UPDATE 1-Chile's Corfo, SQM renew effort to settle lithium dispute

(Adds details about arbitration, quote from Corfo, context about Potash merger)

SANTIAGO, Dec 18 (Reuters) - Chilean development agency Corfo and lithium company SQM have agreed to suspend their arbitration battle for 30 days as they make a new push to solve a dispute over mining royalties, Corfo said on Monday.

SQM and Corfo have been embroiled in a high-stakes arbitration since May 2014. The ongoing dispute has complicated Canadian Potash Corp of Saskatchewan’s bid to divest its stake in SQM as part of its proposed merger with Canadian rival Agrium Inc.

On Monday, SQM, Pampa Calichera and Potash met with Eduardo Bitran, head of Corfo, to reopen the discussion. Pampa Calichera, which controls SQM, presented a proposal to overhaul the company´s corporate governance structure, a key condition put forward by Corfo, the agency said in a statement.

Details of the proposed new arrangement were not disclosed.

“SQM has expressed its willingness to consider the conditions proposed by Corfo in a new conciliation process,” Corfo said.

If the new round of negotiations is successful and the dispute resolved, Chile would be able to expand its lithium production “significantly,” Corfo said.

Talks between Corfo and SQM collapsed in October, leaving a decision in the arbitration case to a judge.

Chilean authorities have accused SQM of underpaying royalties and violating environmental regulations in the Salar de Atacama, home to some of the world’s most productive lithium deposits.

Potash CEO Jochen Tilk met last week with authorities in Chile to discuss the still unresolved arbitration case, which has cast uncertainty over the sale of its shares in SQM. Regulators in India have given Potash until April of 2019 to divest its stake. (Reporting by Antonio de la Jara; Writing by Dave Sherwood and Mitra Taj; Editing by James Dalgleish)