900				473				4,958				272				149				3,281				2,917				287				42,776				130,575				224,838
Closing balance			24,695				648,719				245,731				11,668				24,456				11,377				7,505				132,309				29,955				36,930				207,830				3,068,862				4,450,037

 

Conciliation of changes in property, plant and equipment by class as of December 31, 2018, accumulated depreciation		Land				Buildings				Other property, plant and equipment				Transport equipment				Supplies and accessories				Equipment office				Network and communication equipment				Mining assets				IT equipment				Energy generating assets				Assets under construction				Machinery, plant and equipment				Property, plant and equipment
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance			-				(379,945	)			(219,969	)			(7,938	)			(17,626	)			(10,618	)			(6,306	)			(112,791	)			(23,637	)			(28,782	)			-				(1,988,233	)			(2,795,845	)
Disposals			-				38				7,737				8				-				-				-				-				10				-				-				1,722				9,515
Depreciation expense			-				(29,829	)			(7,415	)			(880	)			(2,056	)			(271	)			(483	)			(8,017	)			(1,374	)			(2,026	)			-				(158,900	)			(211,251	)
Impairment			-				(437	)			-				-				-				-				-				-				-				(12	)			-				(941	)			(1,390	)
Increase (decrease) in foreign currency translation difference			-				41				4				1				12				3				-				-				(1	)			-				-				61				121
Reclassifications			-				106				(483	)			-				(87	)			(17	)			(28	)			-				90				1				-				419				1
Other increases (decreases)			-				115				2,570				33				23				39				4				-				(63	)			6				-				908				3,635
Total changes			-				(29,966	)			2,413				(838	)			(2,108	)			(246	)			(507	)			(8,017	)			(1,338	)			(2,031	)			-				(156,731	)			(199,369	)
Closing balance			-				(409,911	)			(217,556	)			(8,776	)			(19,734	)			(10,864	)			(6,813	)			(120,808	)			(24,975	)			(30,813	)			-				(2,144,964	)			(2,995,214	)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Conciliation of changes in property, plant and equipment by class as of December 31, 2018, net amount		Land				Buildings				Other property, plant and equipment				Transport equipment				Supplies and accessories				Equipment office				Network and communication equipment				Mining assets				IT equipment				Energy generating assets				Assets under construction				Machinery, plant and equipment				Property, plant and equipment
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance			24,900				230,319				24,862				3,257				1,872				487				1,050				16,237				3,401				7,861				165,054				950,054				1,429,354
Changes
Additions			-				28				833				-				41				15				-				-				489				-				263,290				1,448				266,144
Disposals			-				-				(74	)			(43	)			-				-				-				-				-				-				(6,582	)			56				(6,643	)
Depreciation expense			-				(29,829	)			(7,415	)			(880	)			(2,056	)			(271	)			(483	)			(8,017	)			(1,374	)			(2,026	)			-				(158,900	)			(211,251	)
Impairment			-				(437	)			-				-				-				-				-				-				-				(12	)			-				(941	)			(1,390	)
Increase (decrease) in foreign currency translation difference			(64	)			(93	)			(4	)			(2	)			(7	)			(3	)			-				-				(12	)			-				-				(92	)			(277	)
Reclassifications			-				38,852				9,847				529				4,802				251				122				3,281				2,190				76				(184,095	)			124,145				-
Other increases (decreases) (1)			-				(32	)			126				31				70				34				3				-				286				218				(29,837	)			8,128				(20,973	)
Decreases for classification as held for sale (2)			(141	)			-				-				-				-				-				-				-				-				-				-				-				(141	)
Total changes			(205	)			8,489				3,313				(365	)			2,850				26				(358	)			(4,736	)			1,579				(1,744	)			42,776				(26,156	)			25,469
Closing balance			24,695				238,808				28,175				2,892				4,722				513				692				11,501				4,980				6,117				207,830				923,898				1,454,823

 

(1) The net balance of “Other increases (Decreases)” corresponds to all those items that are reclassified to or from property, plant and equipment, They can have the following origin: (i) work in progress which is expensed to profit or loss, forming part of operating costs or other expenses per function, as appropriate;, (ii) the variation representing the purchase and use of materials and spare parts; (iii) projects corresponding mainly to exploration expenditures and ground studies that are reclassified to the item other non-current financial assets; (iv) assets for retirement obligations and (v) software that is reclassified to Intangibles.

 

(2) The Company classifies as non-current held for sale property, plant and equipment (disposal group) that, at the closing date of the financial statements, is subject to a commitment for sale or where the sales process has been initiated and where the sale is expected to occur within twelve months of that date, is classified by the Company as non-current assets held for sale.

 

These assets or disposal groups are valued at the lower of carrying amount or the estimated sales value less the costs to sell and stop being amortized from the moment they are classified as non-current assets held for sale.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

16.3

Conciliation of changes in right of use assets, by classes

 

Conciliation of changes in property, plant and equipment by class as of December 31, 2019, net amount		Land				Buildings				Other property, plant and equipment				Transport equipment				Supplies and accessories				Equipment office				Network and communication equipment				Mining assets				IT equipment				Energy generating assets				Assets under construction				Machinery, plant and equipment				Property, plant and equipment
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance			-				-				-				-				-				-				-				-				-				-				-				-				-
Initial recognition of IFRS 16			-				29,289				-				3,893				-				-				-				-				-				-				-				11,933				45,115
Balance with recognition NIIF 16			-				29,289				-				3,893				-				-				-				-				-				-				-				11,933				45,115
Additions			-				-				-				-				-				-				-				-				-				-				-				-				-
Disposals			-				-				-				-				-				-				-				-				-				-				-				-				-
Depreciation expense			-				(3,547	)			-				(537	)			-				-				-				-				-				-				-				(3,867	)			(7,951	)
Impairment			-				-				-				-				-				-				-				-				-				-				-				-				-
Increase (decrease) in foreign currency translation difference			-				-				-				-				-				-				-				-				-				-				-				-				-
Reclassifications			-				-				-				-				-				-				-				-				-				-				-				-				-
Other increases (decreases)			-				-				-				-				-				-				-				-				-				-				-				-				-
Decreases for classification as held for sale			-				-				-				-				-				-				-				-				-				-				-				-				-
Total changes			-				(3,547	)			-				(537	)			-				-				-				-				-				-				-				(3,867	)			(7,951	)
Closing balance			-				25,742				-				3,356				-				-				-				-				-				-				-				8,066				37,164

 

The Company’s lease activities included the following aspects:

 

	(a)	The nature of the Company’s lease activities is related to contracts focused primarily on business operations, notably rights-of-use to equipment and real estate.
	(b)	The Company does not estimate any significant future cash outflows that would potentially expose the Company, and these are likewise not reflected in the measurement of lease liabilities, related to concepts such as (i) variable lease payments, (ii) expansion options and termination options, (iii) guaranteed residual value and (iv) leases not yet undertaken but committed by the Company.
	(c)	These are not subject to restrictions or agreements imposed by contracts.
	(d)	There were no sales lease back in the period.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

16.4

Detail of property, plant and equipment pledged as guarantee

 

There are no restrictions in title or guarantees for compliance with obligations that affect property, plant and equipment.

 

16.5

Impairment of assets

 

As indicated in Note 3.16 to the financial statements, the recoverable amount of property, plant and equipment is measured provided that there is an indication that the asset could be impaired. As of December 31, 2019, adjustments for impairment of assets were generated in the amount of ThUS$ 49. As of December 31, 2018 adjustments for impairment of assets were generated in the amount of ThUS$ 1,390.

 

16.6

Additional Information

 

As of December 31, 2019, interests were activated in the constructions underway as presented in Note 28.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 17  Other current and non-current non-financial assets

 

As of December 31, 2019, and December 31, 2018, the detail of other current and non-current assets is as follows:

 

Other non-financial assets, current		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Domestic Value Added Tax			17,807				20,209
Foreign Value Added Tax			8,566				7,211
Prepaid mining licenses			1,244				1,329
Prepaid insurance			7,135				1,763
Other prepayments			1,423				1,774
Refund of Value Added Tax to exporters			10,560				12,545
Other taxes			3,213				2,800
Other assets			604				341
Total			50,552				47,972

 

Other non-financial assets, non-current		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Stain development expenses and prospecting expenses (1)			18,654				26,189
Guarantee deposits			551				712
Other assets			524				638
Total			19,729				27,539

 

1)

Conciliation of changes in assets for exploration and mineral resource evaluation, by type.

 

Movements in assets for the exploration and evaluation of mineral resources as of December 31, 2019, and December 31, 2018:

 

Conciliation		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Opening balance			26,189				17,721
Change in assets for exploration and evaluation of mineral resources
Additions			-				11,298
Short-term reclassifications			(1,311	)			1,987
Increase (decrease) due to transfers and other charges			(6,224	)			(4,817	)
Total changes			(7,535	)			8,468
Closing balance			18,654				26,189

 

As of the presentation date, no reevaluations of assets for exploration and assessment of mineral resources have been conducted.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 18 Employee benefits

 

18.1

Provisions for employee benefits

 

Classes of benefits and expenses by employee		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Current
Profit sharing and bonuses			16,387				20,085
Total			16,387				20,085
Non-current
Profit sharing and bonuses			8,026				8,831
Severance indemnity payments			27,814				28,233
Total			35,840				37,064

 

18.2

Policies on defined benefit plan

 

This policy is applied to all benefits received for services provided by the Company's employees. Short-term benefits for active employees are represented by salaries, social welfare benefits, paid time off, sickness and other types of leave, profit sharing and incentives and non-monetary benefits; e.g., healthcare service, housing, subsidized or free goods or services. These will be paid in a term which does not exceed twelve months.

 

The Company only provides compensation and benefits to active employees, with the exemption of SQM North America. (see Note 18.4)

 

The Company maintains incentive programs for its employees based on their personal performance, the Company’s performance and other short-term and long-term indicators.

 

For each incentive bonus delivered to the Company’s employees, there will be a disbursement in the first quarter of the following year and this will be calculated based on profit for the period at the end of each period applying a factor obtained subsequent to each employee’s appraisal process.

 

Employee benefits include retention bonuses for the Company’s executives, which are linked to the Company’s share price and are paid in cash.

 

Staff severance indemnities are agreed and payable based on the final salary, calculated in accordance with each year of service to the Company, with certain maximum limits in respect of either the number of years or in monetary terms. In general, this benefit is payable when the employee or worker ceases to provide his/her services to the Company and there are a number of different circumstances through which a person can be eligible for it, as indicated in the respective agreements; e.g. retirement, dismissal, voluntary retirement, incapacity or disability, death, etc.

 

Law No. 19,728 published on May 14, 2001 which became effective on October 1, 2002 required Compulsory Unemployment Insurance in favor of all dependent employees regulated by the Chilean Labor Code, Article 5 of this law established that this insurance is paid through monthly contribution payments by both the employee and the employer.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

18.3

Other long-term benefits

 

The other long-term benefits relate to staff severance indemnities and are recorded at their actuarial value, and an executive compensation plan (see Note 18.6).

 

The actuarial assessment method has been used to calculate the Company’s obligations with respect to staff severance indemnities, which relate to defined benefit plans consisting of days of remuneration per year served at the time of retirement under conditions agreed in the respective agreements established between the Company and its employees.

 

Under this benefit plan, the Company retains the obligation to pay staff severance indemnities related to retirement, without establishing a separate fund with specific assets, which is referred to as not funded. The discount interest rate of expected flows to be used was 3.68%.

 

(a)

Benefit payment conditions

 

The staff severance indemnity benefit relates to remuneration days for years worked for the Company without a limit being imposed in regard of amount of salary or years of service. It applies when employees cease to work for the Company because they are made redundant or in the event of their death. This benefit is applicable up to a maximum age of 65 for men and 60 for women, which are the usual retirement ages according to the Chilean pensions system as established in Decree Law 3,500 of 1980.

 

(b)

Methodology

 

The Company’s benefits obligation under IAS 19, Projected Benefit Obligation (PBO) is determined as follows:

 

To determine the Company's total liability, we used computer software to develop a mathematical simulation model using the data for each individual employee.

 

This model considered months as discrete time, i.e., the Company determined the age of each person and his/her salary on a monthly basis according to the growth rate. This information on each person was simulated from the beginning of his/her employment contract or when he/she started earning benefits up to the month in which he/she reaches normal retirement age, generating in each period the possible retirement according to the Company’s turnover rate and the mortality rate according to the age reached. When he/she reaches the retirement age, the employee finishes his/her service for the Company and receives a retirement indemnity.

 

The methodology followed to determine the accrual for all the employees covered by agreements took account of the turnover rates and the mortality rate RV-2014 established by the CMF to calculate pension-related life insurance reserves in Chile according to the Accumulated Benefit Valuation or Accrued Cost of Benefit Method. This methodology is established in IAS 19 on “Retirement Benefit Costs”.

 

18.4

Post-employment benefit obligations

 

Our subsidiary SQM NA, together with its employees established a pension plan until 2002 called the “SQM North America Retirement Income Plan”. This obligation is calculated measuring the expected future forecast staff severance indemnity obligation using a net salary gradual rate of restatements for inflation, mortality and turnover assumptions, discounting the resulting amounts at present value using the interest rate defined by the authorities.

 

Since 2003, SQM North America offers to its employees benefits related to pension plans based on the 401-K system, which do not generate obligations for the Company.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

18.5

Staff severance indemnities

 

As of December 31, 2019 and December 31, 2018, severance indemnities calculated at the actuarial value are as follows:

 

Classes of benefits and expenses by employee		As of December 31, 2019				As of December 31, 2018
			ThUS$				ThUS$
Opening balance			(28,233	)			(27,445	)
Current cost of service			(2,880	)			(1,529	)
Interest cost			(1,661	)			(1,658	)
Actuarial gain/loss			(2,514	)			(1,617	)
Exchange rate difference			2,475				2,710
Benefits paid during the year			4,999				1,306
Total			(27,814	)			(28,233	)

 

(a)

Actuarial assumptions

 

The liability recorded for staff severance indemnity is valued at the actuarial value method, using the following actuarial assumptions:

 

Actuarial assumptions		As of December 31, 2019				As of December 31, 2018				Annual/Years
Mortality rate		RV - 2014				RV - 2014
Actual annual interest rate			3.68	%			4.64	%
Voluntary retirement rate:
Men			6.49	%			6.49	%			Annual
Women			6.49	%			6.49	%			Annual
Salary increase			3.00	%			3.00	%			Annual
Retirement age:
Men			65				65				Years
Women			60				60				Years

 

(b)

Sensitivity analysis of assumptions

 

As of December 31, 2019 and December 31, 2018, the Company has conducted a sensitivity analysis of the main assumptions of the actuarial calculation, determining the following:

 

Sensitivity analysis as of December 31, 2019		Effect + 100 basis points				Effect + 100 basis points
		ThUS$				ThUS$
Discount rate			(1,796	)			2,021
Employee turnover rate			(236	)			263

 

Sensitivity analysis as of December 31, 2018		Effect + 100 basis points				Effect + 100 basis points
		ThUS$				ThUS$
Discount rate			(1,807	)			2,033
Employee turnover rate			(237	)			265

 

Sensitivity relates to an increase/decrease of 100 basis points.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

18.6

Executive compensation plan

 

The Company currently has a compensation plan with the purpose of motivating the Company’s executives and encouraging them to remain with the Company, by granting payments based on the change in the price of SQM’s shares. There is a partial payment of the share benefit program in the event of termination of the contract for causes other than the resignation and application of Article 160 of the Labor Code.

 

(a)

Plan characteristics

 

This compensation plan is related to the Company’s performance through the SQM Series B share price (Santiago Stock Exchange).

 

(b)

Plan participants

 

A total of 30 Company executives are entitled to this plan, provided that they continue to work for the Company through to the end of 2020. The payment dates, if applicable, will be during the first quarter of 2021.

 

(c)

Compensation

 

The compensation payable to each executive is calculated by multiplying:

 

a)

The average price of Series B shares on the Santiago Stock Exchange during the fourth quarter of 2020, at its equivalent amount in dollars (with a maximum amount or limit amount of US$ 54 per share), multiplied

 

b)

By a number equal to the quantity of shares that have been individually assigned to each executive included in the plan.

 

This compensation plan was approved by the Company’s Board of Directors and its application started on January 1. 2017.

 

The effect of the plan considers 427,652 shares reflected as a cost of ThUS$ 806 in the results for the period ending December 31, 2019. As of December 31, 2018, the effect of the plan was 476,302 shares, equal to ThUS$ 3,754 recognized as a provision reflected against profit or loss for 2018.

 

Executed shares during 2019 were 83,609.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 19

Provisions and other non-financial liabilities

 

19.1

Types of provisions

 

		As of December 31, 2019												As of December 31, 2018
Types of provisions		Current				Non-current				Total				Current				Non-current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Provision for legal complaints (1)			13,472				1,452				14,924				11,862				3,000				14,862
Provision for dismantling, restoration and rehabilitation cost (2)			-				33,238				33,238				-				28,822				28,822
Other provisions (3)			97,093				-				97,093				94,335				-				94,335
Total			110,565				34,690				145,255				106,197				31,822				138,019

 

(1) These provisions correspond to legal processes that are pending resolution or that have not yet been disbursed. These provisions are mainly related to litigation involving the subsidiaries located in Chile, Brazil and the United States (see note 22.1).

(2) The commitments related to Sernageomin have been incorporated through the issuance of the guarantee for the restoration of the place where the production sites are located.

(3) See Note 19.2

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

19.2

Description of other provisions

 

Current provisions, other short-term provisions		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Rent under Lease contract (1)			90,320				84,826
Provision for additional tax related to foreign loans			543				471
End of agreement bonus			3,641				5,129
Directors’ per diem allowance			1,802				2,881
Miscellaneous provisions			787				1,028
Total			97,093				94,335

 

(1) Payment Obligations for the lease contract with CORFO: These correspond to obligations assumed in the Lease Agreement. Part of these obligations are the quarterly lease payments to Corfo, according to SQM Salar's product sales from leased mining properties. Since 2018, another part are the annual contributions by SQM Salar to research and development, to local communities to the Antofagasta Regional Government and to the municipalities of San Pedro de Atacama, María Elena and Antofagasta.

 

19.3

Other non financial liabilities, Current

 

Description of other liabilities		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Tax withholdings			3,345				4,782
VAT payable			3,465				7,345
Guarantees received			2,641				2,641
Accrual for dividend			68,890				109,670
Monthly tax provisional payments			16,659				21,001
Deferred income			3,033				18,574
Withholdings from employees and salaries payable			4,575				6,052
Accrued vacations (1)			21,686				20,070
Other current liabilities			2,605				4,489
Total			126,899				194,624

 

(1) Vacation benefit (short-term benefits to employees, current) is in line with the provisions established in Chile’s Labor Code, which indicates that employees with more than a year of service will be entitled to annual vacation for a period of at least fifteen paid business days. The Company provides the benefit of two additional vacation days.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

19.4

Changes in provisions

 

Description of items that gave rise to variations as of December 31, 2019		Legal complaints				Provision for dismantling, restoration and rehabilitation cost				Other provisions				Total
		ThUS$				ThUS$				ThUS$				ThUS$
Total provisions, initial balance			14,862				28,822				94,335				138,019
Changes
Additional provisions			4,111				4,416				150,314				158,841
Provision used			(4,049	)			-				(147,532	)			(151,581	)
Increase(decrease) in foreign currency exchange			-				-				(24	)			(24	)
others			-				-				-				-
Total Increase (decreases)			62				4,416				2,758				7,236
Total			14,924				33,238				97,093				145,255

 

Description of items that gave rise to variations as of December 31, 2018		Legal complaints				Provision for dismantling, restoration and rehabilitation cost				Other provisions				Total
		ThUS$				ThUS$				ThUS$				ThUS$
Total provisions, initial balance			19,419				26,954				47,073				93,446
Changes
Additional provisions			1,000				1,820				181,244				184,064
Provision used			(5,557	)			-				(133,949	)			(139,506	)
Increase(decrease) in foreign currency exchange			-				-				-				-
others			-				48				(33	)			15
Total Increase (decreases)			(4,557	)			1,868				47,262				44,573
Total			14,862				28,822				94,335				138,019

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 20  Disclosures on equity

 

The detail and movements in the funds of equity accounts are shown in the consolidated statement of changes in equity.

