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 September, 2017.

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.

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

For the period ended

June 30, 2017

 

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 by Function

-

Consolidated Statements of Comprehensive Income

-

Consolidated Statements of Cash Flows

-

Consolidated Statements of Changes in Equity

-

Notes to the Consolidated Financial Statements

  

   

Table of Contents –Consolidated Financial Statements

 

Consolidated Classified Statements of Financial Position		7
Consolidated Statements of Income by Function		9
Consolidated Statements of Comprehensive Income		11
Consolidated Statements of Cash Flows		12
Consolidated Statements of Changes in Equity		14
Note 1	Identification and activities of the Company and Subsidiaries	16
1.1	Historical background	16
1.2	Main domicile where the Company performs its production activities	16
1.3	Codes of main activities	16
1.4	Description of the nature of operations and main activities	16
1.5	Other background	18
Note 2	Basis of presentation for the consolidated financial statements	20
2.1	Accounting period	20
2.2	Financial statements	20
2.3	Basis of measurement	21
2.4	Accounting pronouncements	22
2.5	Basis of consolidation	25
2.6	Significant accounting judgments, estimates and assumptions	28
Note 3	Significant accounting policies	29
3.1	Classification of balances as current and non-current	29
3.2	Functional and presentation currency	29
3.3	Foreign currency translation	29
3.4	Subsidiaries	31
3.5	Consolidated statement of cash flows	31
3.6	Financial assets	31
3.7	Financial liabilities	32
3.8	Financial instruments at fair value through profit or loss	32
3.9	Financial instrument offsetting	32
3.10	Reclassification of financial instruments	32
3.11	Derivative and hedging financial instruments	32
3.12	Available for sale financial assets	34
3.13	Derecognition of financial instruments	34
3.14	Derivative financial instruments	34
3.15	Fair value initial measurements	34

 

  

3.16	Leases	35
3.17	Deferred acquisition costs from insurance contracts	35
3.18	Trade and other receivables	35
3.19	Inventory measurement	36
3.20	Investments in associates and joint ventures	36
3.21	Transactions with non-controlling interests	37
3.22	Related party transactions	37
3.23	Property, plant and equipment	38
3.24	Depreciation of property, plant and equipment	39
3.25	Goodwill	39
3.26	Intangible assets other than goodwill	40
3.27	Research and development expenses	41
3.28	Prospecting expenses	41
3.29	Impairment of non-financial assets	42
3.30	Minimum dividend	42
3.31	Earnings per share	43
3.32	Trade and other payables	43
3.33	Interest-bearing borrowings	43
3.34	Other provisions	44
3.35	Obligations related to employee termination benefits and pension commitments	45
3.36	Compensation plans	45
3.37	Revenue recognition	46
3.38	Finance income and finance costs	46
3.38	Income tax and deferred taxes	47
3.39	Segment reporting	48
3.40	Environment	49
Note 4	Financial risk management	49
4.1	Financial risk management policy	49
4.2	Risk factors	50
4.3	Risk measurement	54
Note 5	Changes in accounting estimates and policies (consistent presentation)	55
5.1	Changes in accounting estimates	55
5.2	Changes in accounting policies	55
Note 6	Background of companies included in consolidation	56
6.1	Parent’s stand-alone assets and liabilities	56
6.2	Parent entity	56

 

  

6.3	Joint arrangements of controlling interest	56
6.4	General information on consolidated subsidiaries	57
6.5	Information attributable to non-controlling interests	60
6.6	Information on consolidated subsidiaries	61
6.7	Detail of transactions between consolidated companies	65
Note 7	Cash and cash equivalents	66
7.1	Types of cash and cash equivalents	66
7.2	Short-term investments, classified as cash equivalents	66
7.3	Information on cash and cash equivalents by currency	67
7.4	Amount restricted (unavailable) cash balances	67
7.5	Short-term deposits, classified as cash equivalents	68
Note 8	Inventories	70
Note 9	Related party disclosures	71
9.1	Related party disclosures	71
9.2	Relationships between the parent and the entity	71
9.3	Detailed identification of the link between the Parent and subsidiary	73
9.4	Detail of related parties and related party transactions	75
9.5	Trade receivables due from related parties, current:	76
9.6	Trade payables due to related parties, current:	76
9.7	Board of Directors and Senior Management	77
9.8	Key management personnel compensation	80
Note 10	Financial instruments	81
10.1	Types of other financial assets	81
10.2	Trade and other receivables	82
10.3	Hedging assets and liabilities	84
10.4	Financial liabilities	86
10.5	Trade and other payables	97
10.6	Financial liabilities at fair value through profit or loss	98
10.7	Financial asset and liability categories	99
10.8	Fair value measurement of assets and liabilities	101
10.9	Financial assets pledged as guarantee	103
10.10	Estimated fair value of financial instruments and financial derivatives	104
10.11	Nature and scope of risks arising from financing instruments	105
Note 11	Equity-accounted investees	106
11.1	Investments in associates recognized according to the equity method of accounting	106
11.2	Assets, liabilities, revenue and expenses of associates	108

 

  

11.3	Other information	109
11.4	Disclosures on interest in associates	109
Note 12	Joint Ventures	110
12.1	Policy for the accounting of equity accounted investment in joint ventures	110
12.2	Disclosures of interest in joint ventures	110
12.3	Investment in joint ventures accounted for under the equity method of accounting	111
12.4	Assets, liabilities, revenue and expenses from joint ventures:	114
12.5	Other Joint Venture disclosures:	115
Note 13	Intangible assets and goodwill	116
13.1	Balances	116
13.2	Disclosures on intangible assets and goodwill	116
Note 14	Property, plant and equipment	122
14.1	Types of property, plant and equipment	122
14.2	Reconciliation of changes in property, plant and equipment by type:	124
14.3	Detail of property, plant and equipment pledged as guarantee	128
14.4	Impairment of assets	128
14.5	Additional information	128
Note 15	Employee benefits	129
15.1	Provisions for employee benefits	129
15.2	Policies on defined benefit plan	130
15.3	Other long-term benefits	131
15.4	Post-employment benefit obligations	132
15.5	Staff severance indemnities	132
Note 16	Executive compensation plan	134
Note 17	Disclosures on equity	135
17.1	Capital management	135
17.2	Disclosures on preferred share capital	136
17.3	Disclosures on reserves in equity	138
17.4	Dividend policies	141
17.5	Interim and provisional dividends	142
Note 18	Provisions and other non-financial liabilities	144
18.1	Types of provisions	144
18.2	Description of other provisions	145
18.3	Other liabilities current	145
18.4	Changes in provisions	146

 

  

18.5	Detail of main types of provisions	147
Note 19	Contingencies and restrictions	148
19.1	Lawsuits and other relevant events	148
19.2	Restrictions to management or financial limits	156
19.3	Arbitration proceedings with CORFO	157
19.4	Environmental contingencies	158
19.5	Tax contingency	159
19.6	Restricted or pledged cash	160
19.7	Securities obtained from third parties	161
19.8	Indirect guarantees	162
Note 20	Revenue	164
Note 21	Earnings per share	164
Note 22	Borrowing costs	165
22.1	Costs of capitalized interest, property, plant and equipment	165
Note 23	Effect of fluctuations on foreign currency exchange rates	166
Note 24	Environment	167
24.1	Disclosures of disbursements related to the environment	167
24.2	Detail of information on disbursements related to the environment	168
24.3	Description of each project, indicating whether these are in process or have been finished	173
Note 25	Other current and non-current non-financial assets	176
Note 26	Reportable segments	177
26.1	Reportable segments	177
26.2	Reportable segment disclosures:	179
26.3	Statement of comprehensive income classified by reportable segments based on groups of products	181
26.4	Revenue from transactions with other Company’s operating segments	183
26.5	Disclosures on geographical areas	183
26.6	Disclosures on main customers	183
26.7	Segments by geographical areas as of June 30, 2017 and 2016	184
Investment accounted for under the equity method		184
Intangible assets other than goodwill		184
Investment accounted for under the equity method		184
Intangible assets other than goodwill		184
26.8	Property, plant and equipment classified by geographical areas	185

 

  

Note 27	Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature	186
27.1	Revenue	186
27.2	Cost of sales	186
27.3	Other income	187
27.4	Administrative expenses	188
27.5	Other expenses by function	189
27.6	Other income (expenses)	189
27.7	Summary of expenses by nature	190
27.8	Finance expenses	191
Note 28	Income tax and deferred taxes	191
28.1	Current and non-current tax assets	191
28.2	Current tax liabilities	192
28.3	Income tax and deferred taxes	193
Note 29	Disclosures on the effects of fluctuations in foreign currency exchange rates	204
Note 30	Mineral resource exploration and evaluation expenditure	209
Note 31	Lawsuits and complaints	210
Note 32	Sanction proceedings	213
Note 33	Railway for transportation of products between the site Coya Sur and the Port of Tocopilla	213
Note 34	Events occurred after the reporting date	214
34.1	Authorization of the financial statements	214
34.2	Disclosures on events occurring after the reporting date	214
34.3	Detail of dividends declared after the reporting date	215

 

 

Consolidated Classified Statements of Financial Position

 

Assets		Note		As of June 30, 2017 ThUS$				As of December 31, 2016 ThUS$
				Unaudited				Audited
Current assets
Cash and cash equivalents		7.1			517,625				514,669
Other current financial assets		10.1			325,837				289,189
Other current non-financial assets		25			39,217				30,273
Trade and other receivables, current		10.2			381,441				368,761
Trade receivables due from related parties, current		9.5			55,574				82,259
Current inventories		8			951,857				993,072
Current tax assets		28.1			46,405				51,954
Current assets other tan assets classified as held-for-sale or disposal					2,317,956				2,330,177
Non-current assets or asset groups for disposal classified as held-for-sale					1,850				2,056
Total current assets					2,319,806				2,332,233
Non-current assets
Other non-current financial assets		10.1			30,683				34,099
Other non-current non-financial assets		25			31,161				24,690
Trade receivables, non-current		10.2			2,560				1,840
Investments classified using the equity method of accounting		11.1-12.3			109,332				113,140
Intangible assets other than goodwill		13.1			108,932				109,439
Goodwill		13.1			44,177				37,972
Property, plant and equipment		14.1			1,448,773				1,532,710
Tax assets, non-current		28.1			31,857				31,857
Deferred tax assets		28.3			457				664
Total non-current assets					1,807,932				1,886,411
Total assets					4,127,738				4,218,644

 

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

 

 

Consolidated Classified Statements of Financial Position, (continued)

 

Liabilities and Equity		Note		As of June 30, 2017 ThUS$				As of December 31, 2016 ThUS$
				Unaudited				Audited
Current liabilities
Other current financial liabilities		10.4			137,551				179,144
Trade and other payables, current		10.5			159,878				200,496
Trade payables due to related parties, current		9.6			1,251				7
Other current provisions		18.1			35,724				41,912
Current tax liabilities		28.2			47,299				75,872
Provisions for employee benefits, current		15.1			9,936				20,998
Other current liabilities		18.3			161,952				61,920
Total current liabilities					553,591				580,349
Non-current liabilities
Other non-current financial liabilities		10.4			1,062,886				1,093,438
Other non-current provisions		18.1			13,619				8,934
Deferred tax liabilities		28.3			222,988				206,119
Provisions for employee benefits, non-current		15.1			26,565				22,532
Total non-current liabilities					1,326,058				1,331,023
Total liabilities					1,879,649				1,911,372
Equity		17
Share capital					477,386				477,386
Retained earnings					1,724,784				1,781,576
Other reserves					(13,112	)			(12,888	)
Equity attributable to owners of the Parent					2,189,058				2,246,074
Non-controlling interests					59,031				61,198
Total equity					2,248,089				2,307,272
Total liabilities and equity					4,127,738				4,218,644

 

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

 

 

Consolidated Statements of Income by Function

 

				January to June								April to June
		Note		2017 ThUS$				2016 ThUS$				2017 ThUS$				2016 ThUS$
				Unaudited
Revenue		27.1			1,023,865				881,459				505,719				489,614
Cost of sales		27.2			(666,015	)			(620,967	)			(325,812	)			(342,682	)
Gross profit					357,850				260,492				179,907				146,932
Other income		27.3			5,862				6,688				4,467				2,663
Administrative expenses		27.4			(46,087	)			(40,807	)			(23,876	)			(22,716	)
Other expenses by function		27.5			(13,396	)			(9,611	)			(7,621	)			(3,167	)
Other gains (losses)		27.6			(991	)			755				85				(432	)
Profit (loss) from operating activities					303,238				217,517				152,962				123,280
Finance income					5,716				5,591				3,345				1,284
Finance costs		22-27.8			(25,546	)			(32,421	)			(12,908	)			(14,990	)
Share of profit of associates and joint ventures accounted for using the equity method		11-12			7,824				10,596				3,169				4,852
Foreign currency translation differences		23			(4,707	)			(1,594	)			(6,375	)			2,579
Profit (loss) before taxes					286,525				199,689				140,193				117,005
Income tax expense, continuing operations		28.3			(82,610	)			(57,291	)			(39,319	)			(33,255	)
Profit (loss) from continuing operations					203,915				142,398				100,874				83,750
Profit for the year					203,915				142,398				100,874				83,750
Profit attributable to
Owners of the Parent					204,386				141,613				101,154				83,087
Non-controlling interests					(471	)			785				(280	)			663
Profit for the year					203,915				142,398				100,874				83,750

 

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

 

 

Consolidated Statements of Income by Function, (continued)

 

				January to June								April to June
		Note		2017				2016				2017				2016
				US$				US$				US$				US$
				Unaudited
Earnings per share
Common shares
Basic earnings per share (US$ per share		21			0.7766				0.5381				0.3843				0.3157
Diluted common shares
Diluted earnings per share (US$ per share)		21			0.7766				0.5381				0.3843				0.3157

 

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

 

 

Consolidated Statements of Comprehensive Income

 

		January to June								April to June
		2017				2016				2017				2016
Statement of comprehensive income		ThUS$				ThUS$				ThUS$				ThUS$
		Unaudited
Profit (loss) for the year			203,915				142,398				100,874				83,750
Other comprehensive income
Items of other comprehensive income that will not be reclassified to profit for the year, before taxes
Other comprehensive income, before taxes, gains (losses) from new measurements of defined benefit plans			(606	)			(1,014	)			668				(1,013	)
Total other comprehensive income that will not be reclassified to profit for the year, before taxes			(606	)			(1,014	)			668				(1,013	)
Items of other comprehensive income that will be reclassified  to profit for the year, before taxes
Foreign currency exchange difference
Foreign currency exchange gains I(losses) before taxes			(1,498	)			1,316				(313	)			(146	)
Other comprehensive income before taxes			(1,498	)			1,316				(313	)			(146	)
Financial assets available-for-sale
Profit (loss) from new measurements of available for sale financial assets net of taxes			(3,865	)			-				(3,865	)			-
Other comprehensive income before taxes			(3,865	)			-				(3,865	)			-
Cash flow hedges on defined benefit plans
Gains (losses) from cash flow hedges			2,133				(359	)			(2,289	)			2,635
Other comprehensive income before taxes			2,133				(359	)			(2,289	)			2,635
Total other comprehensive income that will be reclassified to profit for the year			(3,230	)			(957	)			(6,467	)			2,489
Other items of other comprehensive income before taxes			(3,836	)			(57	)			(5,799	)			1,476
Income taxes related to items of other comprehensive income that will not be reclassified to profit for the year
Income taxes related to new measurements of defined benefit plans in other comprehensive income			129				197				(117	)			197
Accumulated income taxes related to items of other comprehensive income that will not be reclassified to profit for the year			129				197				(117	)			197
Income taxes related to items of other comprehensive income that will be reclassified to profit for the year
Income taxes related to available for sale financial assets from other comprehensive income			(38	)			-				(38	)			-
Income taxes related to cash flow hedges in other comprehensive income			24				148				24				(617	)
Accumulated income taxes related to items of other comprehensive income that will be reclassified to profit for the year			(14	)			148				(14	)			(617	)
Total other comprehensive income			(3,721	)			288				(5,930	)			1,056
Total comprehensive income			200,194				142,686				94,944				84,806
Comprehensive income attributable to
Owners of the Parent			200,662				141,889				95,222				84,136
Non-controlling interests			(468	)			797				(278	)			670
Total comprehensive income			200,194				142,686				94,944				84,806

 

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

 

 

Consolidated Statements of Cash Flows

 

Consolidated Statements of cash flows		Note		6/30/2017 ThUS$				6/30/2016 ThUS$
				Unaudited
Cash flows from operating activities
Cash receipts from sales of goods and rendering of services					1,002,485				866,528
Cash receipts from premiums and benefits, annuities and other benefits from policies entered					-				1,295
Cash payments to suppliers for the provision of goods and services					(469,390	)			(473,072	)
Cash payments to and on behalf of employees					(131,935	)			(91,575	)
Other payments related to operating activities					(6,395	)			(4,920	)
Net cash generated from (used in) operating activities					394,765				298,256
Dividends received					1,481				2,167
Interest paid					(17,605	)			(1,274	)
Interest received					5,716				6,617
Income taxes paid					(33,446	)			(38,263	)
Other incomes (outflows) of cash					(52,072	)			(8,503	)
Net cash generated from (used in) operating activities					298,839				259,000
Cash flows from (used in) investing activities
Payments made to acquire interest in joint ventures					(42	)			(25,000	)
Proceeds from the sale of property, plant and equipment					3,569				572
Acquisition of property, plant and equipment					(48,307	)			(64,399	)
Proceeds from sales of intangible assets					1,291				1,706
Cash advances and loans granted to third parties					-				56
Proceeds from the repayment of advances and loans granted to third parties					21				-
Other inflows (outflows) of cash (*)					(31,602	)			395,846
Net cash generated from (used in) investing activities					(74,715	)			308,784

 

(*) Includes other cash receipts (payments), investments and redemptions of time deposits and other financial instruments, which do not qualify as cash and cash equivalents in accordance with IAS 7.7 as they record a maturity date from their date of origin greater than 90 days.

 

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

 

 

Consolidated Statements of Cash Flows, (continued)

 

		Note		6/30/2017 ThUS$				6/30/2016 ThUS$
Cash flows used in financing activities
Proceeds from short-term borrowings					20,000				60,000
Total proceeds from borrowings					20,000				60,000
Repayment of borrowings					(83,697	)			(200,000	)
Dividends paid					(159,412	)			(175,111	)
Other cash receipts (payments)					-				(200,000	)
Net cash generated used in financing activities					(223,109	)			(515,111	)
Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate					1,015				52,673
Effects of exchange rate fluctuations on cash held					1,941				3,059
Net (decrease) increase in cash and cash equivalents					2,956				55,732
Cash and cash equivalents at beginning of period					514,669				527,259
Cash and cash equivalents at end of period					517,625				582,991

 

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

 

 

Consolidated Statements of Changes in Equity

 

2017		Share capital				Foreign currency translation difference reserves				Cash flow hedge reserves				Reserve for gains (losses) from financial assets measured at fair value through other comprehensive income				Actuarial gains (losses) from defined benefit plans				Other miscellaneous reserves				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$
Equity at beginning of the year			477,386				(19,463	)			64				3,513				(4,834	)			7,832				(12,888	)			1,781,576				2,246,074				61,198				2,307,272
Profit for the year			-				-				-								-				-				-				204,386				204,386				(471	)			203,915
Other comprehensive income			-				(1,501	)			2,157				(3,903	)			(477	)			-				(3,724	)			-				(3,724	)			3				(3,721	)
Comprehensive income			-				(1,501	)			2,157				(3,903	)			(477	)			-				(3,724	)			204,386				200,662				(468	)			200,194
Dividends			-				-				-				-				-				-				-				(257,678	)			(257,678	)			(1,699	)			(259,377	)
Increase (decrease) due to transfers and other changes			-				-				-				-				-				3,500				3,500				(3,500	)			-				-				-
Increase (decrease) in equity			-				(1,501	)			2,157				(3,903	)			(477	)			3,500				(224	)			(56,792	)			(57,016	)			(2,167	)			(59,183	)
Equity as of June 30, 2017 (Unaudited)			477,386				(20,964	)			2,221				(390	)			(5,311	)			11,332				(13,112	)			1,724,784				2,189,058				59,031				2,248,089

 

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

 

 

Consolidated Statements of Changes in Equity

 

2016		Share capital				Foreign currency translation difference reserves				Cash flow hedge reserves				Actuarial gains (losses) from defined benefit plans				Other miscellaneous reserves				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$
Equity at beginning of the year			477,386				(14,035	)			(1,699	)			(2,386	)			(1,677	)			(19,797	)			1,882,196				2,339,785				60,571				2,400,356
Profit for the year			-				-				-				-				-				-				141,613				141,613				785				142,398
Other comprehensive income			-				449				(211	)			(792	)			830				276				-				276				12				288
Comprehensive income			-				449				(211	)			(792	)			830				276				141,613				141,889				797				142,686
Dividends			-				-				-				-				-				-				(220,807	)			(220,807	)			(1,330	)			(222,137	)
Increase (decrease) in equity			-				449				(211	)			(792	)			830				276				(79,194	)			(78,918	)			(533	)			79,451
Equity as of June 30, 2016 (Unaudited)			477,386				(13,586	)			(1,910	)			(3,178	)			(847	)			(19,521	)			1,803,002				2,260,867				60,038				2,320,905

 

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

 

   

Note 1

Identification and activities of the Company and Subsidiaries

 

1.1

Historical background

 

Sociedad Química y Minera de Chile S.A. "SQM" is an open stock corporation organized under the laws of the Republic of Chile, Tax Identification No.93.007.000-9.

 

The Company was incorporated through a public deed dated June 17, 1968 by the notary public 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, Fl. 6, Las Condes, Santiago, Chile. The Company's telephone number is +56 2 2425-2000.

 

The Company is registered with the Securities Registry of the Chilean Superintendence of Securities and Insurance (SVS) under No. 0184 dated March 18. 1983 and is subject to the inspection of the SVS.

 

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; Administración Building w/n - Maria Elena; Administración 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 s/n - San Pedro de Atacama, potassium sulfate plant at Salar de Atacama s/n – San Pedro de Atacama, Minsal Mining Camp s/n CL Plant CL, Potassium– San Pedro de Atacama, formerly the Iris Saltpeter office S/N, Commune of Pozo Almonte, Iquique.

 

1.3

Codes of main activities

 

The codes of the main activities as established by the Chilean Superintendence of Securities and Insurance are as follows:

 

-

1700 (Mining)

 

-

2200 (Chemical products)

 

-

1300 (Investment)

 

1.4

Description of the nature of operations and main activities

 

Our products are mainly derived from mineral deposits found in northern Chile. We mine and process caliche ore and brine deposits. The ore deposit in northern Chile contains nitrate and iodine deposits. The brine deposits of the Salar de Atacama, in northern Chile, contain high concentrations of lithium and potassium as well as significant concentrations of sulfate.

 

 

Note 1

Identification and Activities of the Company and Subsidiaries (continued)

 

1.4

Description of the nature of operations and main activities, continued

 

From our caliche ore deposits located in the north of Chile, we produce a wide range of nitrate-based products used for specialty plant nutrients and industrial applications, as well as iodine and iodine derivatives. At the Salar de Atacama, we extract brines rich in potassium, lithium and sulfate in order to produce potassium chloride, potassium sulfate, lithium solutions, and bischofite (magnesium chloride). We produce lithium carbonate and lithium hydroxide at our plant near the city of Antofagasta, Chile, from the solutions brought from the Salar de Atacama.

 

We sell our products in over 100 countries worldwide through our global distribution network and generate our revenue mainly from abroad.

 

Our products are divided into six categories: specialty plant nutrition, iodine and its derivatives, lithium and its derivatives, industrial chemicals, potassium and other products and services, described as follows:

 

Specialty plant nutrition: SQM produces and sells four types of specialty plant nutrition in this line of business: potassium nitrate, sodium nitrate, sodium potassium nitrate, and specialty mixes. This business is characterized by being closely related to its customers for which it has specialized staff who provide expert advisory in best practices for fertilization according to each type of crop, soil and climate. Within this type of business, potassium derivative products and specially potassium nitrate have had a leading role given the contribution they make to develop crops insuring an improvement in post-crop life in addition to improving quality, flavor and fruit color. The potassium nitrate, which is sold in multiple formats and as a part of other specialty mixtures, is complemented by sodium nitrate, potassium sodium nitrate, and more than 200 fertilizing mixtures.

 

Iodine: The Company is a major producer of iodine at worldwide level. Iodine is widely used in the pharmaceutical industry, technology and nutrition. Additionally, iodine is used as X ray contrast media and polarizing film for LCD displays.

 

Lithium: The Company’s lithium is mainly used for manufacturing rechargeable batteries for cell phones, cameras and notebooks. Through the manufacturing of lithium-based products, SQM provides significant materials to face great challenges such as the efficient use of energy and raw materials. Lithium is mainly not used for rechargeable batteries for small electrical appliances such as mobile phones, tablets and laptops. It is also used in industrial applications such as the manufacturing of glass, ceramics and lubricating greases. Other uses include the pharmaceutical and chemical industries.

 

 

Note 1

Identification and Activities of the Company and Subsidiaries (continued)

 

1.4

Description of the nature of operations and main activities, continued

 

Industrial Chemicals: Industrial chemicals are products used as supplies for a number of production processes. SQM participates in this line of business producing sodium nitrate, potassium nitrate and potassium chloride. Industrial nitrates have increased their importance over the last few years due to their use as storage means for thermal energy at solar energy plants, which are widely used in countries as Spain and the United States in their search for decreasing CO₂ emissions.

 

Potassium: The potassium is a primary essential macro-nutrient, and even though does not form part of the plant’s structure, has a significant role for the developing of its basic functions, validating the quality of a crop, increasing post-crop life, improving the crop flavor, its amount in vitamins and its physical appearance. Within this business line, SQM has also potassium chlorate and potassium sulfate, both extracted from the salt layer located under the Salar de Atacama (the Atacama Saltpeter Deposit).

 

Other products and services: This business line includes revenue from commodities, services, interests, royalties and dividends.

 

1.5

Other background

 

Staff

 

As of June 30, 2017 and December 31, 2016, staff was detailed as follows:

 

		6/30/2017												12/31/2016
Employees		SQM S.A				Other subsidiaries				Total				SQM S.A.				Other subsidiaries				Total
Executives			41				71				112				31				72				103
Professionals			138				906				1,044				119				919				1,038
Technicians and operators			251				3,073				3,324				262				3,076				3,338
Foreign employees			16				277				293				8				264				272
Overall total			446				4,327				4,773				420				4,331				4,751

 

 

Note 1

Identification and Activities of the Company and subsidiaries (continued)

 

1.5

Other background, continued

 

Main shareholders

 

The table below establishes certain information about the beneficial property of Series A and Series B shares of SQM as of June 30, 2017 and December 31, 2016. In respect to each shareholder which has interest of more than 5% of outstanding Series A or B shares. The information below is taken from our records and reports controlled in the Central Securities Depository and reported to the Superintendence of Securities and Insurance (SVS) and the Chilean Stock Exchange, whose main shareholders are as follows:

 

Shareholder as of June 30, 2017		No. of Series A with ownership				% of Series A shares				No. of Series B with ownership				% of Series B shares				% of total shares
The Bank of New York Mellon, ADRs			-				-				54,198,593				45,02	%			20,59	%
Sociedad de Inversiones Pampa Calichera S.A.(*)			44,894,152				31,43	%			7,007,688				5,82	%			19,72	%
Inversiones El Boldo Limitada			29,330,326				20,54	%			16,363,546				13,59	%			17,36	%
Inversiones RAC Chile Limitada			19,200,242				13,44	%			2,202,773				1,83	%			8,13	%
Potasios de Chile S.A.(*)			18,179,147				12,73	%			-				-				6,91	%
Inversiones PCS Chile Limitada			15,526,000				10,87	%			1,600,000				1,33	%			6,51	%
Banco de Chile por Cuenta de Terceros no Residentes			-				-				8,941,307				7,43	%			3,40	%
Inversiones Global Mining (Chile) Limitada (*)			8,798,539				6,16	%			-				-				3,34	%
Banco Itau por Cuenta de Inversionistas			20,950				0,01	%			6,757,260				5,61	%			2,58	%
Banco Santander por cuenta de inversionistas extranjeros			-				-				3,896,903				3,24				1,48	%

  

(*) Total Pampa Group 29.97%

 

Shareholder as of December 31, 2016		No. of Series A with ownership				% of Series A shares				No. of Series B with ownership				% of Series B shares				% of total shares
The Bank of New York Mellon, ADRs			-				-				59,373,011				49.32	%			22.56	%
Sociedad de Inversiones Pampa Calichera S.A.(*)			44,894,152				31.43	%			7,007,688				5.82	%			19.72	%
Inversiones El Boldo Limitada			29,330,326				20.54	%			16,363,546				13.59	%			17.36	%
Inversiones RAC Chile Limitada			19,200,242				13.44	%			2,202,773				1.83	%			8.13	%
Potasios de Chile S.A.(*)			18,179,147				12.73	%			-				-				6.91	%
Inversiones PCS Chile Limitada			15,526,000				10.87	%			1,600,000				1.33				6.51	%
Banco de Chile on behalf of non-resident third parties			-				-				8,962,355				7.45	%			3.41	%
Inversiones Global Mining (Chile) Limitada (*)			8,798,539				6.16	%			-				-				3.34	%
Banco Itaú on behalf of  investors			20,950				0.01	%			6,502,217				5.40	%			2.48	%
Inversiones La Esperanza Limitada			3,711,598				2.60	%			46,500				0.04	%			1.43	%

 

(*) Total Pampa Group 29.97%

 

On June 30, 2017 the total number of shareholders had risen to 1,229.

 

 

Note 2

Basis of presentation for the consolidated financial statements

 

2.1

Accounting period

 

These consolidated financial statements cover the following periods:

 

-

Consolidated Statements of Financial Position for the periods ended June 30, 2017 and December 31, 2016.

 

-

Consolidated Statements of Changes in Equity for the periods ended June 30, 2017 and 2016.

 

-

Consolidated Statements of Comprehensive Income for the periods between January and June 30, 2017 and 2016.

 

-

Statements of Direct-Method Cash Flows for the periods ended June 30, 2017 and 2016.

 

2.2

Financial statements

 

The consolidated financial statements of Sociedad Química y Minera de Chile S.A. and its Subsidiaries were prepared in accordance with International Financial Reporting Standards (hereinafter “IFRS”) and represent the full, explicit and unreserved adoption of International Financial Reporting Standards as issued by the International Accounting Standards Board (hereinafter the “IASB”).

 

These consolidated financial statements fairly reflect the Company’s financial position, the comprehensive results of operations, changes in equity and cash flows occurring during the years then ended.

 

IFRS establish certain alternatives for their application. Those applied by the Company are detailed in this Note.

 

On October 17, 2014, the Chilean Superintendence of Securities and Insurance issued Official Communication No. 856 providing instructions for inspected entities to recognize in 2014 against equity differences in deferred tax assets and liabilities resulting directly from the increase in the corporate income introduced by Law No. 20.780. Such accounting treatment differs from that provided by International Accounting Standard 12 (IAS 12) and, accordingly, represented a change in the accounting framework for the preparation and presentation of financial information that had been adopted through such date.

 

Considering that indicated in the preceding paragraph, this represented a specific and temporary departure from the IFRS, starting from 2016 and in conformity with that established in paragraph 4ª of IFRS 1, the Company has decided to retrospectively apply such standards (in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”) as if had never ceased their application.

 

Because of that indicated in the preceding paragraph it does not amend any of the accounts disclosed in the statements of financial position as of June 30, 2017 and 2016 or those as of December 31, 2016 and 2015 in conformity with that indicated in paragraph 40A of IAS 1 “Presentation of Financial Statements”, the presentation of the statement of financial position as of January 1, 2015 (third column) is not necessary.

 

 

Note 2

Basis of presentation for the consolidated financial (continued)

 

2.2

Financial statements, continued

 

The accounting policies used for the preparation of the annual consolidated accounts comply with all IFRS in issue at the reporting date.

 

For the closing date of these financial statements certain reclassifications have been mad for the captions current tax assets, other non-current financial assets, equity accounted investees, current tax assets, non-current as of December 31, 2016, for consistent presentation and comparability to the figures as of June 30, 2017.

 

2.3

Basis of measurement

 

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

 

-

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

-

Financial derivatives at fair value; and

-

Staff severance indemnities and pension commitments at actuarial value

-

Certain financial investments classified as available for sale measured at fair value with a counterparty in other comprehensive income.

-

Other current and non-current asset and financial liabilities at amortized cost

 

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

 

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, 2017:

 

Amendments and improvements		Mandatory for annual periods beginning on
Amendment to IAS 7 “Statement of Cash Flows.”  Issued in February 2016. The amendment introduces additional disclosures allowing users of the financial statements to assess changes in obligations from financing activities.		01/01/2017
Amendment to IAS 12 “Income Taxes.”   Issued in February 2016. The amendment clarifies how to account for deferred taxes associated with debt securities measured at their fair value.		01/01/2017
Amendment to IFRS 12 “Disclosure of Interest in Other Entities.”  Issued in December 2016.   The amendment clarifies the scope of this standard.  Such amendments must be applied retrospectively to annual periods beginning on January 1, 2017.		01/01/2017
Amendment to IAS 28 “Investments in Associates and Joint Ventures”, related to the measurement of the associate or joint venture at fair value. Issued in December 2016.		01/01/2017

 

The adoption of the standards, amendments and interpretations indicated above has no significant impact on the Company’s consolidated financial statements.

 

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

 

2.4

Accounting Pronouncements, continued

 

b)           Standards, interpretations and amendments issued, not effective for the financial statements beginning on January 1, 2016, which the Company has not adopted early are as follows:

  

Standards and interpretations		Mandatory for annual periods beginning on
IFRS 9 “Financial Instruments” – Issued in July 20014.  The IASB has issued the full version of IFRS 9, which supersedes the application guidance in IAS 39.  This final version includes requirements on the classification and measurement of financial assets and financial liabilities and an expected credit losses model that replaces the incurred loss impairment model used today.  The final hedging accounting part of IFRS 9 was issued in November 2013.  Early adoption is permitted.		01/01/2018
IFRS 15 “Revenue from Contracts with Customers” – Issued in May 2014. This standard establishes the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer.  For such purposes, the basic principle is that an entity will recognize revenue representing the transfer of goods or services to customers in an amount that reflects the consideration that the entity expects to receive in exchange for such goods or services.  The application of this standard will replace IAS 11 Construction Contracts and IAS 18 Revenue, as well as IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue-Barter Transactions Involving Advertising Services. Earlier adoption is permitted.		01/01/2018
IFRS 16 “Leases” – issued in January 2016 establishes the principle for the recognition, measurement, presentation and disclosure of leases. IFRS 16 supersedes the current IAS 17 and introduces a single model for accounting recognition for lessees and requires a lessee to recognize the assets and liabilities of all lease contracts over a term of more than 12 months, unless the underlying asset has a low value.   IFRS 16 is effective for annual periods beginning on or after January 1, 2019, early adoption is permitted for entities applying IFRS 15 or prior to the date of initial application of IFRS 16.		01/01/2019
IFRS 17 "Insurance Contracts" Issued in May 2017, it replaces the current IFRS 4. IFRS 17 will mainly amend the accounting for all entities issuing insurance contracts and investment contracts with discretionary involvement characteristics.  This standard is applicable to all annual periods beginning on January 1, 2021 and early adoption is allowed provided that the entity applies IFRS 15 "Revenue from Contracts with Customers" and IFRS 9 "Financial Instruments."		01/01/2021
IFRIC 22 “Foreign Currency Transactions and Advance Consideration.”   Issued in December 2016.  This interpretation is applicable to a transaction in foreign currency (or a portion thereof) if an entity recognizes a non-financial asset or non-financial liability arising from the payment of receipt  of an advance consideration prior to the entity recognizing the related asset, expense or income (or the applicable portion thereof).  The interpretation provides guidance for when a single payment / receipt occurs, as well as for situations in which multiple payments / receipts are made. It is intended to reduce diversity in practice		01/01/2018

 

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

 

2.4

Accounting Pronouncements, continued

 

Amendments and improvements		Mandatory for annual periods beginning on
IFRIC 23   “Uncertainty over Income Tax Treatments.” Issued in June 2016. This interpretation clarifies how to apply the recognition and measurement requirements in IAS 12 when uncertainty over the income tax treatments exists.		01/01/2013
Amendment to IFRS 15 "Revenue from Contracts with Customers." Issued in April 2016. This amendment provides clarification for the guidance for the identification of performance obligations in contracts with customers, the accounting for intellectual property license and the assessment of principal versus agent (gross presentation vs. net presentation of revenue).   It includes new and amended illustrative examples, as well as practical examples related to the transition to the new revenue standard.		01/01/2018
Amendments to IFRS 10: Separate Financial Statements" and IAS 28 "Investments in Associates and Joint Ventures." Issued in September 2014. Such amendment addresses an inconsistency between the requirements in IFRS 10 and IAS 28 for the treatment of 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 (either in a subsidiary or not) and a partial gain or loss is recognized when the transaction involves assets that do not constitute a business, even if such assets are housed in a subsidiary.		Not yet determined

 

As of june 30, 2017 the Company's management is in the process of assessing the impacts on the consolidated financial statements of the adoption of IFRS 9, IFRS 15 and IFRS 16. However, for the remaining standards, amendments and interpretations described above, it believes they will not have any significant impact for the initial application period.

 

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

 

2.5

Basis of consolidation

 

(a)

Subsidiaries

 

Relate to all the entities on which Sociedad Química y Minera de Chile S.A. has control when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those variable returns through its power over the entity. Subsidiaries apply the same accounting policies of their Parent.

 

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

 

Companies included in consolidation:

 

								Ownership interest
								06/30/2017												12/31/2016
TAX ID No.		Foreign subsidiaries		Country of origin		Functional 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.		Netherlands		US$			0.0002				99.9998				100.0000				100.0000
Foreign		SQI Corporation N.V.		Netherlands		US$			0.0159				99.9841				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 Peru S.A.		Peru		US$			0.9800				99.0200				100.0000				100.0000
Foreign		SQM Ecuador S.A.		Ecuador		US$			0.0040				99.9960				100.0000				100.0000
Foreign		SQM Nitratos Mexico 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.		Netherlands		US$			1.0000				99.0000				100.0000				100.0000
Foreign		SQM Brasil Limitada		Brazil		US$			1.0900				98.9100				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		SQM Colombia SAS		Colombia		US$			0.0000				100.0000				100.0000				-

 

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

 

2.5

Basis of consolidation, continued

 

								Ownership interest
								6/30/2017												12/31/2016
TAX ID No.		Foreign subsidiaries		Country of origin		Functional currency		Direct				Indirect				Total				Total
Foreign		Rs Agro-Chemical Trading Corporation A.V.V.		Aruba		US$			98.3333				1.6667				100.0000				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 Agro India Pvt. Ltd.		India		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				99.996				99.996				99.996

 

								Ownership interest
								6/30/2017												12/31/2016
TAX ID No.		Domestic subsidiaries		Country of origin		Functional 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.		Chile		Ch$			0.0000				60.6381				60.6381				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.		Chile		Ch$			0.0000				60.5800				60.5800				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. (a)		Chile		Ch$			0.0000				42.4468				42.4468				42.4468
76.145.229-0		Agrorama S.A.		Chile		Ch$			0.0000				60.6377				60.6377				60.6377
76.359.919-1		Orcoma Estudios SPA		Chile		US$			51.0000				-				51.0000				51.0000
76.360.575-2		Orcoma SPA		Chile		US$			100.0000				-				100.0000				100.0000
76.686.311-9		Compañia Minera Arfwedson Spa		Chile		US$			100.0000				-				100.0000				-

 

(a)

The Company consolidated Comercial Agrorama Ltda. as it has the control of this company’s relevant activities.

 

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

 

2.5

Basis of consolidation, continued

 

Subsidiaries are consolidated using the line-by-line method, adding the items that represent assets, liabilities, revenues, and expenses of similar content, and eliminating those related to intragroup transactions.

 

Profit or loss of subsidiaries acquired or disposed during the year are included in profit or loss accounts consolidated from the date control is transferred to the Group, or up to the date control is lost, as applicable.

 

Non-controlling interest represents the equity of a subsidiary not directly or indirectly attributable to the Parent.

 

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

 

2.6

Significant accounting judgments, estimates and assumptions

 

Management of Sociedad Química y Minera de Chile S.A. and its subsidiaries is responsible for the information contained in these consolidated financial statements, which expressly indicate that all the principles and criteria included in IFRSs, as issued by the International Accounting Standards Board (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:

 

-

The useful lives of property, plant and equipment, and intangible assets and their residual value -Estimated useful lives are determined based on current facts and past experience, and take into consideration the anticipated physical life of the asset, the potential for technological obsolescence, and regulations. See notes 3.24, 13 and 14.

 

-

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 fair value 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 recoverable values of these assets. Estimates are reviewed regularly by management. See notes 13 and 14

 

-

Assumptions used in calculating the actuarial amount of pension-related and severance indemnity payment benefit commitments- See Note 15;

 

-

Contingencies – The amount recognized as 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, taking into account 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, 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 note 18 and 19.

 

-

Provisions on the basis of technical studies that cover the different variables affecting products in stock (density and moist, among others), and related allowance - Inventory valuation requires judgment to determine obsolescence and estimates of provisions for obsolescence to ensure that the carrying value of inventory is not in excess of net realizable value. See note 8.

 

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, recognizing the effects of the change in estimates in the related future consolidated financial statements.

 

 

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 remaining recovery (maturity) dates; i.e., those maturing on a date equal to or lower than twelve months are classified as current 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 (“U.S. dollars” or “US$”), 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)

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.

