October 8, 2018 / 3:02 PM / 8 days ago

Albemarle shares drop after Chile rejects hike in lithium quota

SANTIAGO/HOUSTON (Reuters) - Shares of Albemarle Corp (ALB.N) fell as much as 2.3 percent on Monday following news that Chile’s nuclear regulator refused to increase the company’s quota to sell lithium produced from its Salar de Atacama operation.

The Chilean Nuclear Energy Commission (CCHEN) rejected Albemarle’s March request to increase its quota to sell lithium products by 258,446 tonnes, according to a Sept. 13 agency resolution obtained by Reuters via a Chilean freedom of information request.

Albemarle spokeswoman Andrea Cole said CCHEN’s concerns are of a “technical nature” and that the company would re-submit its request “in the coming weeks,” hoping to resolve the issue.

Shares of the world’s largest lithium producer, based in Charlotte, North Carolina, pared losses and closed down 0.8 percent at $102.25.

CCHEN oversees the sale and export of lithium from Chile, though not production, which is controlled by a separate state agency.

The setback could represent a major blow to Albemarle, which aims to satisfy spiking global demand for the ultralight metal used in batteries that power products ranging from cell phones to electric vehicles.

Albemarle previously said that it could achieve an increase in production using more efficient technology, and without extracting any more lithium-rich brine, or saltwater, from the environmentally sensitive Atacama salt flats.

But Chile’s nuclear agency said in the September resolution that Albemarle had failed to answer more detailed questions about how the “technology would permit the increase in efficiency.”

Cole, in an emailed statement, said Albemarle was confident the increase would be approved, “as it entails a project that presents a breakthrough technology to produce more lithium without using more brine.”

Cole added that the company believes its existing sales authorizations are sufficient.

Chilean newspaper La Tercera originally reported the agency’s decision on Saturday, citing CCHEN executive director Patricio Aguilera.

The filing does not indicate the timeframe for the sales quota increase, although lithium companies typically seek decades-long quotas and contracts.

The request came as Albemarle has publicly touted an increase in allowed output to 145,000 metric tons of lithium carbonate equivalent annually through 2043 from Chile’s Economic Development Agency (Corfo), which oversees lithium production in the Salar de Atacama.

The reason for the discrepancy in the physical amount of lithium between the two requests to the two different agencies was not immediately clear.

Corfo declined to comment on CCHEN’s decision.

In Chile, CCHEN’s control over lithium exports dates back to the dictatorship of Augusto Pinochet, which declared lithium “strategic” for its value in nuclear production processes.

Reporting by Ernest Scheyder and Dave Sherwood; editing by Bill Berkrot and Leslie Adler

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