 

20.1

Capital management

 

The main object of capital management relative to the administration of the Company’s financial debt and equity is to ensure the regular conduct of operations and business continuity in the long term, with the constant intention of maintaining an adequate level of liquidity and in compliance with the financial safeguards established in the debt contracts in force. Within this framework, decisions are made in order to maximize the value of the company.

 

Capital management must comply with, among others, the limits contemplated in the Financing Policy approved by the Shareholders’ Meeting, which establish a maximum consolidated indebtedness level of 1.5 times the debt to equity ratio. This limit can be exceeded only if the Company’s management has first obtained express approval at an Extraordinary Shareholders’ Meeting.

 

In addition, capital management should consider that with respect to Series H and Series O Bonds, if the Indebtedness Level (as this term is defined in the respective issuance contracts) exceeds 1.2 times (provided that this does not exceed 1.44 times), the Company must offer bondholders of these series the voluntary and individual option for early redemption of these bonds at par value. As a consequence of the IFRS 16 becoming effective and being implemented in these financial statements, the Indebtedness ratio for the fourth quarter of 2019 reached a proportion of 1.19.

The Company’s management controls capital management based on the following ratios:

 

Capital Management		As of December 31, 2019				As of December 31, 2018				Description (1)		Calculation (1)
Net Financial Debt (ThUS$)			719,809				471,755			Financial Debt – Financial Resources		Other current Financial Liabilities + Other Non-Current Financial Liabilities – Cash and Cash Equivalents – Other Current Financial Assets – Hedging Assets, non-current
Liquidity			3.45				4.32			Current Assets divided by Current Liabilities		Total Current Assets / Total Current Liabilities
Net Debt / Capitalization			0.25				0.18			Net Financial Debt divided by Total Equity		Net financial debt / Total Equity
ROE			13.154	%			20.7	%		Profit for the year divided by Total Equity		LTM(2) Profit for the year / Equity
Adjusted EBITDA (ThUS$)			645,142				855,652			Adjusted EBITDA		Profit for the year + Depreciation and Amortization Expenses + Finance Costs + Income Tax – Other income and Share of profit of associates and joint ventures + Other expenses – Finance income – Currency differences
EBITDA (MUS$)			669,831				902,450			EBITDA		Profit for the year + Depreciation and Amortization Expenses + Finance Costs + Income Tax
ROA			12.76	%			20.31	%		Adjusted EBITDA – Depreciation divided by Total Assets net of financial resources less related parties’ investments		(LTM Gross Profit – Administrative Expenses)/ (Total Assets – Cash and Cash Equivalents – Other Current Financial Assets – Other Non-Current Financial Assets – Equity-accounted Investments)
Indebtedness			1.19				1.00			Total Liabilities on Equity		Total Liabilities / Total Equity
Indebtedness without IFRS 16			1.18				1.00			Total Liabilities   less IFRS 16 liabilities on Equity		Total Liabilities - IFRS 16 liabilities / Total Equity

 

(1) Assumes the absolute value of the accounting records with the exception of exchange differences.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

The Company’s capital requirements change according to variables such as working capital needs, new investment financing and dividends, among others. The SQM Group manages its capital structure and makes adjustments bases on the predominant economic conditions so as to mitigate the risks associated with adverse market conditions and take advantage of the opportunities there may be to improve the liquidity position of the SQM Group.

 

There have been no changes in the capital management objectives or policy within the years reported in this document. No breaches of external requirements of capital imposed have been recorded.

 

20.2

Disclosures on preferred share capital

 

Issued share capital is divided into 142,819,552 Series "A" shares and 120,376,972 Series “B” shares. All such shares are nominative, have no par value and are fully issued, subscribed and paid.

 

Series B shares may not exceed 50% of the total issued, subscribed and paid-in shares of the Company and have a limited voting right, in that all of them can only elect one director of the Company, regardless of their equity interest and preferences:

 

(a)

require the calling of an Ordinary or Extraordinary Shareholders' Meeting when so requested by Series B shareholders representing at least 5% of the issued shares thereof; and

 

(b)

require the calling of an extraordinary meeting of the board of directors, without the president being able to qualify the need for such a request, when so requested by the director who has been elected by the shareholders of said Series B.

 

The limitation and preferences of Series B shares have a duration of 50 consecutive and continuous years as of June 3, 1993.

 

The Series A shares have the preference of being able to exclude the director elected by the Series B shareholders in the voting process in which the president of the board of directors and of the Company must be elected and which follows the one in which the tie that allows such exclusion resulted.

 

The preference of the Series A shares will have a term of 50 consecutive and continuous years as of June 3, 1993. The form of the titles of the shares, their issuance, exchange, disablement, loss, replacement, assignment and other circumstances thereof shall be governed by the provisions of Law No, 18,046 and its regulations.

 

At December 31, 2019 and December 31, 2018, the Group does not hold shares of the Parent Company either directly or through its investees.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Detail of capital classes in shares:

 

As of December 31, 2019 and December 31, 2018, the Company has not placed any new shares issues on the market

 

		As of December 31, 2019								As of December 31, 2018
Type of capital in preferred shares		Series A				Series B				Series A				Series B
Description of type of capital in preferred shares
Number of authorized shares			142,819,552				120,376,972				142,819,552				120,376,972
Number of fully subscribed and paid shares			142,819,552				120,376,972				142,819,552				120,376,972
Number of subscribed, partially paid shares			-				-				-				-
Par value of shares in US$			0.9435				2.8464				0.9435				2.8464
Increase (decrease) in the number of current shares			-				-				-				-
Number of current shares			142,819,552				120,376,972				142,819,552				120,376,972
Number of shares owned by the entity or its subsidiaries or associates			-				-				-				-
Number of shares whose issuance is reserved due to the existence of options or agreements to dispose shares			-				-				-				-
Capital amount in shares ThUS$			134,750				342,636				134,750				342,636
Amount of premium issuance ThUS$			-				-				-				-
Amount of reserves ThUS$			-				-				-				-
Total number of subscribed shares			142,819,552				120,376,972				142,819,552				120,376,972

 

20.3

Disclosures on reserves in Equity

 

As of December 31, 2019 and December 31, 2018, this caption comprises the following:

 

Disclosures on reserves un Equity		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Reserve for currency exchange conversion			(25,745	)			(26,307	)
Reserve for cash flow hedges			7,196				7,971
Reserve for gains and losses from financial assets measured at fair value through other comprehensive income			(270	)			(1,111	)
Reserve for actuarial gains or losses in defined benefit plans			(9,490	)			(6,884	)
Other reserves			14,086				11,332
Total			(14,223	)			(14,999	)

 

Reserves for foreign currency translation differences

 

This balance reflects retained earnings for changes in the exchange rate when converting the financial statements of subsidiaries whose functional currency is that of each company’s origin country and the presentation currency is the US dollar.

 

Reserve for cash flow hedges

 

The Company maintains, as hedge instruments, financial derivatives related to obligations with the public issued in UF and Chilean pesos, Changes from the fair value of derivatives designated and classified as hedges are recognized under this classification.

 

Reserve for gains and losses from financial assets measured at fair value through other comprehensive income

 

This caption includes investments in shares where the Company has no significant influence and these have accordingly been measured at fair value through equity. In the event that such equity instruments are fully or partially disposed of, the proportional accumulated effect of accumulated fair value will be transferred to profit or loss.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Reserve for actuarial gains or losses in defined benefit plans

 

For domestic subsidiaries the effects of changes in assumptions are considered, mainly changes in the discount rate.

 

The subsidiary SQM North America has established pension plans for its retired employees that are calculated by measuring the projected obligation of staff severance indemnities using a net salary progressive rate net of adjustments to inflation, mortality and turnover assumptions, deducting the resulting amounts at present value using a 4% interest rate for 2019.

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Movements in other reserves and changes in interest were as follows:

 

		Foreign currency translation difference				Reserve for cash flow hedges								Reserve for actuarial gains and losses from defined benefit plans									Reserve for gains (losses) from financial assets measured at fair value through other comprehensive income								Other reserves				Total reserves
Movements		Before taxes				Before taxes				Tax				Before taxes					Deferred taxes				Before taxes				Deferred taxes				Before taxes				Reserves				Deferred taxes				Total reserves
		ThUS$				ThUS$				ThUS$				ThUS$					ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance as of January 1, 2018			(24,913	)			2,248				-				(6,847	)				894				4,787				(1,850	)			11,332				(13,393	)			(956	)		(14,349)
Increase			6,542				14,794				-				674					(133	)			294				(79	)			-				22,304				(212	)		22,092
Decrease			(7,936	)			(9,071	)			-				(2,003	)				531				(5,841	)			1,578				-				(24,851	)			2,109			(22,742)
Closing balance as of December 31, 2018			(26,307	)			7,971				-				(8,176	)				1,292				(760	)			(351	)			11,332				(15,940	)			941			(14,999)
Increase			1,824				8,628				(2,683	)			-					-				1,570				(424	)			3,093				15,115				(3,107	)		12,008
Decrease			(1,262	)			(6,720	)			-				(3,306	)				700				(418	)			113				(339	)			(12,045	)			813			(11,232)
Closing balance as of December 31, 2019			(25,745	)			9,879				(2,683	)			(11,482	)				1,992				392				(662	)			14,086				(12,870	)			(1,353	)		(14,223)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Other reserves

 

This caption corresponds to the legal reserves reported in the individual financial statements of the subsidiaries and Associates that are mentioned below and that have been recognized in SQM’s equity through the application of the equity method.

 

Subsidiary - Associate		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
SQM Iberian S.A. (1)			9,464				9,464
SQM Europe NV			1,957				1,957
Soquimich European holding B.V.			828				828
Abu Dhabi Fertilizer Industries WWL			455				455
Doktor Tarsa Tarim Sanayi AS			305				305
Kore Potash PLC			2,754				-
Total			15,763				13,009
Corresponds to the acquisition of the subsidiary SQM Iberian S.A., which was already under Company ownership at the acquisition date (IAS 27 R).			(1,677	)			(1,677	)
Total Other reserves			14,086				11,332

 

(1)

In the case of SQM Iberian S.A., the balance corresponds to the results obtained in the previous financial year which are presented as forming part of other reserves because of local regulations

 

20.4       Dividend policies

 

As required by Article 79 of the Chilean Companies Act, unless otherwise decided by unanimous vote of the holders of issued and subscribed shares, we must distribute a cash dividend in an amount equal to at least 30% of our consolidated profit for the year ended as of December 31, unless and except to the extent it has a deficit in retained earnings (losses not absorbed in prior years).

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Dividend policy for commercial year 2019

 

The Company has defined the following dividend policy:

 

(a)

Distribute and pay, as a final dividend and in favor of the respective shareholders, a percentage of the net income that shall be determined per the following financial parameters:

 

(I)

100% of the profit for 2019 if all the following financial parameters are met: (a) “all current assets” divided by “all current liabilities” is equal to or greater than 2.5 times, and (b) the sum of “all current liabilities” and “all non-current liabilities”, less “cash equivalents”, less “other current financial assets”, all of the above divided by “total equity” in equal or less than 0.8 times.

 

(II)

80% of the profit for 2019 if all the following financial parameters are met: (a) “all current assets” divided by “all current liabilities” is equal to or greater than 2.0 times, and (b) the sum of “all current liabilities” and “all non-current liabilities”, less “cash equivalents”, less “other current financial assets”, all of the above divided by “total equity” in equal or less than 0.9 times.

 

(III)

60% of the profit for 2019 if all the following financial parameters are met: (a) “all current assets” divided by “all current liabilities” is equal to or greater than 1.5 times, and (b) the sum of “all current liabilities” and “all non-current liabilities”, less “cash equivalents”, less “other current financial assets”, all of the above divided by “total equity” in equal or less than 1.0 times.

 

If none of the foregoing financial parameters are met, the Company shall distribute and pay, as a final dividend, and in favor of the respective shareholders, 50% of the 2019 net income.

 

(b)

Distribute and pay, if possible and during 2019, three interim dividends that will be charged against the aforementioned final dividend. These interim dividends shall likely be paid during the month following the approval of the March, June, and September 2019 interim financial statements, respectively. Its amounts shall be calculated as follows:

 

(i)

For the interim dividends that will be charged to the accumulated net income reflected in the March 2019 interim financial statements, the percentage distributed shall be determined per the financial parameters expressed in letter a) above.

 

(ii)

For the interim dividends that will be charged to the accumulated net income reflected in the June 2019 interim financial statements, the percentage distributed shall be determined per the financial parameters expressed in letter a) above, discounting the total amount of interim dividends previously distributed during 2019.

 

(iii)

For the interim dividends that will be charged to the accumulated net income reflected in the September 2019 interim financial statements, the percentage distributed shall be determined per the financial parameters expressed in letter a) above, discounting the total amount of interim dividends previously distributed during 2019.

 

(c)

The amount of the interim dividends mentioned above may vary, pursuant to the information available to the Board of Directors on the date on which it agrees to the distribution of said dividends given that the dividend will not materially or negatively affect SQM’s capacity to impact its investments, fulfill its liabilities, or in general, comply with the investment and finance policy approved at the ordinary shareholders’ meeting.

 

(d)

At the ordinary shareholders meeting that will be held in 2020, the Board of Directors shall propose a final dividend pursuant to the financial parameters expressed in letter a) above, discounting the total amount of the interim dividends previously distributed during 2019.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(e)

If there is an excess of net income in 2019, this may be retained and assigned or allocated for financing its own operations, to one or more investment projects of the Company, notwithstanding a future distribution of special dividends charged to the accumulated net income previously approved at the shareholders’ meeting, or the possible and future capitalization of all or part of the latter.

 

(f)

he payment of additional dividends is not considered.

 

The dividend policy described above corresponds to the intention of the Board of Directors, and the compliance of it shall depend on the net income that the Company ultimately obtains, as well as the results of periodic projections that could impact the Company, or to the existence of determined conditions that may affect it, as applicable. If the dividend policy exposed by the Board of Directors suffers a substantial change, the Company must communicate it as an essential fact.

 

20.5    Interim and provisional dividends

 

The ordinary shareholders’ meeting held on April 25, 2019, agreed to distribute and pay 100% of the distributable net profit obtained by the Company during the 2018 fiscal year, as dividend. Consequently, in May 2019, the Company paid a definitive dividend of US$ 1.67111 per share as distributable net profit obtained during the 2018 fiscal year. An amount of US$ 1.25837 per share was subtracted from this amount, as it had already been paid as interim dividend in 2018.

 

On May 22, 2019, the Board agreed to pay an interim dividend equivalent to US$ 0.30598 per share, charged to the Company's net income for 2019. This amount was paid in Chilean pesos at the official exchange rate to the Dollar published in the Official Gazette on May 29, 2019.

 

On August 21, 2019, the Board paid a provisional dividend equivalent to US$ 0.26669 per share with a charge to Company earnings for 2019. Such amount was paid in its equivalent in Chilean pesos, according to the observed U.S. dollar exchange rate published in the Official Gazette on August 30, 2019.

 

On November 20, 2019, the Board of Directors agreed to pay an interim dividend equivalent to US $ 0.22987 per share, to be charged to the Company's 2019 earnings. This amount was paid in its Pesos equivalent according to the value of the Observed Dollar published in the Official Gazette of November 29, 2019.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

20.6       Potential and provisional dividends

 

Dividends discounted from equity from December 2019 and January to December 2018 were the following:

 

Dividends		Fort the year ended 31, 2019				Fort the year ended 31, 2018
		ThUS$				ThUS$
Ajay SQM Chile S.A. Dividends			882				823
Soquimich Comercial S.A. Potential Dividend			3,936				7,872
Soquimich Comercial S.A. Payable Dividend			1,999				1,038
Non-controlling interests			6,817				9,733
Interim dividend			211,224				331,199
Potential dividend			-				100,000
Dividends payable			66,891				108,631
Owners of the Parent			278,115				539,83
Dividends discounted from equity for the period			284,932				549,563

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 21  Earnings per share

 

Basic earnings per share are calculated by dividing net income attributable to the Company’s shareholders by the weighted average of the number of shares in circulation during that period.

 

As expressed, earnings per share are detailed as follows:

 

Basic earnings per share		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Earnings (losses) attributable to owners of the parent			278,115				439,830

 

Basic earnings per share		As of December 31, 2019				As of December 31, 2018
		Units				Units
Number of common shares in circulation			263,196,524				263,196,524
Basic earnings per share (US$ per share)			1.0567				1.6711

 

The Company has not made any operations with a potential dilutive effect that assumes diluted earnings per share are different from the basic earnings per share.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 22    Contingencies and restrictions

 

In accordance with note 19.1, the Company has only registered a provision for those lawsuits in which there is a probability that the judgments will be unfavorable to the Company, The Company is party to the following lawsuits and other relevant legal actions:

 

22.1

Lawsuits and other relevant events

 

(a)	Plaintiff	:	City of Pomona California, USA
	Defendants	:	SQM North America Corporation
	Date	:	December 2010
	Court	:	United States District Court Central District of California
	Reason	:	Payment of expenses and other amounts related to the treatment of groundwater to allow for its consumption by removing the existing perchlorate in such groundwater that allegedly comes from Chilean fertilizers.
	Status	:	On May 17, 2018, district judge Gary Klausner sentenced in favor of SQM NA following the verdict of the jury, On February 6, 2020, the court of appeals of the 9th circuit of United States ordered a retrial before the District Court.
	Nominal value	:	~ ThUS$ 32,000

 

(b)	Plaintiff	:	City of Lindsay, California, USA
	Defendants	:	SQM NA and the Company (still not noticed)
	Date	:	December 2010
	Court	:	United States District Court Eastern District of California.
	Reason	:	Payment of expenses and other amounts related to the treatment of groundwater to allow for its consumption by removing the existing perchlorate in such groundwater that allegedly comes from Chilean fertilizers.
	Status	:	Filing of the case, processing suspended.
	Nominal value	:	Not possible to determine.