 

 

 

Note 3

Significant accounting policies (continued)

 

3.3

Foreign currency translation, continued

 

The main exchange rates 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:

 

		6/30/2017				12/31/2016
		US$				US$
Brazilian real			3.31				3.25
New Peruvian sol			3.25				3.35
Argentine peso			16.62				15.84
Japanese yen			112.43				116.83
Euro			0.88				0.95
Mexican peso			18.14				20.63
Australian dollar			1.30				0.72
Pound Sterling			0.77				0.81
South African rand			13.07				13.70
Ecuadorian dollar			1.00				1.00
Chilean peso			664.29				669.47
UF			40.14				39.36

 

(b)

Transactions and balances

 

Non-monetary transactions in currencies other than the functional currency (U.S. dollar) foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. 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 item that provide effective hedge for a net investment in a foreign operation. These items are recognized in other comprehensive income on the disposal of the investment; at the time they are recognized in the statement of income. Charges and credits attributable to foreign currency translation differences on those hedge monetary item are also recognize 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.

 

 

Note 3

Significant accounting policies (continued)

 

3.4

Subsidiaries

 

SQM S.A. establishes, as basis, the control exercised in subsidiaries, to determine their share in the consolidated financial statements. Control consists of the Company’s ability to exercise power in the subsidiary, exposure, or right, to variable performance from its share in the investee and the ability to use its power on the investee to have an influence on the amount of the investor’s performance.

 

The Company prepares the consolidated financial statements using consistent accounting policies for the entire Group, the consolidation of a subsidiary commences when the Company has control over the subsidiary and stops when control ceases.

 

3.5

Consolidated statement of cash flows

 

Cash equivalents correspond to highly-liquid short-term investments that are easily convertible in known amounts of cash. They are 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 purposes of the statement of cash flows, cash and cash equivalents comprise cash and cash equivalents as defined above.

 

The statement of cash flows includes movements in cash performed during the year, determined using the direct method.

 

3.6

Financial assets

 

Management determines the classification of its financial assets at the time of initial recognition, on the basis of the business model for the management of financial assets and the characteristics of contractual cash flows from the financial assets. In accordance with IAS 39, financial assets are measured initially at fair value plus transaction costs that may have been incurred and are directly attributable to the acquisition of the financial asset. Subsequently, financial assets are measured at amortized cost or fair value.

 

The Company assesses, at each reporting date, whether there is objective evidence that an asset or group of assets is impaired. An asset or group of financial assets is impaired if and only if there is evidence of impairment as a result of one or more events occurring after the initial recognition of the asset or group of assets. For the recognition of impairment, the loss event has to have an impact on the estimate of future cash flows from the asset or groups of financial assets.

 

 

Note 3

Significant accounting policies (continued)

 

3.7

Financial liabilities

 

Management determines the classification of its financial liabilities at the time of initial recognition. As established in IAS 39, financial liabilities at the time of initial recognition are measured at fair value, less transaction costs that may have been incurred and are directly attributable to the issue of the financial liability. Subsequently, these are measured at amortized cost using the effective interest method. For financial liabilities that have been initially recognized at fair value through profit or loss, these will be measured subsequently at fair value.

 

3.8

Financial instruments at fair value through profit or loss

 

Management will irrevocably determine, at the time of initial recognition, the designation of a financial instrument at fair value through profit or loss. By doing so, this eliminates and/or significantly reduces measurement or recognition inconsistency that would otherwise have arisen from the measurement of assets or liabilities or from the recognition of gains and losses from them on different bases.

 

3.9

Financial instrument offsetting

 

The Company offsets an asset and liability if and only if it presently has a legally enforceable right of setting off the amounts recognized and has the intent of settling for the net amount of realizing the asset and settling the liability simultaneously.

 

3.10

Reclassification of financial instruments

 

At the time when the Company changes its business model for managing financial assets, it will reclassify the financial assets affected by the new business model.

 

For financial liabilities these could not be reclassified.

 

3.11

Derivative and hedging financial instruments

 

Derivatives are recognized initially at fair value as of the date on which the derivatives contract is signed and, subsequently, are 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:

 

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

 

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 existing between hedging instruments and those items hedged, as well as their objectives for risk management purposes and the strategy to conduct different hedging operations.

 

 

Note 3

Significant accounting policies (continued)

 

3.11

Derivative and hedging financial instruments, continued

 

The Company also documents its evaluation both at the beginning and at the end of each period if 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 10.3 (hedging assets and liabilities). 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 higher than 12 months, and as a current asset or liability if the remaining expiration period of the entry is lower 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 hedging fixed rate borrowings is recognised 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 recognised 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 amortised to profit or loss over the period to maturity using a recalculated effective interest rate.

 

b)

Cash flow hedges

 

The effective portion of gains or losses from the hedge instrument is initially recognized with a debit or credit to other comprehensive income, whereas any ineffective portion is immediately recognized with a debit or credit to profit or loss, as applicable.

 

Amounts taken to equity are transferred to profit or loss when the hedged transaction affects profit or loss, as when the hedged interest income or expense is recognized when a projected sale occurs. When the hedged entry is the cost of a non-financial asset or liability, amounts taken to other reserves are transferred to the initial carrying value of the non-financial asset or liability.

 

Should the expected firm transaction or commitment no longer be expected to occur, the amounts previously recognized in equity are transferred to profit or loss. If a hedge instrument expires, is sold, finished, or exercised without any replacement, or if a rollover is performed or if its designation as hedging is revoked, the amounts previously recognized in other reserves are maintained in equity until the expected firm transaction or commitment occurs..

 

 

Note 3

Significant accounting policies (continued)

 

3.12

Available for sale financial assets

 

Available for sale financial assets are non-derivative financial assets, which have been designated as available for sale and are not classified in any of the previous categories of financial instruments. Available for sale financial instruments are initially recognized at fair value plus any directly attributable transaction costs.

 

Subsequent to initial recognition, they are recognized at fair value and changes other than impairment losses are recognized in other comprehensive income and presented in equity in the fair value reserve. If an investment is derecognized, the accumulated gain or loss is reclassified to profit or loss.

 

3.13

Derecognition of financial instruments

 

In accordance with IAS 39, 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.

 

3.14

Derivative financial instruments

 

The Company maintains derivative financial instruments to hedge its exposure to foreign currencies. Derivative financial instruments are recognized initially at fair value; attributable transact ion costs are recognized when incurred. Subsequent to initial recognition, changes in fair value of such derivatives are recognized in profit or loss as part of gains and losses.

 

The Company permanently assesses the existence of embedded derivatives, both in its contracts and financial instruments. As of June 30, 2017 and December 31, 2016, there are no embedded derivatives.

 

3.15

Fair value initial measurements

 

From the initial recognition, the Company measures its assets and liabilities at fair value plus or minus transaction costs incurred that are directly attributable to the acquisition of a financial asset or issuance of a financial liability.

 

 

Note 3

Significant accounting policies (continued)

 

3.16

Leases

 

(a)

Lease - Finance lease

 

Leases are classified as finance leases when the Company holds substantially all the risks and rewards derived from the ownership of the asset. Finance leases are capitalized at the beginning of the lease, at the lower of the fair value of the leased asset or the present value of minimum lease payments.

 

Each lease payment is distributed between the liability and the interest expenses to obtain ongoing interest on the pending balance of debt. The respective lease obligations, net of interest expense, are included in other non-current liabilities. The interest element of finance cost is debited in the consolidated statement of income during the lease period so that a regular ongoing interest rate is obtained on the remaining balance of the liability for each year.

 

(b)

Lease – Operating lease

 

Leases in which the lessor maintains a significant part of the risks and rewards derived from the ownership are classified as operating leases. Operating lease payments (net of any incentive received from the lessor) are debited to the statement of income or capitalized (as applicable) on a straight-line basis over the lease period.

 

3.17

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, and are recognized under other non-financial assets.

 

3.18

Trade and other receivables

 

Trade and other receivables relate to non-derivative financial assets with fixed and determinable payments and are not quoted in any active market. These arise from sales operations involving the products and/or services, of which the Company commercializes directly to its customers.

 

These assets are initially recognized at their fair value and subsequently at amortized cost according to the effective interest rate method, less a provision for impairment loss. An allowance for impairment loss is established for trade receivables when there is objective evidence that the Company will not be able to collect all the amounts which are owed to it, according to the original terms of receivables.

 

Implicit interest in installment sales is recognized as interest income when interest is accrued over the term of the operation.

 

 

Note 3

Significant accounting policies (continued)

 

3.19

Inventory measurement

 

The Company states inventories at the lower of cost and net realizable value. The cost price of finished products and products in progress includes the direct cost of materials and, when applicable, labor costs, indirect costs incurred to transform raw materials into finished products, and general expenses incurred in carrying inventories to their current location and conditions. The method used to determine the cost of inventories is weighted average cost.

 

Commercial discounts, rebates obtained, and other similar entries are deducted in the determination of the acquisition price.

 

The net realizable value represents the estimate of the sales price, less all finishing estimated costs and costs which will be incurred in commercialization, sales, and distribution processes.

 

The Company conducts an evaluation of the net realizable value of inventories at the end of each year, recording an estimate with a charge to income when these are overstated. When a situation arises whereby the circumstances, which previously caused the rebate to cease to exist, or when there is clear evidence of an increase in the net realizable value due to a change in the economic circumstances or prices of main raw materials, the estimate made previously is modified.

 

The valuation of obsolete, impaired or slow-moving products relates to their net estimated, net realizable value.

 

Provisions on the Company's inventories have been made based on a technical study which covers the different variables which affect products in stock (density and humidity, among others).

 

Raw materials, supplies and materials are recorded at the lower of acquisition cost or market value. Acquisition cost is calculated according to the average price method.

 

3.20

Investments in associates and joint ventures

 

Interests in companies on which joint control is exercised (joint venture) or where an entity has significant influence (associates) are recognized using the equity method of accounting. Significant influence is presumed to exist when interest greater than 20% is held in the capital of an investee.

 

Under this method, the investment is recognized in the statement of financial position at cost plus changes, subsequent to the acquisition, and considering the proportional share in the equity of the associate. For such purposes, the interest percentage in the ownership of the associate is used. The associated goodwill acquired is included in the carrying amount of the investee and is not amortized. The debit or credit to profit or loss reflects the proportional share in the profit or loss of the associate.

 

Unrealized gains for transactions with affiliates or associates are eliminated considering the interest percentage the Company has on such entities. Unrealized losses are also eliminated, except if the transaction provides evidence of impairment loss of the transferred asset.

 

 

Note 3

Significant accounting policies (continued)

 

3.20

Investments in associates and joint ventures, continued

 

Changes in the equity of associates are recognized considering the proportional amounts with a charge or credit to “Other reserves” and classified considering their origin.

 

Reporting dates of the associate, the Company and related policies are similar for equivalent transactions and events under similar circumstances.

 

In the event that the significant influence is lost or the investment is sold or is held as available for sale, the equity method is discontinued, suspending the recognition of proportional share of profit or loss.

 

If the resulting amount according to the equity method is negative, the share of profit or loss is reflected at zero value in the consolidated financial statements, unless a commitment exists by the Company to reinstate the Company’s equity position, in which case the related provision for risks and expenses is recorded.

 

Dividends received by these companies are recorded by reducing the equity value, and the proportional share of profit or loss recognized in conformity with the share of equity are included in the consolidated profit or loss accounts in the caption “Equity share of profit (loss) of associates and joint ventures that are accounted for using the equity method of accounting”.

 

3.21

Transactions with non-controlling interests

 

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

 

3.22

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. Also, these transactions have been eliminated in consolidation. Expiration conditions for each case vary according to the originating transaction.

 

 

Note 3

Significant accounting policies (continued)

 

3.23

Property, plant and equipment

 

Tangible 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:

 

1.         Accrued interest expenses during the construction period which 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.

 

2.         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 obligation.

 

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 incurred.

 

The replacement of full 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 daily maintenance of property, plant and equipment are recognized when incurred.

 

 

Note 3

Significant accounting policies (continued)

 

3.24

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.

 

In the case of 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)
Mining assets			3				10
Energy generating assets			2				16
Buildings			2				30
Supplies and accessories			2				15
Office equipment			3				20
Transport equipment			3				20
Network and communication equipment			2				15
IT equipment			2				15
Machinery, plant and equipment			2				30
Other property, plant and equipment			1				30

 

3.25

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.

 

 

Note 3

Significant accounting policies (continued)

 

3.26

Intangible assets other than goodwill

 

Intangible assets mainly relate to water rights, rights issue, electric line easement expenses and software license and development expenses.

 

(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)

Right 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 in third party land. These rights are presented under intangible assets. Amounts paid are capitalized at the date of the agreement and charged to 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 costs that have been incurred to acquire them and prepare them to use the specific program. 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 costs during more than a year, are recognized as intangible assets. Direct costs include expenses of employees that develop information technology software and general expenses in accordance with corporate charges received.

 

The costs of development for IT programs 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 Government. Property rights are usually obtained with no initial cost (other than the payment of mining patents and minor recording expenses) and upon obtaining rights on these concessions, these 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.

 

No impairment of intangible assets exists as of June 30, 2017 and December 31, 2016.

 

 

Note 3

Significant accounting policies (continued)

 

3.27

Research and development expenses

 

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

 

3.28

Prospecting expenses

 

The Company has mining property and concession rights from the Chilean Government and acquired from third parties other than the Chilean Government, destined to the exploitation of caliche ore and saltpeter deposits and also the exploration of this type of deposits.

 

Upon obtaining these rights, the Company initially records disbursements directly associated with the exploration and evaluation of deposits (associated with small deposits with trading feasibility) as asset at cost. Such disbursements include the following concepts:

 

-

Disbursements for geological reconnaissance evaluation

 

-

Disbursements for drilling

 

-

Disbursements for drilling work and sampling

 

-

Disbursements for activities related to technical assessment and trading feasibility of drilling work

 

-

And any disbursement directly related to specific projects where its objective is finding mining resources.

 

Subsequently, the Company distinguishes exploration and evaluation projects according to the economic feasibility of the mineral extracted in the area or exploration, among those that finally will deliver future benefits to the Company (profitable projects) and those projects for which it is not probable that economic benefit will flow to the Company in the future (i.e., when the mine site has low ore grade and its exploitation is not economically profitable).

 

If technical studies determine that the ore grade is not economically suitable for exploitation, the asset is directly expensed. Otherwise, it is held in the caption “other non-current assets”, reclassifying the portion related to the area to be exploited in the year in the caption inventories and such amount is amortized as production cost on the basis of estimated tons to be extracted.

 

The technical reasons for this classification correspond to the fact that this is an identifiable non-monetary asset that is owned to be used in the production of our processes as a main raw material.

 

For this reason and because our disbursements correspond to proven reserves with a trading feasibility and used as main raw material in our production processes, these are presented as inventories that will be exploited within the commercial year and the remainder as development expenses for small deposits and prospecting expenses in the caption “other non-current assets”.

 

 

Note 3

Significant accounting policies (continued)

 

3.29

Impairment of non-financial assets

 

Assets subject to depreciation and amortization are 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.

 

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.

 

When the carrying value of an asset exceeds its recoverable amount, the asset is considered an impaired asset and is reduced to its net recoverable amount.

 

In evaluating value in use, estimated future cash flows are discounted using a discount rate before taxes which reflects current market evaluation on the time value of money and 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 conducted of whether there are impairment loss indicators recognized previously that might have already decreased or ceased to exist. The recoverable amount is estimated if such indicators exist. An impairment loss previously recognized is reversed only if there have been changes in estimates used to determine the asset’s recoverable amount from the last time in which 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 would have not been recognized in prior years. This reversal is recognized with a credit to profit or loss.

 

3.30

Minimum dividend

 

As required by the Shareholders’ Corporations Act, unless decided otherwise by the unanimous vote by the shareholders of subscribed and paid shares, a public company must distribute dividends as agreed by the shareholders at the General Shareholders’ Meeting held each year with a minimum of 30% of its profit, except when the Company records unabsorbed losses from prior years. However, the Company defines as policy the distribution of 50% of its profit for the year, unless decided otherwise by the unanimous vote by the shareholders at the General Shareholders´ meeting held each year.

 

On April 11, 2017, the Company’s Board of Directors at the extraordinary meeting recommended to the Ordinary Shareholders’ Meeting (the Meeting) which was held on April 28, 2017, that the Company distributes and pays as dividend declared 100% of net profit for distribution obtained by the Company during the commercial year 2016. Such recommendation was accepted by the Meeting.

 

 

Note 3

Significant accounting policies (continued)

 

3.30

Minimum dividend, continued

 

For 2017, the Company has defined the following dividend policy: (a) Distributing and paying as dividend declared and in favor of the related shareholder, a percentage of the profits that will be determined as per the following financial parameters.

 

(i) 100% of the profit for 2017 if all the copulative financial parameters are met: (a) that the addition of cash and cash equivalents and other current financial assets (“Cash”) divided by the addition of other current financial liabilities (the “Short-term Financial Liabilities”) is equal to or higher than 2.5 times, and (b) the addition of current liabilities and non-current liabilities (“Total Liabilities”) divided by total equity (“Equity”) is equal to or lower than 1.1 times.

 

(ii) 80% of profit for 2017 if all the following copulative financial parameters are met: (a) that Cash divided by Short-term Financial Liabilities is equal to or higher than 2.0 times, and (b) Total Liabilities divided by Total Equity is equal to or lower than 1.2 times.

 

(iii) 60% of profit for 2017 if all the following copulative financial parameters are met: (a) that Cash divided by Short-term Financial Liabilities is equal to or higher than 1.5 times, and (b) Total Liabilities divided by Total Equity is equal to or lower than 1.3 times. Should none of these parameters be met, the Company will distribute and pay as dividend declared and in favor of the related shareholders, 50% of profit for 2017.

 

3.31

Earnings per share

 

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

 

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

 

3.32

Trade and other payables

 

Trade and other payables are measured at fair value plus all costs associated with the transaction. Subsequently, these are carried at amortized cost using the effective interest rate method.

 

3.33

Interest-bearing borrowings

 

At initial recognition, interest-bearing borrowings are measured at fair value net of transaction costs incurred. Subsequently, they are measured at amortized cost using the effective interest rate method. Amortized cost is calculated considering any premium or discount from the acquisition and includes costs of transactions which are an integral part of the effective interest rate.

 

These are recorded as non-current when their expiration period exceeds twelve months and as current when the term is lower than such term. Interest expense is calculated in the year in which they are accrued following a financial criterion.

 

 

Note 3

Significant accounting policies (continued)

 

3.34

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 time value of money 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 maintaining 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.

 

 

Note 3

Significant accounting policies (continued)

 

3.35

Obligations related to employee termination benefits and pension commitments

 

Obligations with the Company’s employees are in accordance with that established in the collective bargaining agreements in force, formalized through collective employment agreements and individual employment contracts, except for the United States that is regulated in accordance with employment plans in force up to 2002. (See more details in Note 15.4)

 

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. This, considering criteria in force contained in the revised IAS 19.

 

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 departures 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 4.577% and 4.522% for the periods ended June 30, 2017 and December 31, 2016, 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 4.5% interest rate for 2016 and 5.00% for 2015. The net balance of this obligation is presented under the non-current provisions for employee benefits (refer to Note 15.4).

 

3.36

Compensation plans

 

Compensation plans implemented through benefits in share-based payments settled in cash, which have been provided, 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 16).

 

 

Note 3

Significant accounting policies (continued)

 

3.37

Revenue recognition

 

Revenue includes the fair value of considerations received or receivable for the sale of goods and services during 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.

 

Revenue is recognized when its amount can be stated reliably. It is possible that the future economic rewards will flow to the entity and the specific conditions for each type of activity related revenue are complied with, 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 customers. When the related risks of obsolescence and loss have been transferred to the customer and the customer has accepted 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)

Interest income

 

Interest income is recognized when interest is accrued in consideration of the principal pending payment using the effective interest rate method.

 

(d)

Income from dividends

 

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

 

3.38

Finance income and finance costs

 

Finance income is mainly composed of interest income in 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 recognized in profit or loss using the effective interest rate method.

 

 

Note 3

Significant accounting policies (continued)

 

3.38

Finance income and finance costs, continued

 

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 exist, the average financing rate of the subsidiary that makes the investment is utilized. 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.

 

3.38

Income tax and deferred taxes

 

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 Chilean 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 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 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.

 

 

Note 3

Significant accounting policies (continued)

 

3.38

Income tax and deferred taxes, continued

 

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.

 

3.39

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 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 different from those of other segments that operate in other economic environments.

 

For assets and liabilities, the allocation 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 to the applicable segments, in accordance with the criteria established in the costing process for product inventories.

 

The following operating segments have been identified by the Company:

 

-

Specialty plant nutrients

 

-

Industrial chemicals

 

-

Iodine and derivatives

 

-

Lithium and derivatives

 

-

Potassium

 

-

Other products and services

 

 

Note 3

Significant accounting policies (continued)

 

3.40

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.

 

Note 4

Financial risk management

 

4.1

Financial risk management policy

 

The Company’s financial risk management policy is focused on safeguarding the stability and sustainability of Sociedad Química y Minera de Chile S.A. 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.

 

Potentially, additional known or unknown risks may exist, of which we currently deem not 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. The Company uses derivatives to hedge a significant portion of those risks.

 

 

Note 4

Financial risk management, continued

 

4.2

Risk factors

 

4.2.1

Market risk

 

Market risk refers to the uncertainty associated with fluctuations in market variables affecting the Company’s assets and liabilities, including:

 

a)

Country risk: The economic situation of the countries where the Company operates may affect its financial position. For example, sales conducted in emerging markets expose SQM to risks related to economic conditions and trends in those countries. In addition, inventories may also be affected by the economic scenario in such countries and/or the global economy, among other probable economic impacts.

 

b)

Price risk: The Company’s product prices are affected by the fluctuations in international prices of fertilizers and chemicals, as well as changes in productive capacities or market demand, all of which might affect the Company’s business, financial position and results of operations.

 

c)

Commodity price risk: The Company is exposed to changes in commodity prices and energy which may have an impact on its production costs that may cause unstable results.

 

As of to-date, the SQM Group incurs an annual expenditure of approximately US$118 million associated with fuel, gas, energy and equivalents from which US$78 million related to direct electrical supply consumption. A change of 10% in the prices of energy required for the Company’s operations may involve costs of approximately US$12 million in short-term movements.

 

The markets in which the Company operates are unpredictable, exposed to significant fluctuations in supply and demand, and price high volatility. Additionally, the supply of certain fertilizers or chemicals, including certain products which the Company trades, vary mainly depending on the production of top producers and their related business strategies. Accordingly, the Company cannot forecast with certainty changes in demand, responses from competitors or fluctuations in the final price of its products. These factors can lead to significant impacts on the Company’s product sales volumes, financial position and share price.

 

d)

Quality standards: In the markets in which we operate, customers might impose quality standards on our products and/or governments could enact more stringent standards for the distribution and/or use of our products. Consequently, we might not be able to sell our products if we are not able to meet those new standards. In addition, our production costs might increase to meet such new standards. Not being able to sell our products in one or more markets or to key customers might significantly affect our business, financial position or the results of our operations.

 

 

Note 4

Financial risk management, continued

 

4.2.2

Credit risk

 

A contraction of the global economy and the potentially adverse effects in the financial position of our customers may extend the receivables recovery period for SQM, increasing its exposure to doubtful account risk. While measures have been taken to minimize such risk, the global economic situation may result in losses that might have a material adverse effect on the Company’s business, financial position or results of operations.

 

To mitigate these risks, SQM actively controls debt collection and has established certain safeguards which include loan insurance, letters of credit, and prepayments for a portion of receivables.

 

Financial investments correspond to time deposits with maturities exceeding 90 days and less than 360 days from the investment date, so they are not exposed to significant market risks.

 

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates:

 

Rating Institution

06/30/2017

Financial institution

Financial assets

Moody´s

S&P

Fitch

ThUS$

Banco BBVA Chile

Time deposits

P-1

A-2

-

3,700

Banco Crédito e Inversiones

Time deposits

P-1

-

N1+

14,535

Banco de Chile

Time deposits

P-1

A-1

-

11,515

Banco Santander - Santiago

Time deposits

P-1

A1

N1+

8,916

BBVA Banco Francés

Time deposits

-

-

-

186

Itau-Corpbanca

Time deposits

P-1

A-2

-

71,268

JP Morgan US dollar Liquidity Fund Institutional

Investment fund deposits

P-1

-

-

159,758

Legg Mason - Western Asset Institutional Cash Reserves

Investment fund deposits

-

-

-

158,510

Banco Estado

Time deposits

P-1

A1

F1

6,317

Nedbank

Time deposits

P-3

F3

-

5,835

Total

440,540

 

Rating Institution

06/30/2017

Financial institution

Financial assets

Moody´s

S&P

Fitch

ThUS$

Banco Crédito e Inversiones

90 days to 1 year

P-1

-

N1+

139,068

Banco Itau Chile

90 days to 1 year

-

A-2

-

15,129

Itau-Corpbanca

90 days to 1 year

P-1

A-2

-

39,995

Banco Santander - Santiago

90 days to 1 year

P-1

A1

N1+

75,680

Banco Security

90 days to 1 year

-

A-3

N1+

15,120

Morgan Stanley

90 days to 1 year

A-2

A-2

F1

3,581

Scotiabank Sud Americano

90 days to 1 year

-

-

N1+

27,189

Total

315,762

 

 

Note 4

Financial risk management, continued

 

4.2.3

Currency risk

 

As a result of its influence on price level determination as well as its relationship with cost of sales, and since a significant portion of the Company’s business transactions are performed in that foreign currency, the functional currency of SQM is the United States dollar. However, the global business activities of the Company expose it to the foreign exchange fluctuations of several currencies with respect to the value of the U.S. dollar. Accordingly, SQM has entered into hedge contracts to mitigate the exposure generated by its main mismatches (assets, net of liabilities) in currencies other than the U.S. dollar against the foreign exchange fluctuation. These contracts are periodically updated depending on the mismatch amount to be hedged in such currencies. Occasionally, and subject to the Board of Directors’ approval, in the short-term the Company insures cash flows from certain specific items in currencies other than the U.S. dollar.

 

A significant portion of the Company’s costs, particularly payroll, is denominated in Chilean pesos. Accordingly, an increase or decrease in the exchange rate against the U.S. dollar would affect the Company’s profit for the period. Approximately US$317 million of the Company’s costs are denominated in Chilean pesos. A significant portion of the effect of such obligations on the statement of financial position is hedged by derivative instrument transactions on the balance mismatch in such currency.

 

As of June 30, 2017, the Company recorded derivative instruments classified as currency and interest rate hedges associated with all the bonds payable, denominated in UF, with a fair value of US$26.8 million against SQM. As of June 30, 2016, this amounts to US$53 million in against SQM.

 

As of June 30, 2017, the Chilean peso to U.S. dollar exchange rate was Ch$664.29 per US$1.00 (Ch$ 661.37 per US$ 1.00 as of June 30, 2016).

 

 

Note 4

Financial risk management, continued

 

4.2.4

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.

 

The Company has current and non-current debts valued at LIBOR, plus a spread. The Company is partially exposed to fluctuations in such rate, as SQM currently holds hedging derivative instruments to hedge a portion of its liabilities subject to the LIBOR rate fluctuations.

 

As of June 30, 2017, approximately 2% of the Company’s financial liabilities are measured at LIBOR. Accordingly, any significant increase in this rate may have an impact on the Company’s financial position. A 100 basic point variation in this rate may trigger variations in financial expenses of close to US$ 0.03 million. However, this effect is significantly counterbalanced by the returns of the Company’s investments that are also strongly related to LIBOR.

 

In addition, as of June 30, 2017, the Company's financial liabilities are mainly concentrated in the long-term and approximately 7% have maturities of less than 12 months, decreasing in the process the exposure to changes in interest rates.

 

4.2.5

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.

 

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 30 2016, the Company had unused, available revolving credit facilities with banks, for a total of approximately US$330 million.

 

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

 

 

Note 4

Financial risk management, continued

 

4.2.5

Liquidity risk, continued

 

		Nature of undiscounted cash flows
As of June 30, 2017		Carrying amount				Less than 1 year				1 to 5 years				Over 5 years				Total
(in millions of US$)
Other non-derivative financial liabilities
Bank borrowings			80.47				80.7				-				-				80.7
Unsecured obligations			1,092,76				54,26				534,88				783,70				1,372,84
Subtotal			1,173,23				134,96				534,88				783,70				1,453,54
Other derivative financial liabilities
Hedging liabilities			29.06				(12.65	)			2.47				37.42				27.24
Derivative financial instruments			(0.73	)			(0,73	)			-				-				(0.73	)
Subtotal			28.33				(13,38	)			2,47				37,42				26.51
Total			1,201,56				121,58				537,35				821,12				1,480,05

 

		Nature of undiscounted cash flows
As of December 31, 2016		Carrying amount				Less than 1				1 to 5 years				Over 5 years				Total
(in millions of US$)
Other non-derivative financial liabilities
Bank borrowings			101.27				102.08				-				-				102.08
Unsecured obligations			1,130,22				94,76				479,54				873,91				1,448,21
Subtotal			1,231,49				196,84				479,54				873,91				1,550,29
Other derivative financial liabilities
Hedging liabilities			42.62				17.20				40.33				(23,58	)			33.95
Derivative financial instruments			(2,175	)			(2.18	)			-				-				(2.18	)
Subtotal			40.45				15.02				40.33				(23.58	)			31.77
Total			1,271,94				211,86				519,87				850,33				1,582,06

 

4.3

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 Group.

 

 

Note 5

Changes in accounting estimates and policies (consistent presentation)

 

5.1

Changes in accounting estimates

 

The Company had no changes in the determination of accounting estimates at the closing date of the consolidated financial statements.

 

5.2

Changes in accounting policies

 

As of June 30, 2017, the Company’s consolidated financial statements present no changes in accounting policies or estimates compared to the prior period (for further details refer to Note 2.6).

 

The consolidated statements of financial position as of June 30, 2017 and December 31, 2016 and the statements of comprehensive income, changes in equity and cash flows for the periods ended June 30, 2017 and 2016, have been prepared in accordance with the Standards issued by the Chilean Superintendence of Securities and Insurance (SVS), which consider the International Financial Reporting Standards (IFRS).

 

The accounting principles and criteria were applied consistently.

 

 

Note 6

Background of companies included in consolidation

 

6.1

Parent’s stand-alone assets and liabilities

 

 

		6/30/2017				12/31/2016
		ThUS$				ThUS$
Assets			3,853,009				3,824,137
Liabilities			(1,663,951	)			(1,578,063	)
Equity			2,189,058				2,246,074

 

6.2

Parent entity

 

As provided in the Company’s by-laws, no shareholder can concentrate more than 32% of the Company’s voting right shares and therefore there is no controlling entity.

 

6.3

Joint arrangements of controlling interest

 

Sociedad de Inversiones Pampa Calichera S.A., Potasios de Chile S.A., and Inversiones Global Mining (Chile) Limitada, collectively the Pampa Group, are the owners of a number of shares that are equivalent to 29.97% as of June 30, 2017 of the current total amount of shares issued, subscribed and fully-paid of the Company. In addition, Kowa Company Ltd., Inversiones La Esperanza (Chile) Limitada, Kochi S.A. and La Esperanza Delaware Corporation, collectively the Kowa Group, are the owners of a number of shares equivalent to 2.12% of the total amount of issued, subscribed and fully-paid shares of SQM S.A.

 

The Pampa Group and the Kowa Group have informed SQM S.A., the Chilean SVS and the relevant stock exchanges in Chile and abroad that they are not and have never been related parties between them. In addition, this is regardless of the fact that both Groups on December 21, 2006 have entered into a Joint Action Agreement (JAA) related to those shares. Consequently, the Pampa Group, by itself, does not concentrate more than 32% of the voting right capital of SQM S.A., and the Kowa Group does not concentrate by itself more than 32% of the voting right capital of SQM S.A.

 

Likewise, the Joint Action Agreement has not transformed the Pampa and Kowa Groups into related parties between them. The Joint Action Agreement has only transformed the current controller of SQM S.A., composed of the Pampa Group, and the Kowa Group into related parties of SQM S.A.

 

Detail of effective concentration

 

Tax ID No.		Name		Ownership interest %
96.511.530-7		Sociedad de Inversiones Pampa Calichera S.A.			19.72
76.165.311-5		Potasios de Chile S.A.			6.91
96.863.960-9		Inversiones Global Mining (Chile) Limitada			3.34
Total Pampa Group					29.97
79.798.650-k		Inversiones la Esperanza (Chile)  Ltda.			1.43
59.046.730-8		Kowa Co Ltd.			0.30
96.518.570-4		Kochi S.A.			0.30
59.023.690-k		La Esperanza Delaware Corporation			0.09
Total Kowa Group					2.12

 

 

Note 6

Background of companies included in consolidation (continued)

 

6.4

General information on consolidated subsidiaries

 

As of June 30, 2017 and December 31, 2016, the general information of the companies on which the Company exercises control and significant influence is as follows:

 

										Ownership interest
Subsidiary		Tax ID		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				100.0000
Proinsa Ltda.		78.053.910-0		El Trovador 4285 Las Condes		Chile		Ch$			-				60.5800				60.5800
SQMC Internacional Ltda.		86.630.200-6		El Trovador 4285 Las Condes		Chile		Ch$			-				60.6381				60.6381
SQM Potasio S.A.		96.651.060-9		El Trovador 4285 Las Condes		Chile		US$			99.9999				-				99.9999
Serv. Integrales de Tránsito y Transf. S.A.		79.770.780-5		Arturo Prat 1060, Tocopilla		Chile		US$			0.0003				99.9997				100.0000
Isapre Norte Grande Ltda.		79.906.120-1		Anibal Pinto 3228, Antofagasta		Chile		Ch$			1.0000				99.0000				100.0000
Ajay SQM Chile S.A.		96.592.180-K		Av. Pdte. Eduardo Frei 4900, Santiago		Chile		US$			51.0000				-				51.0000
Almacenes y Depósitos Ltda.		79.876.080-7		El Trovador 4285 Las Condes		Chile		Ch$			1.0000				99.0000				100.0000
SQM Salar S.A.		79.626.800-K		El Trovador 4285 Las Condes		Chile		US$			18.1800				81.8200				100.0000
SQM Industrial S.A.		79.947.100-0		El Trovador 4285 Las Condes		Chile		US$			99.0470				0.9530				100.0000
Exploraciones Mineras S.A.		76.425.380-9		El Trovador 4285 Las Condes		Chile		US$			0.2691				99.7309				100.0000
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.		76.534.490-5		Anibal Pinto 3228, Antofagasta		Chile		Ch$			-				100.0000				100.0000
Soquimich Comercial S.A.		79.768.170-9		El Trovador 4285 Las Condes		Chile		US$			-				60.6383				60.6383
Comercial Agrorama Ltda. (*)		76.064.419-6		El Trovador 4285 Las Condes		Chile		Ch$			-				42.4468				42.4468
Comercial Hydro S.A.		96.801.610-5		El Trovador 4285 Las Condes		Chile		Ch$			-				60.6383				60.6383
Agrorama S.A.		76.145.229-0		El Trovador 4285 Las Condes		Chile		Ch$			-				60.6377				60.6377
Orcoma Estudios SPA		76.359.919-1		Apoquindo 3721 Of.131 Las Condes		Chile		US$			51.0000				-				51.0000
Orcoma SPA		76.360.575-2		Apoquindo 3721 Of.131 Las Condes		Chile		US$			100.0000				-				100.0000
Compañia Minera Arfwedon SPA		76.686.311-9		Los Militares 4290, Las Condes		Chile		US$			100.0000				-				100.0000
SQM North America Corp.		Foreign		2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA		United States		US$			40.0000				60.0000				100.0000
RS Agro Chemical Trading Corporation A.V.V.		Foreign		Caya Ernesto O. Petronia 17, Orangestad		Aruba		US$			98.3333				1.6667				100.0000
Nitratos Naturais do Chile Ltda.		Foreign		Al. Tocantis 75, 6° Andar, Conunto 608 Edif. West Gate, Alphaville Barureri, CEP 06455-020, Sao Paulo		Brazil		US$			-				100.0000				100.0000
Nitrate Corporation of Chile Ltd.		Foreign		1 More London Place London SE1 2AF		United Kingdom		US$			-				100.0000				100.0000
SQM Corporation N.V.		Foreign		Pietermaai 123, P.O. Box 897, Willemstad, Curacao		Netherlands		US$			0.0002				99.9998				100.0000
SQM Peru S.A.		Foreign		Avenida Camino Real N° 348 of. 702, San Isidro, Lima		Peru		US$			0.9800				99.0200				100.0000
SQM Ecuador S.A.		Foreign		Av. José Orrantia y Av. Juan Tanca Marengo Edificio Executive Center Piso 2 Oficina 211		Ecuador		US$			0.0040				99.9960				100.0000
SQM Brasil Ltda.		Foreign		Al. Tocantis 75, 6° Andar, Conunto 608 Edif. West Gate, Alphaville Barureri, CEP 06455-020, Sao Paulo		Brazil		US$			1.0900				98.9100				100.0000

(*) SQM is the Parent of Soquimich Comercial and, in its turn, the latter is the Parent of Comercial Agrorama Ltda.

 

 

Note 6

Background of companies included in consolidation (continued)

 

6.4       General information on consolidated subsidiaries, continued

 

Ownership interest

Subsidiary

Tax ID

Address

Country of incorporation

Functional currency

Direct

Indirect

Total

SQI Corporation N.V.

Foreign

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

Netherlands

US$

0.0159

99.9841

100.0000

SQMC Holding Corporation L.L.P.

Foreign

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

United States

US$

0.1000

99.9000

100.0000

SQM Japan Co. Ltd.

Foreign

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

Japan

US$

0.1597

99.8403

100.0000

SQM Europe N.V.

Foreign

Houtdok-Noordkaai 25a B-2030 Antwerp, Belgium

Belgium

US$

0.5800

99.4200

100.0000

SQM Italia SRL

Foreign

Via A. Meucci, 5 500 15 Grassina Firenze

Italy

US$

-

100.0000

100.0000

SQM Indonesia S.A.

Foreign

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

Indonesia

US$

-

80.0000

80.0000

North American Trading Company

Foreign

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

United States

US$

-

100.0000

100.0000

SQM Virginia LLC

Foreign

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

United States

US$

-

100.0000

100.0000

SQM Comercial de México S.A. de C.V.

Foreign

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

Mexico

US$

0.0010

99.9900

100.0000

SQM Investment Corporation N.V.

Foreign

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

Netherlands

US$

1.0000

99.0000

100.0000

Royal Seed Trading Corporation A.V.V.

Foreign

Caya Ernesto O. Petronia 17, Orangestad

Aruba

US$

1.6700

98.3300

100.0000

SQM Lithium Specialties LLP

Foreign

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

United States

US$

-

100.0000

100.0000

Soquimich SRL Argentina

Foreign

Espejo 65 Oficina 6 – 5500 Mendoza

Argentina

US$

-

100.0000

100.0000

Comercial Caimán Internacional S.A.

Foreign

Edificio Plaza Bancomer  Calle 50

Panama

US$

-

100.0000

100.0000

SQM France S.A.

Foreign

ZAC des Pommiers  27930   FAUVILLE

France

US$

-

100.0000

100.0000

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

Foreign

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

Mexico

US$

-

100.0000

100.0000

SQM Nitratos México S.A. de C.V.

Foreign

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

Mexico

US$

-

100.0000

100.0000

 

 

Note 6

Background of companies included in consolidation (continued)

 

6.4

General information on consolidated subsidiaries, continued

 

Ownership interest

Subsidiary

Tax ID

Address

Country of incorporation

Functional currency

Direct

Indirect

Total

Soquimich European Holding B.V.

Foreign

Loacalellikade 1 Parnassustoren 1076 AZ Amsterdam

Netherlands

US$

-

100.0000

100.0000

SQM Iberian S.A

Foreign

Provenza 251 Principal 1a CP 08008, Barcelona

Spain

US$

-

100.0000

100.0000

SQM Africa Pty Ltd.

Foreign

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

South Africa

US$

-

100.0000

100.0000

SQM Oceania Pty Ltd.

Foreign

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

Australia

US$

-

100.0000

100.0000

SQM Agro India Pvt. Ltd.

