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 June, 2014.

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.

 

SQM Los Militares 4290, Las Condes, Santiago, Chile Tel: (56 2) 425 2000 www.sqm.com

 

  

Santiago, Chile, June 09, 2014 – Sociedad Química y Minera de Chile S.A. (SQM), reports the translation of the financial statements that were filed with the Chilean Securities and Insurance Commission (Superintendencia de Valores y Seguros de Chile) for the year period ended March 31, 2014.

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

For the year ended

March 31, 2014

 

SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. AND SUBSIDIARIES

In Thousands of United States Dollars

 

This document includes:

 

-	Consolidated Classified Statements of Financial Position
-	Consolidated Statements of Income by Function
-	Consolidated Statements of Comprehensive Income
-	Consolidated Statements of Cash Flows
-	Statements of Changes in Equity
-	Notes to the Consolidated Financial Statements

 

 

Table of Contents – Consolidated Financial Statements

 

Note			Page
	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
	Statements of Changes in Equity		14
	Notes  to the consolidated financial statements
1	Identification and Activities of the Company and Subsidiaries
	1.1	Historical background	17
	1.2	Main domicile where the Company performs its production activities	17
	1.3	Codes of main activities	17
	1.4	Description of the nature of operations and main activities	17
	1.5	Other background	19
2	Basis of presentation for the consolidated financial statements
	2.1	Accounting period	21
	2.2	Financial statements	22
	2.3	Basis of measurement	22
	2.4	Accounting pronouncements	23
	2.5	Basis of consolidation	30
	2.6	Significant accounting judgments, estimates and assumptions	33
3	Significant accounting policies
	3.1	Classification of balances as current and non-current	34
	3.2	Functional and presentation currency	34
	3.3	Foreign currency translation	34
	3.4	Subsidiaries	37
	3.5	Consolidated statement of cash flows	37
	3.6	Financial assets	37
	3.7	Financial liabilities	38
	3.8	Financial instruments at fair value through profit or loss	38
	3.9	Financial instruments offsetting	38
	3.10	Reclassification of financial instruments	39
	3.11	Derivative and hedging financial instruments	39
	3.12	Derecognition of financial instruments	41
	3.13	Derivative financial instruments	41
	3.14	Fair value measurements	41

 

 

Table of Contents – Consolidated Financial Statements (continued)

 

Note			Page
	3.15	Leases	41
	3.16	Deferred acquisition costs from insurance contracts	42
	3.17	Trade and other receivables	42
	3.18	Inventory measurement	43
	3.19	Investments in associates and joint ventures	44
	3.20	Transactions with non-controlling interests	45
	3.21	Related party transactions	45
	3.22	Property, plant and equipment	45
	3.23	Depreciation of property, plant and equipment	47
	3.24	Intangible assets	47
	3.25	Intangible assets other than goodwill	48
	3.26	Research and development expenses	49
	3.27	Prospecting expenses	49
	3.28	Impairment of non-financial assets	51
	3.29	Minimum dividend	52
	3.30	Earnings per share	52
	3.31	Trade and other payables	52
	3.32	Interest-bearing borrowings	52
	3.33	Other provisions	53
	3.34	Obligations related to employee termination benefits and pension commitments	54
	3.35	Compensation plans	55
	3.36	Revenue recognition	55
	3.37	Finance income and finance costs	56
	3.38	Income tax and deferred taxes	57
	3.39	Segment reporting	58
	3.40	Environment	58
4	Financial risk management
	4.1	Financial risk management policy	59
	4.2	Risk factors	60
	4.3	Risk measurement	63
5	Changes in estimates and accounting policies (consistent presentation)
	5.1	Changes in accounting estimates	64
	5.2	Changes in accounting policies	64

 

 

Table of Contents – Consolidated Financial Statements (continued)

 

Note			Page
6	Background of companies included in consolidation
	6.1	Parent’s stand-alone assets and liabilities	65
	6.2	Parent entity	65
	6.3	Jointly arrangements of controlling interest	65
	6.4	General information on consolidated subsidiaries	67
	6.5	Information attributable to non-controlling interests	70
	6.6	Information on consolidated subsidiaries	71
	6.7	Detail of transactions between consolidated companies	75
7	Cash and cash equivalents
	7.1	Types of cash and cash equivalents	76
	7.2	Short-term investments, classified as cash equivalents	77
	7.3	Information on cash and cash equivalents by currency	77
	7.4	Amount of significant restricted (unavailable) cash balances	78
	7.5	Short-term deposits, classified as cash equivalents	79
8	Inventories		81
9	Related party: disclosures
	9.1	Related party disclosures	82
	9.2	Relationship between the Parent and the entity	82
	9.3	Detailed identification of the relationship between the Parent and subsidiary	83
	9.4	Detail of related parties and related party transactions	85
	9.5	Trade receivables due from related parties, current	86
	9.6	Trade payables due to related parties, current	87
	9.7	Board of directors and senior management	88
	9.8	Key Management Personnel Compensation	90
10	Financial instruments
	10.1	Types of other financial assets	91
	10.2	Trade and other receivables, current and non-current	91
	10.3	Hedging assets and liabilities	95
	10.4	Financial liabilities	97
	10.5	Trade and other payables	108
	10.6	Financial liabilities at fair value through profit or loss	108
	10.7	Financial asset and liability categories	109
	10.8	Fair value measurement of assets and liabilities	111
	10.9	Financial assets pledged as guarantee	112
	10.10	Estimated fair value of financial instruments and financial Derivatives	112
	10.11	Nature and scope of risks arising from financial instruments	114

 

 

Table of Contents – Consolidated Financial Statements (continued)

 

Note			Page
11	Equity-accounted investees
	11.1	Investments in associates recognized according to the equity method of accounting	115
	11.2	Assets, liabilities, revenue and expenses of associates	116
	11.3	Other information	117
12	Joint ventures
	12.1	Policy for the accounting for equity accounted investment in joint ventures	118
	12.2	Disclosures of interest in joint ventures	118
	12.3	Investments in joint ventures accounted for using the equity method of accounting	119
	12.4	Assets, liabilities, revenue and expenses from joint ventures	121
	12.5	Other joint venture disclosures	122
13	Intangible assets and goodwill
	13.1	Balances	123
	13.2	Disclosures on intangible assets and goodwill	123
14	Property, plant and equipment
	14.1	Types of property, plant and equipment	127
	14.2	Reconciliation of changes in property, plant and equipment by type	129
	14.3	Detail of property, plant and equipment pledged as guarantee	131
	14.4	Additional information	131
	14.5	Impairment of assets	131
	14.6	Reclassifications	131
15	Employee benefits
	15.1	Provisions for employee benefits	132
	15.2	Policies on defined benefit plans	133
	15.3	Other long-term benefits	134
	15.4	Post-employment benefit obligations	135
	15.5	Staff severance indemnities	135
16	Executive compensation plan		136
17	Disclosures on equity
	17.1	Capital management	139
	17.2	Disclosures on preferred share capital	140
	17.3	Disclosures on reserves in equity	142
	17.4	Dividend policies	143
	17.5	Provisional dividends	144

 

 

Table of Contents – Consolidated Financial Statements (continued)

 

Note			Page
18	Provisions and other non-financial liabilities
	18.1	Types of provisions	146
	18.2	Description of other provisions	147
	18.3	Other non-financial liabilities, current	147
	18.4	Changes in provisions	148
	18.5	Detail of main types of provisions	150
19	Contingencies and restrictions
	19.1	Lawsuits or other relevant events	151
	19.2	Restrictions to management or financial limits	156
	19.3	Commitments	157
	19.4	Restricted or pledged cash	157
	19.5	Securities obtained from third parties	158
	19.6	Indirect guarantees	159
20	Revenue		161
21	Earnings per share		161
22	Borrowing costs		162
23	Effect of fluctuations on foreign currency exchange rates		163
24	Environment
	24.1	Disclosures on disbursements related to the environment	164
	24.2	Detail of information on disbursements related to the environment	165
	24.3	Description of each project indicating whether these are in process or have been finished	175
25	Other current and non-current non-financial assets		178
26	Operating segments
	26.1	Operating segments	179
	26.2	Operating segments disclosures	181
	26.3	Statement of comprehensive income classified by operating segments based on groups of products	183
	26.4	Revenue from transactions with other company operating segments	185

  

 

Table of Contents – Consolidated Financial Statements (continued)

 

Note			Page
	26.5	Disclosures on geographical areas	186
	26.6	Disclosures on main customers	186
	26.7	Segments by geographical areas	187
	26.8	Property, plant and equipment classified by geographical areas	188
27	Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature
	27.1	Revenue	189
	27.2	Cost of sales	189
	27.3	Other income	190
	27.4	Administrative expenses	190
	27.5	Other expenses by function	191
	27.6	Other income (expenses)	191
	27.7	Summary of expenses by nature	192
	27.8	Finance expenses	192
28	Income tax and deferred taxes
	28.1	Current tax assets	193
	28.2	Current tax liabilities	194
	28.3	Tax earnings	194
	28.4	Income tax and deferred taxes	195
29	Disclosures on the effects of fluctuations in foreign currency exchange rates		206
30	Mineral resource exploration and evaluation expenditure		212
31	Subsequent events
	31.1	Authorization of the financial statements	213
	31.2	Disclosures on events occurring after the reporting	213
	31.3	Detail of dividends declared after the reporting date	214

 

 

CONSOLIDATED CLASSIFIED STATEMENTS OF FINANCIAL POSITION

 

 

ASSETS		Note				As of March 31, 2014 ThUS$				As of December 31, 2013 ThUS$
Current assets
Cash and cash equivalents			7.1				419,486				476,622
Other current financial assets			10.1				383,198				460,173
Other current non-financial assets			25				35,931				44,230
Trade and other receivables, current			10.2				421,752				330,992
Trade receivables due from related parties, current			9.5				137,424				128,026
Current inventories			8				905,995				955,530
Current tax assets			28.1				64,235				59,476
Total current assets							2,368,021				2,455,049
Non-current assets
Other non-current financial assets			10.1				98				95
Other non-current non-financial assets			25				34,751				36,505
Trade receivables, non-current			10.2				-				1,282
Investments in associates			11.1				50,098				51,075
Investments in joint ventures			12.3				27,900				25,943
Intangible assets other than goodwill			13.1				104,515				104,363
Goodwill			13.1				38,388				38,388
Property, plant and equipment			14.1				2,014,871				2,054,377
Deferred tax assets			28.4				393				531
Total non-current assets							2,271,014				2,312,559
Total assets							4,639,035				4,767,608

 

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 march 31, 2014 ThUS$				As of December 31, 2013 ThUS$
Liabilities
Current liabilities
Other current financial liabilities			10.4				185,766				401,426
Trade and other payables, current			10.5				156,013				150,960
Trade payables due to related parties, current			9.6				569				-
Other current provisions			18.1				18,641				17,953
Current tax liabilities			28.2				40,477				31,707
Provisions for employee benefits, current			15.1				14,738				25,236
Other current non-financial liabilities			18.3				136,678				95,353
Total current liabilities							552,882				722,635
Non-current liabilities
Other non-current financial liabilities			10.4				1,410,329				1,417,390
Other non-current provisions			18.1				8,633				8,633
Deferred tax liabilities			28.4				155,189				154,295
Provisions for employee benefits, non-current			15.1				31,724				32,414
Total non-current liabilities							1,605,875				1,612,732
Total liabilities							2,158,757				2,335,367
Equity			17
Share capital							477,386				477,386
Retained earnings							1,950,228				1,909,725
Other reserves							(3,632	)			(10,491	)
Equity attributable to owners of the Parent							2,423,982				2,376,620
Non-controlling interests							56,296				55,621
Total equity							2,480,278				2,432,241
Total liabilities and equity							4,639,035				4,767,608

 

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

 

 

CONSOLIDATED STATEMENTS OF INCOME BY FUNCTION

 

 

						January to March
		Note				2014 ThUS$				2013 ThUS$
Revenue			20				534,072				623,397
Cost of sales			27.2				(379,249	)			(384,540	)
Gross profit							154,823				238,857
Other income			27.3				1,759				4,285
Administrative expenses			27.4				(21,335	)			(23,301	)
Other expenses by function			27.5				(15,244	)			(13,247	)
Other gains (losses)			27.6				439				(237	)
Profit (loss) from operating activities							120,442				206,357
Finance income							2,992				4,371
Finance costs			22				(15,725	)			(13,132	)
Share of profit of associates and joint ventures accounted for using the equity method							4,575				5,921
Foreign currency translation differences			23				(1,682	)			(4,763	)
Profit (loss) before taxes							110,602				198,754
Income tax expense, continuing operations			28.4				(28,865	)			(46,096	)
Profit (loss) from continuing operations							81,737				152,658
Profit for the year							81,737				152,658
Profit attributable to
Owners of the Parent							81,005				151,805
Non-controlling interests							732				853
Profit for the year							81,737				152,658