 

(c)	Plaintiff	:	H&V Van Mele N.V.
	Defendants	:	NV Euroports, SQM Europe N.V. y and its insurance companies
	Date	:	July 2013
	Court	:	Commercial Court
	Reason	:	Alleged indirect responsibility for the absence of adequate specifications for the SOP–WS by the Belgian distributor
	Status	:	Sentencing against NV Euroports and subsidy SQM Europe N.V., for EUR 206,675.91, Appeal presented in November 2017
	Nominal value	:	~ ThUS$ 430

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(d)	Plaintiff	:	Carlos Aravena Carrizo et al.
	Defendants	:	SQM Nitratos S.A. and its insurers
	Date	:	May 2014
	Court	:	18th Civil Court Santiago
	Reason	:	Lawsuit seeking compensation for damages for alleged civil liability under tort as a result of an explosion that occurred during 2010 near Baquedano, causing the death of 6 employees
	Status	:	On May 7, 2019 2019 The 18th Civil Court of Santiago rejected the lawsuit. The case is before the Santiago Court of Appeals, which will hear the plaintiffs' appeal
	Nominal value	:	~ ThUS$ 1,235
(e)	Plaintiff	:	SQM Salar S.A. and the Company
	Defendants	:	Seguros Generales Suramericana S.A. (formerly - RSA Seguros Chile S.A.)
	Date	:	Agoust 29, 2016.
	Court	:	Arbitration award in accordance with the arbitration rules established by the CAM
	Reason	:	Complaint for forced compliance and collection of indemnification for insurance claim of February 7 and 8, 2013
	Status	:	Evidence stage
	Nominal value	:	~ ThUS$ 20,658

 

(f)	Plaintiff	:	Tyne and Wear Pension Fund represented by the Council of the Borough of South Tyneside acting as Lead Plaintiff
	Defendants	:	The Company
	Date	:	January 2016
	Court	:	United States District Court – Southern District of New York
	Reason	:	Alleged damage to ADS holders of the Company resulting from alleged non compliance with the securities regulations in the United States by the Company
	Status	:	Initial stage of disclosure of background information
	Nominal value	:	Not determined

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(g)	Plaintiff	:	Ernesto Saldaña González et al
	Defendants	:	SQM Salar S.A., SQM Industrial S.A. and their insurance companies
	Date	:	May 2016
	Court	:	13th Civil Court of Santiago
	Reason	:	Lawsuit seeking compensation for damages for alleged civil liability under tort law arising from the accident that occurred in July 2014 in the María Elena location
	Status	:	On March 6, 2019, the ruling in first instance was passed, dismissing the claim. The case is currently before the Santiago Court of Appeals, which will hear the plaintiffs' appeal.
	Nominal value	:	~ ThUS$ 515
(h)	Plaintiff	:	Transportes Buen Destino S.A.
	Defendants	:	SQM Salar.
	Date	:	January 24, 2018
	Court	:	Arbitration award in accordance with the arbitration rules established by the CAM
	Reason	:	Discrepancies generated in the implementation of the following contracts entered into between TBD and SQM Salar: (i) lithium brine transportation; and (ii) salt transportation
	Status	:	Pending evidentiary stage.
	Nominal value	:	~ ThUS$ 3,019

 

(i)	Plaintiff	:	Atacameña de Peine Indigenous Community, Atacameña de Camar Indigenous Community and the Consejo de Pueblos Atacameños.
	Defendants	:	SMA. SQM Salar has intervened as an independent third party.
	Date	:	January 30, 2019
	Court	:	1st Environmental Court
	Reason	:	Declare the SMA's decision illegal, which approved the PdC submitted by SQM Salar.
	Status	:	On December 26, 2019, the First Environmental Court of Antofagasta partially accepted the claim presented by the indigenous communities, rendering null and void the SMA resolution that approved the PdC and suspended the sanctions process against SQM Salar. On January 16, 2020, motions for cassation on grounds of form and substance, filed by the Company, were declared admissible and these will be addressed and resolved by the Supreme Court.
	Nominal value	:	Not determined

 

(j)	Plaintiff	:	Quillagua Aymara Indigenous Community and Quechua de Huatacondo Indigenous Community
	Defendants	:	SMA
	Date	:	March 22, 2019
	Court	:	First Environmental Court of Santiago
	Reason	:	Declare the SMA's decision illegal, which approved the PdC submitted by the Company
	Status	:	Pending the case hearing
	Nominal value	:	Not determined

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(k)	Plaintiff	:	Congresspersons Claudia Nathalie Mix Jiménez, Gael Fernanda Yeomans Araya, Camila Ruslay Rojas Valderrama et al.
	Defendants	:	CORFO, the entity has intervened as an independent third party
	Date	:	September 6,2018
	Court	:	Special Magistrate, Mr. Alejandro Madrid Crohare
	Reason	:	To render null and void the contract for the Salar de Atacama Project signed between CORFO and SQM Salar.
	Status	:	Discussion stage
	Nominal value	:	Not determined

 

 

(l)	Plaintiff	:	Danilo Andrés Araya Rojas et al.
	Defendants	:	FPC Ingeniería y Construcción SpA, SQM S.A. and its insurers
	Date	:	May, 2019
	Court	:	19° Civil Court of Santiago
	Reason	:	Claim seeking compensation for damages, for extracontractual liability resulting from the traffic accident occurring on March 5, 2018 on Route 5, kilometer 1713, near Pozo Almonte, involving an overturned pick-up truck owned by FPC resulting in the death of its two occupants, both employees of FPC, one of which was father of the four claimants. At the time the accident occurred, the employees were heading towards their homes on the SQM site in Nueva Victoria (traffic accident). The four children of one of the deceased employees are the claimants in this case, compensation for moral damages
	Status	:	Discussion stage
	Nominal value	:	~ ThUS$ 1,194.

 

(m)	Plaintiff	:	Servicios Logísticos Integrales Inversol SpA
	Defendants	:	SQM Salar
	Date	:	June 24, 2019.
	Court	:	Arbitration in accordance with the rules established by CAM
	Reason	:	Controversies originating in the implementation of the salt transportation contract
	Status	:	Discussion stage
	Nominal value	:	~ ThUS$ 7,029

 

(n)	Plaintiff	:	Fennix Industrial SpA
	Defendants	:	SQM Salar
	Date	:	April 17, 2019.
	Court	:	First Civil Court of Concepción.
	Reason	:	Disputes arising from the execution of civil works and electromechanical assembly contracts.
	Status	:	Pending ruling on motion to dismiss based on lack of jurisdiction.
	Nominal value	:	~ ThUS$ 770

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(o)	Plaintiff		Fennix Industrial SpA
	Defendants		SQM Salar and other
	Date		May 8, 2019.
	Court		Criminal Court of San Pedro de la Paz
	Reason		Alleged misappropriation of funds - controversies originating from contract execution for civil works and electromechanical assembly
	Status		Research stage.
	Nominal value		~ThUS$ 436

 

 

(p)	Plaintiff		Arrigoni Ingeniería y construcción S.A.
	Defendants		SQM Salar
	Date		November 21, 2019
	Court		Arbitration award in accordance with the arbitration rules established by the CAM
	Reason		Request to declare the end of Works Contract No. SC 9500002949, named “Expansion of Lithium Carbonate Plant Phase II” dated April 2, 2018
	Status		Discussion stage
	Nominal value		ThUS$ 13,054

 

The Company and its subsidiaries have been involved and will probably continue to be involved either as plaintiffs or defendants in certain judicial proceedings that have been and will be heard by the arbitration or ordinary courts of justice that will make the final decision. Those proceedings that are regulated by the appropriate legal regulations are intended to exercise or oppose certain actions or exceptions related to certain mining claims either granted or to be granted and that do not or will not affect in an essential manner the development of the Company and its subsidiaries.

 

Soquimich Comercial S.A. has been involved and will probably continue being involved either as plaintiff or defendant in certain judicial proceedings through which it intends to collect and receive the amounts owed, the total nominal value of which is approximately US$ 1.2 million.

 

The Company and its subsidiaries have made efforts and continues making efforts to obtain payment of certain amounts that are still owed to the Company due to its activities. Such amounts will continue to be required using judicial or non-judicial means by the plaintiffs, and the actions and exercise related to these are currently in full force and effect.

 

The Company and its subsidiaries have received no legal notice on lawsuits other than those indicated above, which exceed US$ 0.2 million.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

22.2       Restrictions to management or financial limits

 

Contracts that subscribed the issuance of bonuses in the local and international market require the Company to comply with the following level of consolidated financial indicators, calculated for the last 12 month period:

 

Maintain a borrowing ratio less than 1.44 for the Series H bond and Series O bond.

 

Furthermore, both bonds establish that if the borrowing ratio (as this term is defined in the respective issuance contracts) exceeds 1.2, (provided that this does not exceed than 1.44 times), the bondholders can voluntarily and individually choose to redeem these bonds early at par value. The Indebtedness ratio for the fourth quarter of 2019 reached a proportion of 1.19.

 

As of December 31, 2019, the above-mentioned financial indicator has the following values:

 

Indicator		As of December 31, 2019				As of December 31, 2018
Leverage			1.19				1.00

 

Bond issue agreements issued abroad require the Company to neither merge nor dispose of the whole or a substantial part of its assets, unless all the following conditions are met: (i) the legal successor company is an entity subject to either Chilean or United States law, and assumes SQM S.A.’s obligations under a complimentary contract, (ii) the Issuer does not fail to comply immediately after the merger or disposal, and (iii) the Issuer delivers a legal opinion stating that the merger or disposal and the complimentary contract meet the requirements described in the original contract.

 

In addition, SQM S.A. is committed to disclosing financial information on quarterly basis.

 

The Company and its subsidiaries have complied and are fully complying with all the aforementioned limitations, restrictions and obligations.

 

22.3       Environmental contingencies

 

On June 6, 2016, the “SMA” filed charges against the Company with respect to the Pampa Hermosa project for possible noncompliance with RCA 890/2010.

 

This relates to charges related to certain variables of the follow-up plan and the implementation of a mitigation measure included in the respective environmental impact assessment. The Company has presented for the approval of SMA a compliance program detailing the actions and commitments it will carry out to address the SMA's objections.

 

On June 29, 2017, the SMA rejected the compliance program presented by the Company, On July 10, 2017, the Company presented its rebuttals to the charges made by the SMA, On August 21, 2018, the Second Environmental Court accepted the Company’s claim, ordering the SMA to take the procedure back to the stage prior to their resolution rejecting the compliance program presented by the Company.

 

The SMA approved SQM’s proposed compliance program in its resolution dated January 26, 2019, and this program is currently being executed. On March 22, 2019, the indigenous communities of Quillagua and Huatacondo filed a complaint against the resolution that approved the compliance program before the First Environmental Court of Antofagasta (R-21-2019). This process was suspended on May 16, 2019.

 

The SMA issued a resolution dated November 28, 2016, rectified by a resolution dated December 23, 2016, which filed charges against SQM Salar for brine extraction in excess of authorized amounts, progressive impairment of the vitality of carob trees, providing incomplete information, amending variables, and other charges.

 

SQM Salar S.A. presented a compliance program that was accepted by the SMA. On December 26, 2019, the Environmental Court of Antofagasta rendered null and void the SMA ruling that approved the program and the SMA and SQM Salar presented motions for cassation against this verdict. These were accepted for processing and submitted to the Supreme Court and are currently pending final ruling. Although the ruling approving the compliance program has been rendered null and void, SQM Salar continues to comply with the measures it agreed to under this program. Once the Supreme Court resolves these issues, approval of the compliance program may be confirmed, a new program may be presented that considers other measures in agreement with the SMA or the sanctions process may be reinstated. This latter event may consider the application of fines up to US$9 million, temporary or permanent closure of facilities and in extreme circumstances, revocation of the respective environmental permit.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

22.4       Tax Contingencies

 

On August 26, 2016, SQM Salar filed a tax claim before the Third Tax and Customs Court of the Metropolitan Region against settlements 169, 170, 171 and 172, which extend the application of specific mining tax to lithium exploitation. The disputed amount is approximately US$17.8 million. On November 28, 2018, the Third Tax and Customs Court rejected the claim, and the case was transferred to the Santiago Court of Appeals, following an appeal filed by SQM Salar.

 

On March 24, 2017, SQM Salar filed with the Third Tax and Customs Court of the Metropolitan Region a tax claim against tax assessment No. 207 of 2016 and ruling No. 156 of 2016, both issued by the Chilean IRS, which seek to expand application of the specific tax on mining activities to include lithium exploitation for tax years 2015 and 2016. The amount involved is approximately US$14.4 million. On November 28, 2018, the Third Tax and Customs Court accepted SQM Salar’s claim for US$ 7.0 million corresponding to the overcharge made by the SII and rejected the remainder of the claim. The case is in the Santiago Court of Appeals, based on the appeal filed by SQM Salar.

 

These amounts are classified as taxes for current assets, non-current, as of December 31, 2018 and the same as of December 31, 2019.

 

The amount in dispute is US$ 32.2 million, and approximately US$ 25.2 million of this sum is the potential specific mining tax associated with lithium, whereas US$7.0 million is an excess charge by the SII regarding this latter value, the internal revenue service (SII) has acknowledged the excessive charge of US$5.8 million, and a request has been made on October 17, 2019 for it to be returned, The difference of US$ 1.2 million for the lower first category tax rate plus interests and fines will be reinstated at the end of the trial.

 

The SII has not settled differences with respect to specific mining taxes for 2016, 2017, 2018 and 2019. the current business year. As of the date of these financial statements, the Company has not made provisions for these potential differences.

 

If the Chilean IRS uses criteria similar to that used in previous years, it may issue an assessment in the future for the 2016, 2017, 2018 y 2019financial years. It is reasonable to expect that should these assessments for the period 2016 through the fourth quarter of 2019 be issued, the value would be approximately US$ 69 million (without considering potential interest and fines).

 

The company continues to undertake all legal efforts to actively and decidedly defend its interests.

 

22.5

Contingencies regarding the Changes to the Contracts with Corfo:

 

On September 6, 2018, representatives Claudia Nathalie Mix Jiménez, Gael Fernanda Yeomans Araya and Camila Ruslay Rojas Valderrama and the Poder Ciudadano political party filed an annulment suit against Corfo, which requested that the Contract for the Salar de Atacama Project between Corfo and the Companies be annulled. The Companies have taken part of the process as interested third parties.

 

In the event that the annulment claim is approved for the Salar de Atacama Project Contract, SQM Salar may be prevented from exploit the mining claims in the Salar de Atacama that it has leased from Corfo.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

22.6

Contingencies related to the Class Action lawsuit

 

Since October 2015, a consolidated class action lawsuit has been pending against the Company before the District Court for the Southern District of New York of the United States. The consolidated lawsuit alleges that certain statements made by the Company between June 30, 2010, and June 18, 2015, mainly in documents filed with the SEC and in Company press releases, were materially false and this constitutes a violation of Section 10 (b) of the Securities Exchange Act and of the correlative Standard 10b-5. Specifically, the consolidated lawsuit challenges certain statements issued by the Company associated with its compliance with or implementation of the laws and regulations that regulate it, the effectiveness of its internal controls, the adoption of a code of ethics consistent with SEC requirements, of its income or revenue and taxes paid, and of the applicable accounting standards. The primary plaintiff seeks compensation for the class in a yet undetermined amount for economic losses occurring as a result of the questioned statements. On January 10, 2018, the primary plaintiff filed a motion to certify a class composed of all people or entities who purchased ADSs in the Company between June 30, 2010, and March 18, 2015, and this motion is still pending with the court.

 

Although the Company expects to actively and decisively defend its position, the outcome of this litigation cannot be predicted.

 

22.7

Restricted or pledged cash

 

The subsidiary Isapre Norte Grande Ltda., in compliance with the provisions established by the Chilean Superintendence of Healthcare, which regulates the running of pension-related health institutions, maintains a guarantee in financial instruments delivered in deposits, custody and administration to Banco de Chile.

 

This guarantee, according to the regulations issued by the Chilean Superintendence of Healthcare is equivalent to the total amount owed to its members and medical providers, Banco de Chile reports the present value of the guarantee to the Chilean Superintendence of Healthcare and Isapre Norte Grande Ltda on a daily basis. As of December 31, 2019, the guarantee amounts to ThUS$ 551.

 

22.8

Securities obtained from third parties

 

The main security received (exceeding ThUS$ 100) from third parties to guarantee Soquimich Comercial S.A. their compliance with obligations in contracts of commercial mandates for the distribution and sale of fertilizers amounted to ThUS$ 9,611 and ThUS$ 9,423 on December 31, 2019 and December 31, 2018 respectively; which is detailed as follows:

 

Grantor		Relationship		As of December 31, 2019				As of December 31, 2019
				ThUS$				ThUS$
Ferosor Agrícola S.A.		Unrelated Third party			5,372				3,598
Tattersall Agroinsumos S.A.		Unrelated Third party			2,000				2,000
Contador Frutos S.A.		Unrelated Third party			-				1,587
Covepa SPA		Unrelated Third party			671				720
Johannes Epple Davanzo		Unrelated Third party			300				321
Hortofrutícola La Serena		Unrelated Third party			282				294
Com. Serv Johannes Epple Davanz		Unrelated Third party			269				-
Juan Luis Gaete Chesta		Unrelated Third party			182				195
Arena Fertilizantes y Semillas		Unrelated Third party			201				216
Vicente Oyarce Castro		Unrelated Third party			213				222
Soc. Agrocom. Julio Polanco		Unrelated Third party			-				144
Bernardo Guzmán Schmidt		Unrelated Third party			121				126
Total					9,611				9,423

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

22.9

Indirect guarantees

 

Guarantees without pending balance indirectly reflect that the respective guarantees are in force and approved by the Company’s Board of Directors and have not been used by the respective subsidiary.

 

Outstanding balances as of the closing date of the financial statements

Debtor

As of December 31,

As of December 31,

Creditor of the guarantee

Name

Relationship

Type of guarantee

2019

2018

ThUS$

ThUS$

Australian and New Zealand Bank

SQM North America Corp

Subsidiary

Guarantee

-

-

Australian and New Zealand Bank

SQM Europe N.V.

Subsidiary

Guarantee

-

-

Generale Bank

SQM North America Corp

Subsidiary

Guarantee

-

-

Generale Bank

SQM Europe N.V.

Subsidiary

Guarantee

-

-

Kredietbank

SQM North America Corp

Subsidiary

Guarantee

-

-

Kredietbank

SQM Europe N.V.

Subsidiary

Guarantee

-

-

Bancos e Instituciones Financieras

SQM Investment Corp. N.V.

Subsidiary

Guarantee

-

-

Bancos e Instituciones Financieras

SQM Europe N.V.

Subsidiary

Guarantee

-

-

Bancos e Instituciones Financieras

SQM North America Corp

Subsidiary

Guarantee

-

-

Bancos e Instituciones Financieras

Nitratos Naturais do Chile Ltda.

Subsidiary

Guarantee

-

-

Bancos e Instituciones Financieras

SQM México S.A. de C.V.

Subsidiary

Guarantee

-

-

Bancos e Instituciones Financieras

SQM Brasil Ltda.

Subsidiary

Guarantee

-

-

“BNP’’

SQM Investment Corp. N.V.

Subsidiary

Guarantee

-

-

Sociedad Nacional de Minería A.G.

SQM Potasio S.A.

Subsidiary

Guarantee

-

-

Scotiabank & Trust (Cayman) Ltd.

Royal Seed Trading A.V.V.

Subsidiary

Guarantee

-

-

Scotiabank & Trust (Cayman) Ltd.

Royal Seed Trading A.V.V.

Subsidiary

Guarantee

-

-

Bank of America

Royal Seed Trading A.V.V.

Subsidiary

Guarantee

-

-

Export Development Canada

Royal Seed Trading A.V.V.

Subsidiary

Guarantee

-

-

The Bank of Tokyo-Mitsubishi UFJ Ltd.

Royal Seed Trading A.V.V.

Subsidiary

Guarantee

-

-

JP Morgan Chase Bank

SQM Industrial S.A.

Subsidiary

Guarantee

-

-

The Bank of Nova Scotia

SQM Investment Corp. N.V.

Subsidiary

Guarantee

-

-

Morgan Stanley Capital Services

SQM Investment Corp. N.V.

Subsidiary

Guarantee

-

-

The Bank of Tokyo-Mitsubishi UFJ Ltd

SQM Investment Corp. N.V.

Subsidiary

Guarantee

-

-

HSBC

SQM Investment Corp. N.V.

Subsidiary

Guarantee

-

-

Deutsche Bank AG

SQM Investment Corp. N.V.

Subsidiary

Guarantee

-

-

Credit Suisse International

SQM Investment Corp. N.V.

Subsidiary

Guarantee

-

-

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 23  Lawsuits and complaints

 

Investigation by the Department of Justice and the Securities Exchange Commission and Agreements

 

On January 13, 2017, the Company signed agreements with the DOJ and the SEC relating to their investigations into Company payments to suppliers and organizations that may have had links with politically exposed persons during the period from 2008 to 2015. As a result, the Company conducted its own internal investigation through an ad-hoc Board committee. The Company’s securities are traded in the USA, so the Company is subject to US law. The Company has voluntarily submitted the results of its internal investigation and supporting documents to the DOJ, the SEC and the relevant Chilean authorities.

 

In accordance with the terms of the Deferred Prosecution Agreement with the DOJ, denominated DPA the Company has accepted that the DOJ formulates (i) a charge for infractions for the lack of implementation of effective internal accounting systems and internal accounting controls and (ii) a charge for infractions for failure to adequately maintain books, records and accounting sections in relation to the events investigated, Under the DPA, the DOJ has agreed not to pursue such charges against the Company for a period of 3 years and release the Company from liability after such period, inasmuch as within that period the Company complies with the terms of the DPA, These include payment of a fine of US$15,487,500 and acceptance of an external monitor for a period of 24 months that will assess the Company’s compliance program, and continue to report on the Company independently for an additional year.

 

In relation to the agreement with the SEC, the Company has agreed to (i) pay a fine of 15 million dollars and (ii) maintain the Monitor for the aforementioned period.

 

The SEC has issued a Cease and Desist Order that does not identify other breaches of United States regulations.

 

The aforementioned amounts of approximately US$ 30.5 million, were reflected in the Company’s profit and loss during the fourth quarter of 2016 in the “Other Expenses by function” line.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 24  Environment

 

24.1

Disclosures of disbursements related to the environment

 

The Company is continuously concerned with protecting the environment both in its production processes and with respect to products manufactured. This commitment is supported by the principles indicated in the Company’s Sustainable Development Policy. The Company is currently operating under an Environmental Management System (EMS) that has allowed it to strengthen its environmental performance through the effective application of the Company’s Sustainable Development Policy.

 

Operations that use caliche as a raw material are carried out in desert areas with climatic conditions that are favorable for drying solids and evaporating liquids using solar energy. Operations involving the open-pit extraction of minerals.