Foreign

C 30 Chiragh Enclave New Delhi, 110048

India

US$

-

100.0000

100.0000

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$

-

100.0000

100.0000

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$

-

100.0000

100.0000

 

 

Note 6

Background of companies included in consolidation (continued)

 

6.5

Information attributable to non-controlling interests

 

Subsidiary		% of interests in the ownership held by non- controlling interests.				Profit (loss) attributable to non-controlling interests								Equity, non-controlling interests								Dividends paid to non- controlling interests
							6/30/2017				12/31/2016				6/30/2017				12/31/2016				6/30/2017				12/31/2016
							ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Proinsa Ltda.			0.1	%			-				-				-				-				-				-
SQM Potasio S.A.			0.0000001	%			-				-				-				-				-				-
Ajay SQM Chile S.A.			49	%			391				1,360				8,185				8,303				510				1,163
SQM Indonesia S.A.			20	%			-				-				1				1				-				-
Soquimich Comercial S.A.			39.3616784	%			(780	)			2,378				48,449				50,416				1,189				1,851
Comercial Agrorama Ltda.			30	%			(82	)			(106	)			119				201				-				-
Agrorama S.A.			0.001	%			-				-				-				-				-				-
Orcoma Estudios SPA			49	%			-				2				2,277				2,277				-				-
SQM (Thailand) Limited.			0.004	%			-				-				-				-				-				-
Total							(471	)			3,634				59,031				61,198				1,699				3,014

 

 

Note 6

Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries

 

		06/30/2017
		Assets								Liabilities								Revenue				Profit (loss)				Comprehensive income (loss)
		Current				Non-current				Current				Non-current
Subsidiary		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Nitratos S.A.			719,261				44,181				696,526				4,607				52,236				3,535				3,567
Proinsa Ltda.			55				1				-				-				-				(2	)			(2	)
SQMC Internacional Ltda.			203				-				-				-				-				(2	)			(2	)
SQM Potasio S.A.			227,220				814,858				43,141				23,213				2,047				139,014				139,916
Serv. Integrales de Tránsito y Transf. S.A.			92,188				36,993				121,704				1,041				17,306				2,537				2,524
Isapre Norte Grande Ltda.			509				758				528				137				283				31				33
Ajay SQM Chile S.A.			16,796				1,191				876				407				10,974				798				798
Almacenes y Depósitos Ltda.			280				46				1				-				-				(4	)			32
SQM Salar S.A.			734,239				796,552				543,315				198,139				463,002				174,589				175,208
SQM Industrial S.A.			1,324,952				633,440				967,539				93,553				313,183				8,797				9,869
Exploraciones Mineras S.A.			534				31,684				6,157				-				-				(19	)			(19	)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.			349				590				540				323				178				31				12
Soquimich Comercial S.A.			142,429				14,603				32,874				1,072				33,150				(1,981	)			(1,977	)
Comercial Agrorama Ltda.			8,054				1,669				9,285				39				5,119				(274	)			(276	)
Comercial Hydro S.A.			5,213				49				30				13				15				51				51
Agrorama S.A.			10,215				1,060				12,755				47				4,231				(592	)			(596	)
Orcoma SpA			-				2,360				14				-				-				-				-
Orcoma Estudio SpA			375				4,278				5				-				-				-				-
Compañia Minera Arfwedon SPA			10				-				-				-				-				-				-
SQM North America Corp.			156,973				15,523				184,488				782				148,557				1,910				1,642
RS Agro Chemical Trading Corporation A.V.V.			5,165				-				8				-				-				(15	)			(15	)
Nitratos Naturais do Chile Ltda.			2				140				3,455				-				-				(113	)			(113	)
Nitrate Corporation of Chile Ltd.			5,076				-				-				-				-				-				-
SQM Corporation N.V.			668				107,701				3,575				-				-				(6,621	)			(5,073	)
SQM Perú S.A.			270				1				1,166				-				-				25				25
SQM Ecuador S.A.			16,900				109				14,664				40				13,377				898				898
SQM Brasil Ltda.			194				1				700				2,346				161				(71	)			(71	)
SQI Corporation N.V.			-				21				61				-				-				(7	)			(7	)
SQMC Holding Corporation L.L.P.			23,966				14,166				1,000				-				-				602				602
SQM Japan Co. Ltd.			29,908				293				27,416				576				41,917				(2,298	)			2,861

 

  

Note 6

Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries, continued

 

06/30/2017
		Assets								Liabilities								Revenue				Profit (loss)				Comprehensive income (loss)
		Current				Non-current				Current				Non-current
Subsidiary		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Europe N.V.			405,720				2,725				366,419				-				418,416				(9,167	)			(9,167	)
SQM Italia SRL			1,176				-				15				-				-				-				-
SQM Indonesia S.A.			4				-				1				-				-				-				-
North American Trading Company			158				145				39				-				-				-				-
SQM Virginia LLC			14,805				14,350				14,805				-				-				(6	)			(6	)
SQM Comercial de México S.A. de C.V.			78,587				1,810				52,484				(210	)			95,972				1.571				1,571
SQM Investment Corporation N.V.			62,714				101				21,868				861				-				(6,014	)			(6,014	)
Royal Seed Trading Corporation A.V.V.			30,010				-				49,798				-				-				1,338				1,338
SQM Lithium Specialties LLP			15,757				3				1,264				-				-				(6	)			(6	)
Soquimich SRL Argentina			189				-				173				-				-				(16	)			(16	)
Comercial Caimán Internacional S.A.			261				-				1,122				-				-				2				2
SQM France S.A.			345				6				114				-				-				-				-
Administración y Servicios Santiago S.A. de C.V.			222				78				674				67				1,341				(55	)			(55	)
SQM Nitratos México S.A. de C.V.			41				5				22				8				132				3				3
Soquimich European Holding B.V.			51,121				112,012				68,508				1,150				-				(7,388	)			(5,838	)
SQM Iberian S.A.			72,435				1,335				63,778				4				87,485				38				3.539
SQM Africa Pty Ltd.			80,160				1,334				76,912				-				52,762				(2,124	)			(2,124	)
SQM Oceanía Pty Ltd.			3,041				-				1,080				-				789				143				143
SQM Agro India Pvt. Ltd.			1				-				1				-				-				-				-
SQM Beijing Commercial Co. Ltd.			3,532				23				1,331				-				1,474				72				72
SQM Thailand Limited			11,138				6				8,348				-				2,078				(150	)			(150	)
SQM Colombia SAS			3				-				-				-				-				(8	)			(8	)
Total			4,353,424				2,656,201				3,400,579				328,215				1,766,185				299,052				313,171

 

 

Note 6

Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries, continued

 

12/31/2016
		Assets								Liabilities								Revenue				Profit (loss)				Comprehensive income (loss)
		Current				Non-current				Current				Non-current
Subsidiary		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Nitratos S.A.			656,221				54,180				644.,610				5,990				96,235				12,178				12,164
Proinsa Ltda.			56				1				-				-				-				(4	)			(4	)
SQMC Internacional Ltda.			204				-				-				-				-				(3	)			(3	)
SQM Potasio S.A.			176,976				722,965				37,167				26,933				5,902				253,322				252,435
Serv. Integrales de Tránsito y Transf. S.A.			75,296				36,407				107,567				224				30,315				(18,192	)			(18,362	)
Isapre Norte Grande Ltda.			664				746				714				131				3,053				23				23
Ajay SQM Chile S.A.			17,240				1,069				975				388				28,035				2,776				2,776
Almacenes y Depósitos Ltda.			278				45				1				-				-				(10	)			105
SQM Salar S.A.			785,127				828,606				751,857				195,369				975,326				316,182				316,024
SQM Industrial S.A.			1,212,960				658,277				882,593				97,714				600,075				17,262				21,790
Exploraciones Mineras S.A.			510				31,598				6,027				-				-				(286	)			(284	)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.			337				632				614				291				2,265				85				-
Soquimich Comercial S.A.			153,068				14,663				38,533				1,115				134,501				6,041				6,020
Comercial Agrorama Ltda.			10,759				1,589				11,644				35				15,185				(356	)			(341	)
Comercial Hydro S.A.			5,242				56				115				15				47				350				350
Agrorama S.A.			12,348				842				14,078				37				16,462				(582	)			(584	)
Orcoma SpA			-				2,360				14				-				-				(1	)			(1	)
Orcoma Estudio SpA			671				4,135				159				-				-				4				4
SQM North America Corp.			175,834				15,621				204,201				485				228,229				(27,821	)			(29,082	)
RS Agro Chemical Trading Corporation A.V.V.			5,179				-				8				-				-				(23	)			(23	)
Nitratos Naturais do Chile Ltda.			6				251				3,456				-				-				(175	)			(175	)
Nitrate Corporation of Chile Ltd.			5,076				-				-				-				-				-				-
SQM Corporation N.V.			668				116,267				3,568				-				-				2,479				5,819
SQM Perú S.A.			249				1				1,170				-				8				(165	)			(165	)
SQM Ecuador S.A.			18,870				121				17,538				41				24,161				471				471
SQM Brasil Ltda.			200				1				714				2,266				296				(173	)			(173	)
SQI Corporation N.V.			-				23				55				-				-				(17	)			(17	)
SQMC Holding Corporation L.L.P.			23,135				13,936				1,000				-				-				1.977				1,977
SQM Japan Co. Ltd.			2,868				276				6,708				561				3,013				(7,615	)			(7,615	)

 

 

Note 6

Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries, continued

 

12/31/2016
		Assets								Liabilities								Revenue				Profit (loss)				Comprehensive income (loss)
		Current				Non-current				Current				Non-current
Subsidiary		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Europe N.V.			365,805				2,510				317,147				-				723,192				6,118				8,075
SQM Italia SRL			1,086				-				14				-				-				-				-
SQM Indonesia S.A.			3				-				1				-				-				-				-
North American Trading Company			158				145				39				-				-				-				-
SQM Virginia LLC			14,811				14,357				14,811				-				-				(3	)			(3	)
SQM Comercial de México S.A. de C.V.			73,791				2,200				49,048				-				186,769				(1,757	)			(1,757	)
SQM Investment Corporation N.V.			53,037				117				6,191				863				-				(5,441	)			(5,441	)
Royal Seed Trading Corporation A.V.V.			28,662				-				49,788				-				-				(914	)			(719	)
SQM Lithium Specialties LLP			15,763				3				1,264				-				-				(3	)			(3	)
Soquimich SRL Argentina			209				-				177				-				-				(12	)			(12	)
Comercial Caimán Internacional S.A.			259				-				1,122				-				-				(2	)			(2	)
SQM France S.A.			345				6				114				-				-				-				-
Administración y Servicios Santiago S.A. de C.V.			148				24				504				55				2,687				268				268
SQM Nitratos México S.A. de C.V.			41				1				24				6				266				(2	)			(2	)
Soquimich European Holding B.V.			55,198				115,761				65,005				3,142				-				1,025				5,581
SQM Iberian S.A.			81,119				1,709				73,198				-				146,677				3,501				9,464
SQM Africa Pty Ltd.			89,627				1,399				84,292				-				92,122				(7,627	)			(7,627	)
SQM Oceanía Pty Ltd.			2,387				-				570				-				2,383				(99	)			(99	)
SQM Agro India Pvt. Ltd.			1				-				1				-				-				(3	)			(3	)
SQM Beijing Commercial Co. Ltd.			2,285				30				171				-				5,106				(34	)			(34	)
SQM Thailand Limited			10,228				5				7,288				-				5,579				319				319
SQM Vitas Spain S.A.			2,287				686				1,583				-				13,673				157				253
Total			4,137,292				2,643,621				3,407,438				335,661				3,341,562				553,218				571,387

 

  

Note 6

Background of companies included in consolidation (continued)

 

6.7

Detail of transactions between consolidated companies

 

a)

Transactions conducted in 2017

 

On January 10, 2017, SQM Japan Co. Ltd. Increased its capital by ThUS$ 8,676 where solely Soquimich European Holding B.V. agreed to such increase, resulting in such company increasing its interest from 46.24% to 84.03%, amending the interest by SQM S.A. from 0.54% to 0.16% and that of SQM Potasio S.A. from 53.22% to 15.81%. This generated no effects on the consolidated profit of SQM S.A. maintaining 100% of interest on SQM Japan Co. Ltd. in the Consolidated Balance Sheet of SQM S.A.

 

On January 1, 2017, the subsidiary SQM Iberian S.A. absorbed the subsidiary SQM Vitas Spain.

 

On February 10, 2017, the subsidiary Compañía Minera Arfwedson SAP was incorporated in Chile through the capital contribution made by SQM S.A. by 100% equivalent to ThUS$ 10.

 

b)

Transactions conducted in 2016

 

On May 12, 2016, the subsidiary SQM Iberian S.A. acquired 100% of interest in SQM Vitas Spain for ThUS$ 1,710.

 

On December 5, 2016, Soquimich European Holding B.V. made a contribution in SQM Japan Co. Ltd. of ThUS$ 1,721 for a capital increase. The new interest on SQM Japan Co Ltd. Upon making the contribution is composed of the following:

1.

SQM S.A. with interest of 0.54%,

2.

SQM Potasio S.A. with interest of 53.22%; and

3.

Soquimich European Holding B.V. with interest of 46.24%.

 

On October 25, 2016, in Colombia the subsidiary SQM Colombia SAS was incorporated through a capital contribution from SQM Industrial S.A. by 100% equivalent to ThUS$ 10.

 

 

Note 7

Cash and cash equivalents

 

7.1

Types of cash and cash equivalents

 

As of June 30, 2017 and December 31, 2016, cash and cash equivalents are detailed as follows:

 

a)       Cash		6/30/2017				12/31/20161
		ThUS$				ThUS$
Cash on hand			101				53
Cash in banks			74,916				80,287
Other demand deposits			2,068				1,260
Total cash			77,085				81,600

 

b)       Cash equivalents		6/30/2017				12/31/2016
		ThUS$				ThUS$
Short-term deposits, classified as cash equivalents			122,272				95,673
Short-term investments, classified as cash equivalents			318,268				337,396
Total cash equivalents			440,540				433,069
Total cash and cash equivalents			517,625				514,669

 

7.2

Short-term investments, classified as cash equivalents

 

As of June 30, 2017 and December 31, 2016, short-term investments, classified as cash and cash equivalents relate to mutual funds (investment liquidity funds) for investments in:

 

Institution		6/30/2017 ThUS$				12/31/2016 ThUS$
Legg Mason - Western Asset Institutional Cash Reserves			158,510				178,446
JP Morgan US dollar Liquidity Fund Institutional			159,758				158,950
Total			318,268				337,396

 

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

 

 

Note 7

Cash and cash equivalents (continued)

 

7.3

Information on cash and cash equivalents by currency

 

As of June 30, 2017 and December 31, 2016, information on cash and cash equivalents by currency is detailed as follows:

 

Original currency		6/30/2017				12/31/2016
		ThUS$				ThUS$
Chilean Peso (*)			37,981				6,044
US Dollar			456,388				490,978
Euro			11,830				11,386
Mexican Peso			-				309
South African Rand			3,368				3,250
Japanese Yen			5,362				2,149
Peruvian Sol			8				3
Brazilian Real			1,369				59
Chinese Yuan			1,073				400
Indian Rupee			9				8
Thai Baht			4				8
Argentine Peso			37				4
Pound Sterling			196				71
Total			517,625				514,669

 

(*)The Company maintains financial derivative policies which allow to minimize the risk of the variation in Chilean pesos exchange rate.

 

7.4

Amount restricted (unavailable) cash balances

 

Cash on hand and in current bank accounts are available resources, and their carrying value is equal to their fair value.

 

As of June 30, 2017 and December 31, 2016, restricted cash balances are presented in Note 10.9.

 

 

Note 7

Cash and cash equivalents (continued)

 

7.5

Short-term deposits, classified as cash equivalents

 

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

 

2017 Receiver of the deposit		Type of deposit		Original Currency		Interest rate				Placement date		Expiration date		Principal ThUS$				Interest accrued to-date ThUS$				06/30/2016 ThUS$
Itau Corpbanca		Fixed term		Ch$			0.24			6/1/2017		7/3/2017			18,250				42				18,292
Itau Corpbanca		Fixed term		Ch$			0.23			6/13/2017		7/3/2017			16,941				22				16,963
Itau Corpbanca		Fixed term		US$			1.40			6/7/2017		7/3/2017			20,078				18				20,096
Itau Corpbanca		Fixed term		US$			1.30			6/8/2017		7/3/2017			10,000				8				10,008
Banco Crédito e Inversiones		Fixed term		US$			1.45			6/30/2017		7/18/2017			4,000				-				4,000
Banco Estado		Fixed term		US$			1.11			4/3/2017		7/3/2017			6,300				17				6,317
Banco Crédito e Inversiones		Fixed term		US$			1.35			4/3/2017		7/3/2017			10,500				35				10,535
Banco Santander - Santiago		Fixed term		US$			1.52			4/10/2017		7/10/2017			2,000				7				2,007
Corpbanca		Fixed term		US$			1.34			4/20/2017		7/20/2017			1,700				4				1,704
Banco de Chile		Fixed term		US$			1.15			5/2/2017		7/31/2017			7,000				13				7,013
Corpbanca		Fixed term		US$			1.37			5/25/2017		8/28/2017			3,100				4				3,104
Banco Santander - Santiago		Fixed term		US$			1.48			5/25/2017		8/28/2017			4,500				7				4,507
Corpbanca		Fixed term		US$			1.47			6/5/2017		8/10/2017			1,100				1				1,101
Banco Santander - Santiago		Fixed term		US$			1.45			6/5/2017		8/10/2017			2,400				2				2,402
Banco de Chile		Fixed term		US$			1.45			6/21/2017		8/21/2017			2,000				1				2,001
Banco de Chile		Fixed term		US$			1.45			6/21/2017		8/21/2017			2,500				1				2,501
Banco BBVA Chile		Fixed term		US$			1.50			6/30/2017		8/30/2017			3,700				-				3,700
BBVA Banco Francés		Fixed term		US$			0.18			6/30/2017		7/7/2017			186				-				186
Nedbank		On demand		US$			-			6/1/2017		7/4/2017			5,835				-				5,835
Total															122,090				182				122,272

 

 

Note 7

Cash and cash equivalents (continued)

 

7.5

Short-term deposits, classified as cash equivalents, continued

 

2016 Receiver of the deposit		Type of deposit		Original Currency		Interest rate				Placement date				Expiration date		Principal ThUS$				Interest accrued to-date ThUS$				12/31/2016 ThUS$
Scotiabank Sud Americano		Fixed term		US$			1.28				12/29/2016			1/31/2017			9,900				1				9,901
Banco de Chile		Fixed term		US$			0.90				12/30/2016			1/9/2017			15,000				1				15,001
Banco Crédito e Inversiones		Fixed term		US$			0.90				12/30/2016			1/10/2017			10,000				-				10,000
Banco Crédito e Inversiones		Fixed term		US$			0.93				10/11/2016			1/30/2017			13,000				27				13,027
Banco BBVA Chile		Fixed term		US$			0.75				10/11/2016			1/30/2017			2,000				3				2,003
Banco Santander - Santiago		Fixed term		US$			1.21				12/1/2016			1/3/2017			3,500				4				3,504
Banco de Chile		Fixed term		US$			0.76				12/7/2016			1/6/2017			3,900				2				3,902
Banco Santander - Santiago		Fixed term		US$			0.90				12/12/2016			1/12/2017			5,000				2				5,002
Banco de Chile		Fixed term		US$			1.30				12/12/2016			1/12/2017			1,700				1				1,701
Banco Crédito e Inversiones		Fixed term		US$			0.88				12/14/2016			1/17/2017			2,000				1				2,001
Corpbanca		Fixed term		US$			1.28				12/20/2016			2/21/2017			800				-				800
Scotiabank Sud Americano		Fixed term		US$			1.28				12/20/2016			2/21/2017			5,000				2				5,002
Banco Santander - Santiago		Fixed term		US$			0.75				12/22/2016			1/23/2017			3,500				1				3,501
Banco Santander - Santiago		Fixed term		US$			1.25				12/28/2016			2/9/2017			3,900				1				3,901
Banco Security		Fixed term		US$			1.31				12/28/2016			2/9/2017			3,300				-				3,300
Banco Security		Fixed term		US$			1.00				12/29/2016			1/30/2017			3,800				-				3,800
Banco Santander - Santiago		Fixed term		Ch$			0.31				12/16/2016			1/2/2017			1,942				3				1,945
Corpbanca		Fixed term		Ch$			0.32				12/29/2016			1/9/2017			597				1				598
Scotiabank Sud Americano		Fixed term		Ch$			0.33				12/30/2016			1/9/2017			2,091				-				2,091
Citibank New York		Overnight		US$			0.01				12/31/2016			1/1/2017			1,742				-				1,742
BBVA Banco Francés		Fixed term		US$			0.21				24/102016			1/31/2017			199				-				199
Nedbank		On demand		US$			-				12/1/2016			1/31/2017			2,752				-				2,752
Total																	95,623				50				95,673

 

 

Note 8

Inventories

 

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

 

Type of inventory		6/30/2017 ThUS$				12/31/2016 ThUS$
Raw material reserves			9,445				7,536
Supplies for production reserves			23,246				23,610
Products-in-progress reserves			475,032				482,261
Finished product reserves			444,134				479,665
Total			951,857				993,072

 

As of June 30, 2017, the Company had inventories of caliche ore available for processing for ThUS$49,396 (ThUS$ 43,400 as of December 31, 2016).

 

As of June 30, 2017, the sum registered as cost of sale related to inventory in the statement of income amounts to ThUS$582,231 and to ThUS$528,331 as of June 30, 2016.

 

Inventory reserves recognized as of June 30, 2017 amount to ThUS$86,288, and ThUS$81,295 as of December 31, 2016. Inventory reserves have been made based on a technical study that covers the different variables affecting products in stock (density and humidity, among others). Additionally, reserves are recognized if goods are sold cheaper than the related cost, and for differences that arise from inventory counts.

 

The breakdown of inventory reserves is detailed as follows:

 

Type of inventory		6/30/2017 ThUS$				12/31/2016 ThUS$
Raw material reserves			93				1,013
Products-in-progress reserves			72,309				64,857
Finished product reserves			13,886				15,425
Total			88,288				81.295

 

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

 

 

Note 8

Inventories, continued

 

As of June 30, 2017 and December 31, 2016, movements in provisions are detailed as follows:

 

Reconciliation		6/30/2017				12/31/2016
		ThUS$				ThUS $
Opening balance			81.295				80.369
Changes
Additional provisions			8,506				9,831
Increase (decrease) in existing provisions			(3,513	)			(8,905	)
Total changes			(4,993	)			926
Total			86,288				81,295

 

Note 9

Related party disclosures

 

9.1

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.

 

9.2

Relationships between the parent and the entity

 

According to the Company’s by-laws, no shareholder can own more than 32% of the Company’s voting right shares.

 

Sociedad de Inversiones Pampa Calichera S.A., Potasios de Chile S.A., and Inversiones Global Mining (Chile) Ltda., collectively the Pampa Group, are the owners of a number of shares that are equivalent to 29.97% as of June 30, 2017 of the current total amount of shares issued, subscribed and fully-paid of the Company. In addition, Kowa Company Ltd., Inversiones La Esperanza (Chile) Limitada, Kochi S.A. and La Esperanza Delaware Corporation, collectively the Kowa Group, are the owners of a number of shares equivalent to 2.12% of the total amount of shares of SQM S.A. issued, subscribed and fully-paid.

 

The Pampa Group and the Kowa Group have informed SQM S.A., the Chilean SVS and the relevant stock exchanges in Chile and abroad that they are not and have never been related parties between them. In addition, this is regardless of the fact that both Groups on December 21, 2006 have entered into a Joint Action Agreement (JAA) related to those shares. Consequently, the Pampa Group, by itself, does not concentrate more than 32% of the voting right capital of SQM S.A., and the Kowa Group does not concentrate by itself more than 32% of the voting right capital of SQM S.A.

 

Likewise, the Joint Action Agreement has not transformed the Pampa and Kowa Groups into related parties between them. The Joint Action Agreement has only transformed the current controller of SQM S.A., composed of the Pampa Group, and the Kowa Group into related parties of SQM S.A.

 

 

Note 9

Related party disclosures (continued)

 

9.2

Relationships between the parent and the entity, continued

 

Detail of effective concentration

 

Tax ID No.		Name		Ownership interest %
96.511.530-7		Sociedad de Inversiones Pampa Calichera S.A.			19.72
76.165.311-5		Potasios de Chile S.A.			6.91
96.863.960-9		Inversiones Global Mining (Chile) Ltda.			3.34
Total Pampa Group					29.97
79.798.650-k		Inversiones la Esperanza (Chile) Ltda.			1.43
59.046.730-8		Kowa Co Ltd.			0.30
96.518.570-4		Kochi S.A.			0.30
59.023.690-k		La Esperanza Delaware Corporation			0.09
Total Kowa Group					2.12

 

 

Note 9

Related party disclosures (continued)

 

9.3

Detailed identification of the link between the Parent and subsidiary

 

As of June 30, 2017 and December 31, 2016, the detail of entities that are related parties of the SQM S.A. Group 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		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.		The Netherlands		US$		Subsidiary
Foreign		SQM Corporation N.V.		The Netherlands		US$		Subsidiary
Foreign		SQI Corporation N.V.		The Netherlands		US$		Subsidiary
Foreign		SQM Comercial De México S.A. de C.V.		Mexico		US$		Subsidiary
Foreign		North American Trading Company		United States		US$		Subsidiary
Foreign		Administración y Servicios Santiago S.A. de C.V.		Mexico		US$		Subsidiary
Foreign		SQM Peru S.A.		Peru		US$		Subsidiary
Foreign		SQM Ecuador S.A.		Ecuador		US$		Subsidiary
Foreign		SQM Nitratos Mexico S.A. de C.V.		Mexico		US$		Subsidiary
Foreign		SQMC Holding Corporation L.L.P.		United States		US$		Subsidiary
Foreign		SQM Investment Corporation N.V.		The Netherlands		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		US$		Subsidiary
Foreign		SQM Italia SRL		Italy		US$		Subsidiary
Foreign		Comercial Caiman Internacional S.A.		Panamá		US$		Subsidiary
Foreign		SQM Africa Pty. Ltd.		South Africa		US$		Subsidiary
Foreign		SQM Lithium Specialties LLC		United States		US$		Subsidiary
Foreign		SQM Iberian S.A.		Spain		US$		Subsidiary
Foreign		SQM Agro India Pvt. Ltd.		India		US$		Subsidiary
Foreign		SQM Beijing Commercial Co. Ltd.		China		US$		Subsidiary
Foreign		SQM Thailand Limited		Thailand		US$		Subsidiary
Foreign		SQM Colombia SAS		Colombia		US$		Subsidiary
96.801.610-5		Comercial Hydro  S.A.		Chile		Chilean peso		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

 

 

Note 9

Related party disclosures (continued)

 

9.3

Detailed identification of the link between the Parent and subsidiary, continued

 

As of June 30, 2017 and December 31, 2016, the detail of entities that are a related parties of the SQM S.A: Group is as follows:

 

Tax ID No.		Name		Country of origin		Functional currency		Nature
86.630.200-6		SQMC Internacional Ltda.		Chile		Chilean peso		Subsidiary
79.947.100-0		SQM Industrial S.A.		Chile		US$		Subsidiary
79.906.120-1		Isapre Norte Grande Ltda.		Chile		Chilean peso		Subsidiary
79.876.080-7		Almacenes y Depósitos Ltda.		Chile		Chilean peso		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.		Chile		Chilean peso		Subsidiary
76.534.490-5		Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.		Chile		Chilean peso		Subsidiary
76.425.380-9		Exploraciones Mineras S.A.		Chile		US$		Subsidiary
76.064.419-6		Comercial Agrorama Ltda.		Chile		Chilean peso		Subsidiary
76.145.229-0		Agrorama S.A.		Chile		Chilean 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		Compañía Minera Arfwedson Spa		Chile		US$		Subsidiary
Foreign		Abu Dhabi Fertilizer Industries WWL		Arab Emirates		Arab Emirates dirham		Associate
Foreign		Doktor Tarsa Tarim Sanayi AS		Turkey		Turkish lira		Associate
Foreign		Ajay North America		United States		US$		Associate
Foreign		Ajay Europe SARL		France		Euro		Associate
Foreign		SQM Eastmed Turkey		Turkey		Euro		Associate
Foreign		Charlee SQM Thailand Co. Ltd.		Thailand		Thai baht		Associate
Foreign		Kore Potash Ltd.		Australia		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		Arab Emirates dirham		Joint venture
Foreign		SQM Star Qingdao Corp Nutrition Co., Ltd.		China		US$		Joint venture
Foreign		SQM Vitas Holland B.V.		Dutch Antilles		Euro		Joint venture
Foreign		Kowa Company Ltd.		Japan		US$		Joint control
Foreign		Minera Exar S.A.		Argentina		US$		Joint control
96.511.530-7		Sociedad de Inversiones Pampa Calichera		Chile		US$		Joint control
96.529.340-k		Norte Grande S.A.		Chile		Chilean peso		Other related parties
79.049.778-9		Callegari Agricola S.A.		Chile		Chilean peso		Other related parties
Foreign		Coromandel Internacional		India		Indian rupee		Other related parties
Foreign		Vitas Roullier SAS		France		Euro		Other related parties
Foreign		SQM Vitas Brazil Agroindustria		Brazil		US$		Joint control or significant influence
Foreign		SQM Vitas Peru S.A.C.		Peru		US$		Joint control or significant influence
Foreign		SQM Vitas Plantacote B.V		Dutch Antilles		Euro		Joint control or significant influence
Foreign		Terra Tarsa B.V..		Holland		Euro		Joint control or significant influence
Foreign		Plantacote N.V		Belgium		Euro		Joint control or significant influence
Foreign		Doktolab Tarim Arastima San. Tic As		Turkey		Turkish Lira		Joint control or significant influence
Foreign		Terra Tarsa Ukraine LLC		Ukraine		Ukrainian Grivna		Joint control or significant influence
Foreign		Terra Tarsa Don LLC		Russian Federation		Russian ruble		Joint control or significant influence

 

 

Note 9

Related party disclosures (continued)

 

9.4

Detail of related parties and related party transactions

 

Transactions between the Parent and its subsidiaries 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 June 30, 2017 and December 31, 2016, there are no allowances for doubtful accounts related to balances pending of transactions with related parties as there is no impairment in them.

 

As of June 30, 2017 and December 31, 2016, the detail of significant transactions with related parties is as follows:

 

Tax ID No.

Company

Nature

Country of origin

Transaction

6/30/2017

12/31/2016

ThUS$

ThUS$

Foreign

Doktor Tarsa Tarim Sanayi As

Associate

Turkey

Sale of products

5,943

11,619

Foreign

Ajay Europe S,A.R.L.

Associate

France

Sale of products

7,585

17,977

Foreign

Ajay Europe S.A.R.L.

Associate

France

Dividends

920

1,338

Foreign

Ajay North America LLC.

Associate

United States

Sale of products

7,549

12,865

Foreign

Ajay North America LLC.

Associate

United States

Dividends

561

2,605

Foreign

Abu Dhabi Fertilizer Industries WWL

Associate

United Arab Emirates

Sale of products

2,070

8,312

Foreign

Charlee SQM Thailand Co. Ltd.

Associate

Thailand

Sale of products

2,287

3,798

77.557.430-5

Sales de Magnesio Ltda.

Associate

Chile

Sale of products

45

-

Foreign

Kowa Company Ltd.

Other related parties

Japan

Sale of products

43,978

91,678

Foreign

Kowa Company Ltd.

Other related parties

Japan

Services received

-

-

Foreign

SQM Vitas Brasil Agroindustria

Joint control or significant influence

Brazil

Sale of products

16,362

17,686

Foreign

SQM Vitas Peru S.A.C.

Joint control or significant influence

Peru

Sale of products

13,820

22,090

Foreign

SQM Vitas Fzco.

Joint venture

United Arab Emirates

Sale of products

-

965

Foreign

Sichuan SQM Migao Chemical Fertilizers Co Ltda.

Joint venture

China

Sale of products

-

9,950

Foreign

Sichuan SQM Migao Chemical Fertilizers Co Ltda.

Joint venture

China

Sale of services

129

257

Foreign

Coromandel SQM India

Joint venture

India

Sale of products

3,752

4,630

Foreign

SQM Vitas Spain

Joint venture

Spain

Sale of products

-

5,528

Foreign

SQM Vitas Plantacote B.V.

Joint venture

Netherlands

Sale of products

-

49

Foreign

SQM Star Qingdao Corp Nutrition Co., Ltd.

Joint venture

China

Sale of products

109

166

Foreign

SQM Vitas Holland B.V.

Joint venture

Holland

Sale of products

-

634

79.049.778-9

Callegari Agrícola S.A.

Other related parties

Chile

Sale of products

196

44

Foreign

Minera Exar S.A.

Joint venture

Argentina

Loans

5,000

-

Foreign

Terra Tarsa Ukraine LLC

Associate

Turkey

Sale of services

683

-

Foreign

Terra Tarsa Don LLC

Joint venture

Russian Federation

Sale of products

381

-

 

 

Note 9

Related party disclosures (continued)

 

9.5

Trade receivables due from related parties, current:

 

Tax ID N°

Company

Nature

Country of origin

Currency

6/30/2017

12/31/2016

ThUS$

ThUS$

Foreign

Charlee SQM Thailand Co. Ltd.

Associate

Thailand

US$

2,152

1,315

Foreign

Ajay Europe S.A.R.L.

Associate

France

Euro

4,310

3,801

Foreign

Ajay North America LLC.

Associate

United States

US$

2,324

3,095

Foreign

Abu Dhabi Fertilizer Industries WWL

Associate

United Arab Emirates

Arab Emirates dirham

864

764

Foreign

Kowa Company Ltd.

Jointly controlled entity

Japan

US$

2,417

34,377

96.511.530-7

Soc.de Inversiones Pampa Calichera

Jointly controlled entity

Chile

US$

6

6

Foreign

SQM Vitas Brasil Agroindustria

Joint venture

Brazil

US$

15,385

9,580

Foreign

SQM Vitas Peru S.A.C.

Joint venture

Peru

US$

13,999

13,318

Foreign

Coromandel SQM India

Joint venture

India

Indian rupee

2,694

1,177

Foreign

Sichuan SQM Migao Chemical Fertilizers Co Ltda.

Joint venture

China

US$

4,928

14,547

79.049.778-9

Callegari Agrícola S.A.

Other related parties

Chile

Ch$

231

41

Foreign

SQM Vitas Fzco.

Joint venture

United Arab Emirates

Arab Emirates dirham

-

97

Foreign

SQM Vitas Plantacote B.V.

Joint venture

Holland

Euro

4

91

Foreign

SQM Star Qingdao Corp Nutrition Co., Ltd.

Joint venture

China

US$

72

48

Foreign

Plantacote N.V.

Associate

Belgium

Euro

412

2

Foreign

Terra Tarsa Ukraine LLC

Associate

Turkey

Euro

405

-

Foreign

Terra Tarsa Don LLC

Associate

Russian Federation

Russian ruble

381

Foreign

Minera Exar S.A.

Joint venture

Argentina

US$

5,000

-

Total

55,574

82,259

 

9.6

Trade payables due to related parties, current:

 

Tax ID No.

Company.

Nature

Country of origin

Currency

6/30/2017

12/31/2016

ThUS$

ThUS$

Foreign

Doktor Tarsa Tarim Sanayi AS

Associate

Turkey

YTL

229

7

Foreign

Sichuan SQM Migao Chemical Fertilizers Co Ltda.

Joint venture

China

US$

1,125

-

Foreign

SQM Vitas Fzco

Joint venture

United Arab Emirates

UAE dirham

69

-

Total as of to-date

1,251

7

 

 

Note 9

Related party disclosures (continued)

 

9.7

Board of Directors and Senior Management

 

1)

Board of directors

 

SQM S.A. is managed by a Board of Directors which is composed of 8 regular directors, 2 of which are independent directors, who are elected for a three-year period. The present Board of Directors was elected by the shareholders at the Ordinary Shareholders' Meeting of April 28, 2017.

 

As of June 30, 2017, the Company has the following Committees:

 

-

Directors’ Committee: composed of Juan Gerardo Jofré Miranda, Fernando Massú Taré and Joanne L. Boyes. Such Committee performs the duties contained in Article 50 bis of Law No. 18.046, the Chilean “Securities Act”.

-

Health, Safety and Environmental Matters Committee: composed of Arnfinn F. Prugger, Gonzalo Guerrero Y. and Hernán Büchi Buc.

-

Corporate Governance Committee: composed of Robert A. Kirkpatrick, Hernán Büchi Buc and Juan Gerardo Jofré Miranda.

 

During the periods covered by these financial statements, there are no pending balances receivable and payable 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.

 

 

Note 9

Related party disclosures (continued)

 

9.7

Board of Directors and Senior Management, continued

 

2)

Directors’ Compensation

 

Directors’ compensation is detailed as follows:

 

a)

The payment of a fixed, gross and monthly amount of four hundred UF in favor of the Chairman of the Board of Directors of SQM S.A. and of two hundred UF in favor of the remaining seven Directors of SQM S.A. and regardless of the number of Board of Directors’ Meetings held or not held during the related month.

b)

A payment in domestic currency in favor of the Chairman of the Company’s Board of Directors consisting of a variable and gross amount equivalent to 0.15% of profit for the period effectively earned by the Company during fiscal year 2017.

c)

A payment in domestic currency in favor of each Company’s directors excluding the Chairman of the Board, consisting of a variable and gross amount equivalent to 0.06% of profit for the period effectively earned by the Company during fiscal years 2017.

d)

The fixed and variable amounts indicated above will not be subject to any challenge between them and those expressed in percentages will be paid after the related General Shareholders’ Meeting of SQM S.A. approves the Balance Sheet, Financial Statements, Annual Report, the Account Inspectors’ Report and Independent Auditor’s Report of SQM S.A. for the commercial year ended December 31, 2017.

e)

The amounts expressed in UF will be paid in accordance with the value determined by the Chilean Superintendence of Banks and Financial Institutions (SBIF), the Central Bank of Chile (Banco Central de Chile) or another relevant institution replacing them during the last day of the calendar year applicable. The amounts reflected in or referred to in U.S. dollars will be converted to Chilean pesos and paid in Chilean pesos in accordance with the exchange rate with which the dividend declared for the commercial year 2017 is paid.

f)

Therefore, the remunerations and profit sharing paid to members of the Board of Directors and Audit Committee during 2017 amount to ThUS$2,187 (ThUS$ 2,292 as of December 31, 2016).

 

3)

Audit Committee

 

The remuneration of Directors Committee is composed of:

 

a)

The payment of a fixed, gross and monthly amount of UF 75 in favor of each of the 3 directors that are members of the Directors’ Committee regardless of the number of meetings of the Directors’ Committee that are held or not during the related month.

b)

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 commercial year 2017.

 

 

Note 9

Related party disclosures (continued)

 

9.7

Board of Directors and Senior Management, continued

 

c)

The fixed and variable amounts indicated above will not be subject to any challenge between them and those expressed in percentages will be paid after the related General Shareholders’ Meeting of SQM S.A. approves the Balance Sheet, Financial Statements, Annual Report, the Account Inspectors’ Report and Independent Auditor’s Report of SQM S.A. for the commercial year ended December 31, 2017.

d)

The amounts expressed in UF will be paid in accordance with the value determined by the Chilean Superintendence of Banks and Financial Institutions (SBIF), the Central Bank of Chile (Banco Central de Chile) or another relevant institution replacing them during the last day of the calendar year applicable. The amounts reflected in or referred to in U.S. dollars will be converted to Chilean pesos and paid in Chilean pesos in accordance with the exchange rate with which the dividend declared for the commercial year 2017 is paid.

 

4)

Health, Safety and Environmental Matters Committee:

 

Remuneration for such Committee is composed of the payment of a fixed, gross and monthly amount of fifty UF for each of the 3 Directors comprising such Committees regardless of the number of Meetings held by the Committee.

 

5)

Corporate Governance Committee

 

Remuneration for such Committee is composed of the payment of a fixed, gross and monthly amount of fifty UF for each of the 3 Directors comprising such Committees regardless of the number of Meetings held by the Committee.

 

6)

No guarantees have been constituted in favor of the directors.

 

7)

Senior management compensation:

 

a)

As of June 30, 2017, the global compensation paid to the 112 main executives amounts to ThUS$16,741 and the global compensation paid to the 105 main executives as of December 31, 2016 amounted to ThUS$20,439. This includes monthly fixed salary and variable performance bonuses.

b)

SQM S.A. provides its executives with an annual bonus plan and a long-term bonus plan which, if applicable, are paid during the first quarter of 2021 of the date of resignation by the executive considering the achievement of the objectives and individual contribution to the Company's operating profits.

c)

SQM S.A. has an annual bonus plan for target compliance and individual contribution level to the Company's profit. Such incentives are structured in a minimum and maximum amount of gross remuneration which are paid once a year.

 

 

 

Note 9

Related party disclosures (continued)

 

9.7

Board of Directors and Senior Management, continued

 

8)

Additionally, the Company has retention bonuses for the Company’s executives. The amount of these bonuses is linked to the price of the Company’s share and is payable in cash during the first quarter of 2021 (see Note 16).

 

9)

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

 

10)

The Company’s Managers and Directors do not receive or have not received any benefit during the period ended June 30, 2017 and the year ended December 31, 2016 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.

 

9.8

Key management personnel compensation

 

As of June 30, 2017, the number of executives comprising key management personnel are 109 executives (105 executives as of December 31, 2016).

 

		6/30/2017				12/31/2016
		ThUS$				ThUS$
Key management personnel compensation			16,741				20,439

 

 

Note 10

Financial instruments

 

Financial instruments in accordance with IAS 39 are detailed as follows:

 

10.1

Types of other financial assets

 

Description of other financial assets		6/30/2017 ThUS$				12/31/2016 ThUS$
Other current financial assets (1)			315,762				284,160
Derivatives (2)			10,075				4,095
Hedging assets			-				934
Total other current financial assets			325,837				289,189
Other non-current financial assets (3)			30,683				34,099
Total other non-current financial assets			30,683				34,099

 

(1)

Relates to term deposits with maturities exceeding 90 days and less than 360 days from the investment date.

 

(2)

Relate to forwards and options that were not classified as hedging instruments (see detail in Note 10.3).