 

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

 

  

CONSOLIDATED STATEMENTS OF INCOME BY FUNCTION (continued)

 

 

						January to March
		Note				2014				2013
						US$				US$
Earnings per share
Common shares
Basic earnings per share (US$ per share)			21				0.3078				0.5768
Basic earnings per share (US$ per share) from continuing operations							0.3078				0.5768
Diluted common shares
Diluted earnings per share (US$ per share)			21				0.3078				0.5768
Diluted earnings per share (US$ per share) from continuing operations							0.3078				0.5768

 

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

 

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

		January to March
		2014				2013
Statements of comprehensive income		ThUS$				ThUS$
Profit for the year			81,737				152,658
Components of other comprehensive income before taxes and foreign currency translation differences
Gain (loss) from foreign currency translation differences, before taxes			(246	)			(679	)
Other comprehensive income before taxes and foreign currency translation differences			(246	)			(679	)
Cash flow hedges
(Gain) loss from cash flow hedges before taxes			8,756				(239	)
Other comprehensive income before taxes and cash flow hedges			8,756				(239	)
Other miscellaneous reserves			-				-
Other components of other comprehensive income before taxes			8,510				(918	)
Income taxes associated with components of other comprehensive income
Income taxes associated with cash flow hedges in other comprehensive income			(1,708	)			90
Income taxes associated with components of other comprehensive income			(1,708	)			90
Other comprehensive income			6,802				(828	)
Total comprehensive income			88,539				151,830
Comprehensive income attributable to
Owners of the Parent			87,864				150,962
Non-controlling interests			675				868
Total comprehensive income			88,539				151,830

 

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

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Statements of cash flows		Note				03/31/2014 ThUS$				03/31/2013 ThUS$
Cash flows from (used in) operating activities
Types of receipts from operating activities
Cash receipts from sales of goods and rendering of services							436,943				577,516
Other cash receipts from operating activities							-				-
Types of payments
Cash payments to suppliers for the provision of goods and services							(282,202	)			(377,403	)
Cash payments to and on behalf of employees							(9,768	)			(9,389	)
Other payments related to operating activities							(283	)			(3,280	)
Dividends received							3,929				7,513
Interest paid							(13,162	)			(15,459	)
Interest received							2,992				4,371
Reimbursed (paid) income taxes							(23,219	)			(46,389	)
Other incomes (outflows) of cash							9,374				-
Net cash generated from (used in) operating activities							124,604				137,480
Cash flows from (used in) investing activities
Cash receipts from the loss of control of subsidiaries and other businesses							-				-
Proceeds from the sale of property, plant and equipment							159				412
Acquisition of property, plant and equipment							(33,350	)			(105,913	)
Cash advances and loans granted to third parties							(588	)			189
Other incomes (outflows) of cash (*)							56,020				(126,194	)
Net cash generated from (used in) investing activities							22,241				(231,506	)

 

(*)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				03/31/2014 ThUS$				03/31/2013 ThUS$
Cash flows from (used in) financing activities
Proceeds from issue of capital instruments							-				-
Proceeds from long-term borrowings							-				60,000
Proceeds from short-term borrowings							-				-
Total proceeds from borrowings							-				60,000
Repayment of borrowings							(218,498	)			(60,000	)
Dividends paid							-				-
Other cash receipts (payments)							-				(3	)
Net cash generated from (used in) financing activities							(218,498	)			(3	)
Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate							(71,653	)			(94,029	)
Effects of exchange rate fluctuations on cash held							14,517				(1,594	)
Net (decrease) increase in cash and cash equivalents							(57,136	)			(95,623	)
Cash and cash equivalents at beginning of period							476,622				324,353
Cash and cash equivalents at end of period							419,486				228,730

 

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

 

 

STATEMENTS OF CHANGES IN EQUITY

 

 

2014		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				(3,817	)			(3,766	)			(1,231	)			(1,677	)			(10,491	)			1,909,725				2,376,620				55,621				2,432,241
Restated opening balance of equity			477,386				(3,817	)			(3,766	)			(1,231	)			(1,677	)			(10,491	)			1,909,725				2,376,620				55,621				2,432,241
Profit for the year			-				-				-				-				-				-				81,005				81,005				732				81,737
Other comprehensive income			-				(189	)			7,048				-				-				6,859				-				6,859				(57	)			6,802
Comprehensive income			-				(189	)			7,048				-				-				6,859				81,005				87,864				675				88,539
Dividends			-				-				-				-				-				-				(40,502	)			(40,502	)			-				(40,502	)
Increase (decrease) in transfers and other changes			-				-				-				-				-				-				-				-				-				-
Increase (decrease) in equity			-				(189	)			7,048				-				-				6,859				40,503				47,362				675				48,037
Equity As of March 31, 2014			477,386				(4,006	)			3,282				(1,231	)			(1,677	)			(3,632	)			1,950,228				2,423,982				56,296				2,480,278

 

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

 

 

STATEMENTS OF CHANGES IN EQUITY

 

 

2013		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				(330	)			(16,522	)			(2,243	)			(1,677	)			(20,772	)			1,676,169				2,132,783				54,663				2,187,446
Restated opening balance of equity			477,386				(330	)			(16,522	)			(2,243	)			(1,677	)			(20,772	)			1,676,169				2,132,783				54,663				2,187,446
Profit for the year			-				-				-				-				-				-				151,805				151,805				853				152,658
Other comprehensive income							(694	)			(149	)			-								(843	)							(843	)			15				(828	)
Comprehensive income							(694	)			(149	)			-				-				(843	)			151,805				150,962				868				151,830
Dividends			-				-				-				-				-				-				-				-				-				-
Increase (decrease) in transfers and other changes			-				-				-				-				-				-				-				-				-				-
Increase (decrease) in equity			-				(694	)			(149	)			-				-				(843	)			151,805				150,962				868				151,830
Equity As of March 31, 2013			477,386				(1,024	)			(16,671	)			(2,243	)			(1,677	)			(21,615	)			1,827,974				2,283,745				55,531				2,339,276

 

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

 

 

Notes to the Consolidated Financial
Statements as of March 31, 2014
Sociedad Química y Minera de Chile S.A.
and Subsidiaries

 

 

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, mining works at Salar de Ascotán Region II of Chile, Minsal Mining Camp s/n CL Plant CL, Potassium– San Pedro de Atacama.

 

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 caliche ore in northern Chile contains the only known nitrate and iodine deposits in the world and is the world’s largest commercially exploited source of natural nitrates. The brine deposits of the Salar de Atacama, a salt-encrusted depression within the Atacama Desert in northern Chile, contain high concentrations of lithium and potassium as well as significant concentrations of sulfate and boron.

 

 

 

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, sulfate and boron in order to produce potassium chloride, potassium sulfate, lithium solutions, boric acid 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 market all of these products through an established worldwide distribution network.

 

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 not only used for rechargeable batteries and in new technologies for vehicles propelled by electricity, but is also used in industrial applications to lower melting temperature and to help saving costs and energy.

 

 

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 during more than 30 years producing sodium nitrate, potassium nitrate, boric acid 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 March 31, 2014 and December 31, 2013, staff was detailed as follows:

 

		03/31/2014				12/31/2013
Permanent staff			4,702				4,792

 

 

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 March 31, 2014 and December 31, 2013. 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 March 31, 2014		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			-				-				61,090,894				50.75	%			23.21	%
Sociedad de Inversiones Pampa Calichera S.A.(*)			44,758,830				31.34	%			6,971,799				5.79	%			19.65	%
Inversiones El Boldo Limitada			29,330,326				20.54	%			17,963,546				14.92	%			17.97	%
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	%
BTG Pactual Chile S.A. C de B			15,526,000				10.87	%			-				-				5.90	%
Inversiones Global Mining (Chile) Limitada (*)			8,798,539				6.16	%			-				-				3.34	%
Banco Itau on behalf of foreign investors			20,950				0.01	%			5,531,995				4.60	%			2.10	%
Banco de Chile on behalf of non-resident third parties			-				-				5,386,826				4.47	%			2.05	%
Inversiones La Esperanza Limitada			3,693,977				2.59	%			-				-				1.40	%

 

(*) Total Pampa Group 29.9%

 

Shareholder as of December 31, 2013		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			-				-				56,302,367				46.77	%			21.39	%
Sociedad de Inversiones Pampa Calichera S.A.(*)			44,758,830				31.34	%			6,971,799				5.79	%			19.65	%
Inversiones El Boldo Limitada			29,225,196				20.46	%			18,028,676				14.98	%			17.95	%
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	%
BTG Pactual Chile S.A. C de B			15,593,709				10.92	%			797,393				0.66				6.23	%
Inversiones Global Mining (Chile) Limitada (*)			8,798,539				6.16	%			-				-				3.34	%
Banco Itau on behalf of investors			20,950				0.01	%			5,428,234				4.51	%			2.07	%
Banco de Chile on behalf of non-resident third parties			-				-				5,234,823				4.35	%			1.99	%
Inversiones La Esperanza Limitada			3,693,977				2.59	%			-				-				1.40	%

 

(*) Total Pampa Group 29.90%

 

On March 31, 2014 the total number of shareholders had risen to 1,304.

 

 

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 March 31, 2014 and December 31, 2013.

 

-

Consolidated Statements of Changes in Equity for the periods ended March 31, 2014 and 2013.

 

-

Consolidated Statements of Comprehensive Income for the periods between January and March 31, 2014 and 2013.

 

-

Statements of Cash Flows –Direct method for the periods ended March 31, 2014 and 2013.

 

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.2

Financial statements

 

The consolidated interim financial statements of Sociedad Química y Minera de Chile S.A. and Subsidiaries, have been prepared in accordance with International Financial Reporting Standards (hereinafter “IFRS”) and represent the full, explicit and unreserved application of the aforementioned international standards issued by the International Accounting Oversight Board (IASB).

 

These annual consolidated financial statements reflect fairly the Company’s equity and financial position and the results of its operations, changes in the statement of recognized revenue and expenses and cash flows, which have occurred during the periods then ended.

 

IFRS establish certain alternatives for their application. Those applied by the Company and its subsidiaries are included in detail in this Note.

 

The accounting policies used in the preparation of these consolidated annual and interim accounts comply with each IFRS in force at their date of presentation. Certain reclassifications have been made for comparative purposes.

 

2.3

Basis of measurement

 

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

 

-

inventories are recorded at the lower of cost and net realizable value;

-

other current and non-current asset and financial liabilities at amortized cost;

-

financial derivatives at fair value; and

-

staff severance indemnities and pension commitments at actuarial value.

 

 

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 the annual periods beginning on January 1, 2014:

 

Standards and interpretations		Mandatory for annual periods beginning on
IFRIC 21 “Levies”		01/01/2014
Issued in May 2013. It defines a levy as the outflow of resources that incorporates economic benefits that is imposed by the Government to entities in accordance with current applicable legislation. It indicates the accounting treatment for a liability to pay a levy if such liability is within the scope of IAS 37. It addresses when to recognize a liability for levies imposed by a public authority to operate in a specific market. It proposes that the liability be recognized when an event triggering the liability occurs and payment cannot be avoided. The event triggering the liability may occur at a given date or progressively throughout time. Early adoption is permitted.