 

Many of the Company’s products are shipped in bulk at the Port of Tocopilla. In 2007, the city of Tocopilla was declared a zone saturated with MP10 Particles mainly due to the emissions from the electric power plants that operate in that city. In October 2010, the Decontamination Plan for Tocopilla was put in place. Accordingly, the Company has committed to taking several measures to mitigate the effects derived from bulk product movements in the port. These measures have been timely implemented since 2007.

 

The Company carries out environmental follow-up and monitoring plans based on specialized scientific studies. Follow-up on relevant variables defined for each project enables the Company to verify the status, for example, of vegetation, flora, fauna and aquatic life in the ecosystems to protect. Follow-up plans are supported by a broad control network that includes monitoring points such as meteorological stations and wells, satellite images, plots for recording the status of vegetation and fauna, etc. The activities comprised in these plans are reported regularly to authorities based on the Company’s commitments made through resolutions that approve different SQM projects.

 

The Company maintains environmental monitoring across the systems where it operates, which is supported by numerous studies that integrate diverse scientific efforts from prestigious research centers on a national and international level, such as the Spanish National Research Council (CSIC) and the Universidad Católica del Norte.

 

Furthermore, within the framework of the environmental studies which the Company is conducting, the Company performs significant activities in relation to the recording of Pre-Columbian and historical cultural heritage, as well as the protection of heritage sites, in accordance with current Chilean laws. These activities have been especially performed in the areas surrounding Maria Elena and the Nueva Victoria plant. This effort is being accompanied by cultural initiatives within the community and the organization of exhibits in local and regional museums.

 

As emphasized in its Sustainable Development Policy, the Company strives to maintain positive relationships with the communities surrounding the locations in which it carries out its operations, as well as to participate in communities’ development by supporting joint projects and activities which help to improve the quality of life for residents. For this purpose, the Company has focused its efforts on activities involving the rescue of historical heritage, education and culture, as well as development. In order to do so, it acts both individually and in conjunction with private and public entities.

 

24.2

Detailed information on disbursements related to the environment

 

The cumulative disbursements which the Company had incurred as of December 31, 2019 for the concept of investments in production processes, verification and control of compliance with ordinances and laws related to industrial processes and facilities amounted to ThUS$ 16,983 and are detailed as follows

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Accumulated expenses as of December 31, 2019

 

Parent Company or Subsidiary

Project Name

Reason for Disbursement

Asset / Expense

Disbursement

Exact or Estimated Date of Disbursement

ThUS$

Miscellaneous

Environment - Operating Area

Not classified

Expense

8,054

12-31-2019

SQM S.A.

01-I013800 - Increase height of Absorber Tower

Sustainability: Environment and Risk Prevention

Assets

15

12-31-2019

SQM S.A.

01-I017200 - CEDAM at Puquíos (ponds) at Llamara

Sustainability: Environment and Risk Prevention

Expense

3

12-31-2019

SQM S.A.

01-I017400 - Value Added Paints and Deposits

Sustainability: Environment and Risk Prevention

Expense

2

12-31-2019

SQM S.A.

01-I017600 - Regularization of Substances Decree

Environmental processing

Expense

63

12-31-2019

SQM S.A.

01-I018700 - Penalization Process for Salar de Llamara

Environmental processing

Assets

522

12-31-2019

SQM S.A.

01-I019400 - EIA Ampliación de TEA e Impulsión agua de mar

Environmental processing

Assets

898

12-31-2019

SQM S.A.

01-I028200 - EIA Llamara

Environmental processing

Expense

253

12-31-2019

SQM S.A.

01-I028300 - Implementation of PDC 2019

Sustainability: Environment and Risk Prevention

Expense

1,057

12-31-2019

SQM S.A.

01-I030700 - Sector Permits EIA Tente en el Aire Project

Environmental processing

Expense

131

12-31-2019

SQM Industrial S.A.

04-I017700 - Basic Engineering and EIA for TEA industrial area and seawater impulsion N.V.

Sustainability: Environment and Risk Prevention

Assets

318

12-31-2019

SQM Industrial S.A.

04-I025000 - Re-perforación Pozo 2PL-2 y Ma

Sustainability: Environment and Risk Prevention

Expense

7

12-31-2019

SQM Industrial S.A.

04-J007000 - Environmental impact statement

Environmental processing

Expense

7

12-31-2019

SQM Industrial S.A.

04-J010700 - Recovery Water Intake from Rivers

Sustainability: Environment and Risk Prevention

Assets

119

12-31-2019

SQM Industrial S.A.

04-J012200 - Environmental Impact Statement and Regularization of CS Ponds

Environmental processing

Assets

19

12-31-2019

SQM Industrial S.A.

04-J013500 - Handling of Equipment associated with PCBs

Sustainability: Environment and Risk Prevention

Expense

251

12-31-2019

SQM Industrial S.A.

04-J015200 - Implement Economizers

Sustainability: Environment and Risk Prevention

Assets

195

12-31-2019

SQM Industrial S.A.

04-J015700 - Update closure plans

Sustainability: Environment and Risk Prevention

Expense

52

12-31-2019

SQM Industrial S.A.

04-J017200 - Guarantee availability S

Sustainability: Environment and Risk Prevention

Assets

253

12-31-2019

SQM Industrial S.A.

04-J019900 - Provisional Access to Cerro Domina

Sustainability: Environment and Risk Prevention

Expense

141

12-31-2019

SQM Industrial S.A.

04-M002000 - Recovery of Potable Water at María Elena

Sustainability: Environment and Risk Prevention

Assets

225

12-31-2019

SQM Salar S.A.

19-C005700 - Solar Electric Recharge Point Project-

Sustainability: Environment and Risk Prevention

Assets

53

12-31-2019

SQM Salar S.A.

19-L012100 - Upgrade to weather stations

Sustainability: Environment and Risk Prevention

Assets

17

12-31-2019

SQM Salar S.A.

19-L018000 - Upgrade TT illumination

Sustainability: Environment and Risk Prevention

Assets

40

12-31-2019

SQM Salar S.A.

19-L018700 - 5th Update of environmental modeling

Environmental processing

Expense

10

12-31-2019

SQM Salar S.A.

19-L018800 - UPC Consulting for NW and others

Sustainability: Environment and Risk Prevention

Expense

166

12-31-2019

SQM Salar S.A.

19-L018900 - Evaporation 2018-2019

Sustainability: Environment and Risk Prevention

Assets

8

12-31-2019

SQM Salar S.A.

19-L019800 - Paleoclimate Study (Iberia)

Sustainability: Environment and Risk Prevention

Expense

1

12-31-2019

SQM Salar S.A.

19-L020000 - Improvement of Operations Monitoring Network

Sustainability: Environment and Risk Prevention

Assets

5

12-31-2019

SQM Salar S.A.

19-L020300 - Telemetry boreholes

Sustainability: Environment and Risk Prevention

Assets

821

12-31-2019

SQM Salar S.A.

19-L021400 - Environmental Monitoring 2019

Environmental processing

Expense

2,767

12-31-2019

SQM Salar S.A.

19-L021700 - Improvement of RH and MA 2019

Environmental processing

Expense

80

12-31-2019

SQM Salar S.A.

19- S013400- Online Monitoring

Sustainability: Environment and Risk Prevention

Expense

430

12-31-2019

Total

16,983

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Future expenses as of December 31, 2019

 

Parent Company or Subsidiary

Project Name

Reason for Disbursement

Asset / Expense

Disbursement

Exact or Estimated Date of Disbursement

ThUS$

Miscellaneous

Environment - Operating Area

Not classified

Expense

10,085

12-31-2020

SQM S.A.

01-I017200 - CEDAM at Puquíos (ponds) at Llamara

Sustainability: Environment and Risk Prevention

Expense

28

12-31-2020

SQM S.A.

01-I017400 - Development of Pintados and surrounding area.

Sustainability: Environment and Risk Prevention

Expense

108

12-31-2020

SQM S.A.

01-I017600 - Regularization of Substances Decree

Environmental processing

Expense

75

12-31-2020

SQM S.A.

01-I019400 - EIA Expansion of TEA and Seawater Impulsion

Environmental processing

Assets

426

12-31-2020

SQM S.A.

01-I028200 - EIA Llamara

Environmental processing

Expense

1,527

12-31-2020

SQM S.A.

01-I028300 - Implementation of PDC 2019

Sustainability: Environment and Risk Prevention

Expense

1,231

12-31-2020

SQM S.A.

01-I030700 - Permisos Sectoriales EIA Proyecto Tente en el Aire

Environmental processing

Expense

284

12-31-2020

SQM Industrial S.A.

04-I025000 - Re-perforación Pozo 2PL-2 y Ma

Sustainability: Environment and Risk Prevention

Expense

128

12-31-2020

SQM Industrial S.A.

04-J012200 - DIA and Regularization of CS Ponds

Environmental processing

Assets

35

12-31-2020

SQM Industrial S.A.

04-J013500 - Handling of Equipment associated with PCBs

Sustainability: Environment and Risk Prevention

Expense

303

12-31-2020

SQM Industrial S.A.

04-J015200 - Implementation Economizers

Sustainability: Environment and Risk Prevention

Assets

59

12-31-2020

SQM Industrial S.A.

04-J015700 - Update of Closure Plans

Sustainability: Environment and Risk Prevention

Expense

127

12-31-2020

SQM Industrial S.A.

04-J015800 - Other Sector Regulatory Measures

Sustainability: Environment and Risk Prevention

Expense

237

12-31-2020

SQM Industrial S.A.

04-J017200 - Guarantee availability S

Sustainability: Environment and Risk Prevention

Assets

104

12-31-2020

SQM Industrial S.A.

04-J019900 - Provisional Access to Cerro Domina

Sustainability: Environment and Risk Prevention

Expense

95

12-31-2020

SQM Industrial S.A.

04-M003900 - Revocation of PDME

Sustainability: Environment and Risk Prevention

Expense

47

12-31-2020

SQM Salar S.A.

19-L014700 - Industrial Waste Management

Sustainability: Environment and Risk Prevention

Expense

135

12-31-2020

SQM Salar S.A.

19-L018800 - UPC Consulting for NW and others

Sustainability: Environment and Risk Prevention

Expense

238

12-31-2020

SQM Salar S.A.

19-L018900 - Evaporation 2018-2019

Sustainability: Environment and Risk Prevention

Assets

172

12-31-2020

SQM Salar S.A.

19-L019800 - Paleoclimate Study (Iberia)

Sustainability: Environment and Risk Prevention

Expense

49

12-31-2020

SQM Salar S.A.

19-L020000 - Improvement of Operations Monitoring Network

Sustainability: Environment and Risk Prevention

Assets

95

12-31-2020

SQM Salar S.A.

19-L021400 - Environmental Monitoring 2019

Environmental processing

Expense

33

12-31-2020

SQM Salar S.A.

19-L021700 - Improvement of RH and MA 2019

Environmental processing

Expense

132

12-31-2020

SQM Salar S.A.

19- S013400- Online Monitoring

Sustainability: Environment and Risk Prevention

Expense

300

12-31-2020

Total

16,053

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Accumulated expenses as of December 31, 2018

 

Parent Company or Subsidiary

Project Name

Reason for Disbursement

Asset / Expense

Disbursement

Exact or Estimated Date of Disbursement

ThUS$

Miscellaneous

Environment - Operating Area

Not classified

Expense

9,002

12-31-2018

SQM S.A.

01-I005500 - Standardization of SO2 plants

Environmental processing

Assets

27

31-12-2018

SQM S.A.

01-I007300 - Compliance with Iodine Gas Exposure Standard

Environmental processing

Assets

59

31-12-2018

SQM S.A.

01-I013800 - Increase height of Absorber Tower

Sustainability: Environment and Risk Prevention

Assets

124

31-12-2018

SQM S.A.

01-I017200 - CEDAM at Puquíos (ponds) at Llamara

Sustainability: Environment and Risk Prevention

Expense

25

31-12-2018

SQM S.A.

01-I017400 - Development of Pintados and surrounding area.

Sustainability: Environment and Risk Prevention

Expense

5

31-12-2018

SQM S.A.

01-I018300 - Cultural Heritage Baseline Environmental Impact Statement (EIS) Mina Oeste N.V.

Environmental processing

Expense

117

31-12-2018

SQM S.A.

01-I018700 - Penalization Process for Salar de Llamara

Environmental processing

Expense

992

31-12-2018

SQM S.A.

01-I019400 - EIA Expansion of TEA and Seawater Impulsion

Environmental processing

Assets

1,914

31-12-2018

SQM S.A.

01-I017600 - Regularization of Substances Decree

Environmental processing

Expense

121

31-12-2018

SQM Industrial S.A.

04-J007000 - Environmental Impact Statement

Environmental processing

Expense

30

31-12-2018

SQM Industrial S.A.

04-J010200 - NK CS (KNO3-NaNO3 salt production at NPT2 plant)

Sustainability: Environment and Risk Prevention

Assets

100

31-12-2018

SQM Industrial S.A.

04-I015600 - Recovery of Reject Water from Osmosis Plant, NV Iodine Plant

Sustainability: Environment and Risk Prevention

Assets

130

31-12-2018

SQM Industrial S.A.

04-J012200 - Environmental Impact Statement and Regularization of CS Ponds

Environmental processing

Assets

131

31-12-2018

SQM Industrial S.A.

04-M002000 - Recovery of Potable Water at María Elena

Sustainability: Environment and Risk Prevention

Assets

161

31-12-2018

SQM Industrial S.A.

04-I025000 - Re-drilling of Well 2PL-2 and Maintenance of Access Road to Wells

Sustainability: Environment and Risk Prevention

Expense

18

31-12-2018

SQM Industrial S.A.

04-P006500 - Installation, electrical wiring

Sustainability: Environment and Risk Prevention

Assets

3

31-12-2018

SQM Industrial S.A.

04-I017700 - Basic engineering and Environmental Impact Assessment for TEA industrial area and seawater impulsion N.V.

Sustainability: Environment and Risk Prevention

Assets

561

31-12-2018

SQM Industrial S.A.

04-J013500 - Handling of Equipment associated with PCBs

Sustainability: Environment and Risk Prevention

Expense

127

31-12-2018

SIT S.A.

03-T003400 - 2016 Port maintenance Capex

Sustainability: Environment and Risk Prevention

Assets

28

31-12-2018

SIT S.A.

03-T001900 - Storage Warehouse Cover

Sustainability: Environment and Risk Prevention

Assets

25

31-12-2018

SIT S.A.

03-T001800 - Mechanization of Shipment from Ca

Sustainability: Environment and Risk Prevention

Assets

50

31-12-2018

SIT S.A.

03-T003200 - Mechanization of Shipment from Ca

Sustainability: Environment and Risk Prevention

Assets

218

31-12-2018

SIT S.A.

03-T003600 -Improved Port SQM Bulk Storage

Sustainability: Environment and Risk Prevention

Assets

33

31-12-2018

SIT S.A.

03-T004200 - Encapsulation and Collectors Yards 8 and 9

Sustainability: Environment and Risk Prevention

Assets

795

31-12-2018

SIT S.A.

03-T004500 - Belt 5 Extension and Overhaul

Environmental processing

Assets

200

31-12-2018

SIT S.A.

03-T005000 - Ground leveling and paving of warehouse

Sustainability: Environment and Risk Prevention

Assets

210

31-12-2018

SIT S.A.

03-T006400 - Pollution Control and Management Equipment

Sustainability: Environment and Risk Prevention

Assets

246

31-12-2018

SIT S.A.

03-T006200 - Storage Facilities Yard 6

Sustainability: Environment and Risk Prevention

Assets

299

31-12-2018

SIT S.A.

03-T006100 - Closure of Storage Facilities Yard 9

Sustainability: Environment and Risk Prevention

Assets

443

31-12-2018

SQM Salar S.A.

19-L012200 - Installation of flow meters per environmental standard

Sustainability: Environment and Risk Prevention

Assets

74

31-12-2018

SQM Salar S.A.

19-L012100 – Renewal of equipment with certification required by RCA

Sustainability: Environment and Risk Prevention

Assets

39

31-12-2018

SQM Salar S.A.

19-C003900 - Extension of Carbonate 120,000 TPA Plant

Sustainability: Environment and Risk Prevention

Assets

776

31-12-2018

SQM Salar S.A.

19-L014700 - Industrial Waste Management

Sustainability: Environment and Risk Prevention

Assets

120

31-12-2018

SQM Salar S.A.

19-L014900 - Sludge Drying Project

Sustainability: Environment and Risk Prevention

Assets

180

31-12-2018

SQM Salar S.A.

19-L018400 - EIA, PSA, Hydrogeology and Conservation

Environmental processing

Expense

1,824

31-12-2018

SQM Salar S.A.

19-L018700 5th Update of environmental modeling

Environmental processing

Expense

76

31-12-2018

SQM Nitratos S.A.

12-I012700 - Mine Site Workshop Water Recovery Plant

Sustainability: Environment and Risk Prevention

Assets

156

31-12-2018

Total

19,439

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Future expenses as of December 31, 2018

 

Parent Company or Subsidiary

Project Name

Reason for Disbursement

Asset / Expense

Disbursement

Exact or Estimated Date of Disbursement

ThUS$

Varies

Environment - Operating Area

Not classified

Expense

10,204

12-31-2018

SQM S.A.

01-I012200 - Repair or replacement of borehole

Sustainability: Environment and Risk Prevention

Assets

76

12-31-2018

SQM S.A.

01-I013800 - Increase height of Absorber Tower

Sustainability: Environment and Risk Prevention

Assets

15

12-31-2018

SQM S.A.

01-I017200 - CEDAM at Puquíos (ponds) at Llamara

Sustainability: Environment and Risk Prevention

Expense

90

12-31-2018

SQM S.A.

01-I017400 - Development of Pintados and surrounding area, Pintados y Depósitos

Sustainability: Environment and Risk Prevention

Expense

116

12-31-2018

SQM S.A.

01-I018700 - Penalization Process for Salar de Llamara

Environmental processing

Expense

528

12-31-2018

SQM S.A.

01-I019400 - EIA Expansion of TEA and Seawater Impulsion

Environmental processing

Assets

536

12-31-2018

SQM S.A.

01-I017600 - Regularización Decreto Sustanc

Environmental processing

Expense

485

01-23-2019

SIT S.A.

03-T004200 - Encapsulation and Collectors Yards 8 and 9

Sustainability: Environment and Risk Prevention

Assets

321

12-31-2018

SIT S.A.

03-T004500 - Belt 5 Extension and Overhaul

Environmental processing

Assets

141

12-31-2018

SIT S.A.

03-T006200 - Warehouses, yard 6

Sustainability: Environment and Risk Prevention

Assets

1,147

12-01-2019

SIT S.A.

03-T006400 - Pollution Control Equipment and Maintenance

Sustainability: Environment and Risk Prevention

Assets

144

13-01-2019

SIT S.A.

03-T006100 - Warehouses, yard 9

Sustainability: Environment and Risk Prevention

Assets

490

01-18-2019

SQM Salar S.A.

19-L012100 - Renewal of equipment with certification required by RCA

Sustainability: Environment and Risk Prevention

Assets

13

12-31-2018

SQM Salar S.A.

19-L018000 - Regularize TT lighting

Sustainability: Environment and Risk Prevention

Assets

74

01-16-2019

SQM Salar S.A.

19-L018700 - Fifth environmental model update

Environmental processing

Expense

27

01-22-2019

SQM Industrial S.A.

04-J010200 - NK CS (KNO3-NaNO3 salt production at NPT2 plant)

Sustainability: Environment and Risk Prevention

Assets

3

12-31-2018

SQM Industrial S.A.

04-I017700 - Basic engineering and Environmental Impact Assessment for TEA industrial area and seawater impulsion N.V.

Sustainability: Environment and Risk Prevention

Assets

452

12-31-2018

SQM Industrial S.A.

04-J010700 - Recovery Water Intake from Rivers

Sustainability: Environment and Risk Prevention

Assets

120

12-31-2018

SQM Industrial S.A.

04-J012200 - Environmental Impact Statement and Regularization of CS Ponds

Environmental processing

Assets

187

12-31-2018

SQM Industrial S.A.

04-M002000 - Recovery of Potable Water at María Elena

Sustainability: Environment and Risk Prevention

Assets

264

12-31-2018

SQM Industrial S.A.

04-J013500 - Handling of Equipment associated with PCBs

Sustainability: Environment and Risk Prevention

Expense

34

12-31-2018

SQM Industrial S.A.