 

(3)

The detail of other financial assets, non-current is as follows:

 

		6/30/2017 ThUS$				12/31/2016 ThUS$
Non-current investments not accounted for using the equity method of accounting, classified as available for sale			7,184				6,899
Share purchase option (*)			20,000				20,000
Hedging assets			3,454				7,156
Other financial assets, non-current			45				44
Total other financial assets, non-current			30,683				34,099

 

Detail of other current financial assets

 

Institution		6/30/2017 ThUS$				12/31/2016 ThUS$
Banco Santander			75,680				54,364
Banco de Crédito e Inversiones			139,068				40,627
Corpbanca			39,995				19,247
Banco Itaú			15,129				44,722
Banco Security			15,120				15,007
Morgan Stanley			3,581				3,150
Scotiabank Sud Americano			27,189				107,043
Total			315,762				284,160

 

 

Note 10

Financial instruments, (continued)

 

10.2

Trade and other receivables

 

		6/30/2017												12/31/2016
		Current				Non-current				Total				Current				Non-current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$$				ThUS$
Trade receivables			361,596				-				361,596				344,839				-				344,839
Prepayments			9,237				-				9,237				6,621				-				6,621
Other receivables			10,608				2,560				13,168				17,301				1,840				19,141
Total trade and other receivables			381,441				2,560				384,001				368,761				1,840				370,601

 

		6/30/2017												12/31/2016
		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			372,531				(10,935	)			361,596				361,656				(16,817	)			344,839
Trade receivables, current			372,531				(10,935	)			361,596				361,656				(16,817	)			344,839
Prepayments, current			11,237				(2,000	)			9,237				9,421				(2,800	)			6,621
Other receivables, current			12,661				(2,053	)			10,608				19,300				(1,999	)			17,301
Current trade and other receivables			23,898				(4,053	)			19,8459				28,721				(4,799	)			23,922
Other receivables, non-current			2,560				-				2,5603				1,840				-				1,840
Non-current receivables			2,560				-				2,5603				1,840				-				1,840
Total trade and other receivables			398,989				(14,988	)			384,001				392,217				(21,616	)			370,601

 

 

Note 10

Financial instruments, (continued)

 

10.2

Trade and other receivables, continued

 

Portfolio stratification, continued

 

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

 

Unsecuritized portfolio

 

As of June 30, 2017 and December 31, 2016, the detail of the unsecuritized portfolio is as follows:

 

6/30/2017
		Not overdue				1 - 30 days				31 - 60 days				61 - 90 days				91 - 120 days				121 - 150 days				151 - 180 days				181 - 210 days				211 - 250 days				Over 250 days				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Number of customers, portfolio under no renegotiated terms			2,981				1.445				1,033				854				666				310				555				272				270				2.120				10,506
Portfolio under no renegotiated terms			275,144				11,475				5,125				2,251				9,016				1,575				9,434				246				1,228				52,496				367,990
Number of customers under renegotiated terms portfolio			25				215				85				70				41				42				23				19				16				315				851
Portfolio under renegotiated terms, gross			597				589				251				391				176				146				62				22				26				2,281				4,541
Total gross portfolio			275,741				12,064				5,376				2,642				9,192				1,721				9,496				268				1,254				54,777				372,531

 

12/31/2016
		Not overdue				1 - 30 days				31 - 60 days				61 - 90 days				91 - 120 days				121 - 150 days				151 - 180 days				181 - 210 days				211 - 250 days				Over 250 days				Total
			ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Number of customers, portfolio under no renegotiated terms			1,943				2,502				1,666				1,324				1,473				372				290				227				221				1,903				11,921
Portfolio under no renegotiated terms			298,872				18,511				5,097				2,951				3,441				1,010				643				522				309				25,849				357,205
Number of customers under renegotiated terms portfolio			22				333				155				30				17				9				3				19				5				218				811
Portfolio under renegotiated terms, gross			947				602				83				62				118				5				8				33				33				2,560				4,451
Total gross portfolio			299,819				19,113				5,180				3,013				3,559				1,015				651				555				342				28,409				361,656

 

 

Note 10

Financial instruments, (continued)

 

10.2

Trade and other receivables, continued

 

As of June 30, 2017 and December 31, 2016, movements in provisions are as follows:

 

Reconciliation		06/30/2017				12/31/2016
		ThUS$				ThUS$
Opening balance			21,616				19,731
Additional provisions			7,764				10,632
Increase (decrease in provisions)			(14,392	)			(8,747	)
Closing balance			14,988				21,616

 

Credit risk concentration

 

Credit risk concentration with respect to trade receivables is reduced due to the great number of entities included in the Company’s client database and their distribution throughout the world.

 

10.3

Hedging assets and liabilities

 

The balance represents derivative instruments measured at fair value which have been classified as hedges from exchange and interest rate risks related to the total obligations associated with bonds of the Company in Chilean pesos and UF (and the exchange risk in Chilean pesos of the Company’s investment plans). As of June 30, 2017, the notional amount of cash flows in Cross Currency Swap contracts agreed upon in US dollars amounted to ThUS$334,733 and as of December 31, 2016 such contracts amounted to ThUS$320,155.

 

Hedging assets with underlying debt

Derivative instruments (Fwds)

Effect on profit or loss for the period Derivative instruments

Hedging reserve in gross equity

Deferred tax hedging reserve in equity

Hedging reserve in equity

ThUS$

ThUS$

ThUS$

ThUS$

ThUS$

June 30, 2017

3,070

3,654

-

-

1,756

 

Hedging liabilities with underlying debt

Derivative instruments (CCS)

Effect on profit or loss for the period Derivative instruments

Hedging reserve in gross equity

Deferred tax hedging reserve in equity

Hedging reserve in equity

ThUS$

ThUS$

ThUS$

ThUS$

ThUS$

June 30, 2017

29,836

16,932

1,238

-

1,238

 

Hedging liabilities with underlying investments		Derivative instruments (CCS)				Effect on profit or loss for the period Derivative instruments				Hedging reserve in gross equity				Deferred tax hedging reserve in equity				Hedging reserve in equity
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
June 30, 2017			2,292				(1,519	)			(773	)			-				(773	)

 

 

Note 10

Financial instruments (continued)

 

10.3

Hedging assets and liabilities, continued

 

Hedging assets with underlying debt

Derivative instruments (Fwds)

Effect on profit or loss for the period Derivative instruments

Hedging reserve in gross equity

Deferred tax hedging reserve in equity

Hedging reserve in equity

ThUS$

ThUS$

ThUS$

ThUS$

ThUS$

December 31, 2016

830

789

41

(9

)

32

 

Hedging liabilities with underlying debt

Derivative instruments (CCS)

Effect on profit or loss for the period Derivative  instruments

Hedging reserve in gross equity

Deferred tax hedging reserve in equity

Hedging reserve in equity

ThUS$

ThUS$

ThUS$

ThUS$

ThUS$

December 31, 2016

43,235

28,108

(29

)

5

(24

)

 

Hedging liabilities with underlying investments

Derivative instruments (CCS)

Effect on profit or loss for the period Derivative instruments

Hedging reserve in gross equity

Deferred tax hedging reserve in equity

Hedging reserve in equity

ThUS$

ThUS$

ThUS$

ThUS$

ThUS$

December 31, 2016

218

(294

)

76

(19

)

57

 

The balances in the “effect on profit or loss” column consider the interim effects of the contracts in force As of June 30, 2017 and December 31, 2016.

 

Derivative contract maturities are detailed as follows:

 

Series		Contract amount ThUS$				Currency		Maturity date
C			48,749			UF		12/01/2026
H			191,638			UF		01/05/2018
O			58,748			UF		02/01/2017

 

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 Chilean pesos and UF. Likewise, hedging contracts are denominated in the same currencies and have the same expiration dates of bond principal and interest payments.

 

 

Note 10

Financial instruments (continued)

 

10.3

Hedging assets and liabilities, continued

 

Hedge Accounting

 

The Company classifies derivative instruments as hedging that may include derivative or embedded derivatives either as fair value hedge derivative instruments, cash flow hedge derivative instruments, or hedge derivative instruments for net investment in a business abroad.

 

a) Fair value hedge

 

Changes in fair values of derivative instruments classified as fair value hedge derivative instruments are accounted for in gains and losses immediately along with any change in the fair value of the hedged item that is attributable to the risk being hedged.

 

The Company documents the relationship between hedge instruments and the hedged item along with the objectives of its risk management and strategy to carry out different hedging transactions. In addition, upon commencement of the period hedged and then on a quarterly basis the Company documents whether hedge instruments have been efficient and met the objective of hedging market fluctuations for the purpose of which we use the effectiveness test. A hedge instrument is deemed effective if the effectiveness test result is between 80% and 125%.

 

The hedge instruments are classified as effective or not effective on the basis of the effectiveness test results. As of to date, hedges are classified as effective on the basis of the effectiveness tests. This note includes the detail of fair values of derivatives classified as hedging instruments.

 

b) Cash flow hedges

 

Cash flow hedges cover exposure to the cash flow variations attributable to a risk associated with a specific transaction that is very likely to be executed, that may have material effects on the results of the Company.

 

10.4

Financial liabilities

 

Other current and non-current financial liabilities

 

As of June 30, 2017 and December 31, 2016, the detail is as follows:

 

		6/30/2017												12/31/2016
		Current				Non-current				Total				Current				Non-current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Bank borrowings			80,473				-				80,473				101,270				-				101,270
Obligations with the public (bonds)			19,163				1,062,886				1,082,049				58,973				1,059,706				1,118,679
Derivatives			5,403				-				5,403				1,920				-				1,920
Hedging liabilities			32,512				-				32,512				16,981				33,732				50,713
Total			137,551				1,062,886				1,200,437				179,144				1,093,438				1,272,582

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

Current and non-current bank borrowings

 

As of June 30, 2017 and December 31, 2016, the detail is as follows:

 

		6/30/2017				12/31/2016
		ThUS$				ThUS$
Long-term bank borrowings			-				-
Short-term bank borrowings			80,473				101.270
Short-term borrowings and current portion of long-term borrowings			80,473				101.270
Total bank borrowings			80,473				101.270

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

a)

Bank borrowings, current:

 

As of June 30, 2017 and December 31, 2016, the detail of this caption is as follows:

 

Debtor

Creditor

Currency or adjustment

Effective

Nominal

Tax ID No

Company

Country

Tax ID No.

Financial institution

Country

Index

Repayment

Rate

Rate

93.007.000-9

SQM.S.A.

Chile

97.018.000-1

Scotiabank Sud Americano

Chile

US$

Upon maturity

1.31

%

1.38

%

93.007.000-9

SQM.S.A.

Chile

97.018.000-1

Scotiabank Sud Americano

Chile

US$

Upon maturity

0.74

%

0.74

%

93.007.000-9

SQM.S.A.

Chile

97.018.000-1

Scotiabank Sud Americano

Chile

US$

Upon maturity

0.74

%

0.74

%

79.626.800-K

SQM Salar S.A.

Chile

97.018.000-1

Scotiabank Sud Americano

Chile

US$

Upon maturity

1.34

%

1.34

%

79.947.100-0

SQM Industrial S.A.

Chile

97.030.000-7

Banco Estado

Chile

US$

Upon maturity

1.47

%

1.47

%

 

				6/30/2017												6/30/2017
Debtor		Creditor		Nominal amounts												Current amounts
Company		Financial institution		Up to 90 days ThUS$				90 days to 1 year ThUS$				Total ThUS$				Up to 90 days ThUS$				90 days to 1 year ThUS$				Subtotal ThUS$				Borrowing costs ThUS$				Total ThUS$
SQM.S.A.		Scotiabank Sud Americano			20,000				-				20,000				20,039				-				20,039				-				20,039
SQM.S.A.		Scotiabank Sud Americano			17,000				-				17,000				17,120				-				17,120				-				17,120
SQM.S.A.		Scotiabank Sud Americano			3,000				-				3,000				3,021				-				3,021				-				3,021
SQM Salar S.A.		Scotiabank Sud Americano			-				20,000				20,000				-				20,177				20,177				-				20,177
SQM Industrial S.A.		Banco Estado			-				20,000				20,000				-				20,116				20,116				-				20,116
Total					40,000				40,000				80,000				40,180				40,293				80,473				-				80,473

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

Debtor						Creditor						Currency or adjustment				Effective				Nominal
Tax ID No		Company		Country		Tax ID No.		Financial institution		Country		Index		Repayment		Rate				rate
93.007.000-9		SQM.S.A.		Chile		97.018.000-1		Scotiabank Sud Americano		Chile		US$		Upon maturity			1.00	%			1.00	%
93.007.000-9		SQM.S.A.		Chile		97.030.000-7		Banco Estado		Chile		US$		Upon maturity			4.3	%			4.3	%
93.007.000-9		SQM.S.A.		Chile		97.018.000-1		Scotiabank Sud Americano		Chile		US$		Upon maturity			0.74	%			0.85	%
93.007.000-9		SQM.S.A.		Chile		97.018.000-1		Scotiabank Sud Americano		Chile		US$		Upon maturity			0.74	%			0.84	%
79.626.800-K		SQM Salar S.A.		Chile		97.018.000-1		Scotiabank Sud Americano		Chile		US$		Upon maturity			1.34	%			0.84	%
79.947.100-0		SQM Industrial S.A.		Chile		97.030.000-7		Banco Estado		Chile		US$		Upon maturity			1.20	%			1.20	%

 

					12/31/2016												1231/2016
Debtor		Creditor			Nominal amounts												Current amounts
Company		Financial institution			Up to 90 days ThUS$				90 days to 1 year ThUS$				Total ThUS$				Up to 90 days ThUS$				90 days to 1 year ThUS$				Subtotal ThUS$				Borrowing costs ThUS$				Total ThUS$
SQM.S.A.		Scotiabank Sud Americano			-				20,000				20,000				30				20,000				20,030				-				20,030
SQM.S.A.		Banco Estado			-				20,412				20,412				-				20,919				20,919				-				20,919
SQM.S.A.		Scotiabank Sud Americano			-				17,000				17,000				-				17,057				17,057				-				17,057
SQM.S.A.		Scotiabank Sud Americano			-				3,000				3,000				-				3,010				3,010				-				3,010
SQM Salar S.A.		Scotiabank Sud Americano			-				20,000				20,000				-				20,042				20,042				-				20,042
SQM Industrial S.A.		Banco Estado			20,000				-				20,000				20,212				-				20,212				-				20,212
Total					20,000				80,412				100,412				20,242				81,028				101,270				-				101,270

 

  

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

b)

Unsecured obligations, current:

 

As of June 30 2017 and December 31 2016, the detail of current unsecured interest-bearing obligations is composed of promissory notes and bonds, as follows:

 

Bonds

 

Debtor

Number of registration or ID of the instrument

Series

Maturity date

Currency or adjustment index

Periodicity

Effective rate

Nominal rate

Tax ID No.

Company

País

Payment of interest

Repayment

93.007.000-9

SQM S.A.

Chile

-

ThUS$250,000

10/21/2017

US$

Semiannual

Upon maturity

1.72

%

5.50

%

93.007.000-9

SQM S.A.

Chile

-

ThUS$250,000

07/28/2017

US$

Semiannual

Upon maturity

3.39

%

4.38

%

93.007.000-9

SQM S.A.

Chile

-

ThUS$300,000

10/03/2017

US$

Semiannual

Upon maturity

2.30

%

3.63

%

93.007.000-9

SQM S.A.

Chile

446

C

12/01/2017

UF

Semiannual

Semiannual

1.27

%

4.00

%

93.007.000-9

SQM S.A.

Chile

564

H

07/05/2017

UF

Semiannual

Semiannual

2.32

%

4.90

%

93.007.000-9

SQM S.A.

Chile

699

O

08/01/2017

UF

Semiannual

Upon maturity

2.90

%

3.80

%

 

						6/30/2017												6/30/2017
						Nominal maturities												Current maturities
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		ThUS$250,000			-								-				-				2,635				2,635				(385	)			2,250
SQM S,A,		Chile		ThUS$250,000			-								-				4,618				-				4,618				(433	)			4,185
SQM S,A,		Chile		ThUS$300,000			-				-				-				-				2,628				2,628				(615	)			2,013
SQM S,A,		Chile		C			-				6,021				6,021				-				6,204				6,204				-				6,204
SQM S,A,		Chile		H			-				-				-				3,779				-				3,779				(139	)			3,640
SQM S,A,		Chile		O			-				-				-				938				-				938				(67	)			871
Total							-				6,021				6,021				9,335				11,467				20.802				(1.639	)			19,163

 

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.

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

Debtor						Number of registration or ID of the instrument				Series		Maturity date		Currency or adjustment index		Periodicity				Effective rate				Nominal rate
Tax ID No.		Company		País												Payment of interest		Repayment
93.007.000-9		SQM S.A.		Chile			-			ThUS$250,000		10/21/2016		US$		Semiannual		Upon maturity			1.97	%			5.50	%
93.007.000-9		SQM S.A.		Chile			-			ThUS$250,000		01/28/2017		US$		Semiannual		Upon maturity			3.61	%			4.38	%
93.007.000-9		SQM S.A.		Chile			-			ThUS$300,000		10/03/2016		US$		Semiannual		Upon maturity			2.48	%			3.63	%
93.007.000-9		SQM S.A.		Chile			446			C		12/01/2016		UF		Semiannual		Semiannual			1.34	%			4.00	%
93.007.000-9		SQM S.A.		Chile			564			H		01/05/2017		UF		Semiannual		Semiannual			2.47	%			4.90	%
93.007.000-9		SQM S.A.		Chile			700			M		02/01/2017		UF		Semiannual		Upon maturity			0.69	%			3.30	%
93.007.000-9		SQM S.A.		Chile			699			O		02/01/2017		UF		Semiannual		Upon maturity			3.00	%			3.80	%

 

						12/31/2016												12/31/2016
						Nominal maturities												Current maturities
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		ThUS$250,000			-								-				-				2,674				2,674				(386	)			2,288
SQM S,A,		Chile		ThUS$250,000			-								-				4,649				-				4,649				(433	)			4,216
SQM S,A,		Chile		ThUS$300,000			-				-				-				-				2,658				2,658				(615	)			2,043
SQM S,A,		Chile		C							5,903				5,903				-				6,098				6,098				-				6,098
SQM S,A,		Chile		H			-				-				-				3,726				-				3,726				(139	)			3,587
SQM S,A,		Chile		M			39,356				-				39,356				39,893				-				39,893				(11	)			39,882
SQM S,A,		Chile		O			-				-				-				926				-				926				(67	)			859
Total							39,356				5,903				45,259				49,194				11,430				60,624				(1,651	)			58,973

 

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.

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

c)

Non-current unsecured interest-bearing bonds

 

The breakdown of non-current unsecured interest-bearing bonds as of June 30, 2017 and December 31, 2016 is detailed as follows:

 

																Periodicity
Tax ID No.		Company		Country		Number of 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		-				ThUS$250,000		04/21/2020		US$		Semiannual		Upon maturity		5.50		%		5.50		%
93.007.000-9		SQM S.A.		Chile			-			ThUS$250,000		01/28/2025		US$		Semiannual		Upon maturity			4.38	%			4.38	%
93.007.000-9		SQM S.A.		Chile			-			ThUS$300,000		04/03/2023		US$		Semiannual		Upon maturity			3.63	%			3.63	%
93.007.000-9		SQM S.A.		Chile			446			C		12/01/2026		UF		Semiannual		Semiannual			4.00	%			4.00	%
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	%			3.80	%

 

Nominal non-current maturities 6/30/2017																										Non-current maturities 6/30/2017
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				(711	)			249,289
MUS$250			-				-				-				-				250,000				250,000				-				-				-				-				250,000				250,000				(2,852	)			247,148
MUS$300			-				-				-				300,000				-				300,000				-				-				-				300,000				-				300,000				(2,925	)			297,075
C			6,021				6,021				6,021				6,021				27,095				51,179				6,021				6,021				6,021				6,021				27,095				51,179				-				51,180
H			-				-				-				-				160,563				160,563				-				-				-				-				160,563				160,563				(1,601				158,962
O			-				-				-				-				60,211				60,211				-				-				-				-				60,211				60,211				(979	)			59,232
Total			256,021				6,021				6,021				306,021				497,869				1,071,953				256,021				6,021				6,021				306,021				497,869				1,071,953				(9,068	)			1,062,886

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

d)

Non-current unsecured interest-bearing bonds, continued

 

As of June 30, 2017 and December 31, 2016, the breakdown of unsecured interest-bearing liabilities, non-current is as follows:

 

																Periodicity
Tax ID No.		Company		Country		Number of 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			-			ThUS$250,000		04/21/2020		US$		Semiannual		Upon maturity			5.94	%			5.50	%
93.007.000-9		SQM S.A.		Chile			-			ThUS$250,000		01/28/2025		US$		Semiannual		Upon maturity			4.62	%			4.38	%
93.007.000-9		SQM S.A.		Chile			-			ThUS$300,000		04/03/2023		US$		Semiannual		Upon maturity			3.95	%			3.63	%
93.007.000-9		SQM S.A.		Chile			446			C		12/01/2026		UF		Semiannual		Semiannual			5.57	%			4.00	%
93.007.000-9		SQM S.A.		Chile			564			H		01/05/2030		UF		Semiannual		Semiannual			5.22	%			4.90	%
93.007.000-9		SQM S.A.		Chile			699			O		02/01/2033		UF		Semiannual		Upon maturity			3.97	%			3.80	%

 

Nominal non-current maturities 12/31/2016																										Non-current maturities 12/31/2016
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				(904	)			249,096
MUS$250			-				-				-				-				250,000				250,000				-				-				-				-				250,000				250,000				(3,069	)			246,931
MUS$300			-				-				-				-				300,000				300,000				-				-				-				-				300,000				300,000				(3,230	)			296,770
C			5,903				5,903				5,903				5,903				29,519				53,131				5,903				5,903				5,903				5,903				29,519				53,131				-				53,131
H			-				-				-				-				157,426				157,426				-				-				-				-				157,426				157,426				(1,671	)			155,755
O			-				-				-				-				59,035				59,035				-				-				-				-				59,035				59,035				(1,012	)			58,023
Total			5,903				255,903				5,903				5,903				795,980				1,069,592				5,903				255,903				5,903				5,903				795,980				1,069,592				(9,886	)			1,059,706

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

e)

Additional information

 

Bonds

 

On the 30 of June 2017 and the 31st of December 2016, short term bonds of ThUS$19,163 and ThUS$58,973 respectively were classified as short-term, consisting of the current portion due plus accrued interest to date, debt is presented net of bond issuance costs. The non-current portion consisted of ThUS$1,062,886 on the 31 of December 2016 and ThUS$1,059,706 on the 31^st December 2015, corresponding to the issuance of series C bonds, Single series bonds (ThUS$200), series H bonds second issue single series bonds (ThUS$250), series M bonds, series O bonds, third issue single series bonds (ThUS$300) and fourth issue single series bonds (ThUS$250) excluding debt issue costs.

 

As of June 30, 2017 and December 31, 2016, the details of each issuance are as follows:

 

Series “C” bonds

 

On January 24, 2006, the Company placed Series C bonds for UF 3,000,000 (ThUS$101,918) at an annual rate of 4.00%.

 

As of June 30, 2017 and December 31, 2016, the Company has made the following payments with a charge to the Series C bonds:

 

Payments made		6/30/2017				12/31/2016
		ThUS$				ThUS$
Principal payment			2,971				5,729
Interest payment			1,515				3,275

 

Single series first issue ThUS$200,000

 

On April 5, 2006, the Company placed Single Series bonds for ThUS$200,000 at an annual rate of 6.125% under "Rule 144 and regulation S of the U.S. Securities Act of 1933."

 

As of June 30, 2017 and December 31, 2016, the Company has made the following payments with a charge to the Single series bonds:

 

Payments made		6/30/2017				12/31/2016
		ThUS$				ThUS$
Payments of principal owed			-				200,000
Payments of interest			-				6,125

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

Series “G” and “H” bonds

 

On January 13, 2009, the Company placed two bond series in the domestic market. Series H for UF 4,000,000 (ThUS$139,216) at an annual interest rate of 4.9% at a term of 21 years with payment of principal beginning in 2019 and Series G for ThCh$ 21,000,000 (ThUS$34,146), which was placed at a term of 5 years with a single payment at the maturity of the term and an annual interest rate of 7%.

 

As of June 30, 2017 and December 31, 2016, the Company has made the following payments with a charge to the Series H bonds:

 

Payments made		6/30/2017				12/31/2016
		ThUS$				ThUS$
Payments of interest, Series H bonds			3,798				7,289

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

Single series bonds, second issue ThUS$250,000

 

On April 21, 2010, the Company informed the Chilean Superintendence of Securities and Insurance 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 June 30, 2017 and December 31, 2016, the detail of payments charged to the line of single series bonds, second issue is as follows:

 

Payments made		6/30/2017				12/31/2016
		ThUS$				ThUS$
Interest payment			6.875				13,750

 

Series “M” and “O” bonds

 

On April 4, 2012, the Company placed two bond series in the domestic market. Series M for UF 1,000,000 (ThUS$46,601) was placed at a term of 5 years with a single payment at the maturity of the term and an annual interest rate of 3.3%, and 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 June 30, 2017, and December 31, 2016 the Company has made the following payments with a charge to the Series M and O bonds:

 

Payments made		6/30/2017				12/31/2016
		ThUS$				ThUS$
Payment of interest, Series M bonds			667				1,242
Payment of interest, Series O bonds			1,150				2,142

 

Single series bonds, third issue ThUS$300,000

On April 3, 2013 in the United States, the Company issued a non-guaranteed bond with a value of US$ 300 million. The bond is for a 10 year term with an annual coupon rate of 3.625% and an annual yield of 3.716%. This rate equates to a difference of 180 basis points to comparable US Treasury bonds. The funds raised will be used to refinance long term liabilities and finance general corporate objectives.

 

As of June 30, 2017 and December 31, 2016, the following payments have been made with a debit to the line of single-series bonds, third issue:

 

Payments made		6/30/2017				12/31/2016
		ThUS$				ThUS$
Payment of interest			5,438				10,875

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

Single series bonds, fourth issuance ThUS$ 250

 

On October 23, 2014, the Company informed the Chilean Superintendence of Securities and Insurance that Sociedad Química y Minera de Chile S.A. agreed to issue and place unsecured bonds of ThUS$ 250,000 in international markets. This, essentially, maturing in 2025 with a cover annual interest rate of 4.375% equivalent to a spread of 215 basis points on comparable US Treasury bonds, which were offered to the investors at a price of 99.410% with respect to capital. The aforementioned agreement was agreed on October 23, 2014 and the issuance and placement of such bonds was performed in conformity with the provisions of Rule 144A of the US Securities Act of 1933 and these bonds will not be publicly offered in Chile.

 

As of June 30 2017 and December 31, 2016, the following payments have been made.

 

Payments made		6/30/2017				12/31/2016
		ThUS$				ThUS$
Payment of interest			5,469				10,938

 

10.5

Trade and other payables

 

		6/30/2017												12/31/2016
		Current				Non- current				Total				Current				Non- current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Accounts payable			159,540				-				159,540				200,215				-				200,215
Other accounts payable			338				-				338				281				-				281
Total			159,878				-				159,878				200,496				-				200,496

 

Purchase commitments held by the Company are recognized as liabilities when the goods and services are received by the Company. As of June 30, 2017, the Company has purchase orders amounting to ThUS$29,133 (ThUS$19,959 as of December 31, 2016).

 

 

Note 10

Financial instruments (continued)

 

10.6

Financial liabilities at fair value through profit or loss

 

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

 

Financial liabilities at fair value through profit or loss		6/30/2017 ThUS$				Effect on profit or loss as of 6/30/2017				12/31/2016 ThUS$				Effect on profit or loss as of 12/31/2016
						ThUS$								ThUS$
Current
Derivative instruments (IRS)			-				-				-				(229	)
			-				-				-				(229	)

 

Balances in the column effect on profit or loss consider the effects of agreements which were in force as of June 30, 2017, including derivatives, received during the year.

 

 

Note 10

Financial instruments (continued)

 

10.7

Financial asset and liability categories

 

a)

Financial Assets

 

				6/30/2017												12/31/2016
		Financial		Current				Non-current				Total				Current				Non-current				Total
Description of financial assets		instruments		Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$
Cash and cash equivalent					517,625				-				517,625				514,669				-				514,669
Trade receivables due from related parties					55,574				-				55,574				92,259				-				92,259
Financial assets measured at amortized cost		Term deposits			315,762				45				315,807				284,160				44				284,204
Loans and receivables measured at amortized cost		Trade and other receivables			381,441				2,560				384,001				358,761				1,840				370,601
Total financial assets measured at amortized cost					1,270,402				2,605				1,273,007				1,249,849				1,884				1,251,733
Financial assets at fair value through profit or loss		Derivative instruments			10,075				3,454				13,529				5,029				7,156				12,185
Financial assets classified as available for sale at fair value through equity		Other investments			-				27,184				27,184				-				26,899				26,899
Total financial assets at fair value					10,075				30,638				40,713				5,029				34,055				39,084
Total financial assets					1,280,477				33,243				1,313.720				1,254,878				35,939				1,290,817

 

 

Note 10

Financial instruments (continued)

 

10.7

Financial asset and liability categories (continued)

 

b)

Financial liabilities

 

				6/30/2017												12/31/2016
		Financial		Current				Non-current				Total				Current				Non- current				Total
Description of financial liabilities		instruments		Amount				Amount				Amount				Amount				Amount				Amount
				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Trade payables due to related parties					1,251				-				1,251				7				-				7
Financial liabilities at fair value through profit or loss		Derivative instruments			37,915				-				37,915				18,901				33,732				52,633
Financial liabilities at fair value through profit or loss					39,166				-				39,166				18,908				33,732				52,640
Financial liabilities measured at amortized cost		Bank borrowings			80,473				-				80,473				101,270				-				101,270
Financial liabilities measured at amortized cost		Obligations with the public			19,163				1,062,886				1,082,049				58,973				1,059,706				1,118,679
Financial liabilities measured at amortized cost		Trade and other payables			159,878				-				159,878				200,496				-				200,496
Total financial liabilities measured at amortized cost					259,514				1,062,886				1,322,400				360,739				1,059,706				1,420,445
Total financial liabilities					298,680				1,062,886				1,361,566				379,647				1,093,438				1,473,085

 

 

Note 10

Financial instruments (continued)

 

10.8

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, Cross Currency Swaps (CCS) to hedge bonds issued in local currency ($/UF), and Interest Rate Swaps (IRS) to hedge LIBOR rate debt issued.

 

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 (pesos/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. 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, and basis swap rates. In the case of fair value calculations for IRS, the FRA (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, taking into account 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 the ‘Asociación de Bancos e Instituciones Financieras’ (ABIF) (Association of Banks and Financial Institutions’).

 

 

Note 10

Financial instruments (continued)

 

10.8

Fair value measurement of assets and liabilities, continued

 

Fair value hierarchy

 

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.

 

The valuation technique used for determining fair value of our hedging instruments is that indicated in Level 2.

 

		Fair value				Measurement methodology
		6/30/2017				Level 1				Level 2				Level 3
		ThUS$				ThUS$				ThUS$				ThUS$
Financial assets
Investment
Shares			7,163				7,163				-				-
Non-hedging derivatives
Forwards			797				-				797				-
Options			382				-				382				-
Swaps			8,896				-				8,896				-
Hedging derivatives
Swaps			3,384				-				3,384				-
Other			308,598				-				308,598				-
Financial liabilities
Non-hedging derivatives
Forwards			112				112				112				-
Options			5,013				5,013				5,013				-
Hedging derivatives
Swaps			32,441				32,441				-				-
Other			99,985				-				99,985

 

 

Note 10

Financial instruments (continued)

 

10.8

Fair value measurement of assets and liabilities, continued

 

		Fair value				Measurement methodology
		12/31/2016				Level 1				Level 2				Level 3
		ThUS$				ThUS$				ThUS$				ThUS$
Financial assets
Investment
Shares			6,879				6,879				-				-
Non-hedging derivatives
Forwards			924				-				924				-
Options			426				-				426				-
Swaps			2,745				-				2,745				-
Hedging derivatives
Swaps			8,090				-				8,090				-
Other			64				-				64				-
Financial liabilities
Non-hedging derivatives
Forwards			1,557				-				1,557				-
Options			363				-				363				-
Hedging derivatives
Swaps			50,713				-				50,713				-

 

10.9

Financial assets pledged as guarantee

 

On November 4, 2004, Isapre Norte Grande maintains a guarantee equivalent to the total amount owed to its members and healthcare providers, which is managed and maintained by Banco de Chile.

 

As of June 30, 2017 and December 31, 2016, assets pledged as guarantees are as follows:

 

Restricted cash		6/30/2017 ThUS$				12/31/2016 ThUS$
Isapre Norte Grande Ltda.			709				685
Total			709				685

 

 

Note 10

Financial instruments (continued)

 

10.10

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 are considered to be equal to their carrying values.

 

-

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

 

 

Note 10

Financial instruments (continued)

 

10.10

Estimated fair value of financial instruments and financial derivatives, continued

 

The detail of the Company’s instruments at carrying value and estimated fair value is as follows:

 

		6/30/2017								12/31/2016
		Carrying value				Fair value				Carrying value				Fair value
		ThUS$				ThUS$				ThUS$				ThUS$
Cash and cash equivalents			517,625				517,625				514,669				514,669
Current trade and other receivables			381,441				381,441				368,761				368,761
Receivables due from related parties, current			55,574				55,574				82,259				92,259
Other financial assets, current:			-				-
- Time deposits			315,762				315,762				284,160				284,160
- Derivative instruments			10,075				10,075				4,095				4,095
- Hedging assets			-				-				934				934
Total other current financial assets			325,837				325,837				289,189				289,189
Non-Current Trade Receivables			2,560				2,560				1,840				1,840
Other non-current financial assets:			30,683				30,683				14,099				14,099
Total other non-current financial assets:			30,683				30,683				14,099				14,099
Other financial liabilities, current:
- Bank loans			80,473				80,473				101,270				101,270
- Derivative instruments			5,403				5,403				1,920				1,920
- Hedging liabilities			32,512				32,512				16,981				16,981
- Unsecured obligations			19,163				19,163				58,973				58,973
Other financial liabilities, current			137,551				137,551				179,144				179,144
Current and non-current accounts payable			159,878				159,878				200,496				200,496
Payables due to related parties, non-current			1,251				1,251				7				7
Other non-current financial liabilities:
- Bank loans			-				-				-				-
- Unsecured obligations			1,062,886				1,214,754				1,059,706				1,195,512
- Non-current hedging liabilities			1,062,886				12,871				33,732				33,732
Other non-current financial liabilities:			1,062,886				1,224,233				1,093,438				1,229,244

 

Note 10

Financial instruments (continued)

 

10.11

Nature and scope of risks arising from financing instruments

 

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 4 - Financial Risk Management.

 

 

Note 11

Equity-accounted investees

 

11.1

Investments in associates recognized according to the equity method of accounting

 

As of June 30, 2017 and December 31, 2016, in accordance with criteria established in Note 3.19, investment in associates recognized according to the equity method of accounting and joint ventures are as follows:

 

Associates		Equity-accounted investees								Share on 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
		6/30/2017				12/31/2016				6/30/2017				12/31/2016				6/30/2017				12/31/2016				6/30/2017				12/31/2016
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Abu Dhabi Fertilizer Industries WWL			14,149				13,343				774				1,482				-				-				774				1,482
Doktor Tarsa Tarim Sanayi AS			21,494				16,712				4,309				4,026				44				590				4,353				4,616
Ajay North America			13,575				13,457				2,088				2,794				-				-				2,088				2,794
Ajay Europe SARL			7,499				7,373				601				1,132				15				(7	)			616				1,126
Charlee SQM Thailand Co. Ltd,			2,015				1,763				164				244				5				-				169				244
SQM Eastmed Turkey.			105				-				129				-				-				-				129				-
Total			58,837				52,648				8,065				9,678				64				583				8,129				10,262

 

 

Note 11 Equity-accounted investees (continued)

 

11.1        Investments in associates recognized according to the equity method of accounting, continued

 

Description of the nature of the

Country of

Share of ownership in

Dividends received

Associate

relationship

Domicile

incorporation

associates

6/30/2017

12/31/2016

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

%

-

-

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

49

%

561

2,605

Ajay Europe SARL

Production and commercialization of iodine derivatives.

Z.I. du Grand Verger BP 227 53602 Evron Cedex

France

50

%

920

1,338

SQM Eastmed Turkey

Production and commercialization of specialty products.

Organize Sanayi Bolgesi, Ikinci Kisim, 22 cadde TR07100 Antalya

Turkey

50

%

-

-

Charlee SQM Thailand Co. Ltd.

Distribution and commercialization of specialty plant nutrients.

31 Soi 138 (Meesuk) LLapdrawrd, Bangkapi, 10240 Bangkok

Thailand

40

%

-

-

 

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.

 

		Description of the nature of the  relationship		Domicile		Country of incorporation		Share of ownership in associates				Dividends receive
Terra Tarsa B.V. (1)		Distribution and trading of specialty plant nutrients.		Herikerbergweg 238, Luna Arena, 1101CM Amsterdam PO Box 23393, 1100DW Amsterdam Zuidoost		Holland			50	%			-				-
Plantacote N.V. (1)		Sale of CRF and production and sales of WSNPK		Houtdok-Noordkaai 25a, 2030 Antwerpen, Belgium		Belgium			100	%			-				-
Doktolab Tarim Arastima San. Tic As (1)		Laboratory services		27. Cd. No:2, 07190 Aosb 2. Kısım/Döşemealtı, Antalya, Turkey		Turkey			100	%			-				-
Terra Tarsa Ukraine LLC (2)		Distribution and trading of specialty plant nutrients.		74800 Ukraine, Kakhovka, 4 Yuzhnaya Str.		Ukraine			100	%			-				-
Terra Tarsa Don LLC (2		Distribution and sale of specialty fertilizers		Zorge Street, house 17, 344090, Rostov-on-Don		Russian Federation			100	%

 

 

Note 11

Equity-accounted investees (continued)

 

11.2

Assets, liabilities, revenue and expenses of associates

 

		6/30/2017
		Assets								Liabilities												Gain (loss) from continuing				Other comprehensive				Comprehensive
		Current				Non-current				Current				Non-current				Revenue				operations				income				income
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Abu Dhabi Fertilizer Industries WWL			40,639				1,996				4,396				-				18,868				2,093				-				2,093
Doktor Tarsa Tarim Sanayi AS			79,448				7,566				42,468				1,557				45,377				8,618				88				8,706
Ajay North America			19,341				12,093				3,731				-				19,659				4,262				-				4,262
Ajay Europe SARL			21,834				1,346				8,181				-				17,626				1,201				30				1,231
Charlee SQM Thailand Co. Ltd.			8,042				599				3,363				240				6,320				410				13				423
SQM Eastmed Turkey			3,329				2,380				3,038				2,460				1,361				258				-				258
Total			172,633				25,980				65,177				4,257				109,211				16,842				131				16,973

 

		12/31/2016
		Assets								Liabilities												Gain (loss) from continuing				Other comprehensive				Comprehensive
		Current				Non-current				Current				Non-current				Revenue				operations				income				income
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Abu Dhabi Fertilizer Industries WWL			37,801				2,104				3,843				-				41,442				4,005				-				4,005
Doktor Tarsa Tarim Sanayi AS			68,449				5,984				39,729				1,281				83,905				8,052				1,180				9,232
Ajay North America			18,844				11,633				3,015				-				35,715				5,702				-				5,702
Ajay Europe SARL			20,675				1,361				7,290				-				33,319				2,265				(13	)			2,252
Charlee SQM Thailand Co. Ltd.			6,264				591				2,448				-				12,065				609				-				609
SQM Eastmed Turkey			727				2,265				719				2,362				833				(200	)							(200	)
Total			152,760				23,938				57,044				3,643				207,279				20,433				1,167				21,600

 

 

Note 11

Investment in Associates (continued)

 

11.3

Other information

 

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

 

The Company presents no investments unaccounted for according to the equity method of accounting.

 

The equity method was applied to the Statement of Financial Position as of June 30, 2017 and December 31, 2016.

 

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

 

11.4

Disclosures on interest in associates

 

a) Transactions conducted in 2017:

 

As of June 30, 2017, there are no transactions conducted with associates.

 

b) Transactions conducted in 2016:

 

During December 2016, SQM Salar S.A. sold the interest it had in Sales de Magnesio Ltda. to Rockwood Litio Ltda. generating a gain of ThUS$7,635.

 

 

Note 12

Joint Ventures

 

12.1

Policy for the accounting of equity accounted investment in joint ventures

 

The method for the recognition of 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 of the entity which correspond to the investor. Profit or loss for the period of the investor will collect the portion which belongs to it in the results of the controlled entity as a whole. For these joint ventures there is no quoted market price to measure these investments.

 

There are no significant restrictions on these joint ventures for the transfer of funds as payment of dividends or others.

 

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.

 

12.2

Disclosures of interest in joint ventures

 

a)

Operations conducted in 2017

 

On June 30, 2017, SQM Potasio S.A. recognizes the goodwill generated by the acquisition of 50% of joint venture Minera Exar S.A. for ThUS$ 6,205.

 

b)

Operations conducted in 2016

 

On March 28, 2016, Sociedad Química y Minera de Chile S.A. entered into an agreement to enter a joint venture with Lithium Americas Corp to develop the Cauchari-Olaroz lithium project in Argentina.

 

SQM Potasio S.A. made a capital contribution of ThUS$25,000 in exchange for 50% of the ownership of Minera Exar S.A.

 

During May 2016, SQM Vitas Holland B.V. sold its interest in SQM Vitas Spain, to SQM Iberian S.A. resulting in the latter obtaining 100% in this transaction generating a loss of ThUS$ 104.

 

 

Note 12

Joint Ventures (continued)

 

12.3

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

 

						Country of		Share of interest				Dividends received
Joint venture		Description of the nature of the relationship		Domicile		incorporation		in ownership				6/30/2017				12/31/2016
												ThUS$				ThUS$
Sichuan SQM Migao Chemical Fertilizers Co. Ltda.		Production and distribution of soluble fertilizers.		Huangjing Road, Dawan Town, Qingbaijiang District, 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	%			-				-
SQM Star Qingdao 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 B.V (1)		Without information		Herikerbergweg 238, 1101 CM Amsterdam Zuidoost		Holland			50	%			-				-
Minera Exar S.A.		Exploration and exploitation of minerals, processing and trading of such minerals		Dr. Sabín 1082 Ciudad de Nieva – San Salvador de Jujuy- Jujuy- República Argentina		Argentina			50	%			-				-

 

(1)

During May 2016, SQM Vitas Holland B.V. sold its interest in SQM Vitas Spain, to SQM Iberian S.A. resulting in the latter obtaining 100% in this transaction generating a loss of ThUS$ 104.

 

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

 

(1)

SQM Vitas Fzco.

 

(2)

SQM Vitas Holland B.V.