 

Amendments and improvements		Mandatory for annual periods beginning on
IAS 32 “Financial Instruments: Presentation”		01/01/2014
Issued in December 2011. It clarifies the requirements for the offsetting of financial assets and financial liabilities in the Statement of financial position. Specifically, it indicates that the right to set off must be available at the date of the financial statement and not depend on a future event. It also indicates that it must be legally binding for the counterparties both during the ordinary course of business and in the event of default, insolvency or bankruptcy. Early adoption is permitted.
IAS 27 “Separate Financial Statements”; IFRS 10 “Consolidated Financial Statements” and IFRS 12 “Disclosure of Interests in Other entities”		01/01/2014
Issued in October 2012, the amendments provide an exemption for the consolidation of subsidiaries for entities meeting the definition for an “investment entity”. Also, the amendments require the use of fair value through profit or loss in conformity with IFRS 9 Financial Instruments in its consolidated and separate financial statements to measure those subsidiaries. The amendment also introduces new disclosure requirements relative to investment entities in IFRS 12 and IAS 27

 

 

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
IAS 36 “Impairment of Assets”		01/01/2014
Issued in May 2013. It amends the disclosure of the recoverable amount of non-financial assets aligning them to the requirements of IFRS 13. It requires disclosure of additional information on the recoverable amount of impaired assets if such an amount is based on the fair value less costs to sell. Additionally, it requests, among others, the disclosure of discount rates used in measuring the recoverable amount determined using present value techniques. Early adoption is permitted.
IAS 39 “Financial Instruments: Recognition and Measurement”		01/01/2014
Issued in June 2013. It established certain conditions that must be met for the novation of derivatives to allow the continuance of hedge accounting; this in order to avoid novations that are the result of laws and regulations affecting the financial statements. For such purposes, it indicates that amendments will not give rise to the expiration or termination of the hedge instrument if: (a) as a result of laws and regulations, parts of the hedge instrument agree with a main counterparty, or an entity(ies) act as counterparties substituting the original counterparty; (b) other changes, in their case, to hedge instruments, which are limited to those that are necessary to conduct such substitution of the counterparty. These changes include changes in contractual guarantee requirements, rights to set off trade receivables and payables, taxes and levies. Early adoption is permitted.
IAS 19 “Employee Benefits”		07/01/2014
Issued in November 2013, this amendment applies to employee or third party contributions in defined benefit plans. Amendments are intended to simplify the accounting for contributions that are independent of the number of years of service of employees; e.g., contributions by employees that are calculated in accordance with a fixed percentage of the employee’s salary.

 

 

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
Improvements to Information Financial Reporting Standards (2012) Issued in  December 2013		07/01/2014
IFRS 2 “Share-based Payment” – clarifies the definition of “vesting conditions and “market conditions” and defines separately “performance conditions” and “service conditions.” Such an amendment should be applied prospectively on share-based payment transactions whose grant date is July 1, 2014 or after. Early adoption is permitted.
IFRS 3, "Business Combinations" -  The standard is modified to clarify that the obligation to pay a contingent consideration that meets the definition of a financial instrument is classified as a financial liability or equity, on the basis of the definitions in IAS 32, "Financial Instruments: Presentation." The standard was additionally amended to clarify that all non-equity contingent consideration, both financial and non-financial, is measured at its fair value at each reporting date at fair value through profit or loss.
Consequently, there are also changes to IFRS 9, IAS 37 and IAS 39.
The amendment is applicable prospectively for business combinations the acquisition date of which is July 1, 2014 or after. Early adoption is permitted provided that amendments of IFRS 9 and IAS 37 also issued as part of the 2012 improvement plan are applied.
IFRS 8 “Operating Segments” – The standard is amended to include the requirement to disclose the judgments made by management in the aggregation of operating segments. This includes a description of segments that have been aggregated and economic indicators that have been assessed in the determination of that aggregated segments share similar economic characteristics.
The standard was additionally modified to require a reconciliation of assets of the segments to assets of an entity, when assets are reported by segment. Early adoption is permitted.

 

 

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
IFRS 13 "Fair Value Measurement” – When IFRS 13 was applied, paragraphs B5.4.12 of IFRS 9 and AG79 of IAS 39 were eliminated. This raised a doubt as together entities no longer had the ability to measure short-term receivables and payables for their nominal amounts if the effect of not adjusting was not significant. IASB has modified the basis for conclusions of IFRS 13 to clarify that it did not intend to eliminate the ability to measure short-term receivables and payables at nominal amounts in such cases.		07/01/2014
IAS 16, "Property, Plant and Equipment" and IAS 38 "Intangible Assets" – Both standards are amended to clarify the treatment of the gross carrying amount and accumulated depreciation when an entity uses the revaluation model. In such cases the carrying amount of the asset is adjusted at the revalued amount and the division of such revaluation between the gross carrying amount and accumulated depreciation is treated as follows: 1) either adjusting the gross carrying amount in a manner consistent with the revaluation of the carrying amount and accumulated depreciation is adjusted to equal the difference between the gross carrying amount and carrying amount after taking into consideration accumulated impairment losses; 2) or accumulated depreciation is eliminated against the gross carrying amount of the asset. Early adoption is permitted.
IAS 24 "Related Party Disclosures" – The standard is modified to include, as related party, an entity that provides key management personnel services to the reporting entity of the Parent of the reporting entity (“the managing entity”). The reporting entity is not obliged to disclose the compensation paid by the managing entity to the employees or managers of the managing entity, but is obliged to disclose the amounts charged to the reporting entity by the managing entity for key management personnel services rendered. Early adoption is permitted.

 

 

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
Improvements to Information Financial Reporting Standards (2013)		07/01/2014
Issued in December 2013
IFRS 1 “First-time Adoption of International Financial Reporting Standards” – clarifies that when a new version of a standard is not yet mandatory but is available for early adoption, a first-time adopter of IFRS may opt to apply the older version of the standard, provided that the same standard is applied to all periods presented.
IFRS 3 “Business Combinations” – the standard is modified to clarify that IFRS 3 is not applicable to the accounting recognition of the formation of a new joint arrangement under IFRS 11. This amendment also clarifies that only the scope exemption is applied to the financial statements of the joint arrangement.
IFRS 13 “Fair Value Measurement” – clarifies that the portfolio exception in IFRS 13, that allows an entity to measure the fair value of a group of financial assets and financial liabilities as at their net amount, all contracts including non-financial contracts) within the scope of IAS 39 or IFRS 9.
The amendment is mandatory for the annual periods beginning on July 1, 2014. An entity must apply the amendments prospectively from the start of the first annual period in which IFRS 13 is applied.
IAS 40 “Investment Property” – the standard is modified to clarify that IAS 40 and IFRS 3 are not mutually excluding. IAS 40 provides a guide to distinguish between investment property and properties occupied by their owners. In preparing the financial information, the application guide to IFRS 3 has to be considered to determine whether the acquisition of investment property is or is not a business combination. This amendment is applicable for the annual periods beginning on July 1, 2014, but it can be applied to individual acquisitions of investment property prior to such date if and only if the information required to apply the amendment is available.

 

The adoption of the standards, amendments and interpretations described above have 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)

 

a)

The new standards,, interpretations and amendments issued not effective for 2014, which the company has not adopted early are as follows:

 

Standards and interpretations		Mandatory for annual periods beginning on
IFRS 9 “Financial Instruments”		Not yet determined
In December 2009, the International Accounting Standards Board (IASB) issued IFRS 9 Financial Instruments. This standard introduces new requirements for classifying and measuring financial assets as it establishes that financial assets be measured either at amortized cost or fair value. All equity securities will be measured at fair value. Debt securities will be measured at amortized cost solely if the entity holds it to obtain contractual cash flows and cash flows represent principal and interests.
Subsequently, this standard was amended in November 2010 to include the treatment and classification of financial liabilities. For liabilities the standard maintains the larger part of requirements in IAS 39. These include accounting recognition at amortized cost for the majority of financial liabilities, with the bifurcation of embedded derivatives. The main change is that, in cases where the fair value option of financial liabilities is used, the portion of the change in the fair value attributable to changes in the entity’s credit risk is recognized in other comprehensive income instead of profit or loss, unless this generates an accounting mismatch. Early adoption is permitted
IFRS 14 “Regulatory Deferral Accounts”		01/01/2016
Issued in January 2014,, this is a provisional standard on the accounting for certain balances that arise from rate-regulated activities (“regulatory deferral accounts.”) This standard is applicable only to entities that apply IFRS 1 as first-time adopters of IFRS 1. It allows those entities, in adopting IFRS to continue to apply the accounting policies of the previous generally accepted accounting principles for the recognition, measurement, impairment, impairment and derecognition of regulatory deferral accounts. The provisional standard also provides guidance on the selection and change of accounting policies (in the first-time adoption or subsequently), and in presentation and disclosure.
However, in order to improve the ease of comparison with entities already applying IFRS and do not recognize such amounts, the standard requires that the effect of rate regulation should be presented separately from other items.

 

 

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
IFRS 9 “Financial Instruments”		Not yet determined
Issued in November 2013, amendments include as main element a substantial review of hedge accounting to allow entities to better reflect their risk management activities in the financial statements. Likewise and although not related to hedge accounting, this amendment allows entities to early adopt the requirement of recognizing in other comprehensive income changes in the fair value attributable to changes in the entity’s credit risk (for financial liabilities that are designated under the fair value option). Such an amendment may be applied without having to adopt the remainder of IFRS 9.

 

The Company's management estimates that the adoption of standards, amendments and interpretations described above are under evaluation and it is expected that they will not have a significant impact on the Consolidated Financial Statements of the Company.

 

 

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 to direct the financial and operating activities, which in general is accompanied by share greater than half the voting rights. Subsidiaries are included in consolidation from the date in which control of the Company is transferred and are excluded from consolidation on the date where such control ceases. 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, plus costs directly attributable to the acquisition. 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 acquire either at fair value or as proportional share of net identifiable assets of the acquiree.

 

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.5

Basis of consolidation, continued

 

Companies included in consolidation:

 

								Ownership interest
				Country of				03/31/2014												12/31/2013
TAX ID No.		Foreign subsidiaries		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				99.1400				99.7200				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.		Dutch Antilles		US$			0.0002				99.9998				100.0000				100.0000
Foreign		SQI Corporation N.V.		Dutch Antilles		US$			0.0159				99.9841				100.0000				100.0000
Foreign		SQM Comercial De México S.A. de C.V.		Mexico		US$			0.0013				99.9987				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				51.0000				51.0000				51.0000
Foreign		SQMC Holding Corporation L.L.P.		USA.		US$			0.1000				99.9000				100.0000				100.0000
Foreign		SQM Investment Corporation N.V.		Dutch Antilles		US$			1.0000				99.0000				100.0000				100.0000
Foreign		SQM Brasil Limitada		Brazil		US$			1.0900				97.2100				98.3000				100.0000
Foreign		SQM France S.A.		France		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Japan Co. Ltd.		Japan		US$			1.0000				99.0000				100.0000				100.0000
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		US$			1.6700				98.3300				100.0000				100.0000
Foreign		SQM Oceania Pty Limited		Australia		US$			0.0000				100.0000				100.0000				100.0000
Foreign		Rs Agro-Chemical Trading 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 (b)		Thailand		US$			0.0000				99.996				99.996				99.996

 

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.5

Basis of consolidation, continued

 

Companies included in consolidation:

								Ownership interest
				Country of				03/31/2014												12/31/2013
TAX ID No.		Domestic subsidiaries		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 (c)		Chile		US$			100.0000				-				100.0000				100.0000
76.360.575-2		Orcoma SPA (d)		Chile		US$			100.0000				-				100.0000				100.0000

 

(a)

Comercial Agrorama Ltda. was consolidated given that the Company has control through the subsidiary Soquimich Comercial S.A.

 

(b)

During the first half of 2013 Soquimich European Holdings BV purchased shares of SQM Thailand Limited, acquiring 99.996% of this company.

 

(c)

On December 31, 2013, the subsidiary Orcoma Estudios SPA was incorporated where Sociedad Quimica y Minera de Chile S.A. made a capital contribution of US$ 1,500.

 

(d)

On December 31, 2013, the subsidiary Orcoma SPA, was incorporated where Sociedad Quimica y Minera de Chile S.A. made a capital contribution of ThUS$ 2,358.

 

 

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 depending companies acquired or disposed of during the year are included in profit or loss accounts consolidated from the effective date of acquisition or up to the effective date of disposal, as applicable.

 

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

 

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 Standard 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;

-

Impairment losses of certain assets, including trade receivables;

-

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

-

Provisions for commitments assumed with third parties and contingent liabilities;

-

Provisions on the basis of technical studies that cover the different variables affecting products in stock (density, moist, among others), and allowance for slow-moving spare-parts in stock;

-

Future cost for closure of mining sites;

-

The determination of the fair value of certain financial assets and derivative instruments;

-

The determination and assignment of fair values in business combinations.

 

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 interim 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 U.S. dollar.

 

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

 

3.3

Foreign currency translation

 

(a)

Domestic entities:

 

Assets and liabilities denominated in Chilean pesos and other currencies other than the functional currency (U.S. dollar) as of March 31, 2014 and December 31, 2013 have been translated to U.S. dollars at the exchange rates prevailing at those dates. The corresponding Chilean pesos were converted at Ch$551.18 per US$1.00 as of March 31, 2014, and Ch$524.61 per US$1.00 as of December 31, 2013.

 

The values of the UF (a Chilean peso-denominated, inflation-indexed monetary unit) used to convert the UF denominated assets and liabilities as of March 31, 2014 amounted to Ch$23,606.97 (US$42.83), and as of December 31, 2013 amounted to Ch$23,309.56 (US$44.43).