04-J013300 - Increase solid waste management in Dual Plant (Delkor Filter)

Sustainability: Environment and Risk Prevention

Assets

68

12-31-2018

SQM Industrial S.A.

04-P006500 - Installation, electrical wiring

Sustainability: Environment and Risk Prevention

Assets

104

12-31-2018

SQM Industrial S.A.

04-J015200 - Implementación Economizadores

Sustainability: Environment and Risk Prevention

Assets

276

12-31-2018

SQM Industrial S.A.

04-I025000 - Re-perforación Pozo 2PL-2 y Ma

Sustainability: Environment and Risk Prevention

Expense

242

12-31-2018

SQM Industrial S.A.

04-J014200 - Compromisos con la RCAs

Environmental processing

Expense

70

12-31-2018

Total

16,227

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

24.3

Description of each project, indicating whether these are in process or have been finished

 

SQM S.A.

 

0138: This project is to increase the height of each SO₂ absorber tower (regular and stand-by towers) by 2.5 meters. The towers’ additional height will allow the height of the packing to be increased by 2.5, thereby improving the efficiency of the SO₂ absorption. The main activities are: Basic and detailed engineering; supply of the bodies of the absorber towers (frp), liquid distributors, tower brine pump pad, tri-pack packing type, polyethylene pipes and fitting; gas measurement service; metallic structure manufacturing and installation services; and project start-up.

 

I0172: The commitments of the Pampa Hermosa project for the Salar de Llamara include the Tamarugos Environmental Management Plan (PMAT), which contemplates an Environmental Education Program that includes the design, construction and start-up of an Environmental Education Center (CEDAM) at Puquios de Llamara. Conceptual design, detailed design, construction and start-up are necessary for the CEDAM, which will be subject to approval by the authorities so its duration and costs are subject to the approval of third parties.

 

I0174: The commitments within the Pampa Hermosa project include implementing "Value Added" at the former Pintados station. The "Value Added" proposal was submitted to the authority and once approved, it should be implemented (parking, path, shade and information panels). The commitments within the "Zona de Mina Nueva Victoria" and "Pampa Hermosa" projects include implementing a storage facility in Humberstone to store archaeological material recovered as a result of the archaeological compensation measures included in these projects. The Humberstone storage facility requires a proposal and subsequent implementation, which is subject to approval by the authority. Therefore, its duration and cost is subject to such third-party approvals.

 

I0187: The project involves the implementation of measures that were committed to during the penalty process, including urgent and transitory measures. Actions to be implemented include monthly biotic monitoring, quarterly landscape monitoring, metagenomic analysis, study accrediting the nonexistence of environmental effects in puquios (aquatic biota) and study accrediting the implementation of adequate water quality control of water injected into the system, both accredited by a center for excellence in a state or state-recognized university.

 

I0194: Tender and awarding of environmental permits, implement archeology, biota, human environment campaigns, etc., develop marine studies, prepare reports and enter study into the assessment system, monitor and respond to addenda until the system is approved. Prepare and submit claims to third parties associated with the request for rights of way.

 

I0055: The gas/liquid ratio is deficient in the SO2 plant, preventing the absorption of SO2, resulting in free iodine losses, due to inadequate stripping of kerosene and prilling air. This phenomenon also causes plugs in ducts and furnaces (unscheduled plant shutdowns), a highly contaminated environment for people (hygiene and health deviations), excessive acid rain (corrosion of facilities), and a high sulphur and sodium metabisulphite consumption factor. By changing the extraction fans to increase airflow and SO2 absorption towers for prilling, the diameter of the ducts can be expanded. This ensures that the gas/liquid ratio can be increased and sustained. A scrubber unit must be installed (tower, pump, gas extractor and piping) to reduce SO2 emissions. The same concept was developed for the SO2 Iodine plant in Maria Elena.

 

I0073: The iodine gas capture system is operating very inefficiently. The iodine steam levels are between 150% and 4,900% above the levels allowed for jobs at iodine plants and warehouses as established in Article 61 of Supreme Decree 594/1999 approving the Regulation on Basic Sanitary and Environmental Conditions in Workplaces. This project is in progress.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

I0122: The project will repair and replace environmental monitoring boreholes that need to be deepened. Improvements in pique boreholes are also included, to avoid risk conditions. the priority wells are N° 8 and 10-S1 in the pampa of the tamarugal and PO-5 in Salar de Llamara.

 

I0183: A heritage baseline in the western mine sector will be prepared, which is a DIA requirement.

 

I0176: The project will prepare an initial diagnosis at various sites, which will identify the deviations and measures required to adapt them, in order to subsequently prepare an adaptation program that will be submitted to the Regional Health Ministerial Secretary.

 

I0282: The project will prepare an initial diagnosis at various sites, which will identify the deviations and measures required to adapt them, in order to subsequently prepare an adaptation program that will be submitted to the Regional Health Ministerial Secretary. The measures will be defined on the basis of this diagnosis, and minor or major structural amendments that require prior environmental assessment (DIA/EIA) may be necessary.

 

I0283: The project will implement the measures described in the PDC. The implementation includes advice from consultants (regarding legal, hydrogeological, and PDC procedures), studies and additional monitoring (UCN, ANAM, FisioAquas, and other studies), in addition to building infrastructure.

 

I0307: The project consists of the preparation of reports to obtain sectoral permits: Authorization for the Exploitation Method (SERNAGEOMIN) – For project “Tente en el Aire”.

 

SQM Industrial S.A.

 

I0177: The project will complete the basic engineering, execute the EIA Tente en el Aire, obtain the legal and sectorial permits for a second stage to secure the execution of the project.

 

I0156: The project will recover water from the osmosis rejection plant and use it in the pile leaching area, increasing the efficiency of water resource use.

 

I0250: The project consists of re-drilling well 2Pl-2, which implies the detention of the extraction well, extraction of current casing and its re-drilling, with the relevant development work and pump tests. Road maintenance works imply leveling roads, filling damaged areas and compacting this fill.

 

J0070: This is preparing and processing the Environmental Impact Statement (DIA), in order to obtain an Environmental Qualification Resolution (RCA). The required background information includes the baseline air quality. Therefore, a MP 2.5 and gas monitoring station was installed that compliments the current stations at Maria Elena. The project is underway.

 

J0102: It is proposed to build a new PTS plant that is integrated into the NPT 2 crystallization process. The engineering design of this plant considers the reuse of the equipment already acquired for the NK PV plant. The plant includes a new raw materials yard, a grinder stage (sizer), a wet mill, a dissolution stage with reactors and thickener and a filtration and centrifuge unit for discarded salt. The crystallization from the NPT1 and NPT2 plants will be reused, as well as the refining plant at the NPT2 plant.

 

P0065: The project will install a transformer, posting and collecting tank for trench solutions. It will also improve the trench sector to safely position the low suction pumps. Heavy machinery will be required.

 

J0107: The project looks to renovate and automate the operation of pump stations at the three water intakes, by incorporating automatic valves and smart controls for pumps, In addition, water intake pipe sections, cut-off valves, check valves, drains and vents should be renewed, Due to the water conditions and length of pipes, these face the risk of failure due to overpressure, corrosion and material wear, Maintenance and repair works must also be undertaken on pumps at each water intake as a result of wear and corrosion due to the characteristics of river water.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

J0122: The project consists of entering the Coya Sur wells into the “environmental impact assessment system” and processing the permits for these wells with the General Directorate of Water Resources (DGA).

 

J0135: This project consists of dealing with all the oils and components that contain 50ppm or more of Policlorobife PCB by 2025 at the latest. The activities to be undertaken will be to deal with all those elements with oil that have previously been identified as having more than 50ppm of PCB.

 

M0020: The project consists of concluding the system of the drinking water network, in addition to renewing several sections of the network, due to the deterioration of original pipes. It also intends to acquire equipment to better address water seepage in town and problems in the sewage chambers. Sewage water management requires a single backfill for final sludge disposal, in keeping with current legislation.

 

J0133: The project will increase filtration capacity with the centrifuge of the Anhydrous Sulphate Plant: Industrial test. If it is favorable, install belts to transfer waste to the collection yard.

 

J0152: The project will install exhaust gas heat recovery equipment in boilers and implement associated structural improvements.

 

J0142: The project will implement environmental measures associated with updating the CS DIA (heritage sign and paving ME road) and the Pedro de Valdivia DIA (controlled disturbance plan).

 

J0157: The project will update the closure plans in accordance with the normal regime established by current legislation. These requirements include an initial external audit, detailed risks analysis and their control, and other requirements

 

J0158: The project will prepare and process sectorial permits for favorable reports to construct in Coya Sur (CS), and permits for hydraulic works defined in Article 294 of the Water Code (evaporation wells) at CS and NV.

 

J0172: The project will ensure the availability of water resources. It includes: Acquisition of a Flowserve 6GT booster pump, as a “spare” to drive water to Pedro de Valdivia. Acquisition of 2 motor pump sets to renew the current Coya-Vergara 3 and 4 sets, as the current brand has become obsolete. Repair the industrial water accumulation pond in Recinto Vergara (increasing the storage capacity by 1500 m3). Continue renovating pipes and vents in water lines in "CS, ME, VE and CV" adductions.

 

J0199: The project considers obtaining a provisional roadway approval from the Ministry of Public Works to prepare and use the intersection, incorporating leveling and signposting in accordance with the roadways manual, ensuring adequate conditions for safe transit in compliance with standards.

 

M0039: The project considers requesting the revocation of the saturated zone and the PDME. Currently the Maria Elena and Pedro de Valdivia zone has been declared PM10 saturation zone, with a current Decontamination Plan. The monitoring results from these last few years have resulted in the revocation of the saturation zone and the PDME.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Servicio Integrales de tránsito y Transferencias S.A.

 

T0018: The project will install an underground conveyor belt that runs outside the storage boxes of yards 8 and 9, and connects to belt 5 and then to the loading system. The project has an environmental component, although it is an operational improvement. The project includes the purchase and implementation of belt coverage as an emissions mitigation measure (internal emissions control measure), in order to improve compliance with the Tocopilla Atmospheric Decontamination Plan (PDA). The project is in progress.

 

T0019: The project installed coverings (roof and sides) to the 4 new storage boxes that will be built in areas within yards 8 and 9. The project has an environmental component, although it is an operational improvement. The project includes the construction of a warehouse as an emissions mitigation measure, in order to improve compliance with the Tocopilla Atmospheric Decontamination Plan (PDA) and reduce dust emissions. The project has been completed.

 

T0032: The project will install an underground conveyor belt that runs outside the storage boxes of yard 6, with feeding points connected directly to belt 6 and then to the loading system. The project has an environmental component, although it is an operational improvement. The project includes implementing conveyor belt 6 from yard 6, which is an emission control measure that was committed in the Tocopilla PDA. The project is currently underway.

 

T0034: The project invested as required to maintain the operational capacity of the port, and to ensure the high availability of loading equipment. The project has an environmental component, although it is an operational improvement. The project included replacing and/or repositioning the damaged wind breaks in yard 3, which is an emission control measure that was committed in the Tocopilla PDA. The project has been completed.

 

T0036: The project will install rainwater collection gutters in the storage warehouses. It will carry out an engineering study of potential multiproduct storage in a single silo and potentially install vibrating floors that allow product free runoff thus avoiding manual operation risks and the effect that this causes during loading.

 

T0042: In accordance with regulatory matters in Article 13 Supreme Decree. 70/2010, Tocopilla PDA must incorporate dust collection systems in TV-1 and TV-2 hoppers at yards 8 and 9.

 

T0045: Belts for yards 8 and 9 will be finished by joining them to belt 5 and thus become part of the loading system. This involves the extension, joining and overhaul of belt 5, and joining it to pan feeder 3 and its corresponding improvements, to become an integral part of the loading system. This complies with the environmental regulations required by the Tocopilla Decontamination Plan. "Atmospheric Decontamination Plan for the City of Tocopilla and its Surrounding Zone" (Supreme Decree 70/2010; Art.13 II.3).

 

T0050: Loose soil within the perimeter of the supply warehouse in yard 17 is uneven, which causes difficulties and operational risks for both the supply and operational warehouses. The surface area to be covered in paving stones is 2,100 m2. Furthermore, it includes the construction of a hazardous waste yard.

 

T0061: The project will construct the second stage of the warehouse for yard 9 (1,500 square meters).

 

T0062: An aerodrome yard facility measuring 6 by 35 by 110 meters will be installed for bulk product storage at heights with product loading and unloading from front end loaders and trucks as well as a proper remount. Yard storage facility 6 will be expanded in Box 5 and 6 for storing bulk product.

 

T0064: Sentinel Sweeper Equipment Purchase - Purchase of operationally critical equipment.

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

SQM Salar S.A.

 

C0039: The project consists of increasing the production capacity of lithium carbonate, from 70,000 tons per year to 120,000 tons per year.

 

C0057: The project is focused on developing and promoting electro-mobility in our company, promoting the market for electric vehicles in the region and supporting a technological project to change the image. The project aims to build and maintain operational 1 off-grid electrolinera in Salar del Carmen (charging points of electric vehicles), which will be supplied 100% with solar energy and which will have a bank of lithium batteries which will increase the efficiency of the system, storing the energy not consumed.

 

L0121: Change of the weather station equipment to comply with the standard.

 

L0122: The project considers the change in flow meters to meet new standard requirements as well as adding standby flow meters. This project is in progress.

 

L0147: This project contemplates the reduction of these industrial waste storage points. This work will be undertaken with an external company that works in separation, organization and packaging of different industrial waste according to the RCA and legislation in force, to be removed from the same points until final disposal offsite.

 

L0149: The project involves assembly of a dehydrator plant in current SQM Salar facilities designated for treatment, storage, transport and final disposal of sludge generated in different sewage water treatment plants and provision of the necessary solutions for compliance with Supreme Decree No. 04/09 “Regulation for Sludge Management in Sewage Water Treatment Plants”.

 

L0180: Standardization of lighting and electrical circuits for ground transport operations in Salar de Atacama.

 

L0156: The project aims to increase efficiency in the truck weighing and tare process, with an impact on the time that these spend on site. This will require an engineering study and installation of a new weigh station located in the former Oscar guard station at the Salar de Atacama. It also aims to increase efficiency of the truck weighing circuit by relocating Weigh Station 1 in the Salar de Atacama. This weigh station will be relocated to an appropriate sector, eliminating current issues. Weigh stations will be superficial.

 

L0184: The project involves advising for the Environmental Monitoring Plan, as well as improved environmental monitoring.

 

L0187: The project involves this 5th update to numeric modeling, which would provide compliance with the commitments undertaken during the environmental qualification process for the project “Changes and Improvements to Mining Operations in the Salar de Atacama

 

L0188: The project involves the participation of an external consulting team to narrow down the sources of the risks identified, propose operational optimization plans, improvements to control systems (monitoring networks) and support in modeling this deposit with a view to a better evolution of short- and medium-term projections (5 years). It will also propose the identification of alternative sources of productive brine equivalent at the nucleus. It proposes 3 stages: Diagnosis, operational improvements and monitoring-identification of new sources. Others: support in the development of 3D Peine and Quelana models, through a collaboration with CSIC involving 2 professionals for 6 months at a total cost of ThUS$36. Others: doctorate-level development in quantification and recharge from rain and snow, by supporting a doctoral student under the supervision of Emilio Custodio and Enric Vásquez for a 3-year period, with an annual budget of ThUS$36 (total ThS$108).

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

L0189: It includes improving the current lysimeter stations (7) and implementing new stations (7) in important sectors that are not currently measured, with the ability to remotely transmit information. This will improve the spatial coverage of the stations that measure evaporation within the basin. The initial stage includes constructing 7 lysimeters on land inside the Salar. Subsequently, the equipment implementation stage will initiate recording, storing and transmitting information. Finally, an international expert will provide advice regarding an analysis of the information from all the current stations, to recalculate basin evaporation and propose methodological improvements.

 

L0198: The project will date sediment using the 14C method (or another to be defined) in the depositional environments of the last 50,000 years to complement the facies sedimentological model provided by the consultant. The project will try to reconstruct the variability history of the lagoon system with absolute ages.

 

L0200: The project will identify an appropriate device. Field testing of sensors. Purchase of sensors for all points. Installation of sensors. Analyze remote data transmission (future project)

 

L0203: The project will install a remote telemetry system in boreholes.

 

L0214: The project consists of implementing a 2019 environmental monitoring plan to monitor an optimum compliance of current environmental regulations.

 

L0217: The project involves quoting new equipment. Purchase of new equipment. Reparation of old equipment for use as backup in the event of unexpected failure of new equipment.

 

S0134: The project considers displaying online information on withdrawals and reinjections from the salar using equipment and technology that allows information to be captured 24 hours a day every 1 minute. Additionally, it includes biotic and hydrogeological information according to the frequency associated with compliance with the compromised environmental qualification resolutions that allow showing the authorities and the community the actions implemented by SQM to take charge of the compromised environmental variables.

 

SQM Nitratos S.A.

 

I0127: By installing a reverse osmosis system or a process that enables the recovery of industrial water and that reduces the hardness of the water for cleaning the equipment, we can reuse this water to wash equipment again, thereby reducing the damage to the electrical systems of the equipment as a result of corrosion.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 25  Mineral resource exploration and evaluation expenditure

 

Given the nature of operations of the Sociedad Química y Minera de Chile S.A. and Subsidiaries and the type of exploration it undertakes, disbursements for exploration can be found in 4 stages: execution, economically feasible, not economically feasible and in exploitation:

 

(a)

Implementation: Disbursements for prospecting under implementation and therefore prior to determination of economic feasibility, are classified in accordance with Note 3.23 as Non-Current Assets, in the line item Construction in progress of Property, Plant and Equipment

 

-

Chile: ThUS$ 12,841 and ThUS$ 10,292 corresponds to exploration relating caliche and brine exploration as of December 31, 2019 and 2018.

 

-

For Mt Holland, total disbursements corresponding to construction in progress (which includes exploration disbursements) amount to ThUS$ 30,475 as of December 31, 2019, and ThUS$ 11,298 as of December 31, 2018.

  

(b)

Economically feasible: Prospecting disbursements corresponding to caliche exploration, wherein the study concluded that its economic feasibility is viable, are classified under “Non-Current Assets in Other Non-current Non-Financial Assets”. The balance as of December 31, 2019, is ThUS$ 6,576 and as of December 31, 2018, it is ThUS$ 5,099.

 

At December 31, 2019, ThUS$ 3,433 corresponding to advanced metallic exploration are also presented under the heading "Other Non-Current Non-Financial Assets", as of 31 December 2018, there were no activations for this concept.

 

For the exploration of the Salar de Atacama, the associated assets correspond to wells that can be used both in monitoring and exploitation of the Salar, Therefore, once the studies are concluded, these are classified as “Non-current Assets” in “Properties, Plants and Equipment”, assigning them a technical useful life of 10 years.

 

(c)

Not economically feasible: Prospecting disbursements, once finalized and concluded to be not economically feasible, will be charged to profit and loss. As of December 31, 2019, there was a total of ThUS$ 165 for this concept, and as of December 31, 2018, there were no disbursements for this concept.

  

(d)

In Exploitation: Caliche exploration disbursements that are found in this area are amortized based on the material exploited, the portion that is exploited in the following 12 months is presented as “Current Assets” in the “Process Inventories”, the remaining portion is classified as “Other Non-current Non-Financial Assets”.

 

As of December 31, 2019, the amount in “Current Assets” is ThUS$ 1,367 and the balance as of December 31, 2018 for this concept is ThUS$ 2,028, while in the item “Other Non-current Non-Financial Asset” as of December 31, 2019 is ThUS$ 8,645 and as of December 31, 2018 is ThUS$ 9,791.

  

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 26  Gains (losses) from operating activities in the statement of income of expenses, included according to their nature

 

26.1

Revenue from operating activities customer activities

 

The Group derives revenues from the sale of goods (which are recognized at one point in time) and from the provision of services (which are recognized over time) and are distributed among the following geographical areas and main product and service lines.