 

				Domicile		Country of incorporation		Share of interest in ownership				Dividends received
SQM Vitas Brazil Agroindustria (1)		Production and commercialization of specialty plant and animal nutrition and industrial hygiene.		Via Cndeias, Km. 01 Sem Numero, Lote 4, Bairro Cia Norte, Candeias, Bahia.		Brazil			49.99	%			-				-
SQM Vitas Peru S.A.C (1).		Production and commercialization of specialty plant and animal nutrition and industrial hygiene		Av. Juan de Arona 187, Torre B, Oficina 301-II, San Isidro, Lima		Peru			50	%			-				-
SQM Vitas Plantacote B.V.(2)		Production and commercialization of controlled-released fertilizers		Herikerbergweg 238, 1101 CM Amsterdam Zuidoost		Holland			50	%			-				-

 

 

Note 12

Joint Ventures (continued)

 

12.3

Investment in joint ventures accounted for under the equity method of accounting, continued:

 

Joint Venture		Final reporting period date		Accounting method
Sichuan SQM Migao Chemical Fertilizers Co Ltda.		June 30, 2017		Equity method
Coromandel SQM India		June 30, 2017		Equity method
SQM Vitas Fzco.		June 30, 2017		Equity method
SQM Star Qingdao Corp Nutrition Co., Ltd.		June 30, 2017		Equity method
SQM Vitas Brazil Agroindustria		June 30, 2017		Equity method
SQM Vitas Southern Africa Pty.		June 30, 2017		Equity method
SQM Vitas Perú S.A.C.		June 30, 2017		Equity method
SQM Vitas Holland B.V.		June 30, 2017		Equity method
SQM Vitas Plantacote B.V.		June 30, 2017		Equity method
Minera Exar S.A.		June 30, 2017		Equity method

 

Joint Venture		Equity-accounted investees								Share on 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
			6/30/2017				12/31/2016				6/30/2017				12/31/2016				6/30/2017				12/31/2016				6/30/2017				12/31/2016
			ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Sichuan SQM Migao Chemical Fertilizers Co. Ltd.			11,656				12,150				(323	)			1,372				-				-				(323	)			(1,372	)
Coromandel SQM India			1,126				1,499				(58	)			435				-				-				(58	)			435
SQM Vitas Fzco,			17,501				17,956				86				3,458				18				449				104				3,907
SQM Star Qingdao Corp. Nutrition Co. Ltd.			2,766				2,618				146				163				-				-				146				163
SQM Vitas Holland			1,366				1,269				(8	)			171				-				-				(8	)			171
Minera Exar S.A.			16,080				25,000				(84	)			-				-				-				(84	)			-
Total			50,495				60,492				(241	)			2,855				18				449				(223	)			3,304

 

 

Note 12 Joint Ventures (continued)

 

12.3       Investment in joint ventures accounted for under the equity method of accounting, continued:

 

Joint Venture		Equity-accounted investees								Share on 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
		6/30/2017				12/31/2016				6/30/2017				12/31/2016				6/30/2017				12/31/2016				6/30/2017				12/31/2016
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Vitas Brazil Agroindustria(1)			8,998				9,343				(193	)			4,570				(46	)			2,845				(239	)			5,130
SQM Vitas Peru S.A.C (1)			5,713				5,964				(440	)			815				-				-				(440	)			408
SQM Vitas Plantacote B.V. (2)			639				588				2				187				-				-				2				(80	)
Total			15,350				15,895				(631	)			5,572				(46	)			2,,845				(677	)			5,458

 

The following companies are subsidiaries of

 

(1)

SQM Vitas Fzco.

 

(2)

SQM Vitas Holland

 

 

Note 12 Joint Ventures (continued)

 

12.4

Assets, liabilities, revenue and expenses from joint ventures:

 

		6/30/2017
		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. Ltda.			44,594				7,027				28,309				-				12,382				(647	)			-				(647	)
Coromandel SQM India			4,862				866				3,417				57				3,348				(115	)			-				(115	)
SQM Vitas Fzco,			21,494				15,507				2,000				-				8,515				173				35				208
SQM Star Qingdao Corp. Nutrition Co. Ltd.			10,669				194				5,332				-				6,300				292				-				292
SQM Vitas Brazil Agroindustria			27,103				8,244				26,347				-				24,178				(193	)			(92	)			(285	)
SQM Vitas Peru S.A.C			22,667				9,219				20,070				6,101				17,253				(440	)			-				(440	)
SQM Vitas Holland B.V			2,093				639				-				-				-				(16	)			-				(16	)
SQM Vitas Plantacote B.V.			649				-				10				-				-				3				-				3
Minera Exar S.A.			6,549				41,672				16,060				-				-				(169	)			-				(169	)
Total			140,680				83,368				101,545				6,158				71,976				(1,112	)			(57	)			(1,169	)

 

		12/31/2016
		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. Ltda.			43,639				7,399				26,738				-				16,051				(2,744	)			-				(2,744	)
Coromandel SQM India			4,485				847				2,334				-				8,034				870				-				870
SQM Vitas Fzco.			20,896				16,395				1,380				-				16,210				6,916				897				7,813
SQM Star Qingdao Corp. Nutrition Co. Ltd.			5,733				203				697				-				7,553				325				-				325
SQM Vitas Brazil Agroindustria			21,511				8,917				21,085				-				63,055				4,570				5,690				10,260
SQM Vitas Peru S.A.C			23,598				8,931				20,333				6,231				36,926				815				-				815
SQM Vitas Holland B.V			1,961				588				11				-				-				342				-				342
SQM Vitas Plantacote B.V.			619				-				31				-				-				(159	)			-				(159	)
Total			122,442				43,280				72,609				6,231				147,829				10,935				6,587				17,522

 

 

Note 12

Joint Ventures (continued)

 

12.5

Other Joint Venture disclosures:

 

		Cash and cash equivalents								Other current financial liabilities								Other non-current financial liabilities
		6/30/2017				12/31/2016				6/30/2017				12/31/2016				6/30/2017				12/31/2016
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$$
Sichuan SQM Migao Chemical Fertilizers Co. Ltda.			4,054				4,097				-				-				-				-
Coromandel SQM India			4				15				33				478				-				-
SQM Vitas Fzco,			11,892				11,514				-				-				-				-
SQM Star Qingdao Corp. Nutrition Co. Ltd.			4,276				3,756				-				-				-				-
SQM Vitas Brazil Agroindustria			1,077				2,168				7,847				8,718				-				-
SQM Vitas Peru S.A.C.			655				958				3,893				3,834				1,546				1,781
SQM Vitas Holland B.V			2,093				1,961				-				-				-				-
SQM Vitas Plantacote B.V			649				615				-				-				-				-
Miera Exar S.A.			2,015				-				-				-
Total			26,715				25,084				11,773				13,030				1,546				1,781

 

		Depreciation and amortization expense								Interest expense								Income tax expense, continuing operations
		6/30/2017				12/31/2016				6/30/2017				12/31/2016				6/30/2017				12/31/2016
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Sichuan SQM Migao Chemical Fertilizers Co. Ltda.			(348	)			(691	)			(24	)			(433	)			138				200
Coromandel SQM India			(44	)			-				(12	)			(49	)			(320	)			(44	)
SQM Vitas Fzco.			(292	)			(717	)			(13	)			(16	)			-				-
SQM Star Qingdao Corp. Nutrition Co. Ltd.			(33	)			(64	)			-				(1	)			(90	)			(195	)
SQM Vitas Brazil Agroindustria			-				(438	)			(627	)			(2,127	)			(78	)			(337	)
SQM Vitas Peru S.A.C.			(235	)			(82	)			(221	)			(323	)			(158	)			(362	)
SQM Vitas Holland B.V			-				-				-				-				-				-
SQM Vitas Plantacote B.V			-				-				-				(1	)			-				-
Miera Exar S.A.			(196	)			-				-				-				(123	)
Total			(1,148	)			(1,992	)			(897	)			(2,950	)			(631	)			(738	)

 

The basis of preparation of the financial information of joint ventures corresponds to the amounts included in the financial statements in conformity with the entity’s IFRS.

 

 

Note 13

Intangible assets and goodwill

 

13.1

Balances

 

		6/30/2017				12/31/2016
		ThUS$				ThUS$
Intangible assets other than goodwill			108,932				109,439
Goodwill (1)			44,177				37,972
Total			153,109				147,411

 

(1)

The recoverable amount of the cash-generating unit has been determined based on a calculation of the value in use which used cash flow projections for a 5-year period, plus perpetuity.

 

The present value of the future cash flows generated by these assets has been estimated given a variance in sales volumes, market prices and costs, discounted at weighted average cost of capital (WACC) of 8,04%

 

13.2

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 June 30, 2017 and December 31, 2016 are detailed as follows:

 

				6/30/2017
Intangible assets and goodwill		Useful life		Gross amount ThUS$				Accumulated Amortization ThUS$				Net Value ThUS$
Software		Finite			24,107				(17,583	)			6,524
Intellectual property rights, patents and other industrial property rights, service		Finite			1,493				(1,044	)			449
Intellectual property rights, patents and other industrial property rights, service		Indefinite			98,596				-				98,596
Other intangible assets		Indefinite			3,363				-				3,363
Intangible assets other than goodwill					127,559				(18,627	)			108,932
Goodwill		Indefinite			44,177				-				44,177
Total intangible assets and goodwill					171,736				(18,627	)			153,109

 

 

Note 13

Intangible assets and goodwill (continued)

 

13.2

Disclosures on intangible assets and goodwill, continued

 

				12/31/2016
Intangible assets and goodwill		Useful life		Gross amount ThUS$				Accumulated Amortization ThUS$				Net Value ThUS$
Software		Finite			23,280				(16,234	)			7,046
Intellectual property rights, patents and other industrial property rights, service		Finite			1,483				(1,023	)			460
Intellectual property rights, patents and other industrial property rights, service		Indefinite			98,596				-				98,596
Other intangible assets		Indefinite			3,337				-				3,337
Intangible assets other than goodwill					126,696				(17,257	)			109,439
Goodwill		Indefinite			37,972				-				37,972
Total intangible assets and goodwill					164,668				(17,257	)			147,411

 

a)

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

 

Finite useful life measures the lifetime or the number of productive units or other similar variables which constitute its useful life.

 

The estimated useful life for software is 3 and 6 years, for other finite useful life assets the period in which they are amortized relates to periods defined by contracts or rights which generate them.

 

Intellectual property rights, patents and other industrial property rights, service and exploitation rights, mainly relate to water rights and are obtained as indefinite.

 

b)

Method used to express the amortization of identifiable intangible assets (life or rate)

 

The method used to express the amortization is useful life, and estimated tons to be extracted in the case of mining claims.

 

 

Note 13

Intangible assets and goodwill (continued)

 

13.2

Disclosures on intangible assets and goodwill, continued

 

c)

Minimum and maximum amortization lives or rates of intangible assets:

 

Estimated useful lives or amortization rate		Minimum life or rate		Maximum life or rate
Intellectual property rights, patents and other industrial property rights, service and exploitation rights		Indefinite		Indefinite
Intangible assets other than goodwill		Indefinite		Indefinite
Intellectual property rights, patents and other industrial property rights, service and exploitation rights		1 year		16 years
Trademarks		1 year		5 years
Software		2 years		6 years

 

d)

Information to be disclosed on assets generated internally

 

The Company has no intangible assets generated internally.

 

e)

Other information to disclose on intangible assets

 

SQM has property rights and mining concessions of the Chilean Government, intended for the exploration and exploitation of saltpeter and brine. Such rights, have had no initial cost over registration costs, which are insignificant.

 

Also, SQM has acquired from third-parties other than the Chilean Government, mining concessions, which have been recognized at acquisition cost, which are amortized as the corresponding area is exploited based on the tons estimated to be extracted.

 

Expenses prior to obtaining the mining concessions are recognized in profit or loss for the year as incurred.

 

 

Note 13

Intangible assets and goodwill (continued)

 

13.2

Disclosures on intangible assets and goodwill, continued

 

f)

Movements in identifiable intangible assets as of June 30, 2017:

 

Movements in identifiable intangible assets, gross		Trademarks				Software				Intellectual property rights, patents and other industrial property rights, service, rights of way				Intellectual property rights, patents and other industrial property rights, service, rights of way				Other intangible assets				Goodwill				Identifiable intangible assets
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance		-				23,280				1,483				98,596				3,337				37,972				164,6688
Additions			-				928				10				-				25				6,205				7,168
Other increases (decreases)			-				(101	)			-				-				1				-				(100	)
Final balance			-				24,107				1,493				98,596				3,363				44,177				171,736

 

Movements in identifiable intangible assets, accumulated amortization		Trademarks				Software				Intellectual property rights, patents and other industrial property rights, service, rights of way				Intellectual property rights, patents and other industrial property rights, service, rights of way				Other intangible assets				Goodwill				Identifiable intangible assets
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance			-				(16,234	)			(1,023	)			-				-				-				(17,257	)
Additions			-				-				-				-				-				-				-
Amortization			-				(1,360	)			(20	)			-				-				-				(1,380	)
Other increases (decreases)			-				11				(1	)			-				-				-				10
Final balance			-				(17,583	)			(1,044	)			-				-				-				(18,627	)

 

 

 

Note 13

Intangible assets and goodwill (continued)

 

13.2

Disclosures on intangible assets and goodwill, continued

 

f)

Movements in identifiable intangible assets as of June 30, 2017, continued

 

Movements in identifiable intangible assets, net		Trademarks				Software				Intellectual property rights, patents and other industrial property rights, service, rights of way				Intellectual property rights, patents and other industrial property rights, service rights of way				Other intangible assets				Goodwill				Identifiable intangible assets
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance			-				7,046				460				98,596				3,337				37,972				147,411
Additions			-				928				10				-				25				6,205				7,168
Amortization			-				(1,360	)			(20	)			-				-				-				(1,380	)
Other increases (decreases)			-				(90	)			(1	)			-				1				-				(90	)
Final balance			-				6,524				449				98,596				3,363				44,177				153,109

 

g)

Movements in identifiable intangible assets as of December 31, 2016:

 

Movements in identifiable intangible assets, gross		Trademarks				Software				Intellectual property rights, patents and other industrial property rights, service, rights of way				Intellectual property rights, patents and other industrial property rights, service, rights of way				Other intangible assets				Goodwill				Identifiable intangible assets
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance			3,821				23,251				1,448				96,500				3,651				38,388				167,059
Additions			-				160				25				2,100				-				-				2,285
Other increases (decreases)			(3,821	)			(131	)			10				(4	)			(314	)			(416	)			(4,676	)
Final balance			-				23,280				1,483				98,596				3,337				37,972				164,668

 

 

Note 13

Intangible assets and goodwill (continued)

 

13.2

Disclosures on intangible assets and goodwill, continued

 

g)

Movements in identifiable intangible assets as of December 31, 2016:

 

Movements in identifiable intangible assets, accumulated amortization		Trademarks				Software				Intellectual property rights, patents and other industrial property rights, service, rights of way				Intellectual property rights, patents and other industrial property rights, service, rights of way				Other intangible assets				Goodwill				Identifiable intangible assets
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance			(3,821	)			(13,438	)			(984	)			-				-				-				(18,243	)
Additions			-				-				-				-				-				-				-
Amortization			-				(2,796	)			(38	)			-				-				-				(2,834	)
Other increases (decreases)			3,821				-				(1	)			-				-				-				3,820
Final balance							(16,234	)			(1,023	)			-				-				-				(17,257	)

 

Movements in identifiable intangible assets, net		Trademarks				Software				Intellectual property rights, patents and other industrial property rights, service rights of way				Intellectual property rights, patents and other industrial property rights, service rights of way				Other intangible assets				Goodwill				Identifiable intangible assets
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance			-				9,813				464				96,500				3,651				38,388				148,816
Additions			-				160				25				2,100				-				-				2,285
Amortization			-				(2,796	)			(38	)			-				-				-				(2,834	)
Other increases (decreases)			-				(131	)			9				(4	)			(314	)			(416	)			(856	)
Final balance			-				7,046				460				98,596				3,337				37,972				147,411

 

 

Note 14

Property, plant and equipment

 

As of June 30, 2017 and December 31, 2016, the detail of property, plant and equipment is as follows:

 

14.1

Types of property, plant and equipment

 

		6/30/2017 ThUS$				12/31/2016 ThUS$
Description of types of property, plant and equipment
Property, plant and equipment, net
Land			32,742				32,702
Buildings			222,509				237,585
Other property, plant and equipment			24,444				26,417
Transport equipment			3,019				3,355
Supplies and accessories			1,373				1,773
Office equipment			3,792				3,642
Network and communication equipment			1,363				1,686
Mining assets			21,114				24,643
IT equipment			283				366
Energy generating assets			7,141				8,191
Constructions in progress			189,348				170,710
Machinery, plant and equipment (1)			941,645				1,021,640
Total			1,448,773				1,532,710
Property, plant and equipment, gross
Land			32,742				32,702
Buildings			584,900				582,082
Other property, plant and equipment			253,578				253,555
Transport equipment			10,767				10,819
Supplies and accessories			18,468				18,259
Office equipment			18,474				17,731
Network and communication equipment			7,585				7,522
Mining assets			158,790				158,514
IT equipment			20,316				20,316
Energy generating assets			34,883				34,812
Constructions in progress			189,348				170,710
Machinery, plant and equipment			2,846,225				2,833,819
Total			4,176,076				4,140,841
Accumulated depreciation and value impairment of property, plant and equipment, total
Accumulated depreciation and impairment of buildings			362,391				344,497
Accumulated depreciation and impairment of other property, plant and equipment			229,134				227,138
Accumulated depreciation and impairment of transport equipment			7,748				7,464
Accumulated depreciation and impairment of supplies and accessories			17,095				16,486
Accumulated depreciation and impairment of office equipment			14,682				14,089
Accumulated depreciation and impairment of network and communication equipment			6,222				5,836
Accumulated depreciation and impairment of mining assets			137,676				133,871
Accumulated depreciation and impairment of IT equipment			20,033				19,950
Accumulated depreciation and impairment of energy generating assets			27,742				26,621
Accumulated depreciation and impairment of machinery, plant and equipment			1,904,580				1,812,179
Total			2,727,303				2,608,131

 

 

Note 14

Property, plant and equipment, (continued)

 

14.1

Types of property, plant and equipment, continued

 

(1)

The detail of machinery, plant and equipment is as follows:

 

		6/30/2017 ThUS$				31/12/2016 ThUS$
Description of classes of property, plant and equipment
Property, plant and equipment, net
Pumps			32,642				40,306
Conveyor belt			26,278				28,307
Crystallizer			16,652				17,585
Plant equipment			191,057				208,137
Water tanks			9,666				10,614
Filter			19,816				21,484
Facilities/electrical equipment			104,443				111,876
Other machinery, plant and equipment			52,478				57,298
Piping			113,538				124,699
Pond			284,084				299,956
Well			46,016				50,647
Spare parts			44,975				50,731
Total			941,645				1,021,640

 

 

Note 14

Property, plant and equipment (continued)

 

14.2

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

 

Reconciliation of changes in property, plant and equipment by class as of June 30, 2017 and December 31, 2016:

 

Reconciliation of changes in property, plant and equipment by class as of June 30, 2017, 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			32,702				582,082				253,555				10,819				18,259				17,731				7,522				158,514				20,316				34,812				170,710				2,833,819				4,140,841
Changes
Additions			-				42				227				-				-				29				52				-				-				-				52,530				992				53,872
Disposals			-				-				(2,483	)			(54	)			-				-				-				-				-				-				(3,918	)			-				(6,455	)
Increase (decrease) in foreign currency translation difference			4				2				9				2				-				10				-				-				-				-				-				2				29
Reclassifications			-				2,774				944				-				209				182				11				-				-				71				(21371	)			17,179				(1	)
Other increases (decreases) (*)			-				-				1,271				-				-				522				-				276				-				-				(8,603	)			(5,767	)			(12,301	)
Decreases for classification as held for sale (1)			36				-				55				-				-				-				-				-				-				-				-				-				91
Total changes			40				2,818				23				(52	)			209				743				63				276				-				71				18,638				12,406				35,235
Closing balance			32,742				584,900				253,578				10,767				18,468				18,474				7,585				158,790				20,316				34,883				189,348				2,846,225				4,176,076

 

Reconciliation of changes in property, plant and equipment by class as of June 30, 2017, 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			-				(344,497	)			(227,138	)			(7,464	)			(16,486	)			(14,089	)			(5,836	)			(133,871	)			(19,950	)			(26,621	)			-				(1,812,179	)			(2,608,131	)
Changes
Disposals			-				-				2,483				-				-				-				-				-				-				-				-				-				2,483
Depreciation expense			-				(17,869	)			(3,510	)			(329	)			(599	)			(346	)			(382	)			(3,851	)			(70	)			(1,119	)			-				(92,676	)			(120,751	)
Impairment			-				-				-				-				-				-				-				-				-				-				-				-				-
Increase (decrease) in foreign currency translation difference			-				(2	)			(2	)			(1	)			-				(5	)			-				-				-				-				-				-				(10	)
Reclassifications			-				-				(4	)			-				(6	)			(9	)			-				-				-				-				-				19				-
Other increases (decreases) (*)			-				(23	)			(962	)			46				(4	)			(233	)			(4	)			46				(13	)			(2	)			-				256				(893	)
Decreases for classification as held for sale (1)			-				-				(1	)			-				-				-				-				-				-				-				-				-				(1	)
Total changes			-				(17,894	)			(1,996	)			(284	)			(609	)			(593	)			(386	)			(3,805	)			(83	)			(1,121	)			-				(92,401	)			(119,172	)
Closing balance			-				(362,391	)			(229,134	)			(7,748	)			(17,095	)			(14,682	)			(6,222	)			(137,676	)			(20,033	)			(27,742	)			-				(1,904,580	)			(2,727,303	)

 

  

Note 14

Property, plant and equipment (continued)

 

14.2

Reconciliation of changes in property, plant and equipment by type, continued:

 

Reconciliation of changes in property, plant and equipment by class as of June 30, 2017, 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			32,702				237,585				26,417				3,355				1,773				3,642				1,686				24,643				366				8,191				170,710				1,021,640				1,532,710
Changes
Additions			-				42				227				-				-				29				52				-				-				-				52,530				992				53,872
Disposals			-				-				-				(54	)			-				-				-				-				-				-				(3,918	)			-				(3,972	)
Depreciation expense			-				(17,869	)			(3,510	)			(329	)			(599	)			(346	)			(382	)			(3,851	)			(70	)			(1,119	)			-				(92,676	)			(120,751	)
Impairment			-				-				-				-				-				-				-				-				-				-				-				-				-
Increase (decrease) in foreign currency translation difference			4				-				7				1				-				5				-				-				-				-				-				2				19
Reclassifications			-				2,774				940				-				203				173				11				-				-				71				(21,371	)			17,198				(1	)
Other increases (decreases) (*)			-				(23	)			309				46				(4	)			289				(4	)			322				(13	)			(2	)			(8,603	)			(5,511	)			(13,194	)
Decreases for classification as held for sale (1)			36				-				54				-				-				-				-				-				-				-				-				-				90
Total changes			40				(15,076	)			(1,973	)			(336	)			(400	)			150				(323	)			(3,529	)			(83	)			(1,050	)			18,638				(79,995	)			(83,937	)
Closing balance			32,742				222,509				24,444				3,019				1,373				3,792				1,363				21,114				283				7,141				189,348				941,645				1,448,773

 

(*) The net balance of other increases (decreases) corresponds to: 1) Work in progress which are expensed to profit or loss (forming part of cost of sales and other expenses per function, as appropriate), 2) the variation representing the purchase and use of materials and spare parts and 3) reclassifications to other captions for the sale of property, plant and equipment and 4) projects which correspond to prospecting and development of small deposits.

 

(1) The Company classifies as non-current assets held-for-sale the property, plant and equipment (asset groups held-for-sale) whose date has been committed at the date of the consolidated financial statements or negotiations have started for such sale and the sale is estimated to occur within twelve months following such date.

These assets or asset groups held for sale are measured at the lower of carrying amount or the estimated sales value less costs to sell, and their amortization stops at the time they are classified as non-current assets held for sale.

 

 

Note 14

Property, plant and equipment (continued)

 

14.2

Reconciliation of changes in property, plant and equipment by type, continued:

 

Reconciliation of changes in property, plant and equipment by class as of December 31, 2016, 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			34,589				564,708				248,493				16,170				17,877				18,858				7,323				157,481				19,732				34,579				151,831				2,751,631				4,023,272
Changes
Additions			-				-				545				49				-				753				-				-				-				-				145,605				2.146				149.098
Disposals			-				-				(753	)			(5,540	)			(28	)			(1	)			-				-				-				-				(3,370	)			(1.165	)			(10.857	)
Increase (decrease) in foreign currency translation difference			28				1				65				8				-				52				-				-				-				-				-				19				173
Reclassifications			-				17,373				5,809				277				410				51				199				1,033				584				233				(101,104	)			80.987				5.852
Other increases (decreases) (*)			(24	)			-				(410	)			(145	)			-				(1,982	)			-				-				-				-				(22,252	)			201				(24.612	)
Decreases for classification as held for sale (1)			(1,891	)			-				(194	)			-				-				-				-				-				-				-				-				-				(2.085	)
Total changes			(1,887	)			17,374				5,062				(5,351	)			382				(1,127	)			199				1,033				584				233				18,879				82.188				117.569
Closing balance			32,702				582,082				253,555				10,819				18,259				17,731				7,522				158,514				20,316				34,812				170.710				2.833.819				4.140.841

 

Reconciliation of changes in property, plant and equipment by class as of December 31, 2016, 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			-				(310,676	)			(196,262	)			(12,355	)			(13,870	)			(15,393	)			(5,041	)			(122,034	)			(18,770	)			(23,332	)			-				(1,621,963	)			(2,339,696	)
Changes
Disposals			-				-				-				5,540				28				-				-				-				-				-				-				759				6,327
Depreciation expense			-				(33,808	)			(31,149	)			(764	)			(2,644	)			(846	)			(795	)			(11,837	)			(1,180	)			(3,289	)			-				(184,927	)			(271,239	)
Impairment			-				-				-				-				-				-				-				-				-				-				-				-				-
Increase (decrease) in foreign currency translation difference			-				(13	)			(14	)			(14	)			-				(28	)			-				-				-				-				-				-				(69	)
Reclassifications			-				-				-				-				-				-				-				-				-				-				-				(5,852	)			(5,852	)
Other increases (decreases) (*)			-				-				258				129				-				2,178				-				-				-				-				-				(196	)			2,369
Decreases for classification as held for sale (1)			-				-				29				-				-				-				-				-				-				-				-				-				29
Total changes			-				(33,821	)			(30,876	)			4,891				(2,616	)			1,304				(795	)			(11,837	)			(1,180	)			(3,289	)			-				(190,216	)			(268,435	)
Closing balance			-				(344,497	)			(227,138	)			(7,464	)			(16,486	)			(14,089	)			(5,836	)			(133,871	)			(19,950	)			(26,621	)			-				(1,812,179	)			(2,608,131	)

 

 

Note 14

Property, plant and equipment (continued)

 

14.2

Reconciliation of changes in property, plant and equipment by type, continued:

 

Reconciliation of changes in property, plant and equipment by class as of December 31, 2016, 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			34,589				254,032				52,231				3,815				4,007				3,465				2,282				35,447				962				11,247				151,831				1,129,668				1,683,576
Changes
Additions			-				-				545				49				-				753				-				-				-				-				145,605				2,146				149,098
Disposals			-				-				(753	)			-				-				(1	)			-				-				-				-				(3,370	)			(406	)			(4,530	)
Depreciation expense			-				(33,808	)			(31,149	)			(764	)			(2,644	)			(846	)			(795	)			(11,837	)			(1,180	)			(3,289	)			-				(184,927	)			(271,239	)
Impairment			-				-				-				-				-				-				-				-				-				-				-				-				-
Increase (decrease) in foreign currency translation difference			28				(12	)			51				(6	)			-				24				-				-				-				-				-				19				104
Reclassifications			-				17,373				5,809				277				410				51				199				1,033				584				233				(101,104	)			75,135				-
Other increases (decreases) (*)			(24	)			-				(152	)			(16	)			-				196				-				-				-				-				(22,252	)			5				(22,243	)
Decreases for classification as held for sale (1)			(1,891	)			-				(165	)			-				-				-				-				-				-				-				-				-				(2,056	)
Total changes			(1,887	)			(16,447	)			(25,814	)			(460	)			(2,234	)			177				(596	)			(10,804	)			(596	)			(3,056	)			18,879				(108,028	)			(150,866	)
Closing balance			32,702				237,585				26,417				3,355				1,773				3,642				1,686				24,643				366				8,191				170,710				1,021,640				1,532,710

 

(*) The net balance of other increases (decreases) corresponds to: 1) Work in progress which are expensed to profit or loss (forming part of cost of sales and other expenses per function, as appropriate), 2) the variation representing the purchase and use of materials and spare parts 3) projects corresponding mainly to exploration expenditures and stain development.

 

 

Note 14

Property, plant and equipment (continued)

 

14.3

Detail of property, plant and equipment pledged as guarantee

 

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

 

14.4

Impairment of assets

 

As indicated in Note 3.28 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 June 30, 2017, there were no impairment adjustments and as of December 31, 2016 there were impairment adjustments associated with the closure of the railway facilities for the transportation of products.

 

Railway for transportation of products from the Coya Sur location and the Port of Tocopilla

 

As a result of the rain storms that affected the Tocopilla Zone at the beginning of August 2015, SQM S.A. confirmed the existence of damages in several zones in the railway between the sites Coya Sur and Tocopilla. Accordingly, starting from such date the Company has used the transport of trucks replacing the transport through the railway. SQM has performed several internal and external studies with the purpose of determining the costs and terms necessary to repair the damages in the railway.

 

The analysis of the internal and external reports allows concluding that the costs associated with repairing the damages caused by the rain storms would imply long-terms and high costs, and accordingly, it is not convenient at short and medium-term to repair the railway. Such decision does not affect the production process or imply additional employee reductions.

 

Consequently, SQM has adjusted the value of the assets associated with the railway (fixed equipment, facilities and rolling equipment), which has translated into a charge of approximately US$ 32 million which are reflected in the line other expenses by function in the consolidated statement of income for the period. Such amount approximately represents 0.8% of SQM’s total assets and 11% of revenue reported at the end of December 2016.

 

14.5

Additional information

 

Interest capitalized in construction-in-progress:

 

The amount capitalized for this concept amounted to ThUS$2,462 as of June 30, 2017 and ThUS$ 5,406 as of December 31, 2016.

 

Financing costs are not capitalized for periods which exceed the normal term of acquisition, construction or installation of the asset, such as the case of delays, interruptions or temporary suspension of the project due to technical, financial or other issues, which prevent that the asset is maintained in good conditions for its use.

 

Note 14

Property, plant and equipment (continued)

 

14.5

Additional information, continued

 

Available for sale assets

 

Non-current assets held for sale and the components of groups held for sale classified as held for sale are recorded in the Consolidated Statement of Financial Position in a single line under the following concept: “Non-current assets or asset groups for disposal classified as held for sale.”

 

The main classes of assets of non-current assets held for sale are shown below.

 

Available for sale assets		6/30/2017				12/31/2016
		ThUS$				ThUS$
Land			1,741				1,891
Facilities and fixtures			109				165
Total			1,850				2,056

 

Note 15

Employee benefits

 

15.1

Provisions for employee benefits

 

Classes of benefits and expenses by employee		6/30/2017				12/31/2016
		ThUS$				ThUS$
Current
Profit sharing and bonuses			9,936				20,998
Total			9,936				20,998
Non-current
Profit sharing and bonuses			2,401				-
Severance indemnity payments			24,164				22,532
Total			26,565				22,532

 

 

Note 15

Employee benefits (continued)

 

15.2	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 leaves and other leaves, 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 which applies the definitions under 15.4 below.

 

SQM maintains incentive programs for its employees based on the 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 the employee appraisal process.

 

Employee benefits include retention bonuses for the Company’s executives, which are linked to the Company’s share price and it is paid in cash. The short-term portion is presented as provision for current employee benefits and the long-term portion as non-current.

 

The bonus provided to the Company’s directors is calculated based on Profit for the period at each year-end and will consider the application of a percentage factor.

 

The benefit related to vacations (short-term benefits to employees, current), which is provided in the Labor Code which indicates that employees with more than a year of service will be entitled to annual holidays for a period not lower than fifteen paid business days. The Company provides the benefit of two additional vacation days (classified in Note 18.3).

 

Staff severance indemnities are agreed and payable based on the last salary for each year of service for the Company or with certain maximum limits in respect to the number of years to be considered or in respect to monetary terms. In general, this benefit is payable when the employee or worker ceases to provide his/her services to the Company and the right for its collection can be acquired because of different causes, 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 depending employees regulated by the Chilean Labor Code. Article 5 of this law provided the financing of this insurance through monthly contribution payments by both the employee and the employer.

 

 

Note 15

Employee benefits (continued)

 

15.3

Other long-term benefits

 

The other long-term benefits relate to staff severance indemnities and are recorded at their actuarial value.

 

		6/30/2017				12/31/2016
Staff severance indemnities at actuarial value		ThUS$				ThUS$
Staff severance indemnities, Chile			22,643				21,384
Other obligations in companies elsewhere			1,521				1,148
Total other non-current liabilities			24,164				22,532

 

Staff severance indemnities have been calculated under the actuarial assessment method of the Company’s obligations with respect to staff severance indemnities, which relate to defined benefit plans which consist 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 for the payment of staff severance indemnities related to retirements, 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 4.577%.

 

Benefit payment conditions

 

The staff severance indemnity benefit relates to remuneration days for year worked for the Company with no limit of salary or years of services for the Company, when employees cease to work for the Company due to turnover or death. In this case, the maximum age for men is 65 years and 60 years old for women, which are the usual ages for retirement due to achieving the senior citizen age according to the Chilean pensions system provided in Decree Law 3,500 of 1,980.

 

Methodology

 

The determination of the obligation for benefits under IAS 19 Projected Benefit Obligation (PBO) is described as follows:

 

To determine the Company's total liability, we used a mathematical simulation model which was programmed using a computer and which processed the situation of each employee on an individual basis.

 

 

Note 15

Employee benefits (continued)

 

15.3

Other long-term benefits, continued

 

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. Thus, information on each person was simulated from the beginning of the life of his/her employment contract or when he/she started earning benefits up to the month in which it reaches the 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 indemnity related to retirement due to old age.

 

The methodology followed to determine the accrual for all the employees adhered to agreements has considered turnover rates and the mortality rate RV-2009 established by the Chilean Superintendence of Securities and Insurance 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.

 

15.4

Post-employment benefit obligations

 

Our subsidiary SQM North America, has established with its employees, a pension plan until 2002 called “SQM North America Retirement Income Plan”, whereby obligation is calculated measuring the expected future forecasted 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 employee benefits related to pension plans based on the 401-K system, which do not generate obligations for the Company.

 

15.5

Staff severance indemnities

 

As of June 30, 2017 and December 31, 2016, severance indemnities calculated at the actuarial value are as follows:

 

		6/30/2017 ThUS$				12/31/2016 ThUS$
Opening balance			(22,532	)			(21,995	)
Current cost of service			(570	)			(1,333	)
Interest cost			(688	)			(1,407	)
Actuarial gain/loss			(483	)			(2,253	)
Exchange rate difference			(278	)			(1,215	)
Benefits paid during the year			387				5,671
Balance			(24,164	)			(22,532	)

 

 

Note 15

Employee benefits (continued)

 

15.5

Staff severance indemnities, continued

 

a)

Actuarial assumptions

 

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

 

		6/30/2017				12/31/2016
Mortality rate			RV - 2014				RV - 2009
Actual annual interest rate			4.577	%			4.522	%
Voluntary retirement rotation rate:
Men			6.49	%			7.16	%		annual
Women			6.49	%			7.16	%		annual
Salary increase			3.58	%			3.60	%		annual
Retirement age:
Men			65				65			years
Women			60				60			years

 

b)

Sensitivity analysis of assumptions

 

As of June 30, 2017 and December 31, 2016, on the actuarial calculation, the Company has conducting the sensitivity analysis of the main assumptions, determining the following:

 

Sensitivity analysis 6/30/2017		Effect  + 100 basis points ThUS$				Effect - 100 basis points ThUS$
Discount rate			(1,755	)			2,147
Employee turnover rate			(222	)			248

 

Sensitivity analysis 12/31/2016		Effect  + 100 basis points ThUS$				Effect - 100 basis points ThUS$
Discount rate			(1,576	)			1,773
Employee turnover rate			(207	)			231

 

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

 

 

Note 16

Executive compensation plan

 

Through the present date, the Company has a compensation plan with the purpose of encouraging the Company’s executives and encourage them to stay in the Company, by granting payments based on the change in price of SQM’s shares.

 

Average Share Price Spread

 

Plan characteristics

 

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

 

Plan participants

 

This compensation plan includes 39 of the Company’s executives, who are entitled to receive such benefit, provided that they continue to work for the Company through the end of 2020. The payment dates, if applicable, will be during the first quarter of 2021.

 

Compensation

 

The compensation payable to each executive results from multiplying a) by b):

 

a)

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

b)

For a number of shares equivalent that were assigned individually 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.

 

 

Note 17

Disclosures on equity

 

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

 

17.1

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 SQM.

 

Capital management must comply with, among others, the limits contemplated in the Financing Policy approved Board of Directors, which establish a maximum consolidated indebtedness level of 1.5 times the debt/equity. This limit can be exceeded only if the Company’s management has a written and previously granted authorization issued at the Extraordinary Shareholders’ Meeting.

 

In addition, capital management must comply with the external capital requirements imposed (or covenants) in its financial obligations, which regulate the indebtedness level by 1.2 times, in its more strict level.

 

In conjunction with the level of indebtedness, it is also important for the Company to maintain a comfortable profile of maturities for its financial obligations, in order to oversee the relation between its short-term financial obligations and the long-term maturities, and the relation they have with the Company’s asset distribution. Consequently, the Company has maintained a liquidity level of 3 times during the last periods.

 

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

 

CAPITAL MANAGEMENT		6/30/2017				12/31/2016				Description (1)		Calculation (1)
Net Financial Debt ThUS$			353,520				461,569			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			4.19				4.02			Current Asset divided by Current Liability		Total Current Assets / Total Current Liabilities
Net Debt / Capitalization			0.14				0.17			Net Financial Debt divided by Total Equity		Net financial debt / ( Net financial debt + Total Equity)
ROE			15.3	%			12.25	%		Income divided by Total Equity		Total Income / Equity (UH 12 months)
ROA			19.5	%			16.0	%		EBITDA – Depreciation divided by Net Total Assets of financial resources less  related parties investments		(Gross Income – Administrative Expenses)/ (Total Assets – Cash and Cash Equivalents – Other Current Financial Assets – Other Non-Current Financial Assets – Equity-accounted Investees) (UH 12 months)
Indebtedness			0.84				0.83			Total Liability on Equity		Total Liabilities / Total Equity

 

(1) Assumes the absolute value of the accounting records

 

 

Note 17

Disclosures on equity (continued)

 

17.1

Capital management, continued

 

The Company’s capital requirements change depending on variables such as work capital requirements, of new investment financing and dividends, among others. The Company manages its capital structure and makes adjustments on the basis of 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.

 

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 (or covenants) have been recorded.

 

17.2

Disclosures on preferred share capital

 

Issued share capital is divided into 263,196,524 fully paid and subscribed shares composed of 142,819,552 Series "A" shares and 120,376,972 Series “B” shares, where both series are preferred shares.

 

The preferential voting rights for each series are detailed as follows:

 

Series “A”:

 

If the election of the Company’s President results in a tie vote, the Company's directors may vote once again, without the vote of the director elected by the Series B shareholders.

 

Series “B”:

 

1)

A general or extraordinary shareholders' meeting may be called at the request of shareholders representing 5% of the Company's Series B shares.

 

2)

An extraordinary meeting of the Board of Directors may be called with or without the agreement of the Company's President, at the request of the director elected by Series B shareholders.

 

As of June 30, 2017 and December 31, 2016, the Group does not maintain shares in the parent either directly or through its companies in which it has investments.

 

 

Note 17

Disclosures on equity (continued)

 

17.2

Disclosures on preferred share capital, continued

 

Detail of types of capital in preference shares:

 

Type of capital in preferred shares Description of type of capital in		6/30/2017								12/31/2016
preferred shares		Series A				Series B				Series A				Series B
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 ThUS$			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, total			142,819,552				120,376,972				142,819,552				120,376,972

 

As of June 30, 2017 and December 31, 2016, the Company has not placed any new issuances of shares on the market.

 

 

Note 17

Disclosures on equity (continued)

 

17.3

Disclosures on reserves in equity

 

As of June 30, 2017 and December 31, 2016, this caption comprises the following:

 

		6/30/2017				12/31/2016
		ThUS$				ThUS$
Reserve for currency exchange conversion			(20,964	)			(19,463	)
Reserve for cash flow hedges			2,221				64
Reserve for gains and losses from financial assets measured at fair value through other comprehensive income			(390	)			3,513
Reserve for actuarial gains or losses in defined benefit plans			(5,311	)			(4,834	)
Other reserves			11,332				7,832
Total other reserves			(13,112	)			(12,888	)

 

Reserves for currency exchange conversion

 

This balance reflects retained earnings for changes in the exchange rate when converting financial statements of subsidiaries whose functional currency is from 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; accordingly, have 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.

 

Reserve for actuarial gains or losses in defined benefit plans

 

For the 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 IAS using a net salary progressive rate net of adjustments to inflation, mortality and turnover assumptions, deducting the resulting amounts at present value using a 5.5% interest rate for 2016 and 2015.