 

 

Note 3 - Significant accounting policies (continued)

 

3.3

Foreign currency translation, continued

 

(b)

Foreign entities:

 

The conversion of the financial statements of foreign companies with functional currency other than U.S. dollars is performed as follows:

 

-

Assets and liabilities using the exchange rate prevailing on the closing date of the consolidated financial statements.

-

Statement of income account items using the average exchange rate for the year.

-

Equity accounts are stated at the historical exchange rate prevailing at acquisition date.

 

Foreign currency translation differences which arise from the conversion of financial statements are recorded in the account “Foreign currency translation differences" within equity.

 

The exchange rates used to translate the monetary assets and liabilities expressed in foreign currency at the closing date of each period in respect to the U.S. dollar are detailed as follows:

 

		03/31/2014				12/31/2013
		US$				US$
Brazilian real			2.26				2.34
New Peruvian sol			2.75				2.75
Argentine peso			7.95				6.48
Japanese yen			102.92				105.39
Euro			0.73				0.73
Mexican peso			13.08				13.07
Australian dollar			1.08				1.12
Pound Sterling			0.60				0.61
South African rand			10.58				10.56
Ecuadorian dollar			1.00				1.00
Chilean peso			551.18				524.61
UF			42.83				44.43

 

 

Note 3 - Significant accounting policies (continued)

 

3.3

Foreign currency translation, continued

 

(c)

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 items 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 items are also recognized in other comprehensive income.

 

Non-monetary assets and liabilities that are measured 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 in which the fair value is determined.

 

(d)

Group entities

 

The revenue and 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 loss or gain from the sale.

 

 

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 and subject to insignificant risk of changes in their value and mature in less than three months from the date of acquisition of the instrument.

 

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

 

The statement of cash flows 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 IFRS 9, 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.

 

 

Note 3 - Significant accounting policies (continued)

 

3.6

Financial assets, continued

 

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 or 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.

 

3.7

Financial liabilities

 

Management determines the classification of its financial liabilities at the time of initial recognition. As established in IFRS 9, 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, if by doing so eliminates or significantly reduces a measurement or recognition inconsistency, that would otherwise arise from the measurement of assets or liabilities or from the recognition of the 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 or of realizing the asset and settling the liability simultaneously.

 

 

Note 3 - Significant accounting policies (continued)

 

3.10

Reclassification of financial instruments

 

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

 

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

 

(b)   Hedging of a single risk associated with an asset or liability recognized or a highly possible foreseen 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.

 

The Company also documents its evaluation both at the beginning and the end of each period of whether 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.

 

Investing derivatives are classified as a current asset or liability, and the change in their fair value is recognized directly in profit or loss.

 

 

Note 3 - Significant accounting policies (continued)

 

3.11

Derivative and hedging financial instruments, continued

 

(a)

Fair value hedge

 

The change in the fair value of a derivative is recognized with a debit or credit to profit or loss, as applicable. The change in the fair value of the hedged entry attributable to hedged risk is recognized as part of the carrying value of the hedged entry and is also recognized with a debit or credit to profit or loss.

 

For fair value hedges related to items recorded at amortized cost, the adjustment of the fair value is amortized against profit or loss during the period through maturity. Any adjustment to the carrying value of a hedged financial instrument for which the effective rate is used is amortized with a debit or credit to profit or loss at its fair value attributable to the risk being covered.

 

If the hedged entry is derecognized, the fair value not amortized is immediately recognized with a debit or credit to profit or loss.

 

(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, and 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

Derecognition of financial instruments

 

In accordance with IFRS 9, 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, paying to the creditor or the main liability contained has been legally extinguished.

 

3.13

Derivative financial instruments

 

The Company maintains derivative financial instruments to hedge its exposure in foreign currency. Derivative financial instruments are recognized initially at fair value; attributable transaction 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 March 31, 2014 and 2013, there are no embedded derivatives.

 

3.14

Fair value measurements

 

At 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.

 

3.15

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.

 

 

Note 3 - Significant accounting policies (continued)

 

3.15

Lease, continued

 

Each lease payment is distributed between the liability and the interest expenses to obtain ongoing interest on the pending balance of the 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. The asset acquired through a finance lease is subject to depreciation over the lower of its useful life or the life of the agreement.

 

(b)

Lease – Operating lease

 

Leases in which the lesser 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 lesser) are debited to the statement of income or capitalized (as applicable) on a straight-line basis over the lease period.

 

3.16

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.

 

These are expensed considering the proportional period of time they cover, regardless of the related payment dates.

 

3.17

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 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)

 

3.18

Inventory measurement

 

The Company states inventories for the lower of cost and net realizable value. The cost price of finished products and products in progress includes direct costs of materials and; as 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 the circumstances, which previously caused the rebate ceased 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, 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.

 

 

Note 3 - Significant accounting policies (continued)

 

3.19

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 considering the proportional share in the equity of the associate, using for such purposes, the interest percentage in the ownership of the associate. 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.

 

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 and 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”.

 

 

Note 3 – Significant accounting policies (continued)

 

3.20

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.

 

3.21

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 in regard to terms and market prices. Also, these transactions have been eliminated in consolidation. Expiration conditions for each case vary by virtue of the originating transaction.

 

3.22

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.

 

 

Note 3 – Significant accounting policies (continued)

 

3.22

Property, plant equipment, continued

 

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.

 

Based on the impairment analysis conducted by the Company’s management it has been considered that the carrying value of assets does not exceed the net recoverable value of such assets.

 

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)

 

3.23

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.

 

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

 

Types of property, plant and equipment		Minimum life or rate				maximum life or rate
Buildings			3				60
Plant and equipment			3				35
Information technology equipment			3				10
Fixtures and fittings			3				35
Motor vehicles			5				10
Other property, plant and equipment			2				30

 

3.24

Intangible assets

 

Intangible assets mainly relate to goodwill acquired, water rights, trademarks, and rights of way related to electric lines, development expenses, and computer software licenses.

 

(a)

Goodwill acquired

 

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 acquisitions of subsidiaries is included in goodwill, which is subject to impairment tests every time consolidated financial statements are issued 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.

 

 

Note 3 - Significant accounting policies (continued)

 

3.24

Intangible assets, continued

 

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.

 

3.25

Intangible assets other than goodwill

 

(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 to the Company for a given period, these are amortized during its useful life.

 

(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 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 probably will generate economic benefits that are higher than costs during more than a year, are recognized as intangible assets. Direct costs include expenses incurred for employees who develop IT programs and an adequate percentage of general expenses.

 

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

 

 

Note 3 - Significant accounting policies (continued)

 

3.25

Intangible assets other than goodwill, continued

 

(d)

Mining property and concession right

 

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 March 31, 2014 and December 31, 2013.

 

3.26

Research and development expenses

 

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

 

3.27

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.

 

 

Note 3 - Significant accounting policies (continued)

 

3.27

Prospecting expenses, continued

 

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 main raw material.

 

Paragraph 17 of IFRS 6 establishes that an asset for exploitation and evaluation should be classified as such when it loses the technical feasibility and trading feasibility for extraction and therefore, must be impaired. 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)

 

3.28

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.

 

An appropriate valuation model is used to determine the fair value less selling costs. These calculations are confirmed by valuation multiples, quoted share prices for subsidiaries quoted publicly or other available fair value indicators.

 

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. In this case impairment is also recognized with a debit to equity up to the amount of any previous revaluation.

 

As of March 31, 2014, as explained in Note 14 the Company has made an allowance account for impairment losses, As of December 31, 2013, the Company was unaware of any indication of impairment with respect to its assets.

 

For assets other than acquired goodwill, an annual evaluation is conducted of whether there is impairment loss indicators recognized previously that might have already ceased to exist or decreased. 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 unless an asset is recorded at the revalued amount. Should this be the case, the reversal is treated as an increase in revaluation.

 

 

Note 3 - Significant accounting policies (continued)

 

3.29

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 for the year ended December 31, 2013, 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 ended December 31, 2014.

 

3.30

Earnings per share

 

The net 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 assumes diluted earnings per share other than the basic earnings per share.

 

3.31

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.

 

3.32

Interest-bearing borrowings

 

At initial recognition interest-bearing borrowings are measured at fair value. 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)

 

3.33

Other provisions

 

Provisions are recognized when:

 

-

The Company has a present 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 taxes 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)

 

3.34

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.

 

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 IAS 19 revised.

 

Actuarial gains and losses that may be generated by variations in defined pre-established obligations are directly recorded in profit or loss for the year and not within Other comprehensive income considering their insignificant amount.

 

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 6% for the periods ended March 31, 2014 and December 31, 2013.

 

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 6.5% interest rate for 2014 and 2013. The net balance of this obligation is presented under the non-current provisions for employee benefits.

 

 

Note 3 - Significant accounting policies (continued)

 

3.35

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 Standard 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 No.16).

 

3.36

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

 

Sales of goods are 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, the acceptance period has ended or 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.

 

 

Note 3 - Significant accounting policies (continued)

 

3.36

Revenue recognition, continued

 

(b)

Sales 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.

 

3.37

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 expense in bank borrowings, 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.

 

Finance costs accrued during the construction period that are directly attributable to the acquisition, construction or production of qualifying assets using the effective interest rate related to the project’s specific financing; if none exists, the average financing rate of the subsidiary that makes the investment.

 

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.

 

 

Note 3 - Significant accounting policies (continued)

 

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 not more likely than not that future taxable income will allow for recovery of the deferred tax asset.

 

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

 

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

 

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

 

 

Note 3 - Significant accounting policies (continued)

 

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

 

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 Financial Risk Management Policy of the Company is oriented towards safeguarding the stability and sustainability of Sociedad Química y Minera de Chile S.A. and Subsidiaries in relation to all such relevant financial uncertainty components.

 

The operations of the Company are subject to certain financial risk factors that may affect the financial position or results of the same. Among these risks, the most relevant are market risk, liquidity risk, currency risk, bad debt risk, and interest rate risk

 

There may be additional risks that are currently unknown to us or other known risks but that we currently believe are not significant, which could also affect the commercial operations, the business, the financial position or the results of the Company.

 

The financial risk management structure includes identifying, determining, analyzing, quantifying, measuring and controlling these events. The Management, in particular the Finance Management, is responsible for constantly assessing the financial risk. The Company uses derivatives to cover a significant portion of these risks.

 

 

Note 4 - Financial risk management (continued)

 

4.2

Risk factors

 

4.2.1

Market risk

 

Market risks are those uncertainties associated with fluctuations in market variables that affect the assets and liabilities of the Company, such as:

 

a)

Country risk: The economic position of the countries where the Company has a presence may affect its financial position. For example, the sales carried out in emerging markets expose SQM to risks related to economic conditions and trends in those countries. On the other hand, inventories may also be affected by the economic situation of these countries and/ or the global economy, amongst other probable economic impacts.

 

b)

Price volatility risk: The prices of the products of the Company are affected by the fluctuations of international prices of fertilizers and chemical products and changes in productive capacities or market demand, all of which might affect the Company’s business, financial condition and operational results.

 

c)

Commodity Price risk: The Company is exposed to changes in the prices of raw materials and energy which may have an impact on its production costs, thus giving rise to instability in the results.

 

Currently, the Company has a direct annual expense close to US$140 million on account of petrol, gas and equivalents and close to US$54 million on account of electricity.

Variations of 10% in the prices of energy the Company required to operate, may involve in the short-term movements in costs of approximately US$17 million.

 

As expressed in the Company’s annual report, the markets in which the Company operates are unpredictable, are exposed to significant variations in supply and demand, and have volatile prices. Additionally, the supply of certain fertilizers or chemical products, including certain products which the Company trades, vary mainly depending on the production of the top producers and their respective business strategies. Therefore, the Company cannot predict with certainty changes in demand, the responses of the competition, and the fluctuations in the final price of its products. These factors can lead to significant impacts on sale volumes of its products, the financial situation of the Company and its share price.

 

 

Note 4 - Financial risk management (continued)

 

4.2.1

Market risk, continued

 

d)

Quality standards: In those markets where we operate, customers might impose quality standards for our products and/or governments could enact more stringent for the distribution and/or use of our products. As a result, we could 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 the new standards. Not being able to sell our products in one or more markets or to significant customers might significantly affect our business, financial position or the results of our operations.

 

4.2.2

Doubtful accounts risk

 

A contraction of the global economy and the potentially negative effects in the financial position of our clients may extend the receivables collection time for SQM, increasing the bad debt exposure. While measures have been taken in order to minimize risk, the global economy may trigger losses that might have a material adverse effect on the business, financial position or the results of the Company’s operations.

 

To mitigate these risks, SQM actively controls debt collection and uses measures such as, loan insurance, letters of credit, and prepayments with regard to a portion of receivables.