 

(a)	Geographic areas:

 

As of December 31, 2019
Geographic areas		Specialty plant nutrition				Iodine and derivatives				Lithium and derivatives				Potassium				Industrial chemicals				Other				Total ThUS$
Chile			109,975				1,064				599				27,371				39,512				33,336				211,857
Latin America and the Caribbean			78,872				7,972				3,593				64,868				6,354				269				161,928
Europe			149,992				123,525				76,250				27,973				15,289				735				393,764
North America			243,399				90,070				45,810				43,312				27,798				883				451,272
Asia and Others			141,682				148,389				379,462				48,627				5,922				752				724,834
Total			723,920				371,020				505,714				212,151				94,875				35,975				1,943,655

 

As of December 31, 2018
Geographic areas		Specialty plant nutrition				Iodine and derivatives				Lithium and derivatives				Potassium				Industrial chemicals				Other				Total ThUS$
Chile			111,595				1,052				700				25,593				4,575				45,834				189,349
Latin America and the Caribbean			77,737				6,389				3,598				80,192				12,098				177				180,191
Europe			200,229				112,080				103,430				46,068				17,384				473				479,664
North America			240,995				83,587				68,254				50,685				27,347				647				471,515
Asia and Others			151,195				121,864				558,819				64,936				46,863				1,407				945,084
Total			781,751				324,972				734,801				267,474				108,267				48,538				2,265,803

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(b)	Main product and service lines:

 

		For the period from January to December of the year
Products and Services		2019					2018
		ThUS$					ThUS$
Specialty plant nutrition			723,920				781,751
- Sodium Nitrates			20,679				17,688
- Potassium nitrate and sodium potassium nitrate			457,477				527,945
- Specialty Blends			153,739				145,511
- Other specialty fertilizers			92,025				90,607
Iodine and derivatives			371,020				324,972
Lithium and derivatives			505,714				734,801
Potassium			212,151				267,474
Industrial chemicals			94,875				108,267
Other			35,975				48,538
- Services			3,410				4,017
- Income from leasing properties			1,438				1,474
-  Income from subleases on right-of-use assets			261				-
- Commodities			16,176				18,581
- Other ordinary income Commercial Offices			14,690				24,466
Total			1,943,655				2,265,803

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

26.2

Cost of sales

 

Cost of sales broken down by nature of expense

 

		For the period from January to December of the year
Cost of sales		2019					2018
		ThUS$					ThUS$
Raw materials and consumables used			(271,912	)			(260,869	)
Classes of employee benefit expenses			(178,493	)			(203,571	)
Depreciation expense			(188,157	)			(212,641	)
Depreciation of Right-of-use Assets (contracts under IFRS 16)			(5,450	)			-
Amortization expense			(5,102	)			(6,376	)
Investment plan expenses			(18,367	)			(11,860	)
Provision for site closure			(911	)			(2,045	)
Provision for materials, spare parts and supplies			(7,500	)			1,721
Contractors			(123,096	)			(120,923	)
Operating leases			(47,007	)			(37,245	)
Mining concessions			(7,856	)			(8,168	)
Operations transport			(56,376	)			(64,352	)
Freight and product transport costs			(46,264	)			(51,387	)
Purchase of products from third parties			(189,583	)			(182,695	)
Insurance			(16,968	)			(11,923	)
CORFO rights			(143,861	)			(182,954	)
Export costs			(97,103	)			(107,418	)
Expenses related to Variable Parts Leases (contracts under IFRS 16)			(1,096	)			-
Variation in inventory			52,557				20,597
Variation in inventory provision			17,107				(8,997	)
Other			(48,165	)			(34,525	)
Total			(1,383,603	)			(1,485,631	)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

26.3

Other income

 

Other income		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Discounts obtained from suppliers			676				705
Fines charged to suppliers			483				698
Taxes recovered			457				996
Amounts recovered from insurance			492				443
Overestimate of provisions for third-party obligations			983				375
Other operating income			2,422				1,536
Options on mining claims			5,298				16,095
Easements, pipelines and roads			7,204				10,806
Reimbursement mining licenses and notary expenses			203				394
Total			18,218				32,048

 

26.4

Administrative expenses

 

Administrative expenses		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Remuneration and benefits to employees			(60,255	)			(63,880	)
Marketing costs			(3,911	)			(3,078	)
Amortization expenses			(5	)			(15	)
Entertainment expenses			(5,783	)			(4,805	)
Advisory services			(13,862	)			(12,848	)
Leases			(3,653	)			(4,556	)
Insurance			(2,553	)			(1,758	)
Office expenses			(7,327	)			(8,165	)
Contractors			(4,874	)			(5,730	)
Depreciation of Right-of-use Assets (contracts under IFRS 16)			(2,501	)			-
Other expenses, by nature			(12,456	)			(13,291	)
Total			(117,180	)			(118,126	)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

26.5

Other expenses

 

		For the period from January to December of the year
Other expenses by function		2019					2018
		ThUS$					ThUS$
Depreciation and amortization expense
Depreciation of assets not in use			(136	)			(59	)
Subtotal			(136	)			(59	)
Impairment losses (reversals of impairment losses) recognized in profit (loss) for the year
Property, plant and equipment			(49	)			(1,390	)
Intangible assets other than goodwill			(913	)			(1,736	)
Goodwill			(140	)			(3,254	)
Non-current assets and disowned groups held for sale			(607	)			-
Subtotal			(1,709	)			(6,380	)
Other expenses, by nature
Legal expenses			(9,277	)			(15,139	)
VAT and other unrecoverable taxes			(613	)			(1,187	)
Fines paid			(145	)			(965	)
Investment plan expenses			(1,694	)			(7,555	)
Non-metallic exploration expenses			(5,537	)			(5,864	)
Donations			(5,026	)			(4,502	)
Reorganization of related businesses			-				6,000
Other operating expenses			(1,858	)			(1,256	)
Subtotal			(24,150	)			(30,468	)
Total			(25,995	)			(36,907	)

 

26.6

Other gains (losses)

 

		For the period from January to December of the year
Other income (expenses)		2019					2018
		ThUS$					ThUS$
Adjust previous year application method of participation			(984	)			(664	)
Impairment of interests in joint ventures			631				(8,802	)
Sales of investments in associates			-				(759	)
Sales of investments in joint ventures			-				14,507
Others			(30	)			2,122
Total			(383	)			6,404

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

26.7

Impairment of gains and reversal of impairment losses

 

Impairment of gains and reversal of impairment losses (impairment losses)		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
(Impairment) /reversion value of financial assets			(1,057	)			2,967
Total			(1,057	)			2,967

 

The following summary corresponds to the requirements of CMF and considers notes 26.2, 26.4 and 26.5

 

26.8

Summary of expenses by nature

 

		For the period from January to December of the year
Expenses by nature		2019					2018
		ThUS$					ThUS$
Raw materials and consumables			(271,912	)			(260,869	)
Classes of Employee Benefit Expenses			(238,748	)			(267,451	)
Depreciation and amortization expense
Depreciation expense			(188,293	)			(212,700	)
Depreciation of Right-of-use Assets			(7,951	)			-
Property, plant and equipment			(49	)			(1,390	)
Goodwill			(140	)			(3,254	)
Non-current assets and disowned groups held for sale			(607	)			-
Amortization expense			(6,020	)			(8,127	)
Legal expenses			(9,277	)			(15,139	)
Investment plan expenses			(20,061	)			(19,415	)
Non-metallic exploration expenses			(5,537	)			(5,864	)
Provision for site closure			(911	)			(2,045	)
Provision for materials, spare parts and supplies			(7,500	)			1,721
Contractors			(127,970	)			(126,653	)
Leases			(50,660	)			(41,801	)
Mining concessions			(7,856	)			(8,168	)
Operation transport			(56,376	)			(64,352	)
Freight and product transport costs			(46,264	)			(51,387	)
Purchase of products from third parties			(189,583	)			(182,695	)
CORFO rights			(143,861	)			(182,954	)
Export costs			(97,103	)			(107,418	)
Expenses related to Variable Parts Leases (IFRS 16)			(1,096	)			-
Insurance			(19,521	)			(13,681	)
Restructuring of joint ventures.			-				6,000
Consultant and advisor services			(13,862	)			(12,848	)
Variation in inventory			52,557				20,597
Variation in provision on product inventory			17,107				(8,997	)
Other expenses			(85,284	)			(71,774	)
Total expenses by nature			(1,526,778	)			(1,640,664	)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

26.9

Finance expenses

 

		For the period from January to December of the year
Financial costs		2019					2018
		ThUS$					ThUS$
Interest expense from bank borrowings and overdrafts			(2,133	)			(1,707	)
Interest expense from bonds			(72,983	)			(55,887	)
Interest expense from loans			(2,682	)			(3,093	)
Capitalized interest expenses			7,841				5,021
Financial expenses for site closure			(4,417	)			(960	)
Lease interest			(1,535	)			-
Other finance costs			(1,030	)			(1,181	)
Total			(76,939	)			(57,807	)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 27  Reportable segments

 

27.1

Reportable segments

 

(a)

General information:

 

The amount of each item presented in each operating segment is equal to that reported to the highest authority that makes decisions regarding the operation, in order to decide on the allocation of resources to the defined segments and to assess its performance.

 

These operating segments mentioned are consistent with the way the Company is managed and how results will be reported by the Company. These segments reflect separate operating results that are regularly reviewed by the executive responsible for operational decisions in order to make decisions about the resources to be allocated to the segment and assess its performance (See Note 27.2).

 

The performance of each segment is measured based on net income and revenues. Inter-segment sales are made using terms and conditions at current market rates.

 

(b)

Factors used to identify segments on which a report should be presented:

 

The segments covered in the report are strategic business units that offer different products and services. These are managed separately because each business requires different technology and marketing strategies.

 

(c)

Description of the types of products and services from which each reportable segment obtains its income from ordinary activities

 

The operating segments, which obtain income from ordinary activities, generate expenses and have its operating results reviewed on a regular basis by the highest authority who makes decisions regarding operations, relate to the following groups of products:

 

1.

Specialty plant nutrients

2.

Iodine and its derivatives

3.

Lithium and its derivatives

4.

Industrial chemicals

5.

Potassium

6.

Other products and services

 

(d)

Description of income sources for all the other segments

 

Information regarding assets, liabilities, profits and expenses that cannot be assigned to the segments indicated above, due to the nature of production processes, is included under the "Unallocated amounts” category of the disclosed information.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(e)

Basis of accounting for transactions between reportable segments

 

Inter-segment sales are made under the same conditions as sales to third parties and are measured consistently as presented in the statement of income.

 

(f)

Description of the nature of the differences between measurements of results of reportable segments and the result of the entity before the expense or income tax expense of incomes and discontinued operations

 

The information reported in the segments is extracted from the Company’s consolidated financial statements and therefore there is no need to prepare reconciliations between the data mentioned above and those reported in the respective segments, according to what is stated in paragraph 28 of IFRS 8, "Operating Segments".

 

For the allocation of inventory valuation costs, we identify the direct expenses (can be directly allocated to products) and the common expenses (belong to coproduction processes, for example common leaching expenses for production of Iodine and Nitrates), Direct costs are directly allocated to the product and the common costs are distributed according to percentages that consider different variables in their determination, such as margins, rotation of inventories, revenue, production and etc.

 

The allocation of other common costs that are not included in the inventory valuation process, but go straight to the cost of sales, use similar criteria: the costs associated with a product or sales in particular are assigned to that particular product or sales, and the common costs associated with different products or business lines are allocated according to the sales.

 

(g)

Description of the nature of the differences between measurements of assets of reportable segments and the Company´s assets

 

Assets are not shown classified by segments, as this information is not readily available. Some of these assets are not separable by the type of activity by which they are affected since this information is not used by management in decision-making with respect to resources to be allocated to each defined segment. All assets are disclosed in the "unallocated amounts" category.

 

(h)

Description of the nature of the differences between measurements of liabilities of reportable segments and the Company’s liabilities

 

Liabilities are not shown classified by segments, as this information is not readily available. Some of these liabilities are not separable by the type of activity by which they are affected, since this information is not used by management in decision-making regarding resources to be allocated to each defined segment. All liabilities are disclosed in the "unallocated amounts" category.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

27.2

Reportable segment disclosures:

 

Operating segments for the year ended December 31, 2019		Specialty plant nutrients				Iodine and its derivatives				Lithium and its derivatives				Industrial chemicals				Potassium				Other products and services				Reportable segments				Operating segments				Unallocated amounts				Total as of December 31, 2019
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$					ThUS$
Revenue			723,920				371,020				505,714				94,875				212,151				35,975				1,943,655				1,943,655				-				1,943,655
Revenues from transactions with other operating segments of the same entity			-				-				-				-				-				-				-				-				-				-
Revenues			723,920				371,020				505,714				94,875				212,151				35,975				1,943,655				1,943,655				-				1,943,655
Costs of sales			(573,808	)			(230,468	)			(306,250	)			(63,590	)			(176,199	)			(33,288	)			(1,383,603	)			(1,383,603	)			-				(1,383,603	)
Administrative expenses			-				-				-				-				-				-				-				-				(117,180	)			(117,180	)
Interest expense			-				-				-				-				-				-				-				-				(76,939	)			(76,939	)
Depreciation and amortization expense			(68,007	)			(43,533	)			(45,443	)			(6,885	)			(37,862	)			(534	)			(202,264	)			(202,264	)			-				(202,264	)
The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				-				-				9,786				9,786
Income tax expense, continuing operations			-				-				-				-				-				-				-				-				(110,019	)			(110,019	)
Income (loss) before taxes			150,112				140,552				199,464				31,285				35,952				2,687				560,052				560,052				(169,430	)			390,622
Net income (loss) from continuing operations			150,112				140,552				199,464				31,285				35,952				2,687				560,052				560,052				(279,449	)			280,603
Net income (loss) from discontinued operations			-				-				-				-				-				-				-				-				-				-
Net income (loss)			150,112				140,552				199,464				31,285				35,952				2,687				560,052				560,052				(279,449	)			280,603
Assets			-				-				-				-				-				-				-				-				4,684,151				4,684,151
Equity-accounted investees			-				-				-				-				-				-				-				-				109,435				109,435
Incorporation of non-current assets other than financial instruments, deferred tax assets, net defined benefit assets and rights arising from insurance contracts			-				-				-				-				-				-				-				-				124,569				124,569
Increase of non-current assets			-				-				-				-				-				-				-				-				-				-
Liabilities			-				-				-				-				-				-				-				-				2,549,679				2,549,679
Impairment loss recognized in profit or loss			-				-				-				-				-				-				-				-				(1,057	)			(1,057	)
Reversal of impairment losses recognized in profit or loss for the period			-				-				-				-				-				-				-				-				-				-
Cash flows from (used in) operating activities			-				-				-				-				-				-				-				-				426,971				426,071
Cash flows from (used in) investing activities			-				-				-				-				-				-				-				-				(485,471	)			(485,471	)
Cash flows from (used in) financing activities			-				-				-				-				-				-				-				-				105,896				105,896

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Operating segments for the year ended December 31,2018		Specialty plant nutrients				Iodine and its derivatives				Lithium and its derivatives				Industrial chemicals				Potassium				Other products and services				Reportable segments				Operating segments				Unallocated amounts				Total as of December 31, 2018
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$					ThUS$
Revenue			781,751				324,972				734,801				108,267				267,474				48,538				2,265,803				2,265,803				-				2,265,803
Revenues from transactions with other operating segments of the same entity			-				-				-				-				-				-				-				-				-				-
Revenues			781,751				324,972				734,801				108,267				267,474				48,538				2,265,803				2,265,803				-				2,265,803
Costs of sales			(613,267	)			(217,464	)			(316,875	)			(72,964	)			(217,386	)			(47,675	)			(1,485,631	)			(1,485,631	)			-				(1,485,631	)
Administrative expenses			-				-				-				-				-				-				-				-				(118,126	)			(118,126	)
Interest expense			-				-				-				-				-				-				-				-				(57,807	)			(57,807	)
Depreciation and amortization expense			(79,061	)			(42,438	)			(42,283	)			(8,454	)			(47,940	)			(651	)			(220,827	)			(220,827	)			-				(220,827	)
The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				-				-				6,351				6,351
Income tax expense, continuing operations			-				-				-				-				-				-				-				-				(178,975	)			(178,975	)
Income (loss) before taxes			168,484				107,508				417,926				35,303				50,088				863				780,172				780,172				(159,134	)			621,038
Net income (loss) from continuing operations			168,484				107,508				417,926				35,303				50,088				863				780,172				780,172				(338,109	)			442,063
Net income (loss) from discontinued operations			-				-				-				-				-				-				-				-				-				-
Net income (loss)			168,484				107,508				417,926				35,303				50,088				863				780,172				780,172				(338,109	)			442,063
Assets			-				-				-				-				-				-				-				-				4,268,094				4,268,094
Equity-accounted investees			-				-				-				-				-				-				-				-				111,549				111,549
Incorporation of non-current assets other than financial instruments, deferred tax assets, net defined benefit assets and rights arising from insurance contracts			-				-				-				-				-				-				-				-				(15,028	)			(15,028	)
Increase of non-current assets			-				-				-				-				-				-				-				-				-				-
Liabilities			-				-				-				-				-				-				-				-				2,130,292				2,130,292
Impairment loss recognized in profit or loss			-				-				-				-				-				-				-				-				2,967				2,967
Reversal of impairment losses recognized in profit or loss for the period			-				-				-				-				-				-				-				-				-				-
Cash flows from (used in) operating activities			-				-				-				-				-				-				-				-				524,839				524,839
Cash flows from (used in) investing activities			-				-				-				-				-				-				-				-				(187,004	)			(187,004	)
Cash flows from (used in) financing activities			-				-				-				-				-				-				-				-				(387,313	)			(387,313	)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

27.3

Statement of comprehensive income classified by reportable segments based on groups of products

 

Items in the statement of comprehensive income as of December 31, 2019		Specialty plant nutrients				Iodine and its derivatives				Lithium and its derivatives				Industrial chemicals				Potassium				Other products and services				Corporate Unit				Total segments and Corporate unit
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$					ThUS$
Revenue			723,920				371,020				505,714				94,875				212,151				35,975				-				1,943,655
Cost of sales			(573,808	)			(230,468	)			(306,250	)			(63,590	)			(176,199	)			(33,288	)			-				(1,383,603	)
Gross profit			150,112				140,552				199,464				31,285				35,952				2,687				-				560,052
Other incomes by function			-				-				-				-				-				-				18,218				18,218
Administrative expenses			-				-				-				-				-				-				(117,180	)			(117,180	)
Other expenses by function			-				-				-				-				-				-				(25,995	)			(25,995	)
Impairment of gains and review of impairment losses (impairment losses) determined in accordance with IFRS 9			-				-				-				-				-				-				(1,057	)			(1,057	)
Other gains (losses)			-				-				-				-				-				-				(383	)			(383	)
Financial income			-				-				-				-				-				-				26,289				26,289
Financial costs			-				-				-				-				-				-				(76,939	)			(76,939	)
interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				9,786				9,786
Exchange differences			-				-				-				-				-				-				(2,169	)			(2,169	)
Profit (loss) before taxes			150,112				140,552				199,464				31,285				35,952				2,687				(169,430	)			390,622
Income tax expense			-				-				-				-				-				-				(110,019	)			(110,019	)
Profit (loss) from continuing operations			150,112				140,552				199,464				31,285				35,952				2,687				(279,449	)			280,603
Profit (loss) from discontinued operations			-				-				-				-				-				-				-				-
Profit (loss)			150,112				140,552				199,464				31,285				35,952				2,687				(279,449	)			280,603
Profit (loss), attributable to
Profit (loss) attributable to the controller´s owners			-				-				-				-				-				-				278,115				278,115
Profit (loss) attributable to the non-controllers			-				-				-				-				-				-				2,488				2,488
Profit (loss)			-				-				-				-				-				-				280,603				280,603

 

  

Notes to the Consolidated Financial Statement December 31, 2019

 

Items in the statement of comprehensive income as of December 31, 2018		Specialty plant nutrients				Iodine and its derivatives				Lithium and its derivatives				Industrial chemicals				Potassium				Other products and services				Corporate Unit				Total segments and Corporate unit
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$					ThUS$
Revenue			781,751				324,972				734,801				108,267				267,474				48,538				-				2,265,803
Cost of sales			(613,267	)			(217,464	)			(316,875	)			(72,964	)			(217,386	)			(47,675	)			-				(1,485,631	)
Gross profit			168,484				107,508				417,926				35,303				50,088				863				-				780,172
Other incomes by function			-				-				-				-				-				-				32,048				32,048
Administrative expenses			-				-				-				-				-				-				(118,126	)			(118,126	)
Other expenses by function			-				-				-				-				-				-				(36,907	)			(36,907	)
Impairment of gains and review of impairment losses (impairment losses) determined in accordance with IFRS 9			-				-				-				-				-				-				2,967				2,967
Other gains (losses)			-				-				-				-				-				-				6,404				6,404
Financial income			-				-				-				-				-				-				22,533				22,533
Financial costs			-				-				-				-				-				-				(57,807	)			(57,807	)
interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				6,351				6,351
Exchange differences			-				-				-				-				-				-				(16,597	)			(16,597	)
Profit (loss) before taxes			168,484				107,508				417,926				35,303				50,088				863				(159,134	)			621,038
Income tax expense			-				-				-				-				-				-				(178,975	)			(178,975	)
Profit (loss) from continuing operations			168,484				107,508				417,926				35,303				50,088				863				(338,109	)			442,063
Profit (loss) from discontinued operations			-				-				-				-				-				-				-				-
Profit (loss)			168,484				107,508				417,926				35,303				50,088				863				(338,109	)			442,063
Profit (loss), attributable to
Profit (loss) attributable to the controller´s owners			-				-				-				-				-				-				439,830				439,830
Profit (loss) attributable to the non-controllers			-				-				-				-				-				-				2,233				2,233
Profit (loss)			-				-				-				-				-				-				442,063				442,063

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

27.4

Disclosures on geographical areas

 

As indicated in paragraph 33 of IFRS 8, the entity discloses geographical information on its revenue from operating activities with external customers and from non-current assets that are not financial instruments, deferred income tax assets, assets related to post-employment benefits or rights derived from insurance contracts.