 

 

Note 17

Disclosures on equity (continued)

 

17.3

Disclosures on reserves in equity, continued

 

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 1/1/2016			(14,332	)			(2,144	)			445				(2,077	)			(309	)			-				-				(1,677	)			(20,230	)			136				(20,094	)
Increase (decrease) in reserves			(2,252	)			3,626				-				(3,397	)			-				4,813				-				9,509				12,299				-				12,299
Deferred taxes			-				-				(470	)			-				921				-				(1,300	)			-				-				(849	)			(849	)
Reclassification of loss in reserves			-				(1,393	)			-				28				-				-				-				-				(1,365	)			-				(1,365	)
Closing balance as of 12/31/2016			(16,584	)			89				(25	)			(5,446	)			612				4,813				(1,300	)			7,832				(9,296	)			(713	)			(10,009	)
Increase (decrease) in reserves			(1,498	)			2,133				-				(606	)							(3,865	)			-				3,500				(335	)			-				(335	)
Deferred taxes			-				-				24				-				129				-				(38	)			-				-				115				115
Reclassification of loss in reserves			-				-				-				-				-				-				-				-				-				-				-
Closing balance as of 06/30/2017			(18,082	)			2,222				(1	)			(6,052	)			741				948				(1,338	)			11,332				(9,631	)			(598	)			(10,229	)

 

 

Note 17

Disclosures on equity (continued)

 

17.3

Disclosures on reserves in equity, continued

 

Other reserves

 

Corresponds to the legal reserves reported in the individual financial statements of the subsidiaries that are mentioned below and that have been recognized in the equity of SQM, through the application of the equity method.

 

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

 

Note 17

- Disclosures on equity (continued)

 

17.4

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 period for 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).

 

On April 11, 2017, the Company’s Board of Directors at the extraordinary meeting recommended to the Ordinary Shareholders’ Meeting (the Meeting) which was held on April 28, 2017, that the Company distributes and pays as dividend declared 100% of net profit for distribution obtained by the Company during the commercial year 2016. Such recommendation was accepted by the Meeting.

 

For 2017, the Company has defined the following dividend policy: (a) Distributing and paying as dividend declared and in favor of the related shareholder, a percentage of the profits that will be determined as per the following financial parameters

 

The Company’s dividend policy for 2016 is as follows:

 

-

i) 100% of the profit for 2017 if all the copulative financial parameters are met: (a) that the addition of cash and cash equivalents and other current financial assets (“Cash”) divided by the addition of other current financial liabilities (the “Short-term Financial Liabilities”) is equal to or higher than 2.5 times, and (b) the addition of current liabilities and non-current liabilities (“Total Liabilities”) divided by total equity (“Equity”) is equal to or lower than 1.1 times

 

-

(ii) 80% of profit for 2017 if all the following copulative financial parameters are met: (a) that Cash divided by Short-term Financial Liabilities is equal to or higher than 2.0 times, and (b) Total Liabilities divided by Total Equity is equal to or lower than 1.2 times

 

-

iii) 60% of profit for 2017 if all the following copulative financial parameters are met: (a) that Cash divided by Short-term Financial Liabilities is equal to or higher than 1.5 times, and (b) Total Liabilities divided by Total Equity is equal to or lower than 1.3 times. Should none of these parameters be met, the Company will distribute and pay as dividend declared and in favor of the related shareholders, 50% of profit for 2017

 

Note 17

Disclosures on equity (continued)

 

17.5

Interim and provisional dividends

 

On May 17, 2017, the Board of Directors unanimously agreed to pay a provisional dividend equivalent to US$ 0.39222 per share with a debit to profit for 2017. Such amount will be paid in its equivalent in Chilean pesos, the domestic currency, according to Observed U.S. dollar exchange rate published in the Official Gazette on May 31, 2017.

 

At the General Ordinary Shareholders' Meeting of April 28, 2017, the shareholders agreed to the payment of a dividend declared of US$ 1.05735 per share from the net profit for distribution obtained during commercial year 2016, which must be discounted the sum of US$ 0.85487 per share, which was already paid as provisional dividend, which results in a remaining balance of US$ 0.20248 per share.

 

On November 23, 2016, the Board of Directors of Sociedad Química y Minera de Chile S.A, approved paying a provisional dividend of US$225 million, equivalent to US$0.85487 per share with a charge to profit for 2016. Such amount would be paid at its equivalent in Chilean pesos using the Observed U.S. dollar exchange rate published in the Official Gazette on December 13, 2016.

 

This payment of dividend would be made in favor of the shareholders personally or through their duly authorized representatives from 9:00 am on December 20, 2016. The shareholders of record with the Shareholder’ Registry 5 business days prior to December 20, 2016

 

Change in 2016 Dividend Policy

 

On November 23, 2016, the provisional dividend described above and the Dividend Policy for Commercial Year 2016 were approved as communicated at the Ordinary Shareholders’ Meeting of April 26, 2016 (the “Dividend Policy”, replacing it with the following

 

(i)       not to distribute more provisional dividends during 2016 except for the dividend approved on such date which will be paid during the last quarter of 2016.

 

(ii)      the remaining amount of net profit for 2016, if any, will be withheld and destined to the financing of own operations or activities associated with one or more of the Company’s investment projects.; however, all of this from the possible and future capitalization of all or a portion of this or its distribution as a dividend declared as determined by the shareholders at the Company’s Ordinary Shareholders’ Meeting

 

(iii)     The Dividend Policy described above relates to the intent or expectation of the Board of Directors with respect to such matter. Consequently, compliance with such Dividend Policy is necessarily dependent on the net profits which are finally obtained and the profit or loss indicated by the Company’s regular forecasts.

 

To the extent that the Dividend Policy is changed, the Board of Directors will timely communicate and inform its shareholders on any such change through an essential even

 

Note 17

- Disclosures on equity (continued)

 

17.4

Dividend policies, continued

 

On March 22, 2016, the Company communicated that the Directors of Sociedad Química y Minera de Chile S.A. (SQM), at the Ordinary Meeting unanimously agreed the following:

 

Partially amend the “Dividend Policy for Commercial Year 2015 of SQM S.A.” which was reported to the Ordinary Shareholders’ Meeting of April 24, 2015 with the main purpose of including in such “Policy” the payment of an interim dividend of US$150,000,000, equivalent to US$0.56992 per share, which will be paid with a charge to retained earnings of SQM S.A.

 

Dividends presented deducted from equity are:

 

		6/30/2017 ThUS$				12/31/2016 ThUS$
Dividends attributable to owners of the parent			54,991				3,014
Provisional dividend			103,232				225,000
Interim dividend			-				150,000
Dividend payable			101,154
Total			259,377				378,014

 

Note 18

Provisions and other non-financial liabilities

 

18.1

Types of provisions

 

		6/30/2017												12/31/2016
		Current				Non- current				Total				Current				Non- current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Provision for legal complaints (*)			20,421				3,000				23,421				20,867				3,000				23,867
Provision for dismantling, restoration and rehabilitation cost (**)			-				10,619				10,619				-				5,890				5,890
Other provisions			15,303				-				15,303				21,045				44				21,089
Total			35,724				13,619				49,343				41,912				8,934				50,846

 

(*) Provisions for legal complaints relate to legal expenses for lawsuits whose resolution are pending, and correspond to funds estimated necessary to make the disbursement of expenses incurred for this purpose. This provision relates mainly to the litigation of its subsidiary located in Chile, Brazil and the United States (see note 19.1). Legal expenses: Such provision depends on the pending resolution of a legal lawsuit to pay the associated expenses and expenses incurred during such lawsuit (mainly incurred in Brazil, Chile and the United States). Provision for taxes in tax litigation: This provision relates to litigation pending resolution related to tax in Brazil for two of our subsidiaries, SQM Brasil and NNC.

 

(**) Such provision is calculated considering the instructions issued by the regulating agency (Servicio Nacional de Geología y Minería de Chile, Sernageomin (The Chilean National Geology and Mining Service).

 

(***) Rent for the lease contract with CORFO: This relates to the lease of mining properties that SQM Salar S.A. pays to CORFO on a quarterly basis. The amount payable is calculated based on the sales of products extracted from the Atacama Saltpeter Deposit.

 

Note 18

Provisions and other non-financial liabilities (continued)

 

18.2

Description of other provisions

 

Current provisions, other short-term provisions		6/30/2017				12/31/2016
		ThUS$				ThUS$
Provision for tax loss in fiscal litigation			739				750
Rent under Lease contract with CORFO			9,665				11,452
Provision for additional tax related to foreign loans			412				450
End of agreement bonus			2,472				5,365
Directors’ per diem allowance			1,571				1,918
Miscellaneous provisions			444				1,110
Total			15,303				21,045
Other long-term provisions
Miscellaneous			-				44
Total			-				44

 

18.3

Other liabilities current

 

Description of other liabilities		6/30/2017				12/31/2016
		ThUS$				ThUS$
Tax withholdings			6,644				14,340
VAT payable			4,355				3,949
Guarantees received			2,638				2,638
Accrual for dividend			101,154				1,189
Monthly tax provisional payments			9,958				9,545
Deferred income			14,375				6,507
Withholdings from employees and salaries payable			5,333				5,552
Accrued vacations			15,140				15,841
Other current liabilities			2,355				2,359
Total			161,952				61,920

 

Note 18

Provisions and other non-financial liabilities (continued)

 

18.4

Changes in provisions

 

		6/30/2017
Description of items that gave rise to variations		Guarantee				Restructuring				Legal complaints				Onerous contracts				Provision for dismantling, restoration and rehabilitation cost				Other provisions				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Total provisions, initial balance			-				-				23,867				-				5,890				21,089				52,846
Changes in provisions:
Additional provisions			-				-				2,779				-				4,729				51,844				59,362
Provision used			-				-				(3,225	)			-				-				(57,450	)			(60,675	)
Increase(decrease) in foreign currency exchange			-				-				-				-				-				(17	)			(17	)
others			-				-				-				-				-				(163	)			(163	)
Total provisions, final balance			-				-				23,421				-				10,619				15,303				49,343

 

		12/31/2016
Description of items that gave rise to variations		Guarantee				Restructuring (*)				Legal complaints				Onerous contracts				Provision for dismantling, restoration and rehabilitation cost				Other provisions				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Total provisions, initial balance			-				-				21,067				-				5,890				13,445				40,402
Changes in provisions:
Additional provisions			-				-				2,800				-				-				12,764				15,564
Provision used			-				-				-				-				-				(5,715	)			(5,715	)
Increase(decrease) in foreign currency exchange			-				-				-				-				-				128				128
Others			-				-				-				-				-				467				467
Total provisions, final balance			-				-				23,867				-				5,890				21,089				50,846

 

Note 18

Provisions and other non-financial liabilities (continued)

 

18.5

Detail of main types of provisions

 

Legal expenses: This provision depends on the pending resolution of a legal lawsuit, to pay the expenses associated to and incurred during such lawsuit (incurred mainly in Brazil, Chile and the United States).

 

Tax accrual in tax litigation: This accrual relates to lawsuits pending resolution related to taxes in Brazil for two of our subsidiaries, SQM Brazil and NNC.

 

Rent under lease contract with CORFO: Relates to the commercialization of mining properties that SQM Salar S.A. pays the Economic Development Agency for on a quarterly basis. The amount of the lease payable is calculated based on sales of products extracted from the Atacama Saltpeter deposit.

 

The settlement of the aforementioned amounts is performed on a quarterly basis.

 

To date, the Company and its subsidiaries have no significant uncertainties about the timing and amount of one class of provision.

 

Note 19

Contingencies and restrictions

 

According to note 18.1 the Company has only registered a provision for the lawsuits in which the probability that judgments are unfavorable for the Company is more likely than not. The Company is party to lawsuits and other relevant legal actions that are detailed as follows:

 

19.1

Lawsuits and other relevant events

 

1.	Plaintiff	:	Nancy Erika Urra Muñoz.
	Defendants	:	Fresia Flores Zamorano, Duratec-Vinilit S.A. and the Company and their
			Insurers.
	Date	:	December 2008.
	Court	:	1st Civil Court of Santiago.
	Reason	:	Labor Accident.
	Status	:	Judgment favorable for the Company. Appeal filed by the plaintiff.
	Nominal value	:	ThUS$550.
2.	Plaintiff	:	City of Pomona, California USA.
	Defendant	:	SQM North America Corporation.
	Date	:	December 2010.
	Court	:	United States District Court Central District of California.
	Reason	:	Payment of expenses and other amount related to the treatment of groundwater to allow for consumption by removing the existing perchlorate in such groundwater and that supposedly come from Chilean fertilizer.
	Status	:	On August 7, 2017, the Unites States Court of Appeals for the Ninth Circuit ordered the beginning of a new trial.
	Nominal value	:	ThUS$32,000.
3.	Plaintiff	:	City of Lindsay, California USA.
	Defendant	:	SQM North America Corporation and the Company (still not noticed)
	Date	:	December 2010.
	Court	:	United States District Court Eastern District of California.
	Reason	:	Payment of expenses and other amount related to the treatment of groundwater to allow for consumption by removing the existing perchlorate in such groundwater and that supposedly come from Chilean fertilizer.
	Status	:	Filing of the case. Processing suspended.
	Nominal value	:	Not possible to determine.

 

Note 19

Contingencies and restrictions (continued)

 

19.1

Lawsuits and other relevant events, continued

 

4.	Plaintiff	:	H&V Van Mele N.V.
	Defendant	:	SQM Europe N.V. and its insurance companies.
	Date	:	July 2013.
	Court	:	Commercial Court of Dendermonde.
	Reason	:	Alleged indirect responsibility for the absence of adequate specification for the SOP–WS by the Belgian distributor.
	Status	:	Judgment stage.
	Nominal value	:	ThUS$430.
5.	Plaintiff	:	Carlos Aravena Carrizo et al.
	Defendant	:	SQM Nitratos S.A. and its insurers.
	Date	:	May 2014.
	Court	:	18th Civil Court of 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	:	Evidence.
	Nominal value	:	ThUS$650.
6.	Plaintiff	:	Corporación de Fomento de la Producción (“Corfo”).
	Defendant	:	SQM Salar S.A. (“SQM Salar”); SQM Potasio S.A. and the Company
	Date	:	May 2014.
	Court	:	Arbitration court.  Arbitrator Mr. Héctor Humeres
	Reason	:	(a) Lease Contract (“the “Lease”) early termination action filed on November 12, 1993 by Corfo for (i) alleged failure to fully pay the quarterly lease payments associated with certain products during 2009-2013; and (ii) alleged absence of boundary demarcation of mining properties seeking compensation for damages other related contracts among other matters involving compensation for damages. (b) Request filed by Corfo for early Project Contract termination associated with the contract entered into on November 12, 1993 and other related contracts, among other matters involving compensation for damages; and (c) Request filed by SQM Salar and the Company to state whether lease payments made by SQM Salar under the Lease comply with the agreement entered into by the parties and whether the rent formula applied has been useful for Corfo.
	Status	:	Settlement stage.
	Nominal value	:	Not determined.

 

Note 19

Contingencies and restrictions (continued)

 

19.1

Lawsuits and other relevant events, continued

 

7.	Plaintiff	:	Evt Consulting SpA.
	Defendant	:	SQM Nitratos S.A.
	Date	:	October 2014.
	Court	:	23th Civil Court of Santiago.
	Reason	:	Lawsuit seeking compensation for damages related to the termination of the purchase and sale agreement for metallic structures.
	Status	:	Judgment of December 15, 2016 final judgment for the plaintiff. Absolves SQM Nitratos S.A. from the payment of compensation. Appeal and appeal in cassation on the form of presentation by the plaintiff and appeal filed by SQM Nitratos S.A. Judgment stage.
	Nominal value	:	ThUS$ 835.
8.	Plaintiff	:	Hugo Gutiérrez Gálvez
	Defendants	:	Senators Jaime Orpis B. and Fulvio Rossi C., the Company et al.
	Date	:	July 2015
	Court	:	8th Supervisory Court in Preliminary Proceedings of Santiago, Chile
	Reason	:	With respect to the Company the investigation of alleged liability under Law No. 20.393
	Instance	:	Investigation stage
	Nominal value	:	None
9.	Plaintiff	:	State Defense Council
	Defendant	:	The Company
	Date	:	December 2016
	Court	:	8th Supervisory Court in Preliminary Proceedings of Santiago, Chile
	Reason	:	With respect to the Company the investigation of alleged liability under Law No. 20.393
	Instance	:	Investigation stage
	Valor nominal	:	None

 

Note 19

Contingencies and restrictions (continued)

 

19.1

Lawsuits and other relevant events, continued

 

10.	Plaintiff	:	SQM Salar and the Company.
	Defendant	:	Seguros Generales Suramericana S.A. (formerly - RSA Seguros Chile S.A.)
	Date	:	August 29, 2016
	Court	:	Arbitration Court – Arbitrator Mr. Gonzalo Fernández.
	Reason	:	Complaint for forced compliance and collection of indemnification for insurance claim of February 7 and 8, 2013.
	Status	:	Deliberation stage finished
	Nominal value	:	US$ 20,657,860.
11.	Plaintiff	:	Tyne and Wear Pension Fund as represented by the Council of the Borough of South Tyneside acting as Lead Plaintiff .
	Defendant	:	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 noncompliance with the securities regulations in the United States by the Company.
	Status	:	Initial stage of disclosure of background information.
	Nominal value	:	Not determined.
12.	Plaintiff	:	Thorco Shipping A/S
	Defendant	:	the Company
	Date	:	January 2015.
	Court	:	Arbitration court – London Maritime Arbitrators' Association.
	Reason	:	Lawsuit seeking compensation for damages alleging a freight agreement breach.
	Status	:	On June 6, 2017, the Court rejected becoming aware of the Company's appeal. On August 21, 2017, the Company paid US$253,187 related to the alleged amount plus interests.
	Nominal value	:	ThUS$247

 

Note 19

Contingencies and restrictions (continued)

 

19.1

Lawsuits and other relevant events, continued

 

13.	Plaintiff	:	Ernesto Saldaña González et al.
	Defendant	:	SQM Salar S.A., SQM Industrial S.A. (“SQM Industrial”) 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 occurred in July 2014 in the María Elena location.
	Status	:	Evidentiary stage
	Nominal value	:	ThUS$ 515.
14.	Plaintiff	:	María Yolanda Achiardi Tapia et al.
	Defendant	:	SQM Salar and its insurance companies and other 5 defendants
	Date	:	February 2015.
	Court	:	1st Civil Court of Antofagasta.
	Reason	:	Lawsuit seeking compensation for damages for alleged civil liability under tort law arising from a traffic accident occurred in April 2011 in the city of Antofagasta.
	Status	:	Lawsuit pending notice to one of the defendants.
	Nominal value	:	ThUS$ 1,265.
15.	Plaintiff	:	the Company
	Defendants	:	AES Gener S.A. and Empresa Eléctrica Cochrane SpA.
	Date	:	May 11, 2017
	Court	:	Arbitration award in accordance with the Arbitration Rules established by the Center for Arbitration and Mediation of the Santiago Chamber of Commerce.
	Reason	:	Request for the interpretation of an electricity supply agreement alleging the right by the plaintiff to receive a collection in conformity with such agreement.
	Instance	:	Deliberation stage
	Nominal value	:	Not determined

 

Note 19

Contingencies and restrictions (continued)

 

19.1

Lawsuits and other relevant events, continued

 

16.	Plaintiff	:	AES Gener S.A. and Empresa Eléctrica Cochrane SpA.
	Defendant	:	the Company
	Date	:	May 2017
	Court	:	Arbitration award in accordance with the Arbitration Rules established by the Center for Arbitration and Mediation of the Santiago Chamber of Commerce
	Reason	:	Discrepancy with respect to the amount of an alleged right by the plaintiff to receive a collection in conformity with the agreement entered into by the parties.
	Instance	:	Deliberation stage
	Nominal value	:	Not determined
17.	Plaintiffs	:	Araya Oses, Antonio et al.
	Defendants	:	Transportes Buen Destino S.A. and SQM Salar.
	Date	:	February 17, 2017
	Court	:	1st Civil Court of Santiago
	Reason	:	Lawsuit for several or subsidiary liability for unjustified dismissal, seeking the voidance of the dismissal and collection of labor benefits.
	Instance	:	An appeal seeking voidance o the first instance judgment is pending.
	Nominal value	:	ThUS$ 235.
18.	Plaintiffs	:	Employee Union No. 2 of SQN Nitratos Nueva Victoria.
	Defendant	:	SQM Nitratos S.A.
	Date	:	November 23, 2016.
	Court	:	Labor Court of Iquique.
	Reason	:	Lawsuit alleging differences in the calculation of the bonus payable under the Collective Bargaining Agreement.
	Instance	:	At the evidentiary stage
	Nominal value	:	ThUS$ 385

 

Note 19

Contingencies and restrictions (continued)

 

19.1

Lawsuits and other relevant events, continued

 

19	Plaintiff	:	TBD
	Reason	:	Voluntary Winding up Statement (Law No. 20.720)
	Court	:	Civil Court of Colina
	Instance	:	On January 4, 2017 the voluntary winding up process began. On March 8, 2017, SQM Industrial verified credits in ordinary period associated with the sale of fuel of Ch$217,193,666 with express reserve as to the legal compensation applicable.
	Nominal value	:	Ch$217,193,666
20	Plaintiffs	:	TBD
	Defendant	:	SQM Salar.
	Date	:	None
	Court	:	Arbitration Court Arbitrator Mr. Jaime Martínez Tejeda.
	Reason	:	Discrepancies generated in the performance of the (i) lithium brine transportation agreement; and (ii) salt transportation agreement entered into between TBD and SQM Salar.
	Instance	:	The case has not been presented yet.
	Nominal value	:	Not determined

 

Note 19

Contingencies and restrictions (continued)

 

19.1

Lawsuits and other relevant events, continued

 

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 ThUS$1,200.

 

The Company has made efforts and continues making efforts to obtain payment of certain amounts that are still owed it on occasion of their 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 ThUS$200.

 

Note 19

Contingencies and restrictions (continued)

 

19.2

Restrictions to management or financial limits

 

Credit contracts subscribed by the SQM Group with domestic and foreign banks and the issuance of bonuses in the local and international market require that the Company comply with the following level of consolidated financial indicators, calculated for a moving period which considers the last twelve months:

 

-

To maintain a minimum equity of ThUS$1,000,000.

-

To maintain a Net Financial Debt and EBITDA ratio not higher than 3 times.

-

To maintain a Total Indebtedness Ratio not higher than 1.2 times Total Indebtedness level defined as the Total Liabilities ratio divided by Total Equity.

-

To maintain a ratio between the operating subsidiaries SQM Industrial S.A. and SQM Salar S.A., or their respective legal successor financial debt and the total Issuer’s consolidated current assets not higher than 0.3 times.

 

As of June 30, 2017, the aforementioned financial indicators are as follows:

 

Indicator		6/30/2017				12/31/2016
Equity ThUS$			2,248,089				2,307,272
Net Financial Debt/ EBITDA			0.4				0.58
Indebtedness			0.84				0.83
SQM Industrial and SQM Salar debt / Current assets			0.02				0.02

 

Issuance contracts for bonuses issued abroad does not require that the Company merge or dispose at any title the asset as a whole or as a substantial part of it, unless the following copulative conditions are met: (i) the legal successor company is an entity subject to Chilean or American laws, and assumes under a complimentary contract the Company’s obligations, (ii) the Issuer does not fail to comply immediately after the merge or disposal, and (iii) the Issuer delivers a legal opinion stating the merge or disposal and the complimentary contract meet the requirements described in the original contract.

 

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

 

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

 

Note 19

Contingencies and restrictions (continued)

 

19.3

Arbitration proceedings with CORFO

 

SQM Salar S.A. has signed the Lease, which establishes that the subsidiary must pay annual rent to for the commercialization of certain mining properties owned by Corfo. The amount of such rent is calculated on the basis of sales of each type of product. The Lease is in force until 2030, and rent began being paid in 1996 reflecting an expense amount of ThUS$ 21,612 as of June 30, 2017 (ThUS$ 41,962 as of December 31, 2016).

 

On 15 November 2013, Corfo sent a letter to SQM Salar S.A. stating its intention to (i) collect from SQM Salar the amount of Ch$2,530,298,919 (ThUS$4,823) that in Corfo’s opinion, SQM Salar would owe to it for the calculation and payment of the Lease; and (ii) require the constitution of an instance of arbitrage stated in the Lease with the purpose that the arbitrator determines if other alleged lease payment obligations may exist that SQM Salar could owe to Corfo under the Lease.

 

During May 2014, Corfo filed a lawsuit against SQM Salar requesting the early termination of the Lease and other requests explained in Note 19.1.

 

SQM Salar differs completely form Corfo’s view. In fact, the Lease has been in force for more than 20 years and during all this time, SQM Salar has paid to Corfo more than 80 quarterly payments in their entirety and on a timely basis that Corfo has received satisfactorily.

 

In our legal advisors’ opinion, there are no legal grounds to early terminate the lease agreement as noncompliance on which the lawsuit is based do not exist and, if any, these are not gross or essential or hinder the purpose of the Lease. In addition, the Company has never had the intention of deceiving and has always been fully transparent in providing the information delivered. The conflict rather corresponds to a discussion on the right formula to calculate the rent amount.

 

The total amount finally requested by Corfo was at least US$ 8,940,829 – plus interests and costs – and the arbitrage proceeding is close to the beginning of the evidentiary stage. Corfo and SQM Salar waived all recourses against the judgment provided by the arbitrator. However, it is not possible to discard the filing of the appeals allowed by the law. On August 17, 2016, Corfo noticed a new arbitration proceeding filed against SQM Potasios S.A., the Company and SQM Salar, by virtue of which requests the early termination of the project agreement entered into on November, 1993 and other related contract, among other matters.

 

Note 19

Contingencies and restrictions (continued)

 

19.3

Commitments, continued

 

On August 17, 2016, Corfo noticed a new arbitration proceeding filed against SQM Potasio S.A., the Company and SQM Salar, by virtue of which requests the early termination of the project agreement entered into on November, 1993 and other related contract, among other matters.

 

In addition, on September 28, 2016, the Company and SQM Salar S.A. have started the process for a third arbitrage proceeding with Corfo through which they expect to obtain a declaratory judgment which determines that in the payment of rent payments made under the Lease contract for the period elapsed of the contract there has been no damage for Corfo. The deliberation stage of this arbitrage proceeding has been completed.

 

During the period ended June 30, 2017, revenue related to products from the Atacama saltpeter deposit represented a 47.45% of total consolidated revenue of the Company for the same period. This corresponds to revenue considered in the potassium, lithium and by-product business lines.

 

Additionally, during the same period, SQM Salar sold potassium salts (sylvinite) and other potassium products for a total of US$ 41.4 million to SQM Industrial S.A., to be used as supplies in the production of potassium nitrate.

 

19.4

Environmental contingencies

 

On June 6, 2016, the Superintendence of the Environment (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 with certain variables in the Follow-up Plan and through the implementation of a mitigation action contemplated in the related Environmental Impact Study. The Company has submitted for the approval by the SMA a Compliance Program detailing the actions and commitments that the Company will perform to overcome the objections filed by such environmental authority. On June 29, the SMA rejected the Compliance Program submitted by the Company. On July 10, the Company presented the defense against the charges filed by the SMA.

 

Through resolution of November 28, 2016, confirmed through resolution of December 23, 2016, the SMA filed charges against SQM Salar for the extraction of brine exceeding that authorized, the gradual impact on the vital status of carobs, delivering incomplete information, the amendment of variables, among others.

 

SQM Salar has submitted a compliance program detailing the actions and commitments that it will undertake to overcome the objections filed by the SMA. The Chilean SMA is currently reviewing such compliance program.

 

Note 19

Contingencies and restrictions (continued)

 

19.5

Tax contingency

 

During 2015, the Company, SQM Salar and SQM Industrial submitted to the Chilean IRS four tax amendments (two by the Company, one by SQM Salar and one by SQM Industrial).

 

The first two (one for SQM and one for SQM Salar), after being approved by the SII, generated payments for taxes, interests and other charges for US$ 8.1 million. A provision for such amount was made in the profit or loss for the first quarter of 2015.

 

Additionally during August 2015, the Chilean IRS was provided, for its review and approval, with the documentation necessary for amending the annual tax returns of the Company and SQM Industrial. As a result of such amendments, the Company paid an approximate sum of US$1.4 million for taxes, interests and other charges. This amount was recorded in a provision in the profit or loss for the second quarter of 2015.

 

Finally, during 2016, the last 12 invoices were amended with a payment of approximately US$50 thousand.

 

Accordingly, the SQM Group understands the internal analysis they have been performing has ended, the purpose of which was the identification of the expenses incurred by them during the commercial years 2008 to 2014 and which could be a matter of tax amendment.

 

Because of the aforementioned amendments, the Company, SQM Salar and SQM Industrial might be affected by additional penalty established in the first subparagraph, No. 4 of Article 97 of the Tax Code, for an amount ranging between 50% and 300% of the taxes paid. . The Company has currently not estimated making any provisions related to this possible additional penalty.

 

On August 26, 2016, SQM Salar filed with the Third Tax and Customs Court of the Metropolitan Region a tax claim against tax assessments Nos. 169, 170, 171 and 172, which search for expanding the application of the specific tax on mining activities top the exploitation of lithium. The amount involved is approximately ThUS$ 17,809. Such claim is at the deliberation stage.

 

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 issued by the Chilean IRS, which seeks to extend the application of the specific tax on mining activities to the exploitation of lithium for tax years 2015 and 2016. The amount under dispute is approximately US$ 14.4 million. Such claim is at the deliberation stage.

 

The aforementioned amounts are classified as current tax assets, non-current as of June 30, 2017. The commercial year 2016 and first semester of 2017do not consider potential differences requested through tax assessments by the Chilean IRS under the concept of Specific Tax on Mining Activities applicable to lithium operations by SQMS.

 

 

 

Note 19

Contingencies and restrictions (continued)

 

19.6

Restricted or pledged cash

 

The subsidiary Isapre Norte Grande Ltda., in compliance with that 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 sum 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 June 30, 2017, the guarantee amounts to ThUS$705.

 

SQM S.A. maintains funds with Morgan Stanley for the concept of Marging Call, which provide collateral for the Bank’s exposition towards the Company.

 

Such collateral hedges the fair value of the Cross Currency Swap that SQM S.A. has to hedge a portion of the Series H Bond.

 

Through the present date, SQM S.A. has delivered ThUS$ 2,050 to Morgan Stanley, which will be released when any of the following conditions occur:

 

1.

The market value of the Cross Currency Swap is lower than the sum of that delivered ThUS$2,050 and the collateral threshold ThUS$ 5,000.

2.

The Cross Currency Swap associated with the H Series Bond expires on January 5, 2018.

 

SQM S.A. maintains funds with BCI for the concept of margin call, which provide collateral for the Bank’s exposition towards the Company.

 

Such collateral hedges the fair value of the Cross Currency Swap that SQM S.A. has to hedge the Series H Bond.

 

Through the present date, SQM S.A. has delivered ThUS$0 to BCI, which will be released when any of the following conditions occur:

 

1.

The market value of the Cross Currency Swap of the last business day of the month is lower than the sum of that delivered ThUS$0 and the collateral threshold ThUS$ 10,000.

2.

The Cross Currency Swap associated with the H Series Bond expires on January 5, 2018.

 

 

Note 19

Contingencies and restrictions (continued)

 

19.7

Securities obtained from third parties

 

The main security received (exceeding ThUS$100) from third parties to guarantee Soquimich Comercial S.A.’s compliance with obligations in contracts of commercial mandates for the distribution and sale of fertilizers amounted to ThUS$7,475 and ThUS$7,386 on June 30, 2017 and December 31, 2016 respectively; which is detailed as follows:

 

Grantor		Relationship		6/30/2017				12/31/2016
				ThUS$				ThUS$
Tattersall Agroinsumos S.A.		Unrelated third party			2.000				2.000
Contador Frutos S.A.		Unrelated third party			1.605				1.574
Agrícola Lobert Ltda.		Unrelated third party			1.164				1.141
Covepa SPA		Unrelated third party			753				747
Johannes Epple Davanzo		Unrelated third party			336				333
Hortofrutícola La Serena		Unrelated third party			297				-
Juan Luis Gaete Chesta		Unrelated third party			243				241
Arena Fertilizantes y Semillas		Unrelated third party			226				224
Vicente Oyarce Castro		Unrelated third party			225				220
Soc. Agrocom. Julio Polanco		Unrelated third party			151				149
Bernardo Guzmán Schmidt		Unrelated third party			127				125
Gilberto Rivas Y Cia. Ltda.		Unrelated third party			127				125
Lemp Martin Julian		Unrelated third party			114				-
Comercial Agrosal Ltda.		Unrelated third party			107				105
Total					7,475				6,984

 

 

Note 19

Contingencies and restrictions (continued)

 

19.8

Indirect guarantees

 

Guarantees in which there is no 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.

 

The bonds which disclose a balance as of June 30, 2017 and December 31, 2016 are detailed below:

 

Debtor

Balances as of the closing date of the financial statements

Creditor of the guarantee

Name

Relationship

Type of guarantee

6/30/2017

12/31/2016

ThUS$

ThUS$

Australian and New Zealand Bank

SQM North America Corp

Subsidiary

Bond

-

-

Australian and New Zealand Bank

SQM Europe N.V.

Subsidiary

Bond

-

-

Generale Bank

SQM North America Corp

Subsidiary

Bond

-

-

Generale Bank

SQM Europe N.V.

Subsidiary

Bond

-

-

Kredietbank

SQM North America Corp

Subsidiary

Bond

-

-

Kredietbank

SQM Europe N.V.

Subsidiary

Bond

-

-

Banks and financial institutions

SQM Investment Corp. N.V.

Subsidiary

Bond

-

-

Banks and financial institutions

SQM Europe N.V.

Subsidiary

Bond

-

-

Banks and financial institutions

SQM North America Corp

Subsidiary

Bond

-

-

Banks and financial institutions

Nitratos Naturais do Chile Ltda.

Subsidiary

Bond

-

-

Banks and financial institutions

SQM México S.A. de C.V.

Subsidiary

Bond

-

-

Banks and financial institutions

SQM Brasil Ltda.

Subsidiary

Bond

-

-

“BNP”

SQM Investment Corp. N.V.

Subsidiary

Bond

-

-

Sociedad Nacional de Mineria A.G.

SQM Potasio S.A.

Subsidiary

Bond

-

-

Scotiabank & Trust (Cayman) Ltd.

Royal Seed Trading A.V.V.

Subsidiary

Bond

-

-

Scotiabank & Trust (Cayman) Ltd.

Royal Seed Trading A.V.V.

Subsidiary

Bond

-

-

Bank of America

Royal Seed Trading A.V.V.

Subsidiary

Bond

-

-

Export Development Canada

Royal Seed Trading A.V.V.

Subsidiary

Bond

-

-

The Bank of Tokyo-Mitsubishi UFJ Ltd.

Royal Seed Trading A.V.V.

Subsidiary

Bond

-

-

JP Morgan Chase Bank

SQM Industrial S.A.

Subsidiary

Bond

-

-

The Bank of Nova Scotia

SQM Investment Corp. N.V.

Subsidiary

Bond

-

-

 

 

Note 19

Contingencies and restrictions (continued)

 

19.8

Indirect guarantees, continued

 

Debtor

Pending balances as of the closing date of the financial statements

Creditor of the guarantee

Name

Relationship

Type of guarantee

6/30/2017

12/31/2016

ThUS$

ThUS$

Credit Suisse International

SQM Investment Corp. N.V.

Subsidiary

Bond

-

-

Morgan Stanley Capital Services

SQM Investment Corp. N.V.

Subsidiary

Bond

-

-

The Bank of Tokyo-Mitsubishi UFJ Ltd.

SQM Investment Corp. N.V.

Subsidiary

Bond

-

-

HSBC

SQM Investment Corp. N.V.

Subsidiary

Bond

-

-

Deutsche Bank AG

SQM Investment Corp. N.V.

Subsidiary

Bond

-

-

 

 

Note 20

Revenue

 

As of June 30, 2017 and 2016, revenue is detailed as follows:

 

		January to June								April to June
		2017				2016				2017				2016
Types of revenue		ThUS$				ThUS$				ThUS$				ThUS$
Sales of goods			1,020,927				879,357				504,436				489,159
Sales of goods			2,938				2,102				1,283				455
Total			1,023,865				881,459				505,719				489,614

 

Detail by line of business in Note 26.2 and 26.3

 

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		6/30/2017 ThUS$				6/30/2016 ThUS$
Earnings (losses) attributable to owners of the parent			204,386				141,613
		6/30/2017 Units				12/31/2016 Units
Number of common shares in circulation			263,196,524				263,196,524
			6/30/2017				6/30/2016
Basic earnings per share (US$ per share)			0.7766				0.5381

 

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.

 

 

Note 22

Borrowing costs

 

The cost of interest is recognized as expenses 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. As of June 30, 2017, total interest expenses incurred amount to ThUS$25,546 (ThUS$32,421 as of June 30, 2016).

 

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.

 

22.1

Costs of capitalized interest, property, plant and equipment

 

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.

 

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 IAS 23.

 

The rates and costs for capitalized interest of property, plant and equipment are detailed as follows::

 

		6/30/2017				6/30/2016
Capitalization rate of costs for capitalized interest, property, plant and equipment			4	%			5	%
Amount of costs for interest capitalized in ThUS$			2,462				2,453

 

 

Note 23

Effect of fluctuations on foreign currency exchange rates

 

a)

Foreign currency exchange differences recognized in profit or loss except for financial instruments measured at fair value through profit or loss:

 

		6/30/2017 ThUS$				6/30/2016 ThUS$
Conversion foreign exchange gains (losses) recognized in the result of the year.			(4,707	)			(1,594	)
Conversion foreign exchange reserves attributable to the owners of the controlling entity			(1,501	)			1,279
Conversion foreign exchange reserves attributable to the non-controlling entity			3				37

 

b)

Reserves for foreign currency exchange differences:

 

As of June 30, 2017, and December 31, 2016, foreign currency exchange differences are detailed as follows:

 

Detail		6/30/2017				12/31/2016
		ThUS$				ThUS$
Changes in equity generated by conversion of equity value:
Comercial Hydro S.A.			1,004				1,004
SQMC Internacional Ltda.			(12	)			(13	)
Proinsa Ltda.			(10	)			(10	)
Comercial Agrorama Ltda.			(67	)			(69	)
Isapre Norte Grande Ltda.			(119	)			(124	)
Almacenes y Depósitos Ltda.			78				47
Sales de Magnesio Ltda.			-				(29	)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.			(5	)			(6	)
Agrorama S.A.			(68	)			(49	)
Doktor Tarsa			(12,363	)			(12,264	)
SQM Vitas Fzco			(1,782	)			(1,801	)
Ajay Europe			(3,298	)			(1,935	)
SQM Eastmed Turkey			(22	)			(95	)
Charlee SQM (Thailand) Co. Ltd.			(404	)			(460	)
Coromandel SQM India			(204	)			(282	)
SQM Italia SRL			(198	)			(287	)
SQM Oceania Pty Ltd.			(634	)			(634	)
SQM Indonesia S.A.			(123	)			(124	)
Abu Dhabi Fertilizers Industries WWL.			19				(434	)
SQM Vitas Holland			(175	)			(280	)
SQM Thailand Limited			(68	)			(68	)
SQM Europe N.V.			-				(1,550	)
Minera Exar S.A.			(2,513	)			-
Total			(20,964	)			(19,463	)

 

 

Note 23

Effect of fluctuations on foreign currency exchange rates (continued)

 

c)

Functional and presentation currency

 

The functional currency in 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.

-

The equities of these companies are expressed in local currency (Chilean peso).

 

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, due to their low waste-to-mineral ratio, generate remaining deposits that slightly alter the environment. A portion of the ore extracted is crushed, a process in which particle emissions occur. Currently this operation is conducted only at the Pedro de Valdivia worksite and no ore crushing process is conducted in the María Elena sector.

 

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 successfully implemented since 2007.

 

The Company carries out environmental follow-up and monitoring plans based on specialized scientific studies. Within this context, the Company entered into a contract with the National Forestry Corporation (CONAF) aimed at researching the activities of flamingo groups that live in the Salar de Atacama (Atacama Saltpeter Deposit) lagoons. Such research includes a population count of the birds, as well as breeding research. Environmental monitoring activities carried out by the Company at the Salar de Atacama and other systems in which it operates are supported by a number of studies that have integrated diverse scientific efforts from prestigious research centers, including Dictuc from the Pontificia Universidad Católica in Santiago and the School of Agricultural Science of the Universidad de Chile.

 

 

Note 24

Environment (continued)

 

24.1

Disclosures of disbursements related to the environment, continued

 

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 plants. 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

Detail of information on disbursements related to the environment

 

The accumulated disbursements in which the Company incurred as of June 30, 2017 for the concept of investments in production processes, verification and control of compliance with ordinances and laws relative to industrial processes and facilities, including prior year disbursements related to these projects amounted to ThUS$6,242 and are detailed as follows:

 

 

Note 24

Environment (continued)

 

24.2

Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 6/30/2017

 

Identification of the Parent or subsidiary

Name of the project with which expenditure is associated

Concept for which the expenditure was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of expenditure

Actual or estimated date on which expenditure was or will be made

Miscellaneous

Environmental - Operating Area

Not classified

Expense

Not classified

3,400

12/31/2017

SQM Industrial S.A.

04-IQWZ00 - Normalization TK NV liquid fuels

Environmental processing

Assets

Not classified

32

12/31/2017

SQM Industrial S.A.

04-PPZU00 - Standardize and Certify Plant Fuel Tanks

Environmental processing

Assets

Not classified

44

12/31/2017

SQM Industrial S.A.

04-J007000 – Environmental Impact Statement

Environmental processing

Expense

Not classified

75

12/31/2017

SQM Industrial S.A.

04-P003600 – Opening of NPT IV Project (NK engineering studies)

Sustainability: Environment and Risk Prevention

Assets

Not classified

24

12/31/2017

SQM S.A.

01-I005500 – Standardization of SO2 plants

Environmental processing

Assets

Not classified

53

12/31/2017

SQM S.A.

01-I007100 – 2015-2016 Environmental Follow-up Plan for Pampa del Tamarugal

Environmental processing

Expense

Not classified

2

3/31/2017

SQM S.A.

01-I007300 – Compliance with Iodine Gas Exposure Standard

Environmental processing

Assets

Not classified

518

12/31/2017

SQM S.A.