 

4.2.3

Currency risk

 

As a result of the influence in the price determination, of its relationship with sales costs and since a significant part of the business of the Company is carried out in that foreign currency, the functional currency of SQM is the United States dollar. However, the global business activities of the Company expose the same to the foreign exchange fluctuations of several currencies with respect to the US dollar. Therefore, SQM has hedge contracts to mitigate the exposure generated by its main mismatches (assets net of liabilities) in currencies other than the US dollar against the foreign exchange fluctuation. Those contracts are periodically up-dated depending upon the mismatch amount to be covered in these currencies. Occasionally and subject to the Board of Directors’ approval, the Company insures cash flows from certain specific items in currency other tan U.S. dollar at short-term.

 

A significant portion of the costs of the Company, particularly payroll, is related to the Chilean peso. Therefore, an increase or decrease in the exchange rate against the dollar would affect the net income of SQM. Approximately US$ 470 million cost of the Company are related to the Chilean peso. A significant part of the effect of such obligations in the statement of financial position is covered by operations of derivative instruments that hedge the mismatch of balance in this currency.

 

 

Note 4 - Financial risk management (continued)

 

4.2.3

Currency risk, continued

 

As of December 31, 2013, the Company had derivative instruments classified as hedging currency and interest rate associated with all the obligations denominated bonds both in Chilean pesos and UF, with a fair value of US$ 23.6 million. As of March 31, 2014, this value amounts to US$ 6 million, against of SQM.

 

As of March 31, 2014, the Chilean peso to US dollar Exchange rate was Ch$ 551.18 per US$1.00, and as of December 31, 2013 it was Ch$ 524.61 per US$ 1.00.

 

4.2.4

Interest rate risk

 

Interest rate fluctuations, due to the uncertain future behavior of markets, may have a material impact on the financial results of the Company.

 

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

 

As of March 31, 2014, approximately 20% of the Company’s financial obligations are valued at LIBOR; therefore significant increases in the rate may impact its financial position. A 100 base point variation in this rate may trigger variations in the financial expenses close to US$ 1,4 million. Notwithstanding, this effect is significantly counterbalanced by the returns of the Company’s investments that also relate to LIBOR.

 

In addition, as of March 31, 2014, the Company's financial debt is mainly in the long-term, with 10% with maturities of less than 12 months which decreases the exposure to changes in the interest rates.

 

 

Note 4 - Financial risk management (continued)

 

4.2.5

Liquidity risk

 

Liquidity risk is related to the fund requirements to comply with payment obligations. The object of the Company is to keep financial flexibility by comfortably balancing the fund requirements and the flows from the regular business conduct, bank loans, public bonds, short term investments, and negotiable instruments, amongst other.

 

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

 

On the other hand, world financial markets go through contraction and expansion periods that are not foreseeable in the long-term and may affect SQM’s access to financial resources. These factors may have a material adverse impact on the business, financial position, and results of operations of the Company.

 

SQM constantly monitors that its obligations and investments match, taking care as part of its financial risk management strategy of the obligations and investments maturities from a conservative perspective. As of March 31, 2014, the Company had non-committed and available bank credit lines for working capital for a total of approximately US$555 million.

 

The position in other cash and cash equivalents so generated by the Company is invested in highly liquid mutual funds which have an AAA risk rating.

 

4.3

Risk measurement

 

The Company has methods to measure the effectiveness and efficiency of financial risk hedging strategies, both prospectively and retrospectively. Those 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

 

There are no changes in accounting estimates as of the closing date of the consolidated financial statements.

 

5.2

Changes in accounting policies

 

As of March 31, 2014, the Company’s consolidated financial statements present no changes in accounting policies or estimates compared to the prior period.

 

The consolidated classified statements of financial position as of March 31, 2014 and December 31, 2013 and the statements of comprehensive income, equity and cash flows for the periods ended March 31, 2014 and March 31, 2013, have been prepared in accordance with IFRS, and accounting principles and criteria have been applied consistently.

 

 

Note 6 - Background of companies included in consolidation

 

6.1 Parent’s stand-alone assets and liabilities

 

		03/31/2014				12/31/2013
		ThUS$				ThUS$
Assets			4,238,956				4,269,749
Liabilities			(1,814,974	)			(1,893,129	)
Assets (liabilities)			2,423,982				2,376,620

 

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 29.9% as of March 31, 2014 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 2.09% 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.

 

 

6.3   Joint arrangements of controlling interest, continued

 

Detail of effective concentration

 

Tax ID No.		Name		Ownership interest %
96.511.530-7		Sociedad de Inversiones Pampa Calichera S.A.			19.65
96.863.960-9		Inversiones Global Mining (Chile) Limitada			3.34
76.165.311-5		Potasios de Chile S.A.			6.91
Total Pampa Group					29.90
79,798,650-k		Inversiones la Esperanza (Chile)  Ltda.			1.40
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					2.09

 

 

 

Note 6 - Background of companies included in consolidation (continued)

 

6.4

General information on consolidated subsidiaries

 

As of March 31, 2014 and December 31, 2013 the general information of the companies on which the Company exercises control and significant influence is as follows:

 

						Country of				Ownership interest
Subsidiary		Tax ID		Address		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$			-				60.6382				60.6382
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		Los Militares 4290 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$			100.0000				-				100.0000
Orcoma SPA		76.360.575-2		Apoquindo 3721 Of.131 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		Dutch Antilles		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

 

 

  

Note 6 - Background of companies included in consolidation (continued)

 

6.4

General information on consolidated subsidiaries

 

Country of

Ownership interest

Subsidiary

Tax ID

Address

incorporation

Functional currency

Direct

Indirect

Total

SQI Corporation N.V.

Foreign

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

Dutch Antilles

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$

1.0000

99.0000

100.0000

SQM Europe N.V.

Foreign

Sint Pietersvliet 7 bus 8, 2000. Antwerp

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

Calle Industria Eléctrica s/n Lote 30, Manzana A Parque Industrial Bugambilias CP 45645, Trajomulco de Zuñiga, Jalisco

Mexico

US$

0.0013

99.9987

100.0000

SQM Investment Corporation N.V.

Foreign

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

Dutch Antilles

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

Calle Industria Eléctrica s/n Lote 30, Manzana A Parque Industrial Bugambilias CP 45645, Trajomulco de Zuñiga, Jalisco

Mexico

US$

-

100.0000

100.0000

SQM Nitratos México S.A. de C.V.

Foreign

Calle Industria Eléctrica s/n Lote 30, Manzana A Parque Industrial Bugambilias CP 45645, Trajomulco de Zuñiga, Jalisco

Mexico

US$

-

100.0000

100.0000

 

 

Note 6 - Background of companies included in consolidation (continued)

 

6.4

General information on consolidated subsidiaries

 

Country of

Ownership interest

Subsidiary

Tax ID

Address

incorporation

Functional currency

Direct

Indirect

Total

Soquimich European Holding B.V.

Foreign

Loacalellikade 1 Parnassustoren 1076 AZ Amsterdan

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 Dehli, 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

  

 

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
						03/31/2014				12/31/2013				03/31/2014				12/31/2013				03/31/2014				12/31/2013
						ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Proinsa Ltda.			0.1	%			-				-				-				-				-				-
SQM Potasio S.A.			0.0000001	%			-				-				-				-				-				-
Ajay SQM Chile S.A.			49	%			(547	)			(3,389	)			9,353				8,806				-				4,400
SQM Indonesia S.A.			20	%			-				-				1				16				-				-
Soquimich Comercial S.A.			39.3616784	%			(203	)			(4,051	)			46.626				46,448				-				2,026
Comercial Agrorama Ltda.			30	%			17				(18	)			316				351				-				-
Agrorama S.A.			0.001	%			-				-				-				-				-				-
SQM (Thailand) Limited			0.004	%			-				-				-				-				-				-
Total							(733	)			(7,458	)			56,296				55,621				-				6,426

 

 

 

Note 6 - Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries

 

03/31/2014
		Assets								Liabilities																Comprehensive
Subsidiary		Current				Non-current				Current				Non-current				Revenue				Profit (loss)				income (loss)
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Nitratos S.A.			530,724				132,011				577,134				15,000				18,403				(2,981	)			(2,981	)
Proinsa Ltda.			190				1				-				-				-				-				-
SQMC Internacional Ltda.			252				-				-				-				-				-				-
SQM Potasio S.A.			124,398				1,075,119				3,117				16,339				590				40,090				40,186
Serv. Integrales de Tránsito y Transf. S.A.			370,175				86,573				407,255				8,498				13,636				3,778				3,778
Isapre Norte Grande Ltda			745				811				730				188				1,119				40				25
Ajay SQM Chile S.A.			20,122				1,192				1,487				740				16,921				1,116				1,116
Almacenes y Depósitos Ltda.			343				48				1				-				-				(5	)			(24	)
SQM Salar S.A.			692,235				986,443				511,335				128,636				195,065				42,331				42,211
SQM Industrial S.A.			1,198,328				813,408				943,705				77,616				209,181				10,570				10,518
Exploraciones Mineras S.A.			475				31,553				4,852				-				-				(73	)			(73	)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.			645				235				219				540				559				1				-
Soquimich Comercial S.A.			141,406				22,283				44,248				986				27,494				515				444
Comercial Agrorama Ltda.			12,991				2,009				13,833				113				2,796				(56	)			(56	)
Comercial Hydro S.A.			8,314				127				35				74				16				92				92
Agrorama S.A.			13,798				537				14,397				32				1,738				(265	)			(265	)
Orcoma SpA			2				2,356				-				-				-				-				-
Orcoma Estudio SpA			2				-				-				-				-				-				-
SQM North América Corp.			232,047				16,989				219,298				1,781				79,773				(4,690	)			(4,690	)
RS Agro Chemical Trading  Corporation A.V.V.			5,204				-				-				-				-				-				-
Nitratos Naturais do Chile Ltda.			2				261				4,785				-				-				(85	)			(85	)
Nitrate Corporation of Chile Ltd.			5,076				-				-				-				-				-				-
SQM Corporation N.V.			669				90,248				3,725				-				-				(3,660	)			(3,693	)
SQM Perú S.A.			601				1				1,222				-				-				(10	)			(10	)
SQM Ecuador S.A.			8,709				76				8,310				42				4,113				283				283
SQM Brasil Ltda.			803				29				881				-				50				82				82
SQI Corporation N.V.			-				18				92				-				-				(4	)			(4	)
SQMC Holding Corporation L.L.P.			16,013				14,404				1,000				-				-				1,353				1,353
SQM Japan Co. Ltd.			2,259				269				359				506				708				181				181

 

 

Note 6 - Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries, continued

 

03/31/2014
		Assets								Liabilities																Comprehensive
Subsidiary		Current				Non-current				Current				Non-current				Revenue				Profit (loss)				income (loss)
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Europe N.V.			309,727				614				279,263				-				167,477				(5,612	)			(5,612	)
SQM Italia SRL			1,421				-				18				-				-				-				-
SQM Indonesia S.A.			4				-				1				-				-				-				-
North American Trading Company			160				145				39				-				-				-				-
SQM Virginia LLC			14,828				14,374				14,828				-				-				-				-
SQM Comercial de México S.A. de C.V.			97,786				1,288				69,965				-				51,741				956				956
SQM Investment Corporation N.V.			67,382				279				42,168				851				20				(483	)			(483	)
Royal Seed Trading Corporation A.V.V.			240,172				367				84,040				170,000				-				(782	)			(568	)
SQM Lithium Specialties LLP			15,781				3				1,264				-				-				-				-
Soquimich SRL Argentina			411				-				218				-				-				(3	)			(3	)
Comercial Caimán Internacional S.A.			271				-				1,122				-				-				-				-
SQM France S.A.			345				6				114				-				-				-				-
Administración y Servicios Santiago S.A. de C.V.			256				-				899				125				790				1				1
SQM Nitratos México S.A. de C.V.			25				4				20				4				47				2				2
Soquimich European Holding B.V.			81,053				91,387				94,069				673				-				(4,423	)			(4,456	)
SQM Iberian S.A			73,890				69				72,535				-				45,724				1,805				1,805
SQM Africa Pty Ltd.			48,895				641				42,491				-				18,226				(1,386	)			(1,386	)
SQM Oceania Pty Ltd.			4,359				-				969				-				800				(52	)			(52	)
SQM  Agro India Pvt. Ltd.			6				-				2				-				-				(1	)			(1	)
SQM Beijing Commercial Co. Ltd.			4,066				71				1,987				-				1,399				(12	)			(12	)
SQM Thailand Limited			5,611				42				3,278				-				682				(178	)			(178	)
Total			4,352,977				3,386,291				3,471,310				422,744				859,068				78,435				78,401