 

27.5

Disclosures on main customers

 

With respect to the degree of dependency of the Company on its customers, in accordance with paragraph 34 of IFRS 8, the Company has no external customers who individually represent 10% or more of its revenue. Credit risk concentrations with respect to trade and other accounts receivable are limited due to the significant number of entities in the Company’s portfolio and its worldwide distribution. The Company’s policy requires guarantees (such as letters of credit, guarantee clauses and others) and/or to maintain insurance policies for certain accounts as deemed necessary by the Company’s Management.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

27.6

Segments by geographical areas

 

Items as of December 31, 2019		Chile				Latin America and the Caribbean				Europe				North America				Asia and others				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$					ThUS$
Revenue			211,857				161,928				393,764				451,272				724,834				1,943,655
Investment accounted for under the equity method			-				(5,175	)			42,243				14,669				57,698				109,435
Intangible assets other than goodwill			106,910				420				1,397				2,683				76,948				188,358
Goodwill			23,205				-				11,521				-				-				34,726
Property, plant and equipment, net			1,559,080				513				6,241				8,333				32,903				1,607,070
Other non-current assets			20,321				28				4				(624	)			-				19,729
Non-current assets			1,709,516				(4,214	)			61,406				25,061				167,549				1,959,318

 

Items as of December 31, 2018		Chile				Latin America and the Caribbean				Europe				North America				Asia and others				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$					ThUS$
Revenue			189,349				180,189				479,664				471,515				945,086				2,265,803
Investment accounted for under the equity method			(6,588	)			-				61,256				16,115				40,766				111,549
Intangible assets other than goodwill			110,544				1,215				238				152				77,201				189,350
Goodwill			22,535				86				11,521				724				-				34,866
Property, plant and equipment, net			1,445,349				347				4,451				3,098				1,578				1,454,823
Other non-current assets			17,111				23				-				(892	)			11,297				27,539
Non-current assets			1,588,951				1,671				77,466				19,197				130,842				1,818,127

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

27.7

Property, plant and equipment classified by geographical areas

 

The company's main production facilities are located near their mines and extraction facilities in northern Chile. The following table presents the main production facilities as of December 31, 2019 and December 31, 2018:

 

	Location		Products
-	Pedro de Valdivia	:	Production of iodine and nitrate salts
-	María Elena	:	Production of iodine and nitrate salts
-	Coya Sur	:	Production of nitrate salts
-	Nueva Victoria	:	Production of iodine and nitrate salts
-	Salar de Atacama	:	Potassium chloride, lithium chloride, boric acid and potassium sulfate
-	Salar del Carmen	:	Production of lithium carbonate and lithium hydroxide
-	Tocopilla	:	Port facilities

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 28 Borrowing costs

 

The cost of interest is recognized as an expense in the year in which it is incurred, except for interest that is directly related to the acquisition and construction of tangible property, plant and equipment assets and that complies with the requirements of IAS 23.

 

The Company capitalizes all interest costs directly related to the construction or to the acquisition of property, plant and equipment, which require a substantial time to be suitable for use.

 

(a)

Costs of capitalized interest, property, plant and equipment

 

The cost of capitalized interest is determined by applying the average or weighted average of all financing costs incurred by the Company to the monthly end balances of works-in-progress meeting the requirements of NIC 23.

 

Financing costs are not activated for periods that exceed the normal term for acquisition, construction or installation of the property; such is the case for delays, interruptions or temporary suspension of the project due to technical, financial or other problems that make it impossible to leave the property in usable conditions.

 

The rates and costs for capitalized interest of property, plant and equipment are detailed as follows:

 

Costs of capitalized interest		As of December 31, 2019				As of December 31, 2018
		ThUS$					ThUS$
Capitalization rate of costs for capitalized interest			4	%			4	%
Amount of costs for interest capitalized in ThUS$			7,841				5,021

 

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 29

Effect of fluctuations in foreign currency exchange rates

 

a)

Foreign currency exchange differences recognized in profit or loss and other comprehensive income:

 

Exchange rate differences recognized in income and other comprehensive income		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Conversion foreign exchange gains (losses) recognized in the result of the year.			(2,169	)			(16,597	)
Reserves for translation differences
Conversion foreign exchange reserves attributable to the owners of the controlling entity.			562				(1,394	)
Conversion foreign exchange reserves attributable to the non-controlling entity.			226				174
Total			788				(1,220	)

 

b)

Reserves for foreign currency exchange differences:

 

As of December 31, 2018 and 2017, foreign currency exchange differences are detailed as follows:

 

Detail		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Changes in equity generated by conversion of equity value:
Comercial Hydro S.A.			1,004				1,004
SQMC Internacional Ltda.			(9	)			(17	)
Proinsa Ltda.			(10	)			(11	)
Comercial Agrorama Ltda.			33				(21	)
Isapre Norte Grande Ltda.			(44	)			(1	)
Almacenes y Depósitos Ltda.			142				113
Sacal S.A.			(3	)			(3	)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.			(19	)			(10	)
Agrorama S.A.			231				132
Doktor Tarsa Tarim Sanayi AS			(13,811	)			(13,811	)
SQM Vitas Fzco.			(2,267	)			(2,682	)
Ajay Europe S.A.R.L.			(1,449	)			(1,270	)
SQM Eastmed Turkey			(155	)			(113	)
Doctochem Tarim Sanayai Ticaret LTD			7				-
Coromandel SQM India			(431	)			(393	)
SQM Italia SRL			(236	)			(213	)
SQM Oceanía Pty Ltd.			(634	)			(634	)
SQM Indonesia S.A.			(124	)			(124	)
Abu Dhabi Fertillizers Industries WWL.			372				(435	)
SQM Vitas Holland			(197	)			(170	)
SQM Thailand Limited			(68	)			(68	)
SQM Europe N.V.			(1,983	)			(1,983	)
SQM Australia Pty Ltd.			(4,035	)			(4,222	)
Pavoni & C. Spa			(185	)			70
Terra Tarsa BV			116				(82	)
Plantacote NV			(16	)			(34	)
Doktolab Tarim Arastirma San.			(54	)			(29	)
Kore Potash PLC (a)			(1,754	)			(1,206	)
SQM Colombia SAS			(166	)			(94	)
Total			(25,745	)			(26,307	)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

c)

Functional and presentation currency

 

The functional currency of these companies corresponds to the currency of the country of origin of each entity, and its presentation currency is the U.S. dollar.

 

d)

Reasons to use one presentation currency and a different functional currency

 

-

The total revenues of these subsidiaries are associated with the local currency.

-

The commercialization cost structure of these companies is affected by the local currency.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 30

Disclosures on the effects of fluctuations in foreign currency exchange rates

 

Assets held in foreign currency subject to fluctuations in exchange rates are detailed as follows:

 

Class of assets		Currency		As of December 31, 2019				As of December 31, 2018
				ThUS$				ThUS$
Cash and cash equivalents		USD			558,572				353,674
Cash and cash equivalents		ARS			3				2
Cash and cash equivalents		CLP			8,240				157,500
Cash and cash equivalents		CNY			2,484				2,305
Cash and cash equivalents		EUR			3,131				4,738
Cash and cash equivalents		GBP			3				-
Cash and cash equivalents		AUD			8,492				29,598
Cash and cash equivalents		INR			6				-
Cash and cash equivalents		MXN			2,103				1,242
Cash and cash equivalents		PEN			4				1
Cash and cash equivalents		AED			-				1
Cash and cash equivalents		JPY			1,559				1,786
Cash and cash equivalents		ZAR			3,929				5,219
Cash and cash equivalents		IDR			3				-
Cash and cash equivalents		PLN			1				-
Subtotal cash and cash equivalents					588.530				556,066
Other current financial assets		USD			127,889				291,790
Other current financial assets		CLF			36,896				-
Other current financial assets		CLP			340,705				20,931
Subtotal other current financial assets					505.490				312,721
Other current non-financial assets		USD			16,535				19,523
Other current non-financial assets		ARS			-				2
Other current non-financial assets		AUD			285				102
Other current non-financial assets		BRL			2				-
Other current non-financial assets		CLF			31				47
Other current non-financial assets		CLP			24,374				20,276
Other current non-financial assets		CNY			326				8
Other current non-financial assets		EUR			3,055				3,153
Other current non-financial assets		MXN			2,629				3,274
Other current non-financial assets		THB			22				19
Other current non-financial assets		JPY			174				21
Other current non-financial assets		ZAR			3,119				1,547
Subtotal other current non-financial assets					50,552				47,972
Trade and other receivables		USD			225,554				255,528
Trade and other receivables		PEN			6				-
Trade and other receivables		BRL			19				20
Trade and other receivables		CLF			504				453
Trade and other receivables		CLP			56,023				71,730
Trade and other receivables		CNY			3,340				11,361
Trade and other receivables		EUR			24,925				31,426
Trade and other receivables		GBP			148				-
Trade and other receivables		MXN			211				452
Trade and other receivables		AED			1,193				15,841
Trade and other receivables		THB			1,695				2,970
Trade and other receivables		JPY			66,266				76,267
Trade and other receivables		AUD			801				-
Trade and other receivables		ZAR			15,900				571
Trade and other receivables		COP			2,557				-
Subtotal trade and other receivables					399,142				466,619
Receivables from related parties		USD			60,135				42,685
Receivables from related parties		EUR			1,092				105
Subtotal receivables from related parties					61,227				42,790
Current inventories		USD			983,338				913,674
Subtotal Current inventories					983,338				913,674

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Assets held in foreign currency subject to fluctuations in exchange rates are detailed as follows:

 

Class of assets		Currency		As of December 31, 2019				As of December 31, 2018
				ThUS$				ThUS$
Current tax assets		USD			87,509				52,033
Current tax assets		ARS			1				2
Current tax assets		CLP			1,623				601
Current tax assets		EUR			61				3,500
Current tax assets		MXN			1,806				843
Current tax assets		PEN			-				131
Current tax assets		ZAR			139				-
Current tax assets		COP			294				-
Subtotal current tax assets					91,433				57,110
Non-current assets or groups of assets classified as held for sale		USD			2,454				1,430
Subtotal Non-current assets or groups of assets classified as held for sale					2,454				1,430
Total current assets					2,682,166				2,398,382
Non-current assets
Other non-current financial assets		USD			8,687				17,039
Other non-current financial assets		CLP			20				20
Other non-current financial assets		JPY			71				72
Subtotal Other non-current financial assets					8,778				17,131
Other non-current non-financial assets		USD			19,101				26,758
Other non-current non-financial assets		BRL			22				23
Other non-current non-financial assets		COP			6				-
Other non-current non-financial assets		EUR			4				-
Other non-current non-financial assets		CLP			596				758
Subtotal Other non-current non-financial assets					19,729				27,539
Other receivables, non-current		USD			522				139
Other receivables, non-current		CLF			165				329
Other receivables, non-current		MXN			43				-
Other receivables, non-current		CLP			980				1,807
Subtotal Other receivables, non-current					1,710				2,275
Investments classified using the equity method of accounting		USD			57,777				41,923
Investments classified using the equity method of accounting		TRY			26,624				21,892
Investments classified using the equity method of accounting		AED			9,111				31,023
Investments classified using the equity method of accounting		EUR			14,315				14,929
Investments classified using the equity method of accounting		INR			1,568				1,729
Investments classified using the equity method of accounting		THB			40				53
Subtotal Investments classified using the equity method of accounting					109,435				111,549
Intangible assets other than goodwill		USD			185,951				189,265
Intangible assets other than goodwill		MXN			1,137				-
Intangible assets other than goodwill		CLP			136				85
Intangible assets other than goodwill		EUR			1,134				-
Subtotal intangible assets other than goodwill					188,358				189,350
Purchases goodwill, gross		USD			34,438				34,866
Purchases goodwill, gross		CLP			140				-
Purchases goodwill, gross		EUR			148				-
Subtotal Purchases goodwill, gross					34,726				34,866
Property, plant and equipment		USD			1,593,324				1,451,436
Property, plant and equipment		CLP			3,294				3,387
Property, plant and equipment		EUR			4,756				-
Property, plant and equipment		MXN			5,588				-
Property, plant and equipment		COP			108				-
Subtotal property, plant and equipment					1,607,070				1,454,823
Current tax assets, non-current		USD			32,179				32,179
Subtotal Current tax assets, non-current					32,179				32,179
Total non-current assets					2.001.985				1,869,712
Total assets					4,684,151				4,268,094

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

				As of December 31, 2019												As of December 31, 2018
Current liabilities		Currency		Up to90 days				91 days to 1 year				Total				Up to90 days				91 days to 1 year				Total
				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Current liabilities
Other current financial liabilities		USD			20,582				258,388				278,970				12,471				4,464				16,935
Other current financial liabilities		CLF			19,518				323				19,841				342				6,256				6,598
Other current financial liabilities		BRL			11				-				11				52				-				52
Subtotal other current financial liabilities					40,111				258,711				298,822				12,865				10,720				23,585
Trade and other payables		USD			44,146				-				44,146				51,489				3				51,492
Trade and other payables		ARS			-				-				-				4,082				-				4,082
Trade and other payables		BRL			10				-				10				34				-				34
Trade and other payables		THB			53				-				53				65				-				65
Trade and other payables		CLP			73,703				17,108				90,811				69,789				-				69,789
Trade and other payables		EUR			58,538				5				58,543				36,439				-				36,439
Trade and other payables		GBP			17				-				17				-				-				-
Trade and other payables		INR			1				-				1				1				-				1
Trade and other payables		MXN			5,122				-				5,122				7				-				7
Trade and other payables		PEN			5				-				5				-				-				-
Trade and other payables		AUD			4,442				-				4,442				-				-				-
Trade and other payables		ZAR			2,260				-				2,260				1,842				-				1,842
Trade and other payables		AED			188				-				188				-				-				-
Trade and other payables		COP			192				-				192				-				-				-
Subtotal trade and other payables					188,677				17,113				205,790				163,748				3				163,751
Trade payables due to related parties, current		USD			475				-				475				-				9				9
Subtotal Trade payables due to related parties, current					475				-				475				-				9				9
Other current provisions		USD			109,650				820				110,470				74,020				31,150				105,170
Other current provisions		ARS			7				-				7				-				13				13
Other current provisions		BRL			-				-				-				707				-				707
Other current provisions		CLP			82				-				82				-				64				64
Other current provisions		EUR			6				-				6				243				-				243
Subtotal other current provisions					109,745				820				110,565				74,970				31,227				106,197
Current tax liabilities		USD			2,863				14,994				17,857				-				41,612				41,612
Current tax liabilities		CLP			-				17				17				-				31				31
Current tax liabilities		BRL			-				-				-				-				3				3
Current tax liabilities		CNY			-				-				-				-				8				8
Current tax liabilities		EUR			-				-				-				4,548				1,000				5,548
Current tax liabilities		ZAR			-				-				-				-				201				201
Current tax liabilities		MXN			-				-				-				-				9				9
Subtotal current tax liabilities					2,863				15,011				17,874				4,548				42,864				47,412

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

				As of December 31, 2019												As of December 31, 2018
Class of liability		Currency		Up to90 days				91 days to 1 year				Total				Up to90 days				91 days to 1 year				Total
				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Provisions for employee benefits, current		USD			12,486				3,901				16,387				20,085				-				20,085
Subtotal Provisions for employee benefits, current					12,486				3,901				16,387				20,085				-				20,085
Other current non-financial liabilities		USD			117,136				154				117,290				176,506				2,489				178,995
Other current non-financial liabilities		THB			30				-				30				158				-				158
Other current non-financial liabilities		BRL			3				-				3				3				-				3
Other current non-financial liabilities		CLP			5,969				2,439				8,408				7,703				6,431				14,134
Other current non-financial liabilities		CNY			-				-				-				11				40				51
Other current non-financial liabilities		EUR			842				-				842				1,053				-				1,053
Other current non-financial liabilities		MXN			129				64				193				103				46				149
Other current non-financial liabilities		JPY			21				12				33				-				-				-
Other current non-financial liabilities		PEN			70				-				70				70				-				70
Other current non-financial liabilities		ZAR			10				-				10				11				-				11
Other current non-financial liabilities		COP			20				-				20				-				-				-
Subtotal other current non-financial liabilities					124,230				2,669				126,899				185,618				9,006				194,624
Total current liabilities					478,587				298,225				776,812				461,834				93,829				555,663

 

				As of December 31, 2019
Class of liability		Currency		1 to 2 years				2 to 3 years				3 to 4 years				4 to 5 years				Over 5 years				Total
				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Non-current liabilities
Other non-current financial liabilities		USD			89,896				42,336				313,749				13,749				647,258				1,106,988
Other non-current financial liabilities		CLF			-				-				-				-				411,938				411,938
Subtotal Other non-current financial liabilities					89,896				42,336				313,749				13,749				1,059,196				1,518,926
Other non-current provisions		USD			23,014				167				-				1,452				10,057				34,690
Subtotal Other non-current provisions					23,014				167				-				1,452				10,057				34,690
Deferred tax liabilities		USD			69,048				-				-				114,353				10				183,411
Subtotal Deferred tax liabilities					69,048				-				-				114,353				10				183,411
Provisions for employee benefits, non-current		USD			34,884				-				-				-				-				34,884
Provisions for employee benefits, non-current		CLP			519				-				-				-				-				519
Provisions for employee benefits, non-current		MXN			236				-				-				-				-				236
Provisions for employee benefits, non-current		JPY			201				-				-				-				-				201
Subtotal Provisions for employee benefits, non-current					35,840				-				-				-				-				35,840
Total non-current liabilities					217,798				42,503				313,749				129,554				1,069,263				1,772,867
Total liabilities																									2,549,679

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

				As of December 31, 2018
Class of liability		Currency		1 to 2 years				2 to 3 years				3 to 4 years				4 to 5 years				Over 5 years				Total
				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Non-current liabilities
Other non-current financial liabilities		USD			249,869				80,903				297,994				-				247,798				876,564
Other non-current financial liabilities		CLF			-				-				-				-				453,818				453,818
Subtotal Other non-current financial liabilities					249,869				80,903				297,994				-				701,616				1,330,382
Other non-current provisions		USD			28,822				3,000				-				-				-				31,822
Subtotal Other non-current provisions					28,822				3,000				-				-				-				31,822
Deferred tax liabilities		USD			63,534				33,355				56,040				-				22,432				175,361
Subtotal Deferred tax liabilities					63,534				33,355				56,040				-				22,432				175,361
Provisions for employee benefits, non-current		USD			-				9,081				-				-				27,116				36,197
Provisions for employee benefits, non-current		CLP			-				-				-				-				521				521
Provisions for employee benefits, non-current		MXN			-				-				-				-				175				175
Provisions for employee benefits, non-current		YEN			-				-				-				-				171				171
Subtotal Provisions for employee benefits, non-current					-				9,081				-				-				27,983				37,064
Total non-current liabilities					342,225				126,339				354,034				-				752,031				1,574,629
Total liabilities																									2,130,292

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 31

Income tax and deferred taxes

 

Accounts receivable from taxes as of December 31, 2019 and December 31, 2018, are as follows:

 

31.1

Current and non-current tax assets

 

a)

Current tax assets

 

Current tax assets		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Monthly provisional income tax payments, Chilean companies			47,283				21,172
Monthly provisional income tax payments, foreign companies			124				5,199
Corporate tax credits (1)			1,262				1,858
1st category tax absorbed by tax loss (2)			916				-
Taxes in recovery process			41,848				28,881
Total			91,433				57,110

 

b)

Non-current tax assets

 

Non-current tax assets		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
Monthly provisional income tax payments, Chilean companies compensated by the specific tax on mining activity (Lithium)			6,398				6,398
Specific tax on mining activities (IEAM) paid by Lithium (on consignment)			25,781				25,781
Total			32,179				32,179

 

(1)

These credits are available for Companies and are related to corporate tax payments in April of the following year. These credits include, among others, credits for training expenses (SENCE), credits for acquisition of fixed assets, donations and credits in Chile for taxes paid abroad.

