SQM terms of MOU imply downside risk, says BofA

After SQM announced it reached a Memorandum of Understanding with the National Copper Corporation of Chile, or Codelco, regarding lithium operations in the Salar de Atacama between 2025 and 2060, BofA said the definition of a potential new framework eliminates a major overhang on the stock, but added that the terms could provide downside risk to the stock, if approved. The firm estimates the potential deal implies downside risk assuming $13 per share negative impact from the split of ownership as of 2031, $3 per share loss from the “dividends” to Codelco between 2025-2030 and positive $2 per share from the potential increase in production of 135k tons in 2025-2030, notes the analyst, who reiterates an Underperform rating on SQM shares.