 

 

Note 6 - Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries, continued

 

		12/31/2013																12/31/2013
		Assets								Liabilities																Comprehensive
Subsidiary		Current				Non-current				Current				Non-current				Revenue				Profit (loss)				income (loss)
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Nitratos S.A.			490,084				124,966				525,924				15,545				184,487				18,434				18,434
Proinsa Ltda.			200				1				-				-				-				(2	)			(2	)
SQMC Internacional Ltda.			266				-				-				-				-				(1	)			(1	)
SQM Potasio S.A.			109,408				1,049,628				3,411				15,749				2,052				184,948				185,458
Serv. Integrales de Tránsito y Transf. S.A.			348,685				86,935				389,980				8,423				50,135				6,149				6,149
Isapre Norte Grande Ltda			916				829				924				192				4,192				28				334
Ajay SQM Chile S.A.			22,720				1,232				5,226				755				67,413				6,916				6,916
Almacenes y Depósitos Ltda.			362				50				1				-				-				(11	)			(40	)
SQM Salar S.A.			678,215				1,000,954				453,864				216,110				792,109				206,745				206,679
SQM Industrial S.A.			1,110,303				820,831				872,216				79,021				925,167				64,602				61,547
Exploraciones Mineras S.A.			477				31,537				4,765				-				-				(312	)			(312	)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.			762				243				322				556				2,276				31				46
Soquimich Comercial S.A.			143,515				22,582				47,121				973				214,350				10,291				10,162
Comercial Agrorama Ltda.			15,450				2,148				16,314				114				16,009				61				62
Comercial Hydro S.A.			8,302				134				124				72				109				370				370
Agrorama S.A.			15,722				568				16,074				36				16,122				37				37
Orcoma SpA			2				2,356				-				-				-				-				-
Orcoma Estudio SpA			2				-				-				-				-				-				-
SQM North América Corp.			214,359				17,058				197,077				1,781				365,691				(4,763	)			(3,751	)
RS Agro Chemical. Trading Corporation A.V.V.			5,204				-				-				-				-				(9	)			(9	)
Nitratos Naturais do Chile Ltda.			3				254				4,695				-				-				278				278
Nitrate Corporation of Chile Ltd.			5,076				-				-				-				-				-				-
SQM Corporation N.V.			669				93,936				3,725				-				-				10,441				7,377
SQM Perú S.A.			578				1				1,190				-				1				(191	)			(191	)
SQM Ecuador S.A.			10,644				81				10,533				42				25,475				(1,224	)			(1,224	)
SQM Brasil Ltda.			680				40				851				-				802				88				88
SQI Corporation N.V.			-				19				62				-				-				(1	)			(2	)
SQMC Holding Corporation L.L.P.			11,978				16,394				1,000				-				-				5,267				5,267
SQM Japan Co. Ltd.			1,948				263				234				494				2,468				(283	)			(283	)

 

 

Note 6 - Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries, continued

 

		12/31/2013																12/31/2013
		Assets								Liabilities																Comprehensive
Subsidiary		Current				Non-current				Current				Non-current				Revenue				Profit (loss)				income (loss)
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Europe N.V.			316,396				383				280,092				-				677,497				1,608				1,608
SQM Italia SRL			1,421				-				18				-				-				-				-
SQM Indonesia S.A.			4				-				(76	)			-				-				-				-
North American Trading Company			160				145				39				-				-				(1	)			(1	)
SQM Virginia LLC			14,828				14,374				14,828				-				-				(1	)			(1	)
SQM Comercial de México S.A. de C.V.			88,252				1,427				61,534				-				178,180				4,724				4,724
SQM Investment Corporation N.V.			62,496				282				36,805				851				50				1,097				1,097
Royal Seed Trading Corporation A.V.V.			240,231				442				83,606				170,000				-				(2,537	)			(1,904	)
SQM Lithium Specialties LLP			15,781				3				1,264				-				-				(1	)			(1	)
Soquimich SRL Argentina			414				-				218				-				-				(49	)			(49	)
Comercial Caimán Internacional S.A.			271				-				1,122				-				-				(38	)			(38	)
SQM France S.A.			345				6				114				-				-				-				-
Administración y Servicios Santiago S.A. de C.V.			153				-				795				127				3,243				(7	)			(7	)
SQM Nitratos México S.A. de C.V.			26				4				23				4				186				(7	)			(7	)
Soquimich European Holding B.V.			79,966				96,670				93,496				987				-				8,849				5,785
SQM Iberian S.A			101,299				70				101,757				-				166,087				66				66
SQM Africa Pty Ltd.			55,635				729				47,932				-				109,968				1,611				1,611
SQM Oceanía Pty Ltd.			4,251				-				811				-				3,542				51				51
SQM  Agro India Pvt. Ltd.			7				-				2				-				-				(2	)			(2	)
SQM Beijing Commercial Co. Ltd.			2,415				80				301				-				9,915				(1,164	)			(1,164	)
SQM Thailand Limited			7,052				36				4,510				-				4,379				(787	)			(787	)
Total			4,187,933				3,387,691				3,284,824				511,832				3,821,905				521,301				514,370

  

 

Note 6 - Background of companies included in consolidation (continued)

 

6.7

Detail of transactions between consolidated companies

 

a)

Transactions conducted in 2014

 

As of March 31, 2014, there are no transactions conducted among companies included in consolidation.

 

Transactions conducted in 2013

 

On December 31, 2013, the subsidiary Orcoma Estudios SPA was incorporated where Sociedad Quimica y Minera de Chile S.A. made a capital contribution of US$ 1,500.

 

On December 31, 2013, the subsidiary Orcoma SPA was incorporated where Sociedad Quimica y Minera de Chile S.A. made a capital contribution of ThUS$ 2,358.

 

On March 25, 2013, SQM Industrial S.A. increased by ThUS$ 1,500 the capital of its subsidiary SQM Beijing Commercial Co. Ltd.

 

During the first half of the year Iodine Minera was absorbed into Soquimich European Holdings.

 

During the first half of 2013 Soquimich European Holdings B.V. purchased shares of SQM Thailand Limited, acquiring 99.996% of this company.

 

 

Note 7 - Cash and cash equivalents

 

7.1

Types of cash and cash equivalents

 

As of March 31, 2014 and December 31, 2013, cash and cash equivalents are detailed as follows:

 

		03/31/2014				12/31/20131
a)    Cash		ThUS$				ThUS$
Cash on hand			109				119
Cash in banks			48,325				29,671
Other demand deposits			6,757				3,625
Total cash			55,191				33,415

 

		03/31/2014				12/31/2013
b)    Cash equivalents		ThUS$				ThUS$
Short-term deposits, classified as cash equivalents			103,907				158,208
Short-term investments, classified as cash equivalents			260,388				284,999
Total cash equivalents			364,295				443,207
Total cash and cash equivalents			419,486				476,622

 

 

Note 7 - Cash and cash equivalents (continued)

 

7.2    Short-term investments, classified as cash equivalents

 

As of March 31, 2014 and December 31, 2013, short-term investments, classified as cash and cash equivalents relate to mutual funds (investment liquidity funds) for investments in:

 

Institution		03/31/2014 ThUS$				12/31/2013 ThUS$
Legg Mason - Western Asset Institutional Cash Reserves			86,818				95,941
BlackRock - Institutional US Dollar Liquidity Fund			85,733				94,726
JP Morgan US dollar Liquidity Fund Institutional			87,837				94,332
Total			260,388				284,999

 

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

 

7.3

Information on cash and cash equivalents by currency

 

As of March 31, 2014 and December 31, 2013, information on cash and cash equivalents by currency is detailed as follows:

 

		03/31/2014				12/31/2013
Original currency		ThUS$				ThUS$
Chilean Peso (*)			43,397				25,391
U.S. dollar			356,337				430,263
Euro			12,150				9,230
Mexican Peso			425				429
South African Rand			4,615				7,229
Japanese Yen			1,407				1,435
Peruvian Sol			5				2
Brazilian Real			160				73
Chinese Yuan			305				384
Indonesian Rupiah			4				4
Indian rupee			14				7
Thai baht			616				2,161
Pound sterling			51				14
Total			419,486				476,622

 

(*) The Company maintains financial derivative policies which allow dollarizing these term deposits in Chilean pesos.

 

 

 

Note 7 - Cash and cash equivalents (continued)

 

7.4

Amount of significant 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 March 31, 2014 and December 31, 2013, the Company has no significant cash balances with any type of restriction.

 

 

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:

 

Receiver of the deposit		Type of deposit		Original Currency		Interest rate				Placement date		Expiration date		Principal MUS$				Interest accrued to date MUS$				31/03/2014 MUS$
Banco BBVA Chile		Fixed term		Ch$			0.38			01/24/2014		04/21/2014			14,805				129				14,934
Banco Crédito e Inversiones		Fixed term		US$			0.66			01/16/2014		04/14/2014			5,007				7				5,014
Banco de Chile		Fixed term		Ch$			0.36			03/20/2014		04/25/2014			21,294				28				21,322
Banco Santander - Santiago		Fixed term		US$			0.66			01/23/2014		04/16/2014			20,326				25				20,351
Banco Santander - Santiago		Fixed term		US$			0.48			01/16/2014		04/14/2014			15,000				22				15,022
Banco Santander - Santiago		Fixed term		Ch$			0.35			03/28/2014		04/10/2014			1,361				-				1,361
Banco Crédito e Inversiones		Fixed term		US$			0.65			01/15/2014		04/11/2014			10,000				13				10,013
Banco Crédito e Inversiones		Fixed term		US$			0.65			01/15/2014		04/11/2014			10,000				13				10,013
Banco BBVA Chile		Fixed term		Ch$			-			03/21/2014		04/04/2014			1,700				-				1,700
Banco Santander - Santiago		Fixed term		US$			-			03/28/2014		04/04/2014			1,000				-				1,000
Citibank New York		Overnight		US$			0.01			03/28/2014		04/01/2014			113				-				113
Citibank New York		Overnight		US$			0.01			03/28/2014		04/01/2014			604				-				604
Citibank New York		Overnight		US$			0.01			03/28/2014		04/01/2014			382				-				382
ABN Amro Bank		Fixed term		Euro			-			03/28/2014		04/01/2014			2,078				-				2,078
Total															103,670				237				103,907

 

 

Note 7 - Cash and cash equivalents (continued)

 

7.5 Short-term deposits, classified as cash equivalents, continued

 

Receiver of the deposit		Type of deposit		Original Currency		Interest rate				Placement date				Expiration date				Principal ThUS$				Interest accrued to-date ThUS$				31/12/2013 ThUS$
Banco BBVA Chile		Fixed term		US$			0.50				12/20/2013				01/09/2014				10,000				2				10,002
Banco BBVA Chile		Fixed term		US$			-				12/20/2013				01/09/2014				10,000				2				10,002
Banco BBVA Chile		Fixed term		US$			-				12/20/2013				01/09/2014				10,000				2				10,002
Banco Crédito e Inversiones		Fixed term		US$			0.40				12/16/2013				01/16/2014				20,000				3				20,003
Banco Crédito e Inversiones		Fixed term		US$			0.48				12/16/2013				02/06/2014				20,000				4				20,004
Banco Crédito e Inversiones		Fixed term		US$			0.50				10/17/2013				01/03/2014				10,093				10				10,103
Banco Crédito e Inversiones		Fixed term		US$			0.58				12/16/2013				03/11/2014				20,000				5				20,005
Banco Crédito e Inversiones		Fixed term		Ch$			0.37				12/30/2013				01/13/2014				4,384				-				4,384
Banco Crédito e Inversiones		Fixed term		Ch$			0.38				12/27/2013				01/09/2014				4,193				2				4,195
Banco Santander - Santiago		Fixed term		US$			0.48				12/09/2013				01/23/2014				20,314				6				20,320
Banco Santander - Santiago		Fixed term		US$			0.52				12/04/2013				01/03/2014				10,104				4				10,108
Banco Santander - Santiago		Fixed term		Ch$			0.43				10/21/2013				01/03/2014				14,352				148				14,500
IDBI Bank		Fixed term		Indian rupee			-				12/31/2013				03/31/2014				2				-				2
Citibank New York		Overnight		US$			0.01				12/31/2013				01/02/2014				444				-				444
Citibank New York		Overnight		US$			0.01				12/31/2013				01/02/2014				640				-				640
Citibank New York		Overnight		US$			0.01				12/31/2013				01/02/2014				1,301				-				1,301
ABN Amro Bank		Fixed term		Euro			-				12/31/2013				01/31/2014				2,193				-				2,193
Banco Security		Fixed term		US$			-				-				-				-				-				-
Corpbanca		Demand deposit		US$			-				-				-				-				-				-
Total																			158,020				188				158,208

 

 

Note 8 - Inventories

 

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

 

Type of inventory		03/31/2014 ThUS$				12/31/2013 ThUS$
Raw material reserves			3,834				8,552
Supplies for production reserves			45,770				42,366
Products-in-progress reserves			415,453				400,824
Finished product reserves			440,938				503,788
Total			905,995				955,530

 

Inventory reserves recognized as of March 31, 2014 amount to ThUS$89,766, and ThUS$97,248 as of December 31, 2013. Inventory reserves have been made based on a technical study that covers the different variables affecting products in stock (density, humidity, among others). Additionally, reserves are recognized if goods are sold cheaper than the related cost, and for differences that arise from inventory counts.