 

(2)

This concept corresponds to the absorption of the tax losses determined by the company at the end of the year, which must be attributed to the dividends received during the year.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

31.2

Current tax liabilities

 

Current tax liabilities		As of December 31, 2019				As of December 31, 2018
		ThUS$				ThUS$
1st Category income tax			7,863				25,163
Foreign company income tax			9,944				21,097
Article 21 single tax			67				1,152
Total			17,874				47,412

 

Income tax is calculated based on the profit or loss for tax purposes that is applied to the effective tax rate applicable in Chile. As established by Law No. 20,780, a progressive income tax rate has been established, which is 27% from 2018.

 

The royalty is determined by applying the taxable rate to the net operating income obtained, according to the chart in force, the Company currently provisioned 5% for mining royalties that involve operations in the Salar de Atacama and 5.24% for caliche extraction operations.

 

The income tax rate for the main countries where the Company operates is presented below:

 

		Income tax				Income tax
Country		2019				2018
Spain			25	%			25	%
Belgium			29.58	%			29.58	%
Mexico			30	%			30	%
United States			21% + 6	%			21% + 6	%
South Africa			28	%			28	%

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

 

31.3

Income tax and deferred taxes

 

Assets and liabilities recognized in the statement of financial position are offset if and only if:

 

(a)

The Company has recognized legally before the tax authority the right to offset the amounts recognized in these entries; and

 

(b)

Deferred income tax assets and liabilities are derived from income tax related to the same tax authority on:

 

(i)

the same entity or tax subject; or

 

(ii)

different entities or tax subjects who intend either to settle current fiscal assets and liabilities for their net amount, or to exercise tax assets and pay liabilities simultaneously in each of the future periods in which the Company expects to settle or recover significant amounts of deferred tax assets or liabilities.

 

Recognized deferred income tax assets are the income taxes that are to be recovered in future periods, related to:

 

a)

deductible temporary differences.

b)

the offsetting of losses obtained in prior periods and not yet subject to tax deduction; and

c)

the offsetting of unused credits from prior periods.

 

The Company recognizes a deferred tax asset when there is certainty that these can be offset with tax income from subsequent periods, losses or fiscal credits not yet used, but solely as long as it is more likely than not that there will be tax earnings in the future against which to charge these losses or unused fiscal credits.

 

Recognized deferred tax liabilities refer to the amounts of income taxes payable in future periods related to taxable temporary differences.

 

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(a)

Income tax assets and liabilities as of December 31, 2019 are detailed as follows:

 

		Net liability position
Description of deferred tax assets and liabilities as of December 31, 2019		Assets					Liabilities
		ThUS$					ThUS$
Unrealized loss			82,075				-
Property, plant and equipment and capitalized interest			-				(197,167	)
Facility closure provision			7,313				-
Manufacturing expenses			-				(106,420	)
Staff severance indemnities, unemployment insurance			-				(6,000	)
Vacation accrual			5,591				-
Inventory provision			23,885				-
Materials provision			7,982				-
Forward			-				-
Employee benefits			2,689				-
Research and development expenses			-				(3,533	)
Provision Accounts receivable			3,542				-
Provision for legal complaints and expenses			2,546				-
Loan approval expenses			-				(3,856	)
Financial instruments recorded at market value			-				(1,287	)
specific tax on mining activity			-				(1,357	)
Tax loss benefit			2,296				-
Other			-				(2,021	)
Foreign items (other)			311				-
Balances to date			138,230				(321,641	)
Net balance							(183,411	)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(b)	Income tax assets and liabilities as of December 31, 2018 are detailed as follows

 

		Net liability position
Description of deferred tax assets and liabilities as of December 31, 2018		Assets					Liabilities
		ThUS$					ThUS$
Unrealized loss			75,832				-
Property, plant and equipment and capitalized interest			-				(196,843	)
Facility closure provision			4,280				-
Manufacturing expenses			-				(103,760	)
Staff severance indemnities, unemployment insurance			-				(5,679	)
Vacation accrual			5,155				-
Inventory provision			28,155				-
Materials provision			6,239				-
Forward			2,169				-
Employee benefits			3,309				-
Research and development expenses			-				(2,216	)
bad debt provisions			4,188				-
Provision for legal complaints and expenses			4,013				-
Loan approval expenses			-				(2,337	)
Financial instruments recorded at market value			-				(976	)
specific tax on mining activity			-				(3,278	)
Tax loss benefit			1,124				-
Other			5,005				-
Foreign items (other)			259				-
Balances to date			139,728				(315,089	)
Net balance							(175,361	)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(c)       Reconciliation of changes in deferred tax liabilities (assets) as of December 31, 2019

 

Reconciliation of changes in deferred tax liabilities (assets) as of December 31, 2019		Deferred tax liability (asset) at beginning of period				Deferred tax expense (benefit) recognized in profit (loss) for the year				Deferred taxes related to items credited (charged) directly to equity				Total increases (decreases) in deferred tax liabilities (assets)				Deferred tax liability (asset) at end of period
		ThUS$				ThUS$				ThUS$				ThUS$					ThUS$
Unrealized loss			(75,832	)			(6,243	)			-				(6,243	)			(82,075	)
Property, plant and equipment and capitalized interest			196,843				324				-				324				197,167
Facility closure provision			(4,280	)			(3,033	)			-				(3,033	)			(7,313	)
Manufacturing expenses			103,760				2,660				-				2,660				106,420
Staff severance indemnities, unemployment insurance			5,679				1,007				(686	)			321				6,000
Vacation accrual			(5,155	)			(436	)			-				(436	)			(5,591	)
Inventory provision			(28,155	)			4,270				-				4,270				(23,885	)
Materials provision			(6,239	)			(1,743	)			-				(1,743	)			(7,982	)
Forward			(2,169	)			(514	)			2,683				2,169				-
Employee benefits			(3,309	)			620				-				620				(2,689	)
Research and development expenses			2,216				1,317				-				1,317				3,533
bad debt provisions			(4,188	)			646				-				646				(3,542	)
Provision for legal complaints and expenses			(4,013	)			1,467				-				1,467				(2,546	)
Loan approval expenses			2,337				1,519				-				1,519				3,856
Financial instruments recorded at market value			976				-				311				311				1,287
specific tax on mining activity			3,278				(1,905	)			(16	)			(1,921	)			1,357
Tax loss benefit			(1,124	)			(1,172	)			-				(1,172	)			(2,296	)
Other			(5,005	)			7,026				-				7,026				2,021
Foreign items (other)			(259	)			(52	)			-				(52	)			(311	)
Total temporary differences, unused losses and unused tax credits			175,361				5,758				2,292				8,050				183,411

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(d)       Reconciliation of changes in deferred tax liabilities (assets) as of December 31, 2018

 

Reconciliation of changes in deferred tax liabilities (assets) as of December 31, 2018		Deferred tax liability (asset) at beginning of period				Deferred tax expense (benefit) recognized in profit (loss) for the year				Deferred taxes related to items credited (charged) directly to equity				Total increases (decreases) in deferred tax liabilities (assets)				Deferred tax liability (asset) at end of period
		ThUS$				ThUS$				ThUS$				ThUS$					ThUS$
Unrealized loss			(68,544	)			(7,288	)			-				(7,288	)			(75,832	)
Property, plant and equipment and capitalized interest			211,374				(14,531	)			-				(14,531	)			196,843
Facility closure provision			(3,469	)			(811	)			-				(811	)			(4,280	)
Manufacturing expenses			102,748				1,012				-				1,012				103,760
Staff severance indemnities, unemployment insurance			6,792				(667	)			(446	)			(1,113	)			5,679
Vacation accrual			(4,887	)			(268	)			-				(268	)			(5,155	)
Inventory provision			(25,172	)			(2,983	)			-				(2,983	)			(28,155	)
Materials provision			(7,107	)			868				-				868				(6,239	)
Forward			(624	)			(1,545	)			-				(1,545	)			(2,169	)
Employee benefits			(2,317	)			(992	)			-				(992	)			(3,309	)
Research and development expenses			3,501				(1,285	)			-				(1,285	)			2,216
bad debt provisions			(4,253	)			686				(621)	1			65				(4,188	)
Provision for legal complaints and expenses			(5,243	)			1,230				-				1,230				(4,013	)
Loan approval expenses			2,670				(333	)			-				(333	)			2,337
Financial instruments recorded at market value			2,474				-				(1,498	)			(1,498	)			976
specific tax on mining activity			4,084				(795	)			(11	)			(806	)			3,278
Tax loss benefit			(1,437	)			313				-				313				(1,124	)
Other			(5,002	)			(64	)			61				(3	)			(5,005	)
Foreign items (other)			(305	)			46				-				46				(259	)
Total temporary differences, unused losses and unused tax credits			205,283				(27,407	)			(2,515	)			(29,922	)			175,361

 

(1) This corresponds to the adjustment to the beginning balance of the impairment provision for receivables against other reserves.

 

(e)      Deferred taxes related to benefits for tax losses

 

The Company’s tax loss carryforwards were mainly generated by losses in Chile, which in accordance with current Chilean tax regulations have no expiration date.

 

As of December 31, 2019 and December 31, 2018, tax loss carryforwards are detailed as follows:

 

Deferred taxes related to benefits for tax losses		As of December 31, 2019				As of December 31, 2018
		ThUS$					ThUS$
Chile			2,296				1,124
Total			2,296				1,124

 

The tax losses as of December 31, 2019 that form the basis of these deferred taxes correspond mainly to SIT S.A., Exploraciones Mineras S.A. Comercial Agrorama Ltda. and Orcoma Estudio SpA.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(f)        Movements in deferred tax assets and liabilities

 

Movements in deferred tax assets and liabilities as of December 31, 2019 and December 31, 2018 are detailed as follows:

 

		Assets (liabilities)
Movements in deferred tax assets and liabilities		As of December 31, 2019					As of December 31, 2018
		ThUS$					ThUS$
Deferred tax assets and liabilities, net opening balance			(175,361	)			(205,283	)
Increase (decrease) in deferred taxes in profit or loss			(5,758	)			27,407
Increase (decrease) in deferred taxes in equity			(2,292	)			2,515
Total			(183,411	)			(175,361	)

 

(g)       Disclosures on income tax expense (income)

 

The Company recognizes current and deferred taxes as income or expenses, and they are included in profit or loss, unless they arise from:

 

(a)

a transaction or event recognized in the same period or in a different period, outside profit or loss either in other comprehensive income or directly in equity; or

 

(ii)

a business combination

 

Current and deferred tax expenses (income) are detailed as follows:

 

		Assets (liabilities)
Disclosures on income tax expense (income)		As of December 31, 2019					As of December 31, 2018
		ThUS$					ThUS$
Current income tax expense
Current tax expense			(116,483	)			(207,959	)
Adjustments to prior year current income tax			12,222				1,577
Current income tax expense, net, total			(104,261	)			(206,382	)
Deferred tax expense
Deferred tax expense (income) relating to the creation and reversal of temporary differences			2,551				26,434
Tax adjustments related to the creation and reversal of temporary differences from the previous year			(8,309	)			973
Deferred tax expense, net, total			(5,758	)			27,407
Tax expense (income)			(110,019	)			(178,975	)

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Tax expenses (income) for foreign and domestic parties are detailed as follows:

 

		Assets (liabilities)
Income tax (expense) benefit		For the year ended December 31, 2019					For the year ended December 31, 2018
		ThUS$					ThUS$
Current income tax expense by foreign and domestic parties, net
Current income tax expense, foreign parties, net			(7,394	)			(7,516	)
Current income tax expense, domestic, net			(96,867	)			(198,866	)
Current income tax expense, net, total			(104,261	)			(206,382	)
Deferred tax expense by foreign and domestic parties, net
Current income tax expense, foreign parties, net			2,370				(1,885	)
Current income tax expense, domestic, net			(8,128	)			29,292
Deferred tax expense, net, total			(5,758	)			27,407
Income tax expense			(110,019	)			(178,975	)

 

The values presented include a higher current tax of ThUS$ 1,068 due to a tax difference in SQM Europe N.V. determined at the close of audit due to transfer prices from the 2017 fiscal year.

 

(h)

Equity interest in taxation attributable to equity-accounted investees

 

The Company does not recognize any deferred tax liability in all cases of taxable temporary differences associated with investments in subsidiaries, branches and associated companies or interest in joint ventures, because as indicated in the standard, the following two conditions are jointly met:

 

(i)

the parent, investor or interest holder is able to control the time for reversal of the temporary difference; and

 

(ii)

It is more likely than not that the temporary difference will not be reversed in the foreseeable future.

 

In addition, the Company does not recognize deferred income tax assets for all deductible temporary differences from investments in subsidiaries, branches and associated companies or interests in joint ventures because it is unlikely that they will meet the following requirements:

 

(i)

Temporary differences are reversed in a foreseeable future; and

 

(ii)

The Company has tax earnings, against which temporary differences can be used.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(i)

Disclosures on the tax effects of other comprehensive income components:

 

		For the year ended December 31, 2019
Income tax related to other income and expense components with a charge or credit to net equity		Amount before taxes (expense) gain				(Expense) income for income taxes					Amount after taxes
		ThUS$				ThUS$					ThUS$
Gain (loss) from defined benefit plans			(3,310	)			702				(2,608	)
Cash flow hedge			1,907				(2,683	)			(776	)
Reserve for gains (losses) from financial assets measured at fair value through other comprehensive income			1,152				(311	)			841
Total			(251	)			(2,292	)			(2,543	)

 

		For the year ended December 31, 2018
Income tax related to other income and expense components with a charge or credit to net equity		Amount before taxes (expense) gain				(Expense) income for income taxes					Amount after taxes
		ThUS$				ThUS$					ThUS$
Gain (loss) from defined benefit plans			(1,327	)			396				(931	)
Cash flow hedge			5,723				-				5,723
Reserve for gains (losses) from financial assets measured at fair value through other comprehensive income			(5,546	)			1,498				(4,048	)
Total			(1,150	)			1,894				744

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(j)       Explanation of the relationship between expense (income) for tax purposes and accounting income.

 

Based on IAS 12, paragraph 81, letter “c”, the company has estimated that the method that reveals the most significant information for users of the financial statements is the numeric conciliation between the tax expense (income) and the result of multiplying the accounting profit by the current rate in Chile. The afore mentioned choice is based on the fact that the Company and subsidiaries established in Chile generate a large part of the Company’s tax expense (income). The amounts provided by subsidiaries established outside Chile have no relative importance in the overall context.

 

Conciliation of numbers in income tax expenses (income) and the result of multiplying financial gain by the rate prevailing in Chile.

 

		Benefits (Expenses)
Income Tax Expense (Benefit)		As of December 31, 2019					As of December 31, 2018
		ThUS$					ThUS$
Consolidated income before taxes			390,622				621,038
Income tax rate in force in Chile			27	%			27	%
Tax expense using the legal rate			(105,468	)			(167,680	)
Effect of royalty tax payments			(4,314	)			(4,919	)
Tax effect of revenue from regular activities exempt from taxation			2,376				1,446
Tax rate effect of non-tax-deductible expenses for determining taxable profit (loss)			(2,128	)			(2,327	)
Tax effect of tax rates supported abroad			(252	)			(3,724	)
IRS provision surplus (*)			-				3,517
Other tax effects from reconciliation between accounting gains and tax expenses			(233	)			(5,288	)
Tax expense using the effective rate			(110,019	)			(178,975	)

 

(*) internal revenue service

 

(k) Tax periods potentially subject to verification:

 

The Group’s Companies are potentially subject to income tax audits by tax authorities in each country These audits are limited to a number of interim tax periods, which, in general, when they elapse, give rise to the expiration of these inspections.

 

Tax audits, due to their nature, are often complex and may require several years. Below, we provide a summary of tax periods that are potentially subject to verification, in accordance with the tax regulations in force in the country of origin:

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

(i)

Chile

 

According to article 200 of Decree Law No 830, the taxes will be reviewed for any deficiencies in terms of payment and to generate any taxes that might arise. There is a 3-year prescriptive period for such review, dating from the expiration of the legal deadline when payment should have been made. This prescriptive period can be extended to 6 years for the revision of taxes subject to declaration, when such declaration has not been filed or has been presented with maliciously false information.

 

(ii)

United States

 

In the United States, the tax authority may review tax returns for up to 3 years from the expiration date of the tax return. In the event that an omission or error is detected in the tax return of sales or cost of sales, the review can be extended for a period of up to 6 years.

 

As a result of the audit performed by the tax authority, SQM North America Corp., a subsidiary of the Company, paid in November 2018, for income tax and interest between 2013 and 2015, approximately US$3.8 million. On top of this, SQM North America Corp would have to pay an additional US$0.4 million in state taxes for the same period. These charges are already provisioned in the financial statements.

 

(iii)

Mexico:

 

In Mexico, the tax authority can review tax returns up to 5 years from the expiration date of the tax return.

 

(iv)

Spain:

 

In Spain, the tax authority can review tax returns up to 4 years from the expiration date of the tax return.

 

(v)

Belgium:

 

In Belgium, the tax authority may review tax returns for up to 3 years from the expiration date of the tax return if no tax losses exist. In the event of detecting an omission or error in the tax return, the review can be extended for a period of up to 5 years.

 

(vi)

South Africa:

 

In South Africa, the tax authority may review tax returns for up to 3 years from the expiration date of the tax return. In the event that an omission or error in the tax return is detected, the review can be extended for a period of up to 5 years.

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 32  Assets held for sale and detail of assets sold

 

The non-current assets held for sale and the components of the disposal groups classified as held for sale are presented in the Consolidated Statement of Financial Position under the item “Non-current assets or groups of assets classified as held for sale”.

 

The following table shows the movements in assets held for sale:

 

Assets held for sale		As of December 31, 2019				As of December 31, 2018
		ThUS$					ThUS$
Land owned by Soquimich Comercial S.A.			2,454				1,430
Total assets held for sale			2.454				1,430

 

 

Notes to the Consolidated Financial Statement December 31, 2019

 

Note 33  Events occurred after the reporting date

 

33.1

Authorization of the financial statements

 

The consolidated financial statements of Sociedad Química y Minera de Chile S.A. and subsidiaries, prepared in accordance with IFRS for the period ended December 31, 2019, were approved and authorized for issuance by the Company´s Board of Directors on March 02, 2020.

 

33.2

Disclosures on events occurring after the reporting date

 

On January 22, 2020, the Company placed an unsecured bond in the international markets for US$ 400 million at an annual interest rate of 4.250% with maturity in 2050, pursuant to Rule 144 -A and Regulation S of the Securities and Exchange Commission.

 

The Company hopes to use net income from this placement for general corporate purposes, including financing its capital expense program and reduction of its pending debt, considering the ´payment of bonds for US$ 250 million with 5.50% interest and maturity on April 21, 2020.

 

The bond has been sold to qualified institutional buyers in the United States and no security laws from other states or jurisdictions have been registered in accordance with SEC regulations.

 

On February 26, 2020, the Company reported that its Board of Directors had agreed to call an Ordinary Shareholders’ Meeting for 10:00 am on Thursday, April 23, 2020.

 

33.3

Details of dividends declared after the reporting date

 

At the reporting dates of the financial statements, there are no dividends declared after the reporting date.

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 

	CHEMICAL AND MINING COMPANY OF CHILE INC.
		(Registrant)
Date: March 23, 2020		/s/ Gerardo Illanes
		By: Gerardo Illanes
		CFO

 

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