01-I012200 – Repair or replacement of well

Sustainability: Environment and Risk Prevention

Assets

Not classified

41

12/31/2017

SQM S.A.

01-I007200– 2015-2016 Salar de Llamara Environmental Follow-up Plan

Sustainability: Environment and Risk Prevention

Expense

Not classified

1

12/31/2017

SIT S.A.

03-T003400 - 2016 Port maintenance Capex

Sustainability: Environment and Risk Prevention

Assets

Not classified

42

12/31/2017

SIT S.A.

03-T001900 – Storage Warehouse Cover

Sustainability: Environment and Risk Prevention

Assets

Not classified

34

12/31/2017

SIT S.A.

03-T001800 – Mechanization of Shipment from Ca

Sustainability: Environment and Risk Prevention

Assets

Not classified

238

12/31/2017

SQM Salar S.A.

19-L008100 - EIS Salar 2015

Environmental processing

Expense

Not classified

146

12/31/2017

SIT S.A.

03-T003200 – Mechanization of Shipment from Ca

Sustainability: Environment and Risk Prevention

Assets

Not classified

1,197

12/31/2017

SQM Salar S.A.

19-L012200 – Installation of flow meters per environmental standard

Sustainability: Environment and Risk Prevention

Assets

Not classified

222

12/31/2017

SQM Salar S.A.

19-C002300 - Extension of LIOH 7.000 TPA Plant

Sustainability: Environment and Risk Prevention

Assets

Not classified

173

12/31/2017

Total

6,242

 

 

Note 24

Environment (continued)

 

24.2

Detail of information on disbursements related to the environment, continued

 

Future expenses as of 6/30/2017

 

Identification of the Parent or subsidiary

Name of the project with which expenditure is associated

Concept for which the expenditure was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of expenditure

Actual or estimated date on which expenditure was or will be made

Miscellaneous

Environmental - Operating Area

Not classified

Expense

Not classified

6,468

12/31/2017

SQM Industrial S.A.

04-IQWZ00 - Normalization TK NV liquid fuels

Environmental processing

Assets

Not classified

11

12/31/2017

SQM Industrial S.A.

04-PPZU00 - Standardize and Certify Plant Fuel Tanks

Environmental processing

Assets

Not classified

36

12/31/2017

SQM Industrial S.A.

04-J007000 – Environmental Impact Statement

Environmental processing

Expense

Not classified

154

12/31/2017

SQM Industrial S.A.

04-P003600 – Opening of NPT IV Project (NK engineering studies)

Sustainability: Environment and Risk Prevention

Assets

Not classified

467

12/31/2017

SQM S.A.

01-I005500 – Standardization of SO2 plants

Environmental processing

Assets

Not classified

69

12/31/2017

SQM S.A.

01-I007300 – Compliance with Iodine Gas Exposure Standard

Environmental processing

Assets

Not classified

411

12/31/2017

SQM S.A.

01-I012200 – Repair or replacement of well

Sustainability: Environment and Risk Prevention

Assets

Not classified

109

12/31/2017

SQM S.A.

01-I013800 – Increase height of Absorber Tower

Sustainability: Environment and Risk Prevention

Assets

Not classified

150

12/31/2017

SQM S.A.

01-I007100 – 2015-2016 Environmental Follow-up Plan for Pampa del Tamarugal

Environmental processing

Expense

Not classified

3

12/31/2017

SQM S.A.

01-I007200– 2015-2016 Salar de Llamara Environmental Follow-up Plan

Sustainability: Environment and Risk Prevention

Expense

Not classified

13

12/31/2017

SIT S.A.

03-T001900 – Storage Warehouse Cover

Sustainability: Environment and Risk Prevention

Assets

Not classified

13

12/31/2017

SIT S.A.

03-T001800 – Mechanization of Shipment from Ca

Sustainability: Environment and Risk Prevention

Assets

Not classified

779

12/31/2017

SIT S.A.

03-T003200 – Mechanization of Shipment from Ca

Sustainability: Environment and Risk Prevention

Assets

Not classified

329

12/31/2017

SQM Salar S.A.

19-L012100 – Regularization of weather station

Sustainability: Environment and Risk Prevention

Assets

Not classified

65

12/31/2017

SQM Salar S.A.

19-L012200 – Installation of flow meters per environmental standard

Sustainability: Environment and Risk Prevention

Assets

Not classified

28

12/31/2017

SQM Salar S.A.

19-L008100 - EIS Salar 2015

Environmental processing

Expense

Not classified

471

12/31/2017

SQM Salar S.A.

19-C002300 - Extension of LIOH 7.000 TPA Plant

Sustainability: Environment and Risk Prevention

Assets

Not classified

27

12/31/2017

SIT S.A.

03-T004200 - Encapsulation and collectors yards 8 and 9

Sustainability: Environment and Risk Prevention

Assets

Not classified

900

12/31/2017

SIT S.A.

03-T004500 - Belt 5 Extension and Overhaul

Environmental processing

Assets

Not classified

480

12/31/2017

SQM Nitratos S.A

12-I012700 - Mine Site Workshop Water Recovery Plant

Sustainability: Environment and Risk Prevention

Assets

Not classified

160

12/31/2017

Total

11,143

 

 

Note 24

Environment (continued)

 

24.2

Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 12/31/2016

 

Identification of the Parent or subsidiary

Name of the project with which expenditure is associated

Concept for which the expenditure was made

Asset / Expense

Description of the asset or expense Item

Amount of expenditure

Actual or estimated date on which expenditure was or will be made

Miscellaneous

Environmental - Operating Area

Not classified

Expense

Not classified

2,331

12/31/2016

SQM S.A.

01-I003200 – Standardization of hazardous materials

Sustainability: Environment and Risk Prevention

Assets

Not classified

79

12/31/2016

SQM S.A.

01-I005500 – Standardization of SO2 plants

Sustainability

Assets

Not classified

188

12/31/2016

SQM S.A.

01-I007300 – Compliance with Iodine Gas Exposure Standard

Sustainability: Environment and Risk Prevention

Assets

Not classified

721

12/31/2016

SQM S.A.

01-I006700 – Enablement of CPC wells

Sustainability: Environment and Risk Prevention

Expense

Not classified

-

12/31/2016

SQM S.A.

01-I007100 – 2015-2016 Environmental Follow-up Plan for Pampa del Tamarugal

Sustainability

Expense

Not classified

290

03/31/2017

SQM S.A.

01-I007200– 2015-2016 Salar de Llamara Environmental Follow-up Plan

Sustainability: Environment and Risk Prevention

Assets

Not classified

54

12/31/2016

SQM S.A.

01-P003500 – Tur Development Master Plan

Sustainability: Environment and Risk Prevention

Expense

Not classified

20

12/31/2016

SQM S.A.

01-P003000 – Plant 1 Scrubber and Plant 3 Scrubber

Sustainability: Environment and Risk Prevention

Assets

Not classified

355

12/31/2016

SQM Industrial S.A.

04-I007600– NV evaporation ponds

Sustainability: Environment and Risk Prevention

Expense

Not classified

78

12/31/2016

SQM Industrial S.A.

04-J004100 – Coya Sur Field Disposal DIA

Sustainability: Environment and Risk Prevention

Expense

Not classified

31

12/31/2016

SQM Industrial S.A.

04-J004300 - Energy efficiency study

Sustainability: Environment and Risk Prevention

Expense

Not classified

31

12/31/2016

SQM Industrial S.A.

04-J007000 – Environmental Impact Statement

Sustainability: Environment and Risk Prevention

Expense

Not classified

40

04/30/2017

SQM Industrial S.A.

04-J003300 – Improvements to water distribution

Sustainability: Environment and Risk Prevention

Expense

Not classified

376

12/31/2016

SQM Industrial S.A.

04-P003600 - NK PV Project

Sustainability: Environment and Risk Prevention

Expense

Not classified

214

12/31/2017

SIT S.A.

03-T003000 – Archeological salvage for northern access, Port of Tocopilla

Sustainability

Expense

Not classified

51

12/31/2016

SQM Salar S.A.

19-L008100 - EIS Salar 2015

Sustainability: Environment and Risk Prevention

Expense

Not classified

35

12/31/2016

SQM Salar S.A.

19-C001500 - 2016 Waste ponds

Sustainability: Environment and Risk Prevention

Expense

Not classified

92

12/31/2017

Total

4,986

 

 

Note 24

Environment (continued)

 

24.2

Detail of information on disbursements related to the environment, continued

 

Future expenses as of 12/31/2016

 

Identification of the Parent or subsidiary

Name of the project with which expenditure is associated

Concept for which the expenditure was made

Asset / Expense

Description of the asset or expense Item

Amount of expenditure

Actual or estimated date on which expenditure was or will be made

SQM S.A.

01-I003200 – Standardization of hazardous materials

Sustainability: Environment and Risk Prevention

Assets

Not classified

25

12/31/2017

SQM S.A.

01-I005500 – Standardization of SO2 plants

Sustainability

Assets

Not classified

15

12/31/2017

SQM S.A.

01-I006700 – Enablement of CPC wells

Sustainability: Environment and Risk Prevention

Expense

Not classified

133

12/31/2017

SQM S.A.

01-I007100 – 2015-2016 Environmental Follow-up Plan for Pampa del Tamarugal

Sustainability

Expense

Not classified

2

03/31/2017

SQM S.A.

01-I007200– 2015-2016 Salar de Llamara Environmental Follow-up Plan

Sustainability: Environment and Risk Prevention

Assets

Not classified

1

12/31/2017

SQM S.A.

01-P003000 – Plant 1 Scrubber and Plant 3 Scrubber

Sustainability: Environment and Risk Prevention

Assets

Not classified

3

12/31/2017

SQM S.A.

01-P003500 – Tur Development Master Plan

Sustainability: Environment and Risk Prevention

Expense

Not classified

18

12/31/2017

SQM S.A.

01-I007300 – Compliance with Iodine Gas Exposure Standard

Sustainability: Environment and Risk Prevention

Assets

Not classified

90

12/31/2017

SQM Industrial S.A.

04-I007600– NV evaporation ponds

Sustainability: Environment and Risk Prevention

Expense

Not classified

0

12/31/2017

SQM Industrial S.A.

04-J003300 – Improvements to water distribution

Sustainability: Environment and Risk Prevention

Expense

Not classified

55

12/31/2017

SQM Industrial S.A.

04-J004300 - Energy efficiency study

Sustainability: Environment and Risk Prevention

Expense

Not classified

54

12/31/2017

SQM Industrial S.A.

04-J007000 – Environmental Impact Statement

Sustainability: Environment and Risk Prevention

Expense

Not classified

229

04/30/2017

SQM Industrial S.A.

04-I012400 - Acquisition of Power Generator to Back up the Injection System at Puquios in Salar of Salar de Llamara

Sustainability: Environment and Risk Prevention

Assets

Not classified

33

12/31/2017

SQM Industrial S.A.

04-P003600 - NK PV Project

Sustainability: Environment and Risk Prevention

Expense

Not classified

86

01/02/2018

SQM Salar S.A.

19-L012100 – Regularization of weather station

Sustainability: Environment and Risk Prevention

Expense

Not classified

65

12/31/2017

SQM Salar S.A.

19-C001500 - 2016 Waste ponds

Sustainability: Environment and Risk Prevention

Expense

Not classified

27

01/01/2018

SIT S.A.

03-T003000 – Archeological salvage for northern access, Port of Tocopilla

Sustainability

Expense

Not classified

6

12/31/2017

Total

842

 

 

Note 24

Environment (continued)

 

24.3

Description of each project, indicating whether these are in process or have been finished

 

SQM Industrial S.A.

 

IQWZ: Standardization of plant fuel tanks. This implies repairing, amending, replacing or eliminating tanks per their current condition. This project is in progress.

 

PPZU: Standardization of plant fuel tanks. This implies repairing, amending, replacing or eliminating tanks per their current condition. This project is in progress.

 

J0070: Relates to the preparation and processing of an Environmental Impact Statement (EIS), with the purpose of obtaining the environmental authorization (RCA) of the fields, including in the background information the air quality baseline for which a MP 2.5 and gas monitoring station was installed supplementing the stations existing at ME. This project is in progress.

 

P0036: This project’s objective is that, based on basic engineering which has already been developed and completed in December 2015, the Company is able to develop detailed engineering to allow the acquisition of critical equipment (at long-term or key for the project). This project is in progress.

 

SQM S.A.

 

I0055: This project consists of changing gas extractors to increase air flows, changing SO2 absorption towers for prilling, extending the diameter of ducts; thereby guaranteeing an increase and sustaining the gas/liquid ratio. In order to decrease SO2 emissions require the installation of a scrubber unit (tower, pump, gas extractor and piping), the same concept developed at the ME Iodine SO2 plant. This project is in progress.

 

I0071: This project consists of implementing mitigation and compensation actions as committed in the Environmental Assessment of the Pampa Hermosa Environmental Impact Assessment (EIA). Actions to be implemented are those contemplated in the Environmental Management Plan of Tamarugos in Pampa del Tamarugal (Environmental Education Program, planting tamarugos, ex situ conservation of tamarugos, tamarugo production, and support for the phytosanitary control of tamarugos). This project is in progress.

 

I0073: System for capturing iodine gases operating very inefficiently. Iodine steam level exceed the range between 150% and 4,900% of the levels allowed for work positions at the Iodine Plant and Warehouse in accordance with Article 61 Supreme Decree 594/1999 approving Basic Sanitary and Environmental Conditions in Workplaces.

 

 

Note 24

Environment (continued)

 

24.3

Description of each project, indicating whether these are in process or have been finished, continued

 

SQM S.A.

 

I0122: The project consists of repairing or replacing the environmental follow-up wells that require being deepened. It also considers implementing improvements in mine shaft type wells to avoid risk conditions. Priority are wells Nos. 8 and 10 S-1 in Pampa del Tamarugal and PO-5 in Salar de Llamara. This project is in progress.

 

I0138: Increasing by 2.5 meters the height in each SO2 absorber tower (regular and stand-by towers). Such increased height in towers will allow increasing by 2.5 the height of the packing, increasing efficiency of the absorption of SO2. The main engineering 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.

 

I0070: Salar de Llamara Environmental Follow-up Plan project.

 

SIT S.A.

 

T0034: The project seeks to make all the investments associated with maintenance of Port’s operating capacity, guaranteeing the high availability of equipment for shipment purposes. The project has an environmental component, despite being an operating improvement, the project considered the replenishment and/or replacement of the impaired wind barriers membranes in Yard No. 3, which is an action to control emissions committed at the Tocopilla EDP. This project has been completed.

 

T0019: The project consists of the installation of covers (ceiling and side cover) in the 4 new storage boxes, which will be built in the zone of current yards Nos. 8 and 9. The project has an environmental component, despite being an operating improvement, the project considered as an action to mitigate emissions the building of the warehouse to improve the compliance with the Tocopilla EDP and reduce dust emissions. This project has been completed.

 

T0018: The project consists of the installation of an underground conveyor belt running outside of the storage boxes in yards Nos. 8 and 9, connected to belt 5 and subsequently to the shipment system. The project has an environmental component, despite being an operating improvement, the project considered as action to mitigate emissions the implementation and acquisition of belt covers (to control internal emissions) to improve compliance with the Tocopilla EDP. This project is in progress.

 

T0032: The project consists of the installation of an underground conveyor belt running outside of the storage boxes in Yard No. 6, with feeding points of accesses directly connected to belt 6 and subsequently to the shipment system. The project has an environmental component, despite being an operating improvement, the project considered the implementation of conveyor belt No. 6 from Yard No. 6, which is an action to control emissions committed within the Tocopilla EDP. This project is at the start-up stage.

 

 

SQM Salar.

 

L0081: The authority requires conducting different environmental impact studies either for exploration or the construction of new wells and being able to support current production. Project in progress. This project is in progress.

 

L0122: The project considers the change in flow meters to the new standard in addition to adding stand by flow meters. This project is in progress.

 

C02300: A new plant extension will be built with capacity for 7,000 TPA of products. This project is in progress.

 

 

Note 25

Other current and non-current non-financial assets

 

As of June 30, 2017, and December 31, 2016, the detail of other current and non-current assets is as follows:

 

Other non-financial  assets, current		6/30/2017				12/31/2016
		ThUS$				ThUS$
Domestic Value Added Tax			13,806				13,999
Foreign Value Added Tax			2,066				2,537
Prepaid mining licenses			4,814				1,136
Prepaid insurance			2,110				6,323
Other prepayments			560				408
Refund of Value Added Tax to exporters			11,104				855
Other taxes			4,469				4,660
Other assets			288				355
Total			39,217				30,273

 

Other non-financial  assets, non-current		6/30/2017				12/31/2016
		ThUS$				ThUS$
Stain development expenses and prospecting expenses (1)			21,421				23,008
Guarantee deposits			710				685
Prepayments associated with investment plans			8,957				-
Other assets			73				997
Total			31,161				24,690

 

1)

Reconciliation 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 June 30, 2017, and December 31, 2016:

 

Reconciliation		6/30/2017				12/31/2016
		ThUS$				ThUS$
Opening balance			23,008				31,911
Changes
Additions, other than business combinations			-				-
Depreciation and amortization			(950	)			(9,498	)
Increase (decrease) due to transfers and other charges			(637	)			595
Total changes			(1,587	)			(8,903	)
Total			21,421				23,008

 

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

 

 

Note 26

Reportable segments

 

26.1

Reportable segments

 

General information:

 

The amount of each item presented in each operating segment is equal to that reported to the maximum 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 Company. These segments reflect separate operating results which are regularly reviewed by chief operating decision maker in order to make decisions about the resources to be allocated to the segment and assess its performance (See Note 24.2).

 

The segments performance is measured based on net income and revenues. Sales between segments are conducted using terms and conditions at current market rates.

 

Factors used to identify segments on which a report should be presented:

 

Segments reported are strategic business units that offer different products and services. These are managed separately because each business requires different technology and marketing strategies.

 

Description of the types of products and services on which each reportable segment obtain its income from ordinary activities

 

The operating segments, through which incomes of ordinary activities are obtained, that generate expenses and whose operating results are reviewed on a regular basis by the maximum 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

 

Description of income sources for all the other segments

 

Information relative to assets, liabilities, profit and expenses that cannot be assigned to the segments indicated above, due to the nature of production processes, is included under "Unassigned amounts” category of the disclosed information.

 

Basis of accounting for transactions between reportable segments

 

Sales between segments are made in the same conditions as those made to third parties, and are consistently measures as presented in the income statement.

 

 

Note 26

Reportable segments (continued)

 

26.1

Reportable segments, continued

 

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 is not required 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 process of cost allocation in inventory valuation, we identify the direct costs (can be assigned directly to a product) and the common costs (belong to processes of co-production, for example costs of common leaching for the production of iodine and nitrates). The direct costs are directly associated with the product and the common costs are allocated using percentages of sales, prices and inventory rotation.

 

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.

 

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.

 

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 decisions making regarding resources to be allocated to each defined segment, All liabilities are disclosed in the "unallocated amounts" category.

 

 

Note 26

Reportable segments (continued)

 

26.2

Reportable segment disclosures:

 

6/30/2017
		Specialty plant nutrients				Iodine and its derivatives				Lithium and its derivatives				Industrial chemicals				Potassium				Other products and services				Reportable segments				Operating segments				Elimination of inter- segments amounts				Unallocated amounts				Total 6/30/2017
Operating segment items		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Revenue			325,749				129,054				297,445				66,379				187,955				17,283				1,023,865				1,023,865				-				-				1,023,865
Revenues from transactions with other operating segments of the same entity			147,056				146,530				253,918				94,174				133,266				94,684				869,628				869,628				(869,628	)			-				-
Revenues from external customers and transactions with other operating segments of the same entity			472,805				275,584				551,363				160,553				321,221				111,967				1,893,493				1,893,493				(869,628	)			-				1,023,865
Costs of sales			(261,527	)			(104,803	)			(80,770	)			(46,488	)			(157,688	)			(14,739	)			(666,015	)			(666,015	)			-				-				(666,015	)
Administrative expenses			-				-				-				-				-				-				-				-				2,760				(48,847	)			(46,087	)
Interest expense			-				-				-				-				-				-				-				-				39,499				(65,045	)			(25,546	)
Depreciation and amortization expense			(47,029	)			(18,847	)			(14,525	)			(8,360	)			(28,357	)			(2,649	)			(119,767	)			(119,767	)			-				(45	)			(119,812	)
The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				-				-				-				7,824				7,824
Income tax expense, continuing operations			-				-				-				-				-				-				-				-				(1,072	)			(81,538	)			(82,610	)
Other items other than significant cash			64,222				24,251				216,675				19,891				30,267				2,544				357,850				357,850				(346,175	)			274,850				286,525
Income (loss) before taxes
			64,222				24,251				216,675				19,891				30,267				2,544				357,850				357,850				(347,247	)			193,312				203,915
Net income (loss) from continuing operations
Net income (loss) from discontinued operations			64,222				24,251				216,675				19,891				30,267				2,544				357,850				357,850				(347,247	)			193,312				203,915
Net income (loss)
			-				-				-				-				-				-				-				-				(6,735,063	)			10,862,801				4,127,738
Assets			-				-				-				-				-				-				-				-				(2,962,768	)			3,072,100				109,332
Equity-accounted investees			-				-				-				-				-				-				-				-				-				(75,576	)			(75,576	)
Increase of non-current assets			-				-				-				-				-				-				-				-								-				-
Liabilities			-				-				-				-				-				-				-				-				(3,513,267	)			5,392,916				1,879,649
Impairment loss recognized in profit or loss			(5,576	)			(259	)			(243	)			(2,559	)			(894	)			(59	)			(9,590	)			(9,590	)			-				(2,736	)			(12,326	)
Reversal of impairment losses recognized in profit or loss for the period			-				-				-				-				-				-				-				-				-				-				-
Cash flows from (used in) operating activities			-				-				-				-				-				-				-				-				-				-				298,839
Cash flows from (used in) investing activities			-				-				-				-				-				-				-				-				-								(74,715	)
Cash flows from (used in) financing activities			-				-				-				-				-				-				-				-				-								(223,109	)

 

 

Note 26

Reportable segments (continued)

 

26.2

Reportable segment disclosures, continued

 

6/30/2016
		Specialty plant nutrients				Iodine and its derivatives				Lithium and its derivatives				Industrial chemicals				Potassium				Other products and services				Reportable segments				Operating segments				Elimination of inter- segments amounts				Unallocated amounts				Total  6/30/2016
Operating segment items		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Revenue		332,221				118,566				192,774				30,518				181,621				25,759				881,459				881,459				-				-				881,459
Revenues from transactions with other operating segments of the same entity			57,837				142,276				152,048				194,933				173,721				98,819				819,634				819,634				(819,634	)			-				-
Revenues from external customers and transactions with other operating segments of the same entity			390,058				260,842				344,822				225,451				355,342				124,578				1,701,093				1,701,093				(819,634	)			-				881,459
Costs of sales			(248,969	)			(98,731	)			(71,510	)			(21,394	)			(156,317	)			(24,046	)			(620,967	)			(620,967	)			-				-				(620,967	)
Administrative expenses			-				-				-				-				-				-				-				-				2,836				(43,644	)			(40,807	)
Interest expense			-				-				-				-				-				-				-				-				45,561				(77,982	)			(32,421	)
Depreciation and amortization expense			(50,454	)			(20,009	)			(14,492	)			(4,336	)			(31,678	)			(4,872	)			(125,841	)			(125,841	)			-				(2,169	)			(128,010	)
The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				-				-				-				10,596				10,596
Income tax expense, continuing operations			-				-				-				-				-				-				-				-				-				(57,291	)			(57,291	)
Other items other tan significant cash			-				-				-				-				-				-				-				-				-				-				-
Income (loss) before taxes			83,252				19,835				121,264				9,124				25,304				1,713				260,492				260,492				(194,605	)			133,802				199,689
Net income (loss) from continuing operations			83,252				19,835				121,264				9,124				25,304				1,713				260,492				260,492				(194,605	)			76,511				142,398
Net income (loss) from discontinued operations
Net income (loss)			83,252				19,835				121,264				9,124				25,304				1,713				260,492				260,492				(194,605	)			76,511				142,398
Assets			-				-				-				-				-				-				-				-				(6,435,882	)			10,675,128				4,239,246
Equity-accounted investees			-				-				-				-				-				-				-				-				(3,131,020	)			3,246,163				115,143
Increase of non-current assets			-				-				-				-				-				-				-				-								(35,323	)			(35,323	)
Liabilities			-				-				-				-				-				-				-				-				(2,973,687	)			4,892,028				1,918,341
Impairment loss recognized in profit or loss			-				(98	)			(140	)			-				(288	)			(204	)			(730	)			(730	)			-				(207	)			(937	)
Reversal of impairment losses recognized in profit or loss for the period			887				-				-				372				-				-				1,259				1,259				-				-				1,259
Cash flows from (used in) operating activities			-				-				-				-				-				-				-				-				-				259,000				259,000
Cash flows from (used in) investing activities			-				-				-				-				-				-				-				-				-				308,784				308,784
Cash flows from (used in) financing activities			-				-				-				-				-				-				-				-				-				(515,111	)			(515,111	)

 

 

Note 26

Reportable segments (continued)

 

26.3

Statement of comprehensive income classified by reportable segments based on groups of products

 

		6/30/2017
Items in the statement of comprehensive income		Specialty plant nutrients ThUS$				Iodine and its derivatives ThUS$				Lithium and its derivatives ThUS$				Industrial chemicals ThUS$				Potassium ThUS$				Other products and services ThUS$				Corporate Unit ThUS$				Total segments and Corporate unit ThUS$
Revenue			325,749				129,054				297,445				66,379				187,955				17,283				-				1,023,865
Cost of sales			(261,527	)			(104,803	)			(80,770	)			(46,488	)			(157,688	)			(14,739	)			-				(666,015	)
Gross profit			64,222				24,251				216,675				19,891				30,267				2,544				-				357,850
Other incomes by function			-				-				-				-				-				-				5,862				5,862
Administrative expenses			-				-				-				-				-				-				(46,087	)			(46,087	)
Other expenses by function			-				-				-				-				-				-				(13,396	)			(13,396	)
Other gains (losses)			-				-				-				-				-				-				(991	)			(991	)
Financial income			-				-				-				-				-				-				5,716				5,716
Financial costs			-				-				-				-				-				-				(25,546	)			(25,546	)
interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				7,824				7,824
Exchange differences			-				-				-				-				-				-				(4,707	)			(4,707	)
Profit (loss) before taxes			64,222				24,251				216,675				19,891				30,267				2,544				(71,325	)			286,525
Income tax expense			-				-				-				-				-				-				(82,610	)			(82,610	)
Profit (loss) from continuing operations			64,222				24,251				216,675				19,891				30,267				2,544				(153,935	)			203,915
Profit (loss) from discontinued operations			-				-				-				-				-				-				-				-
Profit (loss)			64,222				24,251				216,675				19,891				30,267				2,544				(153,935	)			203,915
Profit (loss), attributable to
Profit (loss) attributable to the controller´s owners			-				-				-				-				-				-				-				204,386
Profit (loss) attributable to the non-controllers			-				-				-				-				-				-				-				(471	)
Profit (loss)			-				-				-				-				-				-				-				203,915

 

 

Note 26

Reportable segments (continued)

 

26.3

Statement of comprehensive income classified by reportable segments based on groups of products, continued

 

		6/30/2016
Items in the statement of comprehensive income		Specialty plant nutrients ThUS$				Iodine and its derivatives ThUS$				Lithium and its derivatives ThUS$				Industrial chemicals ThUS$				Potassium ThUS$				Other products and services ThUS$				Corporate Unit ThUS$				Total segments and Corporate unit ThUS$
Revenue			332,221				118,566				192,774				30,518				181,621				25,759				-				881,459
Cost of sales			(248,969	)			(98,731	)			(71,510	)			(21,394	)			(156,317	)			(24,046	)			-				(620,967	)
Gross profit			83,252				19,835				121,264				9,124				25,304				1,713				-				260,492
Other incomes by function			-				-				-				-				-				-				6,688				6,688
Administrative expenses			-				-				-				-				-				-				(40,807	)			(40,807	)
Other expenses by function			-				-				-				-				-				-				(9,611	)			(9,611	)
Other gains (losses)			-				-				-				-				-				-				755				755
Financial income			-				-				-				-				-				-				5,591				5,591
Financial costs			-				-				-				-				-				-				(32,421	)			(32,421	)
interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				10,596				10,596
Exchange differences			-				-				-				-				-				-				(1,594	)			(1,594	)
Profit (loss) before taxes			83,252				19,835				121,264				9,124				25,304				1,713				(60,803	)			199,689
Income tax expense			-				-				-				-				-				-				(57,291	)			(57,291	)
Profit (loss) from continuing operations			83,252				19,835				121,264				9,124				25,304				1,713				(118,094	)			142,398
Profit (loss) from discontinued operations			-				-				-				-				-				-				-				-
Profit (loss)			83,252				19,835				121,264				9,124				25,304				1,713				(118,094	)			142,398
Profit (loss), attributable to
Profit (loss) attributable to the controller´s owners			-				-				-				-				-				-				-				141,613
Profit (loss) attributable to the non-controlling interests			-				-				-				-				-				-				-				785
Profit (loss)			-				-				-				-				-				-				-				142,398

 

 

Note 26

Reportable segments (continued)

 

26.4

Revenue from transactions with other Company’s operating segments

 

6/30/2017
Items in the statement of comprehensive income		Specialty plant nutrients ThUS$				Iodine and its derivatives ThUS$				Lithium and its derivatives ThUS$				Industrial chemicals ThUS$				Potassium  ThUS$				Other products and services ThUS$				Total segments and Corporate unit ThUS$
Revenue			325,749				129,054				297,445				66,379				187,955				17,283				1,023,865
6/30/2016
Items in the statement of comprehensive income		Specialty plant nutrients ThUS$				Iodine and its derivatives ThUS$				Lithium and its derivatives ThUS$				Industrial chemicals ThUS$				Potassium  ThUS$				Other products and services ThUS$				Total segments and Corporate unit ThUS$
Revenue			332,221				118,566				192,774				30,518				181,621				25,759				881,459

 

26.5

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.

 

26.6

Disclosures on main customers

 

With respect to the degree of dependency of the Company on its customers, in accordance with paragraph N° 34 of IFRS N° 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.

 

 

Note 26

Reportable segments (continued)

 

26.7

Segments by geographical areas as of June 30, 2017 and 2016

 

		6/30/2017
Items		Chile ThUS$				Latin America and the Caribbean ThUS$				Europe  ThUS$				North America ThUS$				Asia and others ThUS$				Total ThUS$
Revenue			47,358				109,948				501,900				242,156				122,503				1,023,865
Investment accounted for under the equity method			(6,154	)			16,080				32,483				14,166				52,757				109,332
Intangible assets other than goodwill			108,218				-				515				199				-				108,932
Goodwill			23,731				6,290				11,373				724				2,059				44,177
Property, plant and equipment, net			1,441,051				222				3,550				2,531				1,419				1,448,773
Investment property			-				-				-				-				-				-
Other non-current assets			31,133				28				-				-				-				31,161
Non-current assets that are not financial instruments			1,597,979				22,620				47,921				17,620				56,235				1,742,375
		6/30/2016
Items		Chile ThUS$				Latin America and the Caribbean ThUS$				Europe  ThUS$				North America ThUS$				Asia and others ThUS$				Total ThUS$
Revenue			58,102				120,842				216,094				232,516				253,905				881,459
Investment accounted for under the equity method			1,765				25,000				29,465				13,691				45,222				115,143
Intangible assets other than goodwill			108,744				-				-				225				1				108,970
Goodwill			26,629				86				11,373				-				-				38,088
Property, plant and equipment, net			1,614,411				249				3,162				2,396				1,375				1,621,593
Investment property			-				-				-				-				-				-
Other non-current assets			25,962				141				-				-				-				26,103
Non-current assets that are not financial instruments			1,777,511				25,476				44,000				16,312				46,598				1,909,897

 

 

Note 26

Reportable segments (continued)

 

26.8

Property, plant and equipment classified by geographical areas

 

The company's main productive facilities are located near their mines and extraction facilities in northern Chile, The following table presents the main production facilities as of June 30, 2017 and December 31, 2016:

 

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

 

 

Note 27

Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature

 

27.1

Revenue

 

		6/30/2017				6/30/2016
		ThUS$				ThUS$
Products			1,020,927				879,357
Services			2,938				2,102
Total			1,023,865				881,459

 

27.2

Cost of sales

 

		6/30/2017				6/30/2016
		ThUS$				ThUS$
Raw material and supplies			(261,865	)			(230,193	)
Types of employee benefits expenses
Salaries and wages			(54,796	)			(49,145	)
Other short-term employee benefits			(32,303	)			(30,920	)
Termination benefit expenses			(4,277	)			(2,714	)
Total employee benefits expenses			(91,376	)			(82,779	)
Depreciation expense			(118,386	)			(121,010	)
Amortization expense			(1,381	)			(1,501	)
Small deposit amortization expense			-				(3,384	)
Impairment losses (reversals of impairment losses) recognized in profit or loss for the period			(9,590	)			529
Operating leases			(56,836	)			(51,308	)
Investment plan expenses			(4,584	)			(8,643	)
Maintenance and repair			(3,199	)			(4,183	)
Provision for mine closure			(5,824	)			(955	)
Contractors			(32,393	)			(30,232	)
Mining concessions			(4,865	)			(4,271	)
Operations transport			(30,557	)			(24,630	)
Freight and product transport costs			(11,820	)			(17,280	)
Packaging costs			(653	)			(498	)
Sales commissions			(1,119	)			(2,048	)
Insurance policies			(5,910	)			(6,388	)
Port costs			(5,691	)			(7,102	)
CORFO right costs			(21,612	)			(18,058	)
Adjustment of customer prices			(1,017	)			(3,381	)
Other expenses, by nature			2,663				(3,652	)
Total			(666,015	)			(620,967	)

 

 

Note 27

Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature, (continued)

 

27.3

Other income

 

		6/30/2017				6/30/2016
		ThUS$				ThUS$
Discounts obtained from suppliers			157				437
Penalties charged to suppliers			41				96
Tax recoveries			-				3
Insurance recoveries			154				1,485
Excess in the provision for liabilities with 3rd parties			493				539
Overstatement of doubtful accounts			3				-
Sale of property, plant and equipment			414				(13	)
Sale of materials, spare parts and supplies			76				11
Sale of metal scrap			-				1
Overstatement of allowance for inventories			17				-
Options on mining properties			1,079				1,459
Interest collections from customers			-				20
Easements, ducts and roads			1				1
Non-conventional renewable energy			210				245
Reimbursement of mining patents and notarial expenses			690				1,013
Miscellaneous services			4				15
Obtaining shares in junior companies for shares			2,210				1,026
Other operating income			313				350
Total			5,862				6,688

 

 

Note 27

Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature, (continued)

 

27.4

Administrative expenses

 

		6/30/2017				6/30/2016
		ThUS$				ThUS$
Employee benefit expenses by nature
Salaries and wages			(22,330	)			(20,136	)
Other short-term benefits to employees			(2,016	)			(1,972	)
Total employee benefit expenses			(24,346	)			(22,108	)
Amortization expense			(624	)			(3	)
Advisory services			(3,317	)			(2,202	)
Marketing costs			(865	)			(709	)
Audit fees			(112	)			(783	)
Building and facilities rent expenses			(1,894	)			(1,562	)
Advertisement expenses			(267	)			(86	)
Lunch expenses			(159	)			(172	)
Accommodation expenses			(215	)			(195	)
Personnel payroll expenses			(177	)			(100	)
Tickets and transportation expenses			(1,103	)			(1,036	)
Isapre (healthcare institution) contribution payments			(147	)			(173	)
Other employee expenses			(352	)			(242	)
General material expenses			(507	)			(431	)
Rent of light trucks			(480	)			(401	)
Professional services			(1,353	)			(1,333	)
Data transmission services			(829	)			(879	)
Maintenance services			(528	)			(460	)
Miscellaneous contractors			(731	)			(521	)
Mobile phone expenses			(618	)			(679	)
Acquisition of software			(1,061	)			(1,034	)
Contribution payments			(445	)			(418	)
Business license expenses			(728	)			(587	)
Water patent expenses			(290	)			(114	)
Easements			(209	)			(144	)
Insurance policies			(1,122	)			(794	)
Other expenses, by nature			(3,608	)			(3,641	)
Total			(46,087	)			(40,807	)

 

 

Note 27

Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

27.5

Other expenses by function

 

		6/30/2017				6/30/2016
		ThUS$				ThUS$
Employee benefit expenses by nature
Depreciation and amortization expenses
Depreciation of stopped assets			(45	)			(56	)
Subtotal to date			(45	)			(56	)
Impairment loss (review of impairment losses) recognized in profit or loss for the year
Impairment of allowance for doubtful accounts			(2,697	)			(207	)
Subtotal to date			(2,697	)			(207	)
Other expenses, by nature
Legal Expenses			(5,292	)			(2,005	)
Indemnities paid			-				-
VAT and other unrecoverable tax			(640	)			(407	)
Fines, interests and tax (*)			(810	)			(427	)
Advisory services			(36	)			(33	)
Provisions, materials and action sales			-				-
Investment plan expenses			(2,480	)			(3,022	)
Amortization of small deposit expenses			-				(2,112	)
Donations rejected as tax credits			(1,039	)			(623	)
Investment plan - management expenses			387				-
Provision for materials, spare-parts and supplies			(39	)
Severance indemnity payments made			(153	)
Other operating expenses			(552	)			(719	)
Subtotal to date			(10,654	)			(9,348	)
Total			(13,396	)			(9,611	)

 

27.6

Other income (expenses)

 

		6/30/2017				6/30/2016
		ThUS$				ThUS$
Employee termination process costs			192				-
Prior year adjustment, application of equity method of accounting			455				1,130
Other gains (losses)			(1,638	)			(375	)
Total			(991	)			755

 

 

Note 27

Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

27.7

Summary of expenses by nature

 

		January to June
		2017				2016
		ThUS$				ThUS$
Raw materials and consumables used			(261,865	)			(230,193	)
Classes of employee benefit expenses
Salaries and wages			(77,126	)			(69,281	)
Other short-term employee benefits			(34,319	)			(32,892	)
Termination benefit expenses			(4,277	)			(2,714	)
Total employee benefit expenses			(115,722	)			(104,887	)
Depreciation and amortization expense
Depreciation expense			(118,431	)			(121,066	)
Amortization expense			(1,384	)			(1,504	)
Small deposit amortization expense			-				(5,496	)
Impairment losses (reversals of impairment losses) recognized in profit or loss for the period			(12,326	)			322
Operating leases			(56,836	)			(51,308	)
Fines paid			(810	)			(427	)
Investment plan expenses			(7,064	)			(11,665	)
Maintenance and repairs			(3,199	)			(4,183	)
Operation disruption expenses			(5,824	)			(955	)
Contractors			(32,393	)			(30,232	)
Mining concessions			(4,865	)			(4,271	)
Operating transport			(30,557	)			(24,630	)
Freight and product transportation costs			(11,820	)			(17,280	)
Packing costs			(653	)			(498	)
Sales commissions			(1,119	)			(2,048	)
Insurance policies			(7,033	)			(7,183	)
Port costs			(5,691	)			(7,102	)
CORFO right costs			(21,612	)			(18,058	)
Adjustment of customer prices			(1,017	)			(3,381	)
Advisory services			(3,670	)			(2,202	)
Audit fees			(112	)			(782	)
Marketing costs			(865	)			(709	)
Building and facilities rent expenses			(2,161	)			(1,562	)
Advertising expenses			(267	)			(86	)
Lunch expenses			(159	)			(172	)
Accommodation expenses			(215	)			(195	)
Personnel payroll expenses			(177	)			(100	)
Tickets and transportation expenses			(1,103	)			(1,036	)
Isapre (healthcare institution) contribution payments			(147	)			(173	)
Other employee expenses			(352	)			(242	)
General material expenses			(507	)			(431	)
Rent of light trucks			(480	)			(401	)
Professional services			(1,353	)			(1,333	)
Data transmission services			(829	)			(879	)
Maintenance services			(528	)			(460	)
Miscellaneous contractors			(731	)			(521	)
Mobile phone expenses			(618	)			(679	)
Acquisition of software			(1,061	)			(1,034	)
Contribution payments			(445	)			(418	)
Business license expenses			(728	)			(587	)
Water patent expenses			(290	)			(114	)
Easements			(209	)			(144	)
Other expenses, by nature			(9,261	)			(11,080	)
Total expenses, by nature			(726,489	)			(671,385	)

 

This table corresponds to the summary required by the Chilean Superintendence of Securities and Insurance (SVS) and considers notes 27.2, 27.4 and 27.5.

 

 

Note 27

Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

27.8

Finance expenses

 

		January to June
		2017				2016
		ThUS$				ThUS$
Interest expense from bank borrowings and overdrafts			(830	)			(1,058	)
Interest expense from bonds			(25,369	)			(29,743	)
Interest expense from loans			(1,206	)			(3,507	)
Capitalized interest expenses			2,462				2,453
Other finance costs			(603	)			(566	)
Total			(25,546	)			(32,421	)

 

Note 28

Income tax and deferred taxes

 

Accounts receivable from taxes as of June 30, 2017 and December 31, 2016, are as follows:

 

28.1

Current and non-current tax assets

 

a)

Current tax assets

 

		6/30/2017				12/31/2016
		ThUS$				ThUS$
Monthly provisional income tax payments, Chilean companies current year			32,308				46,277
Monthly provisional payment Royalty			195				3,542
Monthly provisional income tax payments, foreign companies			2,138				1,323
Corporate tax credits (1)			304				748
Corporate tax absorbed by tax losses (2)			-				64
Taxes in recovery process			11,460				-
Total			46,405				51,954

 

b)

Non-current tax assets

 

		6/30/2017				12/31/2016
		ThUS$				ThUS$
Monthly provisional income tax payments, Chilean companies prior year			6,076				6,076
Specific tax on mining activities paid (on consignment)			25,781				25,781
Total			31,857				31,857

 

(1)

These credits are available to companies and relate to the corporate tax payment in April of the following year, These credits include, amongst others, training expense credits (SENCE) and property, plant and equipment acquisition credits that are equivalent to 4% of the property, plant and equipment purchases made during the year, In addition, some credits relate to the donations the Group has made during 2017 and 2016.