 

As of March 31, 2014, the sum registered as cost of sale related to inventory in the statement of income amounts to ThUS$332,025 and to ThUS$337.281 as of March 31, 2013.

 

The breakdown of inventory reserves is detailed as follows:

 

Type of inventory		03/31/2014 ThUS$				12/31/2013 ThUS$
Raw material reserves			93				93
Supplies for production reserves			500				500
Products-in-progress reserves			56,966				65,768
Finished product reserves			32,207				30,887
Total			89,766				97,248

 

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

 

 

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. For the period ended March 31, 2014, the Company has not recorded any impairment in accounts receivable related to amounts owed by related parties. This evaluation is conducted every year through an examination of the financial position of the related party in the market in which it operates.

 

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 29.9% as of March 31, 2014 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 2.09% 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

Relationship between the Parent and the entity

 

Detail of effective concentration

 

Tax ID No.		Name		Ownership interest %
96.511.530-7		Sociedad de Inversiones Pampa Calichera S.A.			19.65
96.863.960-9		Inversiones Global Mining (Chile) Ltda.			3.34
76.165.311-5		Potasios de Chile S.A.			6.91
Total Pampa Group					29.90
79,798,650-k		Inversiones la Esperanza (Chile) Ltda.			1.40
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					2.09

 

9.3

Detailed identification of the link between the Parent and subsidiary

 

As of March 31, 2014 and December 31, 2013, 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
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.		Dutch Antilles		US$		Subsidiary
Foreign		SQI Corporation N.V.		Dutch Antilles		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.		Dutch Antilles		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

 

 

Note 9 - Related party disclosures (continued)

 

9.3

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

 

As of March 31, 2014 and December 31, 2013, 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
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
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
77.557.430-5		Sales de Magnesio Ltda.		Chile		Chilean peso		Associate
Foreign		Abu Dhabi Fertilizer Industries WWL		United 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		Sichuan SQM Migao Chemical Fertilizers Co Ltda.		China		US$		Joint venture
Foreign		Coromandel SQM		India		Indian rupee		Joint venture
Foreign		SQM Vitas Fzco.		Arab Emirates		Arab Emirates dirham		Joint venture
Foreign		SQM Star Qingdao Crop Nutrition Co., Ltd.		China		US$		Joint venture
Foreign		SQM Vitas Spain		Spain		Euro		Joint venture
Foreign		SQM Vitas Holland		Dutch Antilles		Euro		Joint venture
Foreign		SQM Vitas Plantacote B.V		Dutch Antilles		Euro		Joint venture
Foreign		Kowa Company Ltd.		Japan		US$		Other related parties
96.511.530-7		Sociedad de Inversiones Pampa Calichera		Chile		US$		Other related parties
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 Brasil 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 Southern Africa Pty.		South Africa		US$		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 March 31, 2014 and December 31, 2013, 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 March 31, 2014 and December 31, 2013, the detail of transactions with related parties is as follows:

 

Tax ID No.

Company

Nature

Country of origin

Transaction

03/31/2014 ThUS$

12/31/2013 ThUS$

Foreign

Doktor Tarsa Tarim Sanayi As

Associate

Turkey

Sale of products

12,201

13,844

Foreign

Doktor Tarsa Tarim Sanayi As

Associate

Turkey

Other Transactions

-

740

Foreign

Ajay Europe S.A.R.L.

Associate

France

Sale of products

8,653

35,884

Foreign

Ajay Europe S.A.R.L.

Associate

France

Dividends

3,569

5,093

Foreign

Ajay North America LLC.

Associate

United States

Sale of products

6,971

40,605

Foreign

Ajay North America LLC.

Associate

United States

Dividends

-

10,437

Foreign

Abu Dhabi Fertilizer Industries WWL

Associate

United Arab Emirates

Sale of products

2,013

7,908

Foreign

Charlee SQM Thailand Co. Ltd.

Associate

Thailand

Sale of products

882

5,669

77.557.430-5

Sales de Magnesio Ltda.

Associate

Chile

Sale of products

291

1,186

77.557.430-5

Sales de Magnesio Ltda.

Associate

Chile

Dividends

362

892

77.557.430-5

Sales de Magnesio Ltda.

Associate

Chile

Sale of services

6

-

96.529.340-k

Norte Grande S.A.

Other related parties

Chile

Sale of services

-

140

Foreign

Kowa Company Ltd.

Other related parties

Japan

Sale of products

18,960

77,176

Foreign

SQM Vitas Brasil Agroindustria

Joint control or significant influence

Brazil

Sale of products

8,966

52,901

Foreign

SQM Vitas Peru S.A.C.

Joint control or significant influence

Peru

Sale of products

8,576

21,255

Foreign

SQM Vitas Southern Africa Pty.

Joint control or significant influence

South Africa

Sale of products

3,053

17,908

Foreign

SQM Vitas Fzco.

Joint venture

United Arab Emirates

Sale of products

496

289

Foreign

SQM Vitas Fzco.

Joint venture

United Arab Emirates

Sale of services

-

98

Foreign

Sichuan SQM Migao Chemical Fertilizers Co Ltda.

Joint venture

China

Sale of products

10,304

56,254

Foreign

Sichuan SQM Migao Chemical Fertilizers Co Ltda.

Joint venture

China

Sale of services

-

282

Foreign

Coromandel SQM

Joint venture

India

Sale of products

549

5,242

Foreign

SQM Star Qingdao Crop Nutrition Co., Ltd.

Joint venture

China

Sale of services

-

148

Foreign

SQM Vitas Spain

Joint venture

Spain

Sale of products

2,565

1,624

 

 

Note 9 - Related party disclosures (continued)

 

9.5

Trade receivables due from related parties, current:

 

Tax ID No.

Company

Nature

Country of origin

Currency

03/31/2014 ThUS$

12/31/2013 ThUS$

77.557.430-5

Sales de Magnesio Ltda.

Associate

Chile

Ch$

495

147

Foreign

Charlee SQM Thailand Co. Ltd.

Associate

Thailand

US$

991

331

Foreign

Doktor Tarsa Tarim Sanayi AS

Associate

Turkey

US$

-

11

Foreign

Ajay Europe S.A.R.L.

Associate

France

Euro

4,306

4,974

Foreign

Ajay North America LLC.

Associate

United States

US$

6,993

4,166

Foreign

Abu Dhabi Fertilizer Industries WWL

Associate

United Arab Emirates

Arab Emirates dirham

3,088

2,958

Foreign

Kowa Company Ltd.

Other related parties

Japan

US$

20,202

22,960

96.511.530-7

Soc.de Inversiones Pampa Calichera

Other related parties

Chile

US$

7

8

Foreign

SQM Vitas Brasil Agroindustria

Joint venture

Brazil

US$

18,043

18,205

Foreign

SQM Vitas Peru S.A.C.

Joint venture

Peru

US$

19,319

17,840

Foreign

SQM Vitas Southern Africa PTY

Joint venture

South Africa

US$

3,299

4,553

Foreign

Coromandel SQM

Joint venture

India

Indian rupee

1,536

2,271

Foreign

Sichuan SQM Migao Chemical Fertilizers Co Ltda.

Joint venture

China

US$

56,175

47,910

79.049.778-9

Callegari Agrícola S.A.

Other related parties

Chile

Ch$

211

363

Foreign

SQM Vitas Fzco.

Joint venture

United Arab Emirates

Arab Emirates dirham

916

436

Foreign

SQM Vitas Spain

Joint venture

Spain

Euro

1,716

760

Foreign

SQM Vitas Plantacote B.V

Joint venture

Dutch Antilles

Euro

79

133

Foreign

SQM Vitas Holland  B.V.

Joint venture

Dutch Antilles

Euro

48

-

Total to-date

137,424

128,026

 

 

Note 9 - Related party disclosures (continued)

 

9.6

Trade payables due to related parties, current:

 

Tax ID No.

Company

Nature

Country of origin

Currency

03/31/2014 ThUS$

12/31/2013 ThUS$

Foreign

Doktor Tarsa Tarim Sanayi AS

Associate

Turkey

Turkish lira

569

-

Total as of to-date

569

-

 

 

Note 9 - Related party disclosures (continued)

 

9.7

Board of Directors and Senior Management

 

1)

Board of directors

 

The Company is managed by a Board of Directors which is composed of eight regular 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 25, 2013.

 

As of March 31, 2014, the Company has an Audit Committee made up of three members of the Board of Directors. This Committee performs those duties provided in Article 50 bis of Law No. 18,046 on Shareholders Company, the Shareholders’ Corporations Act.

 

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.

 

2)

Directors’ Compensation

 

2.1.1

Board of Directors

 

Directors’ compensation is detailed as follows:

 

a)

A payment of a monthly fixed gross amount of UF 300 in favor of the Chairman of the Company’s Board of Directors and UF 125 in favor of the seven remaining board members regardless of their attendance at Board meetings or the number of meetings attended during the respective 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 0.35% of profit for the period effectively earned by the Company during fiscal year 2014.

 

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 0.05% of profit for the period effectively earned by the Company during fiscal years 2014.

 

 

Note 9 - Related party disclosures (continued)

 

9.7

Board of Directors and Senior Management, continued

 

d)

The fixed and variable amounts indicated above will not be subject to any charge between them, and those expressed as a percentage will be paid immediately after the shareholders at the respective Annual General Shareholders’ Meeting of the Company approve the statement of financial position (balance sheet), the financial statements, the annual report, the report by the account inspectors and the report of external auditors for the fiscal years ending December 31, 2014.

 

e)

Therefore, the remunerations and profit sharing paid to members of the Board of Directors and Audit Committee during 2014 amount to ThUS$68 (ThUS$ 4,827 as of December 31, 2013).

 

2.1.2 Audit Committee

 

The remuneration of Directors Committee is composed of:

 

a)

A payment of a monthly, fixed and gross amount of UF 17 in favor of each of the three Directors who are a part of the Company’s Audit Committee regardless of the number of meetings conducted during the respective month.

 

b)

A payment in domestic currency and in favor of each of the three Directors of a variable and gross amount equivalent to 0.013% of the Company’s profit for the period effectively earned by the Company during fiscal years 2014 and 2013.

 

 

Note 9 - Related party disclosures (continued)

 

9.7

Board of Directors and Senior Management, continued

 

3)

No guarantees have been constituted in favor of the directors.

 

4)

Senior management compensation

 

As of March 31, 2014, the global compensation paid to the 117 main executives amounts to ThUS$12,970 (ThUS$32,388 as of December 31, 2013). This includes monthly fixed salary and variable performance bonuses.

 

The Company has a bonuses intermediate and bi-intermediate plan for compliance target and level of individual contribution to the Company’s profit or loss. These benefits are structured in a minimum and maximum of gross remunerations which are paid once a year or every two years.

 

5)

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 between 2012 and 2016 (See Note 16).

 

6)

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

 

7)

The Company’s Managers and Directors do not receive or have not received any benefit during the period ended March 31, 2014 and the year ended December 31, 2013 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.

 

8)

In accordance with IAS 24, we should report that the Company's Director Mr. Wolf Von Appen B. is member of the Ultramar Group. During the period ended March 31, 2014, the amount of operations with this Group is approximately ThUS$2,923 (ThUS$16,850 as of December 31, 2013).

 

9.8

Key management personnel compensation

 

		03/31/2014				12/31/2013
		ThUS$				ThUS$
Key management personnel compensation			12,970				32,888

 

 

Note 10 – Financial instruments

 

Financial assets in conformity with IAS 39 are detailed as follows:

 

10.1

Types of other financial assets

 

Description of other financial assets		03/31/2014 ThUS$				12/31/2013 ThUS$
Other current financial assets (1)			375,863				431,883
Derivatives (2)			6,242				3,283
Hedging assets, current			1,093				25,007
Total other current financial assets			383,198				460,173
Other non-current financial assets			98				95
Hedging assets, non-current			-				-
Total other non-current financial assets			98				95

 

(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).