 

 

Note 28

Income tax and deferred taxes (continued)

 

28.1

Current and non-current tax assets, continued

 

(2)

This concept corresponds to the absorption of non-operating losses (NOL’s) determined by the company at year end, which must be imputed or recorded in the Retained Taxable Profits Registry (FUT).

 

In accordance with the laws in force and as provided by article 31 No, 3 of the Income Tax Law, when profits recorded in the FUT that have not been withdrawn or distributed are totally or partially absorbed by NOL’s, the corporate tax paid on such profits (24%, 22,5%, 21%, 20% or 17%, depending on the year in which profits were generated) will be considered to be a provisional payment with respect to the portion representing the absorbed accumulated tax profits.

 

Tax payers are entitled to apply for a refund of this monthly provisional income tax payments on the absorbed profits recorded in the FUT registry via their tax returns (Form 22).

 

Therefore, the provisional payment for absorbed profits (PPAP) recorded in the FUT is in effect a recoverable tax, and as such the Company records it as an asset.

 

28.2

Current tax liabilities

 

Current tax liabilities		6/30/2017				12/31/2016
		ThUS$				ThUS$
1st Category income tax			23,935				50,174
Foreign company income tax			23,323				25,276
Article 21 single tax			41				422
Total			47,299				75,872

 

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, an income tax rate of 21% was set starting from 2014, a rate of 22.5% for 2015, a rate of 24% for 2016, a rate of 25.5% for 2017, and a rate of 27% starting from 2018.

 

The provision for royalty is determined by applying the tax rate determined for the net operating income (NOI). Currently, the Company pays 5% for the application of the Tax Invariability Contract established with the Ministry of Economy in 2010.

 

In conclusion, both concepts represent the estimated amount the Company will have to pay for income tax and tax on mining.

 

 

Note 28

Income tax and deferred taxes (continued)

 

28.3

Income tax and deferred taxes

 

Assets and liabilities recognized in the statement of financial position are offset if and only if:

 

1

The Company has legally recognized before the right the tax authority to offset the amounts recognized in these entries; and

 

2

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 realize 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.

 

Deferred income tax assets recognized are the income taxes that are to be recovered in future periods, related to:

 

a)

deductible temporary differences.

b)

the offset of losses obtained in prior periods and not yet subject to tax deduction; and

c)

the offset 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 to these losses or unused fiscal credits.

 

Deferred tax liabilities recognized refer to the amounts of income taxes payable in future periods related to taxable temporary differences.

 

 

Note 28

Income tax and deferred taxes (continued)

 

28.3

Income tax and deferred taxes, continued

 

d.1

Income tax assets and liabilities as of June 30, 2017 are detailed as follows:

 

Description of deferred income tax assets and		Net position, assets								Net position, liabilities
liabilities		Assets				Liabilities				Assets				Liabilities
		ThUS$				ThUS$				ThUS$				ThUS$
Depreciation			-				-				-				(212,637	)
Doubtful accounts impairment			-				-				3,636				-
Accrued vacations			-				-				3,878				-
Manufacturing expenses			-				-				-				(109,478	)
Unrealized gains (losses) from sales of products			-				-				73,878				-
Fair value of bonds			-				-				-				-
Severance indemnity			-				-				-				(5,681	)
Hedging			-				-				-				(1,669	)
Inventory of products, spare parts and supplies			1				-				22,513				-
Research and development expenses			-				-				-				(4,718	)
Tax losses			-				-				4,777				-
Capitalized interest			-				-				-				(1,856	)
Expenses in assumption of bank loans			-				-				-				(2,891	)
Unaccrued interest			-				-				47				-
Fair value of property, plant and equipment			-				-				-				(4,182	)
Employee benefits			-				-				908				-
Royalty deferred income taxes			-				-				-				(4,837	)
Acquisition of intangible assets											-				(260	)
Provision for lawsuits and legal expenses			-				-				6,378				-
Provision for investment plan			-				-				1,891				-
Provision for materials, spare-parts and supplies			-				-				7,959				-
Provision for mine closure			-				-				2,867				-
Deferred taxes from investments in equity instruments			-				-				-				(1,934	)
Other			456				-				-				(1,577	)
Balance to date			457				-				128,732				(351,720	)
Net balance			457				-				-				(222,988	)

 

 

Note 28

Income tax and deferred taxes (continued)

 

28.3

Income tax and deferred taxes, continued

 

d.2

Income tax assets and liabilities as of December 31, 2016 are detailed as follows

 

Description of deferred income tax assets		Net position, assets								Net position, liabilities
and liabilities		Assets				Liabilities				Assets				Liabilities
		ThUS$				ThUS$				ThUS$				ThUS$
Depreciation			-				(1	)			-				(221,791	)
Doubtful accounts impairment			32				-				4,273				-
Accrued vacations			-				-				4,062				-
Manufacturing expenses			-				-				-				(110,718	)
Unrealized gains (losses) from sales of products			-				-				86,156				-
Fair value of bonds			-				-				-				(24	)
Severance indemnity			-				-				-				(5,203	)
Hedging			-				-				10,230				-
Inventory of products, spare parts and supplies			77				-				20,899				-
Research and development expenses			-				-				-				(4,641	)
Tax losses			-				-				1,302				-
Capitalized interest			-				-				-				(1,340	)
Expenses in assumption of bank loans			-				-				-				(3,115	)
Unaccrued interest			-				-				136				-
Fair value of property, plant and equipment			-				-				-				(4,179	)
Employee benefits			-				-				6,783				-
Royalty deferred income taxes			-				-				-				(6,458	)
Acquisition of intangible assets											-				(218	)
Provision for lawsuits and legal expenses			-				-				9,276				-
Provision for investment plan			-				-				1,953				-
Provision for materials, spare-parts and supplies			-				-				7,547				-
Deferred taxes, investments in equity instruments			-				-				-				(1,300	)
Provision for mine closure, fine copper and crushing			-				-				-				-
Other			575				(19	)			251				-
Balance to date			684				(20	)			152,868				(358,987	)
Net balance			664				-				-				(206,119	)

 

 

Note 28

Income tax and deferred taxes (continued)

 

28.3

Income tax and deferred taxes, continued

 

d.3

Reconciliation of changes in deferred tax liabilities (assets) as of June 30, 2017

 

		Deferred tax liabilities (assets) at the beginning of the period				Deferred tax expense (income) recognized in profit or loss				Deferred tax related to items credited (debited) directly to equity				Total increase (decrease) of deferred tax liabilities (assets)				Deferred tax liabilities (assets) at the end of the period
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Depreciation			221,792				(9,155	)			-				(9,155	)			212,637
Doubtful accounts impairment			(4,305	)			669				-				669				(3,636	)
Accrued vacations			(4,062	)			184				-				184				(3,878	)
Manufacturing expenses			110,718				(1,240	)			-				(1,240	)			109,478
Unrealized gains (losses) from sales of products			(86,156	)			12,278				-				12,278				(73,878	)
Fair value of bonds			24				-				(24	)			(24	)			-
Severance indemnity			5,203				607				(129	)			478				5,681
Hedging			(10,230	)			11,899				-				11,899				1,669
Inventory of products, spare parts and supplies			(20,976	)			(1,538	)			-				(1,538	)			(22,514	)
Research and development expenses			4,641				77				-				77				4,718
Capitalized interest			1,340				516				-				516				1,856
Expenses in assumption of bank loans			3,115				(224	)			-				(224	)			2,891
Unaccrued interest			(136	)			89				-				89				(47	)
Fair value of property, plant and equipment			4,179				3				-				3				4,182
Employee benefits			(6,783	)			5,875				-				5,875				(908	)
Royalty deferred income taxes			6,458				(1,621	)			-				(1,621	)			4,837
Unused tax losses			(1,302	)			(3,475	)			-				(3,475	)			(4,777	)
Purchase of intangible assets			218				42				-				42				260
Provision for lawsuits and legal expenses			(9,276	)			2,898				-				2,898				(6,378	)
Provision for investment plan			(1,953	)			62				-				62				(1,891	)
Provision for materials, spare-parts and supplies			(7,547	)			(412	)			-				(412	)			(7,959	)
Provision for mine closure			-				(2,867	)							(2,867	)			(2,867	)
Deferred taxes from investments in equity instruments			1,300				596				38				634				1,934
Other deferred taxes			(807	)			1,928				-				1,928				1,121
Total temporary differences, losses and unused fiscal credits			205,455				17,191				(115	)			17,076				222,531

 

 

Note 28

Income tax and deferred taxes (continued)

 

28.3

Income tax and deferred taxes, continued

 

d.4

Reconciliation of changes in deferred tax liabilities (assets) as of December 31, 2016

 

		Deferred tax liabilities (assets) at the beginning of the period				Deferred tax expense (income) recognized in profit or loss				Deferred tax related to items credited (debited) directly to equity				Total increase (decrease) of deferred tax liabilities (assets)				Deferred tax liabilities (assets) at the end of the period
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Depreciation			233,073				(11,281	)			-				(11,281	)			221,792
Doubtful accounts impairment			(5,119	)			814				-				814				(4,305	)
Accrued vacations			(3,368	)			(694	)			-				(694	)			(4,062	)
Manufacturing expenses			109,134				1,584				-				1,584				110,718
Unrealized gains (losses) from sales of products			(87,440	)			1,284				-				1,284				(86,156	)
Fair value of bonds			(446	)			-				470				470				24
Severance indemnity			4,178				1,946				(921	)			1,025				5,203
Hedging			(11,876	)			1,646				-				1,646				(10,230	)
Inventory of products, spare parts and supplies			(29,474	)			8,498				-				8,498				(20,976	)
Research and development expenses			7,981				(3,340	)			-				(3,340	)			4,641
Capitalized interest			3,133				(1,793	)			-				(1,793	)			1,340
Expenses in assumption of bank loans			3,651				(536	)			-				(536	)			3,115
Unaccrued interest			(156	)			20				-				20				(136	)
Fair value of property, plant and equipment			3,375				804				-				804				4,179
Employee benefits			(1,920	)			(4,863	)			-				(4,863	)			(6,783	)
Royalty deferred income taxes			6,410				48				-				48				6,458
Unused tax losses			(1,522	)			220				-				220				(1,302	)
Purchase of intangible assets			-				218				-				218				218
Provision for lawsuits and legal expenses			(7,357	)			(1,919	)			-				(1,919	)			(9,276	)
Provision for investment plan			(3,312	)			1,359				-				1,359				(1,953	)
Provision for materials, spare-parts and supplies			-				(7,547	)			-				(7,547	)			(7,547	)
Deferred taxes from investments in equity instruments			-				-				1,300				1,300				1,300
Other deferred taxes			285				(1,092	)			-				(1,092	)			(807	)
Total temporary differences, losses and unused fiscal credits			219,230				(14,624	)			849				(13,775	)			205,455

 

During the period ended June 30, 2017 and December 31, 2016, the Company calculated and accounted for taxable income considering a rate of 24% and 22.5% respectively, in conformity with Law No, 20,780, Tax Reform, published in the Official Gazette on September 29, 2014.

 

The main amendments include a gradual increase in the corporate income tax rate up to 27% starting from 2018.

 

 

Note 28

Income tax and deferred taxes (continued)

 

28.3

Income tax and deferred taxes, continued

 

d.5

Deferred taxes related to benefits for tax losses

 

The Company’s tax loss carryforwards (NOL carryforwards) were mainly generated by losses in Chile, which in accordance with current Chilean tax regulations have no expiration date.

 

As of June 30, 2017 and December 31, 2016, tax loss carryforwards (NOL carryforwards) are detailed as follows:

 

		6/30/2017				12/31/2016
		ThUS$				ThUS$
Chile			4,777				1,302
Total			4,777				1,302

 

Tax losses as of June 30, 2017 correspond mainly to SQM S.A., Exploraciones Mineras S.A. and Agrorama S.A.

 

d.6        Unrecognized deferred income tax assets and liabilities

 

Unrecognized deferred tax assets and liabilities as of June 30, 2017 and December 31, 2016 are as follows:

 

		6/30/2017				12/31/2016
		ThUS$				ThUS$
		Assets (liabilities)				Assets (liabilities)
Tax losses (NOL’s)			56				56
Doubtful accounts impairment			79				79
Inventory impairment			2871				2871
Pensions plan			297				297
Accrued vacations			29				29
Depreciation			(245	)			(245	)
Other			(45	)			(45	)
Balances to date			3,042				3,042

 

Tax losses mainly relate to the United States, and they expire in 20 years.

 

 

Note 28

Income tax and deferred taxes (continued)

 

28.3

Income tax and deferred taxes, continued

 

d.7

Movements in deferred tax assets and liabilities

 

Movements in deferred tax assets and liabilities as of June 30, 2017 and December 31, 2016 are detailed as follows:

 

		6/30/2017				12/31/2016
		ThUS$				ThUS$
		Liabilities (assets)				Liabilities (assets)
Deferred tax assets and liabilities, net opening balance			205,455				219,230
Increase (decrease) in deferred taxes in profit or loss			17,191				(14,624	)
Increase (decrease) in deferred taxes in equity			(115	)			849
Balances to date			222,531				205,455

 

d.8

Disclosures on income tax expense (income)

 

The Company recognizes current tax 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

 

(b)

a business combination

 

Current and deferred tax expenses (income) are detailed as follows:

 

		6/30/2017				6/30/2016
		ThUS$				ThUS$
		Income (expenses)				Income (expenses)
Current income tax expense
Current income tax expense			(81,126	)			(59,293	)
Adjustments to prior year current income tax			15,707				1,955
Current income tax expense, net, total			(65,419	)			(57,338	)
Deferred tax expense
Deferred tax expense (income) relating to the creation and reversal of temporary differences			(17,191	)			47
Deferred tax expense, net, total			(17,191	)			47
Tax expense (income)			(82,610	)			(57,291	)

 

 

Note 28

Income tax and deferred taxes (continued)

 

28.3

Income tax and deferred taxes, continued

 

Tax expenses (income) for foreign and domestic parties are detailed as follows:

 

		6/30/2017				6/30/2016
		ThUS$				ThUS$
		Income (expenses)				Income (expenses)
Current income tax expense by foreign and domestic parties, net
Current income tax expense, foreign parties, net			(4,096	)			(543	)
Current income tax expense, domestic, net			(61,323	)			(56,795	)
Current income tax expense, net, total			(65,419	)			(57,338	)
Deferred tax expense by foreign and domestic parties, net
Deferred tax expense, foreign parties, net			(8	)			571
Deferred tax expense, domestic, net			(17,183	)			(524	)
Deferred tax expense, net, total			(17,191	)			47
Income tax expense			(82,610	)			(57,291	)

 

d.9

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:

 

(a)

the parent, investor or interest holder is able to control the time for reversal of the temporary difference; and

 

(b)

It is more likely than not that the temporary difference is not 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 not possible to meet for the following requirements:

 

(a)

Temporary differences are reversed in a foreseeable future; and

 

(b)

The Company has tax earnings, against which temporary differences can be used.

 

 

Note 28

Income tax and deferred taxes (continued)

 

28.3

Income tax and deferred taxes, continued

 

d.10

Disclosures on the tax effects of other comprehensive income components:

 

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
		6/30/2017				6/30/2017				6/30/2017
		ThUS$				ThUS$				ThUS$
Gain (loss) from defined benefit plans			(605	)			129				(476	)
Cash flow hedge			2,133				24				2,157
Reserve for gains (losses) from financial assets measured at fair value through other comprehensive income			(3,865	)			(38	)			(3,903	)
Total			(2,337	)			115				(2,222	)

 

Income tax related to components of other income and expense with a charge or credit to net equity		Amount before taxes (expense) gain				((Expense) income for income taxes				Amount after taxes
		6/30/2016				6/30/2016				6/30/2016
		ThUS$				ThUS$				ThUS$
Gain (loss) from defined benefit plans			(1,014	)			197				(817	)
Cash flow hedge			(359	)			148				(211	)
Total			(1,373	)			345				(1,028	)

 

d.11

Explanation of the relationship between expense (income) for tax purposes and accounting income.

 

In accordance with paragraph No, 81, letter c) of IAS 12, the Company has estimated that the method that discloses more significant information for the users of its financial statements is the reconciliation of tax expense (income) to the result of multiplying income for accounting purposes by the tax rate in force in Chile, This option is based on the fact that the Parent and its subsidiaries incorporated in Chile generate almost the total amount of tax expense (income) and the fact that amounts of subsidiaries incorporated in foreign countries have no relevant significance within the context of the total amount of tax expense (income).

 

 

Note 28

Income tax and deferred taxes (continued)

 

28.3

Income tax and deferred taxes, continued

 

Reconciliation of numbers in income tax expenses (income) and the result of multiplying financial gain by the rate prevailing in Chile,

 

		Income (expense)
		6/30/2017				6/30/2016
		ThUS$				ThUS$
Consolidated income before taxes			286,526				199,689
Income tax rate in force in Chile			25.5	%			24	%
Tax expense using the legal rate			(73,064	)			(47,925	)
Effect of royalty tax expense and passive income			(1,637	)			(2,809	)
Tax effect of non-taxable revenue			1,723				3,100
Effect of taxable rate of non-deductible expenses for determination of taxable income (loss)			(2,243	)			(894	)
Tax effect of tax rates supported abroad			(4,988	)			2,600
Other tax effects from the reconciliation between the accounting income and tax expense Effect of changes in tax rate			(2,401	)			(11,363	)
Tax expense using the effective rate			(82,610	)			(57,291	)

 

d.12

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 tax regulations in force in the country of origin:

 

Chile

 

According to article 200 of Decree Law No 830, the tax authority shall review for any deficiencies in its settlement and taxes turn giving rise, by applying a requirement of 3 years term from the expiration of the legal deadline when payment should have been made, Besides, this requirement was extended to 6 years term for the revision of taxes subject to declaration, when such declaration was not been filed or has been presented maliciously false.

 

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.

 

 

Note 28

Income tax and deferred taxes (continued)

 

28.3

Income tax and deferred taxes, continued

 

Mexico:

 

In Mexico, the tax authority can review tax returns up to 5 years from the expiration date of the tax return.

 

Spain:

 

In Spain, the tax authority can review tax returns up to 4 years from the expiration date of the tax return.

 

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.

 

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 an omission or error in the tax return is detected, the review can be extended for a period of up to 5 years.

 

 

Note 29

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		6/30/2017 ThUS				12/31/2016 ThUS$
Current assets:
Cash and cash equivalents		ARS			37				4
Cash and cash equivalents		BRL			1,369				60
Cash and cash equivalents		CLP			37,981				6,044
Cash and cash equivalents		CNY			1,073				400
Cash and cash equivalents		EUR			11,830				11,386
Cash and cash equivalents		GBP			196				71
Cash and cash equivalents		IDR			4				-
Cash and cash equivalents		INR			9				12
Cash and cash equivalents		MXN			-				310
Cash and cash equivalents		PEN			8				3
Cash and cash equivalents		THB			3				-
Cash and cash equivalents		YEN			5,362				2,150
Cash and cash equivalents		ZAR			3,368				3,250
Subtotal cash and cash equivalents					61,240				23,690
Other current financial assets		CLF			-				-
Other current financial assets		CLP			168,011				50,740
Subtotal other current financial assets					168,011				50,740
Other current non-financial assets		ARS			-				5
Other current non-financial assets		AUD			-				45
Other current non-financial assets		BRL			1,125				-
Other current non-financial assets		CLF			64				47
Other current non-financial assets		CLP			18,870				14,554
Other current non-financial assets		CNY			17				10
Other current non-financial assets		EUR			257				822
Other current non-financial assets		MXN			2				1,734
Other current non-financial assets		THB			13				21
Other current non-financial assets		PEN			17				-
Other current non-financial assets		YEN			58				53
Other current non-financial assets		ZAR			-				18
Subtotal other current non-financial assets					20,423				17,309
Trade and other receivables		AUD			-				-
Trade and other receivables		BRL			25				23
Trade and other receivables		CLF			410				545
Trade and other receivables		CLP			69,522				71,908
Trade and other receivables		CNY			186				48
Trade and other receivables		EUR			56,901				30,941
Trade and other receivables		GBP			605				152
Trade and other receivables		MXN			399				423
Trade and other receivables		PEN			-				-
Trade and other receivables		THB			474				2,777
Trade and other receivables		YEN			24,153				209
Trade and other receivables		ZAR			36,916				25,835
Subtotal trade and other receivables					189,591				132,861
Receivables from related parties		PEN			-				40
Receivables from related parties		CLP			231				41
Receivables from related parties		EUR			1,266				476
Receivables from related parties		THB			994				705
Receivables from related parties		CNY			-				48
Receivables from related parties		YEN			-				-
Receivables from related parties		ZAR			-				-
Subtotal receivables from related parties					2,491				1,310

 

 

Note 29

Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

Class of assets		Currency		6/30/2017 ThUS$				12/31/2016 ThUS$
Current tax assets		ARS			4				5
Current tax assets		CLP			1,207				1,640
Current tax assets		EUR			353				118
Current tax assets		BRL			5				3
Current tax assets		ZAR			404				386
Current tax assets		MXN			573				202
Current tax assets		PEN			200				203
Subtotal current tax assets					2,746				2,557
Non-current assets
Other non-current financial assets		CLP			20				20
Other non-current financial assets		YEN			42				41
Subtotal other non-current financial assets					62				61
Other non-current non-financial assets		BRL			-				139
Other non-current non-financial assets		CLP			755				729
Subtotal other non-current non-financial assets					755				868
Non-current right receivable		CLF			367				344
Non-current right receivable		CLP			579				1,382
Subtotal non-current rights receivable					946				1,726
Equity-accounted investees		AED			31,649				31,297
Equity-accounted investees		CLP			-				-
Equity-accounted investees
Equity-accounted investees		IDR			-				-
Equity-accounted investees		EUR			7,499				7,373
Equity-accounted investees		INR			1,127				1,499
Equity-accounted investees		THB			2,197				1,932
Equity-accounted investees		TRY			21,600				16,712
Subtotal equity-accounted investees					64,072				58,813
Intangible assets other than goodwill		CLP			292				294
Intangible assets other than goodwill		CNY			-				1
Subtotal intangible assets other than goodwill					292				295
Property, plant and equipment		CLP			4,298				3,810
Subtotal property, plant and equipment					4,298				3,810
Total non-current assets					70,425				65,573
Total assets					514,927				294,040

 

 

Note 29

Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

Liabilities held in foreign currencies are detailed as follows:

 

				6/30/2017												12/31/2016
Class of liability		Currency		91 days to 1 year ThUS$				91 days to 1 year ThUS$				Total ThUS$				Up to90 days ThUS$				91 days to 1 year ThUS$				Total ThUS$
Current liabilities
Other current financial liabilities		CLF			4,511				6,204				10,715				44,327				6,098				50,425
Other current financial liabilities		CLP			-				-				-				-				20,919				20,919
Subtotal other current financial liabilities					4,511				6,204				10,715				44,327				27,017				71,344
Trade and other payables		BRL			40				-				40				38				-				38
Trade and other payables		THB			69				-				69				131				-				131
Trade and other payables		CLP			38,443				4,890				43,333				40,604				2,808				43,412
Trade and other payables		CNY			13				-				13				-				-				-
Trade and other payables		EUR			10,889				-				10,889				30,545				-				30,545
Trade and other payables		GBP			15				-				15				6				-				6
Trade and other payables		INR			-				-				-				1				-				1
Trade and other payables		MXN			12				-				12				67				-				67
Trade and other payables		PEN			3				-				3				4				-				4
Trade and other payables		ZAR			1,562				-				1562				3,054				-				3,054
Subtotal trade and other payables					51,046				4,890				55,936				74,450				2,808				77,258
Other current provisions		ARS			-				15				15				-				-				-
Other current provisions		CLF			-				28				28				-				-				-
Other current provisions		BRL			-				739				739				-				-				-
Other current provisions		CLP			6				75				81				-				70				70
Other current provisions		EUR			6				237				243				5				-				5
Other current provisions		INR			1				-				1				-				-				-
Subtotal other current provisions					13				1,094				1,107				5				70				75
Current tax liabilities		CLP			-				28				28				-				131				131
Current tax liabilities		CNY			-				7				7				-				36				36
Current tax liabilities		EUR			-				4,318				4,318				-				3,987				3,987
Current tax liabilities		ZAR			-				-				-				27				-				27
Current tax liabilities		MXN			-				2,181				2,181				-				56				56
Subtotal current tax liabilities					-				6,534				6,534				27				4,210				4,237

 

 

Note 29

Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

				6/30/2017												12/31/2016
Class of liability		Currency		Up to 90 days ThUS$				over 90 days to 1 year ThUS$				Total ThUS$				Up to90 days ThUS$				Over 90 days to 1 year ThUS$				Total ThUS$
Other current non-financial liabilities		BRL			10				1				11				4				-				4
Other current non-financial liabilities		CLP			7,895				2,389				10,284				7,481				2,820				10,301
Other current non-financial liabilities		CNY			95				-				95				78				-				78
Other current non-financial liabilities		EUR			4,448				-				4,448				958				-				958
Other current non-financial liabilities		MXN			636				268				904				1,284				35				1,319
Other current non-financial liabilities		YEN			-				10				10				-				-				-
Other current non-financial liabilities		PEN			70				-				70				70				-				70
Other current non-financial liabilities		GBP			-				-				-				-				-				-
Other current non-financial liabilities		ZAR			857				-				857				866				-				866
Subtotal other current non-financial liabilities					14,011				2,668				16,679				10,741				2,855				13,596
Total current liabilities					69,581				21,390				90,971				129,550				36,960				166,510

 

 

Note 29

Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

		6/30/2017
Class of liability		Currency		1 to 2 years ThUS$				2 to 3 years ThUS$				3 to 4 years ThUS$				4 to 5 years ThUS$				Over 5 years ThUS$				Total ThUS$
Non-current liabilities
Other non-current financial liabilities		CLF			6,021				6,021				6,021				6,021				245,290				269,374
Subtotal other non-current financial liabilities					6,021				6,021				6,021				6,021				245,290				269,374
Non-current provisions for employee benefits		CLP			-				-				-				-				547				547
Non-current provisions for employee benefits		MXN			-				-				-				-				76				76
Non-current provisions for employee benefits		YEN			-				-				-				-				576				576
Subtotal non-current provisions for employee benefits					-				-				-				-				1,199				1,199
Total non-current liabilities					6,021				6,021				6,021				6,021				246,489				270,573
		12/31/2016
Class of liability		Currency		1 to 2 years ThUS$				2 to 3 years ThUS$				3 to 4 years ThUS$				4 to 5 years ThUS$				Over 5 years ThUS$				Total ThUS$
Non-current liabilities
Other non-current financial liabilities		CLF			5,903				5,903				5,903				5,903				243,297				266,909
Subtotal other non-current financial liabilities					5,903				5,903				5,903				5,903				243,297				266,909
Non-current provisions for employee benefits		CLP			-				-				-				-				494				494
Non-current provisions for employee benefits		MXN			-				-				-				-				61				61
Non-current provisions for employee benefits		YEN			-				-				-				-				561				561
Subtotal non-current provisions for employee benefits					-				-				-				-				1,116				1,116
Total non-current liabilities					5,903				5,903				5,903				5,903				244,413				268,025

 

 

Note 30

Mineral resource exploration and evaluation expenditure

 

Because of the nature of the operations of Sociedad Química y Minera de Chile S.A. and its subsidiaries and the type of exploration they conduct (which is different than other mining businesses where the exploration process results in significant time), the exploration and process and the definition of the economic feasibility occurs normally within the year. Accordingly, although expenditure is initially capitalized, it could be recognized in profit or loss for the same year should there be no technical and commercial feasibility. This results in having no significant expenditure that have no feasibility study at the end of the year.

 

Prospecting expenditure can be found in 4 different stages: execution, economically feasible, not economically feasible and under exploitation:

 

1.          Execution: prospecting expenditure which are under execution and accordingly there is no yet a definition as to its economic feasibility are classified in the caption property, plant and equipment, as of June 30, 2017 and December 31, 2016, the balance amounts to ThUS$17,621 and ThUS$ 12,163, respectively,

 

2.          Economically feasible: prospecting expenditure, which upon completion, has been concluded to be economically feasible is classified in the caption non-current assets in other non-current non-financial assets, as of June 30, 2017 and December 31, 2016, the balance amounts to ThUS$21,421 and ThUS$ 23,008 respectively,

 

3.          Not economically feasible: Prospecting expenditure, which upon completion it has been concluded that are not economically feasible are recorded in profit or loss: As of June 30, 2017 and December 31, 2016 there is no expenditure for such concept.

 

4.          Under exploitation: Prospecting expenditure under exploitation is classified in the caption current assets in current inventories, These are amortized considering the exploited material, as of June 30, 2017 and December 31, 2016, the balance amounts to ThUS$1,311 and ThUS$ 674 respectively.

 

For the amount of capitalized expenditure, the total amount disbursed in exploration and evaluation of mineral resources as of June 30, 2017 ThUS$1,396, and correspond to non-metallic projects, Such expenditure mainly correspond to studies, either topographical, geological, exploratory drilling, sampling, among others,.

 

With respect to this expenditure, the Company has defined classifying it in accordance with IFRS 6.9:

 

For exploration expenditure where the mineral has low ore grade that is not economically exploitable, it is debited directly to profit or loss.

 

If studies determine that the ore grade is economically exploitable, it is classified in other non-current assets in the caption stain development and prospecting expenses and at the time of making the decision for exploiting the zone it is classified in the caption inventories as part of the cost of raw materials required for production purposes.

 

 

Note 31

Lawsuits and complaints

 

Lawsuits and complaints

 

During 2015, the Chilean IRS has filed several lawsuits and complaints related to the so-called “SQM Case”, which are associated with the irregular financing of politicians against a number of individuals, amongst others, the legal representatives of the Company Patricio de Sominihac T. – CEO – and Ricardo Ramos R. – Vice President of Corporate Services–. Basically, those lawsuits and complaints relate to alleged tax crimes associated with a possible undue decrease in taxable net income of the Company and two of its subsidiaries over the last seven years by recording as expenses in their accounting records invoices and fee receipts, which could be considered to be ideologically false. Such legal actions are also filed against the taxpayers who provided the tax documents that allowed the alleged performance of the related illicit acts.

 

Likewise, during 2015 Oscar Gajardo S. filed several similar lawsuits against the Directors and Executives of ten major Chilean companies, including SQM, alleging undue appropriation incurred by making contributions regulated by the Law and the Chilean Electoral Service without the approval of their shareholders. Subsequently, Mr. Gajardo filed a new lawsuit against Patricio Contesse G. – former CEO of SQM – and Ricardo Ramos R. el al for the alleged perpetration of several crimes for the irregular financing of politicians to the detriment of SQM and its shareholders.

 

Additionally, during 2015 and within the context of the “SQM Case”, the Deputy of the Tarapacá Region of Chile Hugo Gutiérrez G. filed a lawsuit for alleged extortion-bribery and money laundering referred to in Law No. 20.393 on Legal Responsibility of Juridical Persons against SQM and its legal representative Patricio de Sominihac T. and Senators of the Tarapacá Region of Chile Jaime Orpis B. and Fulvio Rossi C.

 

Actions performed by the Authority

 

The Public Ministry and Chilean IRS (Servicio de Impuestos Internos (SII)) have performed a number of actions within the framework of the so-called “SQM Case” where the Company and its executives have provided their cooperation. Several of the Company’s executives have granted access to their computers and made several statements at the request of the Prosecutors responsible for the investigation. Additionally, SQM has provided physical and digital copies of its accounting records and its subsidiaries’ accounting records. In addition, SQM has also provided the Public Ministry with its email files and all the documentation that has been required by the related authority.

 

 

Note 31

Lawsuits and complaints, (continued)

 

Shearman & Sterling and Ad-Hoc Committee

 

The Company’s Board of Directors, at its Extraordinary Meeting of February 26, 2015, formed an Ad-hoc Committee. This Committee was formed with the purpose of conducting an investigation and gather all the information necessary related to the “Penta case –SQM aspect,” so that upon completion of such investigation the Committee is able to report to the Board of Directors its results, conclusions and recommendations. The Board of Directors provided the Committee with the authority necessary to conduct its intended duties and provided it with powers so that, at its discretion, engages all the legal and accounting, and other independent advisory services it deemed appropriate and that, upon completion of its duties, reports to the Board of Directors under the aforementioned terms.

 

The Committee engaged the legal Advisory of the law firms Shearman & Sterling and Vial / Serrano, and the forensic services provided by the US company FTI (the “Advisors”) to conduct an investigation and analysis of the possible contingencies to which SQM may be exposed under the standards contained in the Foreign Corrupt Practices Act (FCPA) of the United States of America, which is applicable to the Company as the issuer of securities in the US market. Specifically, the investigation was focused on conducting an analysis of: (a) whether the Company had made any undue payment defined as a corrupt practice for FCPA purposes; and (b) whether the Company had not complied with the accounting regulations in accordance with that established in the FCPA.

 

On December 15, 2015, the Committee, together with the Advisors, reported to the Board of Directors the results, conclusions and recommendations resulting from their work. Likewise, on the same date, the Advisors reported such results, conclusions and recommendations to the Chilean Authorities and on January 7, 2016, they reported these to the US Regulators.

 

The main conclusions contained in the Ad-Hoc Committee Report are: (a) the Committee identified payments authorized by the former General Manager of SQM, Mr. Patricio Contesse G. with respect to which the Company found no sufficient supporting documentation; (b) no evidence was identified demonstrating that such payments were made with the purpose of inducing an public officer to act or refrain from acting with the purpose of helping SQM obtain economic benefits: (c) a conclusion was reached with respect to the cost center managed by the former General Manager of SQM Mr. Patricio Contesse G., that the Company’s accounting records did not accurately reflect the transactions challenged, notwithstanding the fact that, because of their amount, such transactions are below the materiality level defined by the Company’s external auditors determined in comparison to the volume of equity, sales, expenses or profits of SQM within the reported period; and that (d) SQM’s internal controls were not sufficient to monitor the expenses included in the cost center managed by the former General Manager of SQM and that the Company relied in the adequate use of the resources by Mr. P. Contesse G. ”

 

 

Note 31

Lawsuits and complaints, (continued)

 

Investigation by the Department of Justice and the Securities Exchange Commission

 

SQM informed of the investigation currently being performed by Shearman & Sterling on US regulating entities (Department of Justice and Securities and Exchange Commission), in conformity with the standards effective in the United States of America. The outcome of such investigation was delivered to these regulating entities, which have started investigations to determine the existence of possible noncompliance with FCPA (Foreign Corruption Practices Act) or internal control standards.

 

On January 13, 2017, the Company entered into agreements with the Department of Justice (the “DOJ”) and the Securities and Exchange Commission (the “SEC”),both based in the United States of America (the “United States”), with respect to the investigations that such agencies have conducted as a result of payments to suppliers and entities that might have been related to politically exposed persons during the years from 2008 through 2015, which resulted in the performance of an internal investigation at the Company through an Ad-hoc Committee from its Board of Directors and which was led by the law firm Shearman & Sterling (the “Investigated Facts”). Because the Company’s securities are traded in the United States, the Company is subject to the U.S. legislation. The Company has voluntarily provided the results of its internal investigation and documents supporting it to the DOJ, the SEC and the relevant Chilean authorities.

 

In conformity with the terms of the agreement entered into with the DOJ, referred to as Deferred Prosecution Agreement (the “DPA”), the Company has accepted that the DOJ presents (i) a charge for the infractions referred to the absence of implementation of effective internal accounting systems and internal accounting controls and (ii) a charge for infractions related to failure to properly maintain accounting ledgers, records and sections with respect to the Investigated Facts. By virtue of the DPA, the DOJ has agreed not to prosecute those charges against the Company for a period of 3 years and releasing the Company from such responsibility after such period to the extent that within such term the Company complies with the terms in the DPA, which include the payment of a fine of 15,487,500 United States dollars (“U.S. dollars”) and the acceptance of an external monitor for a term of 24 months (the “Monitor”) which evaluates the Company’s compliance program, for a subsequent independent report by the Company for an additional year.

 

With respect to the agreement entered into with the SEC, the Company has agreed to (i) pay a fine of 15 million of U.S. dollars and (ii) maintaining the Monitor for the aforementioned term.

 

The SEC has issued a Cease and Desist Order which does not identify any other events of noncompliance with the standards applicable in the United States.

 

The aforementioned amounts of approximately US$ 30.5 million were reflected in the profit or loss of SQM during the fourth quarter of 2016 in the line item Other expenses by function.

 

 

Note 32

Sanction proceedings

 

On April 1, 2015, the SVS started an administrative proceeding against five Directors of SQM for supposedly not having provided to the market on a timely and truthful basis information which could be significant for making investment decisions. Such information mainly relates to the preliminary estimate of the impact on the Company’s financial statements of certain expenses paid by the Company between 2008 and 2014 and which might not qualify as expenses under current Chilean tax regulations because of the absence of supporting documentation.

 

On December 31, 2015, the Company reported that the Chilean Superintendence of Securities and Insurance (SVS) has made its resolution to impose sanctions on Patricio Contesse Fica, Julio Ponce Lerou – former Company’s Directors–, Hernán Büchi Buc, Juan Antonio Guzmán Molinari and Wolf von Appen Berhmann –former Directors of SQM– for not having reported to the market, in March 2015, as an Essential event and in their role of Company’s Directors, on the expenses that SQM incurred during certain years, which did not have sufficient reporting documentation or might be considered to be unnecessary to generate income. The sanction imposed relates to a fine of UF 1,000 on each of the aforementioned individuals and a remedy can be sought with the Chilean Superintendence of Securities and Insurance (SVS) and courts of justice.

 

Note 33

Railway for transportation of products between the site Coya Sur and the Port of Tocopilla

 

As a result of the rain storms that affected the Tocopilla Zone at the beginning of August 2015, SQM S.A. confirmed the existence of damages in several zones in the railway between the sites Coya Sur and Tocopilla. Accordingly, starting from such date the Company has used the transport of trucks replacing the transport through the railway. SQM has performed several internal and external studies with the purpose of determining the costs and terms necessary to repair the damages in the railway.

 

The analysis of the internal and external reports allows concluding that the costs associated with repairing the damages caused by the rain storms would imply long-terms and high costs, and accordingly, it is not convenient at short and medium-term to repair the railway. Such decision does not affect the production process or imply additional employee reductions.

 

Consequently, SQM has adjusted the value of the assets associated with the railway (fixed equipment, facilities and rolling equipment), which has translated into a charge of approximately US$ 32 million which are reflected in the line other expenses by function in the consolidated statement of income for the period. Such amount approximately represents 0.7% of SQM’s total assets reported at the end of September 2016.

 

 

Note 34

Events occurred after the reporting date

 

34.1

Authorization of the financial statements

 

The consolidated financial statements of Sociedad Química y Minera de Chile S.A. and subsidiaries prepared in accordance with International Financial Reporting Standards for the period ended June 30, 2017 were approved and authorized for issuance by the Board of Directors at their meeting held on August 23 , 2017.

 

34.2

Disclosures on events occurring after the reporting date

 

On July 11, 2017, SQM communicated to the Chilean Superintendency of Securities and Insurance (SVS) that the Australian company Kidman Resources Ltd. (“Kidman”) (ASX:KDR) has accepted the offer (“Offer”) by SQM, with the prior unanimous approval of the directors attending the Extraordinary Board of Directors' Meeting held on July 10, 207 for a SQM's subsidiary to acquire from Kidman 50% of the interest in the lithium project Mt. Holland, located in the Western Australia State, Australia (the “Project”) and incorporate through equal shares of interest a joint venture (the “Joint Venture”) in exchange for the payment in cash of US$30 million to Kidman. Likewise, SQM will make a contribution of US$80 million to finance a part of the performance of the project. As part of such contribution to the Project, SQM will provide a loan convertible into shares of US$21.5 million to Kidman subsequent to entering into the final documents to allow the progress of the Project while the conditions for implementing the Joint Venture are complied with.

 

The Joint Venture will develop a mine site and spodumene concentration plant (the “Mine”), and a refinery plant to process the concentrate from the Mine. The initial objective of the production will be approximately 40 MT of lithium carbonate equivalent (LCE) by year, starting from the year 2021. Kidman shall maintain the exclusive right to explore gold within the Project's area.

 

The Offer is subject to SQM and Kidman entering into the formal agreements reflecting the business terms in the Offer on or before September 30, 2017.

 

Management is not aware of other significant events occurred between June 30, 2017 and the date of issuance of these consolidated financial statements, which may significantly affect them.

 

 

Note 34

Events occurred after the reporting date, continued

 

34.3

Detail of dividends declared after the reporting date

 

August 23, 2017, the Company's Board of Directors' approved the following:

 

Payment of Provisional Dividend

 

Payment of a provisional dividend equivalent to US$ 0.38432 per share with a debit to profit for 2017. Such amount will be paid in its equivalent in Chilean pesos, the domestic currency, according to Observed U.S. dollar exchange rate published in the Official Gazette on August 31, 2017.

 

This dividend will be paid to the shareholders, personally or through their representatives duly authorized from 9:00 a.m. of September 14, 2017. The payment of such dividend will be made in favor of the shareholders registered with the Company’s Shareholders’ Record at the fifth business day prior to the payment 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: September 20, 2017	/s/ Ricardo Ramos
	By: Ricardo Ramos
	CFO & Vice-President of Development

 

Persons who are to respond to the collection of information contained SEC 1815 (04-09) in this form are not required to respond unless the form displays currently valid OMB control number.