 

Detail of other current financial assets

 

Institution		03/31/2014 ThUS$				12/31/2013 ThUS$
Banco Santander			46,184				131,534
BBVA			86,097				80,206
Banco de Crédito e Inversiones			79,335				79,530
Banco de Chile			71,398				42,095
Corpbanca			41,204				61,244
Banco Itaú			41,286				30,207
Banco Estado			10,359				-
Banco Security			-				7,067
Total			375,863				431,883

 

10.2

Trade and other receivables, current and non-current

 

		03/31/2014												12/31/2013
		Current				Non- current				Total				Current				Non- current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Trade receivables			397,146				-				397,146				314,151				-				314,151
Prepayments			16,160				-				16,160				12,127				-				12,127
Other receivables			8,446				-				8,446				4,714				1,282				5,996
Total trade and other receivables			421,752				-				421,752				330,992				1,282				332,274

 

 

Note 10 – Financial instruments, (continued)

 

10.2

Trade and other receivables, continued

 

		03/31/2014												12/31/2013
		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			412,935				(15,789	)			397,146				330,052				(15,901	)			314,151
Trade receivables, current			412,935				(15,789	)			397,146				330,052				(15,901	)			314,151
Prepayments, current			18,960				(2,800	)			16,160				14,927				(2,800	)			12,127
Other receivables, current			10,395				(1,949	)			8,446				6,663				(1,949	)			4,714
Current trade and other receivables			442,290				(20,538	)			421,752				351,642				(20,650	)			330,992
Other receivables, non-current			-				-				-				1,282				-				1,282
Non-current receivables			-				-				-				1,282				-				1,282
Total trade and other receivables			442,290				(20,538	)			421,752				352,924				(20,650	)			332,274

 

 

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 March 31, 2014 and December 31, 2013, the detail of the unsecuritized portfolio is as follows:

 

03/31/2014
		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			2,738				998				169				449				37				356				7				285				323				1,792				7,154
Portfolio under no renegotiated terms			322,924				36,825				24,771				6,042				5,506				1,754				331				72				239				8,046				406,510
Number of customers under renegotiated terms portfolio			70				7				4				-				2				-				1				1				3				128				216
Portfolio under renegotiated terms, gross			3,297				118				142				-				66				-				16				14				55				2,717				6,425
Total gross portfolio			326,221				36,943				24,913				6,042				5,572				1,754				347				86				294				10,763				412,935

 

12/31/2013
		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			3,175				1,055				515				395				332				304				303				294				312				1,817				8,502
Portfolio under no renegotiated terms			269,970				29,722				4,144				432				572				210				1,138				118				8,955				8,371				323,632
Number of customers under renegotiated terms portfolio			42				8				2				2				3				1				5				6				12				113				194
Portfolio under renegotiated terms, gross			2,964				79				15				69				42				13				87				85				447				2,619				6,420
Total gross portfolio			272,934				29,801				4,159				501				614				223				1,225				203				9,402				10,990				330,052

 

 

Note 10 – Financial instruments, (continued)

 

10.2

Trade and other receivables, continued

 

The detail of allowances is as follows:

 

Allowance and write-offs		03/31/2014 ThUS$				12/31/2013 ThUS$
Allowance for portfolio under no renegotiated terms			16,376				16,711
Allowance for portfolio with renegotiated terms			4,288				4,459
Write-offs for the period			(126	)			(520	)
Total			20,538				20,650

 

a)

Credit risk concentration

 

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

 

 

Note 10 – Financial instruments (continued)

 

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 relating to bonds of the Company in Chilean pesos and UF (and the exchange risk in Chilean pesos of the Company’s investment plans). As of March 31, 2014, the face value of cash flows in Cross Currency Swap contracts agreed upon in US dollars amounted to ThUS$373,149 and as of December 31, 2013 such contracts amounted to ThUS$555,303.

 

Hedging assets		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$
March 31, 2014			-				-				-				-				-
December 31, 2013			23,602				(45,312	)			(3,307	)			661				(2,646	)

 

Hedging liabilities		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$
March  31, 2014			26,602				20,044				5,235				(1,047	)			4,188
December 31, 2013			-				-				-				-				-

 

Hedging liabilities		Derivative instruments (IRS)				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$
March 31, 2014			1,299				(262	)			(939	)			-				(939	)
December 31, 2013			1,339				(93	)			(1,153	)			-				(1,153	)

 

The balances in the effect on profit or loss column consider the interim effects of the contracts in force as of March 31, 2014 and December 31, 2013.

 

 

Note 10 - Financial instruments (continued)

 

10.3 Hedging assets and liabilities, continued

 

Derivative contract maturities are detailed as follows:

 

Series		Contract amount ThUS$				Currency		Maturity date
C			66,710			UF		12/01/2026
H			191,638			UF		01/05/2018
M			46,463			UF		02/01/2017
O			68,338			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.

 

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% to 120%.

 

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.

 

 

Note 10 - Financial instruments (continued)

 

10.3

Hedging assets and liabilities, continued

 

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 March 31, 2014 and December 31, 2013, the detail is as follows:

 

		03/31/2014												12/31/2013
		Current				Non-current				Total				Current				Non-current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Bank borrowings			150,952				309,570				460,522				171,347				309,489				480,836
Obligations with the public			25,449				1,093,654				1,119,103				227,652				1,106,496				1,334,148
Derivatives			8,066				-				8,066				1,088				-				1,088
Hedging liabilities			1,299				7,105				8,404				1,339				1,405				2,744
Total			185,766				1,410,329				1,596,095				401,426				1,417,390				1,818,816

 

Current and non-current borrowings

 

As of March 31, 2014 and December 31, 2013, the detail is as follows:

 

		03/31/2014				12/31/2013
		ThUS$				ThUS$
Long-term borrowings			309,570				309,489
Short-term borrowings			80,139				100,135
Current portion of long-term borrowings			70,813				71,212
Short-term loans and current portion of long-term borrowings			150,952				171,347
Total borrowings assumed			460,522				480,836

 

 

Note 10 - Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

a)

Bank loans, current:

 

As of March 31, 2014 and December 31, 2013, the detail of this caption is as follows:

 

Debtor						Creditor																		03/31/2014 Current maturities
Tax ID No.		Subsidiary		Country		Tax ID No.		Financial institution		Country		Currency or adjustment  index		Repayment		Effective rate				Nominal rate				Up to 90 days ThUS$				90 days to 1 year ThUS$				Total ThUS$
93.007.000-9		SQM.S.A.		Chile		97.018.000-1		Scotiabank Sud Americano		Chile															20,003				-				20,003
93.007.000-9		SQM.S.A.		Chile		97.018.000-1		Scotiabank Sud Americano		Chile		US$		Upon maturity			0.47	%			0.47	%			20,007				-				20,007
93.007.000-9		SQM S.A.		Chile		Foreign		Banco Estado NY Branch		United States		US$		Upon maturity			3.21	%			2.33	%			-				163				163
79.626.800-K		SQM Salar S.A.		Chile		97.018.000-1		Scotiabank Sud Americano		Chile		US$		Upon maturity			0.59	%			0.59	%			20,011				-				20,011
79.947.100-0		SQM Industrial S.A.		Chile		97.030.000-7		Banco Estado		Chile		US$		Upon maturity			0.75	%			0.75	%			20,118				-				20,118
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		Foreign		Bank of America		United States		US$		Upon maturity			1.75	%			1.27	%			246				-				246
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		Foreign		Export Development Canada		Canada		US$		Upon maturity			1.69	%			1.30	%			10,177				-				10,177
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		Foreign		Scotiabank & Trust (Cayman) Ltd.		Cayman Islands		US$		Upon maturity			1.45	%			1.18	%			-				50,031				50,031
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		Foreign		Scotiabank & Trust (Cayman) Ltd.		Cayman Islands		US$		Upon maturity			1.73	%			1.41	%			315				-				315
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		Foreign		The Bank of Tokyo-Mitsubishi UFJ, Lda. (New York)		United States		US$		Upon maturity			1.37	%			1.01	%			10,235				-				10,235
																									101,112				50,194				151,306
Borrowing costs																									(300	)			(54	)			(354	)
Total																									100,812				50,140				150,952

 

 

Note 10 - Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

Debtor								Creditor																		12/31/2013 Current maturities
Tax ID No.		Subsidiary		Country				Tax ID No.		Financial institution		Country		Currency or adjustment index		Repayment		Effective rate				Nominal rate				Up to 90 days ThUS$				91 days to 1 year ThUS$				Total ThUS$
93.007.000-9		SQM.S.A.			Chile			97.018.000-1		Scotiabank Sud Americano		Chile															3				20,000				20,003
93.007.000-9		SQM.S.A.			Chile			97.018.000-1		Scotiabank Sud Americano		Chile		US$		Upon maturity			0.47	%			0.47	%			7				20,000				20,007
93.007.000-9		SQM S.A.			Chile			Foreign		Banco Estado NY Branch		United States		US$		Upon maturity			3.10	%			2.39	%			1,012				-				1,012
79.626.800-K		SQM Salar S.A.			Chile			97.030.000-7		Banco Estado		Chile		US$		Upon maturity			0,61	%			0,61	%			20,033				-				20,033
79.626.800-K		SQM Salar S.A.			Chile			97.018.000-1		Scotiabank Sud Americano		Chile		US$		Upon maturity			0.59	%			0.59	%			11				20,000				20,011
79.947.100-0		SQM Industrial S.A.			Chile			97.030.000-7		Banco Estado		Chile		US$		Upon maturity			0.75	%			0.75	%			-				20,081				20,081
Foreign		Royal Seed Trading Corporation A.V.V.			Aruba			Foreign		Bank of America		United States		US$		Upon maturity			1.75	%			1.27	%			-				120				120
Foreign		Royal Seed Trading Corporation A.V.V.			Aruba			Foreign		Export Development Canada		Canada		US$		Upon maturity			1.69	%			1.30	%			-				10,014				10,014
Foreign		Royal Seed Trading Corporation A.V.V.			Aruba			Foreign		Scotiabank & Trust (Cayman) Ltd.		Cayman Islands		US$		Upon maturity			1.35	%			1.24	%			189				50,000				50,189
Foreign		Royal Seed Trading Corporation A.V.V.			Aruba			Foreign		Scotiabank & Trust (Cayman) Ltd.		Cayman Islands		US$		Upon maturity			1.73	%			1.41	%			-				139				139
Foreign		Royal Seed Trading Corporation A.V.V.			Aruba			Foreign		The Bank of Tokyo-Mitsubishi UFJ, Lda. (New York)		United States		US$		Upon maturity			1.37	%			1.01	%			-				10,108				10,108
Total																											21,255				150,462				171,717
Borrowing costs																											(26	)			(344	)			(370	)
Total																											21,229				150,118				171,347

 

 

Note 10 – Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

b)

Unsecured obligations, current:

 

As of March 31, 2014 and December 31, 2013, the detail of current unsecured interest-bearing obligations is composed of promissory notes and bonds, as follows:

 

Bonds

  

Debtor																Periodicity												03/31/2014 Current maturities
Tax ID No.		Subsidiary		Country		Number of registration or ID of the instrument				Series		Maturity date		Currency or adjustment index		Payment of interest		Repayment		Effective rate				Nominal rate				Up to 90 days ThUS$				91 days to 1 year ThUS$				Total ThUS$
93.007.000-9		SQM S.A		Chile												Semiannual		Upon maturity											5,649				-				5,649
93.007.000-9		SQM S.A		Chile			-			ThUS$250,000		04/21/2014		US$		Semiannual		Upon maturity			5.70	%			5.50	%			6,111				-				6,111
93.007.000-9		SQM S.A		Chile			-			ThUS$300,000		04/03/2014		US$		Semiannual		Upon maturity			3.87	%			3.63	%			5,377				-				5,377
93.007.000-9		SQM S.A		Chile			446			C		06/01/2014		UF		Semiannual		Semiannual			4.44	%			4.00	%			7,527				-				7,527
93.007.000-9		SQM S.A		Chile			564			H		07/05/2014		UF		Semiannual		Semiannual			5.10	%			4.90	%			-				1,981				1,981
93.007.000-9		SQM S.A		Chile			700			M		08/01/2014		UF		Semiannual		Upon maturity			3.62	%			3.30	%			-				234				234
93.007.000-9		SQM S.A		Chile			699			O		08/01/2014		UF		Semiannual		Upon maturity			3.95	%			3.80	%			-				403				403
							Total																						24,664				2,618				27,282
							Bond issuance costs																						(1,396	)			(437	)			(1,833	)
							Total																						23,268				2,181				25,449

 

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																Periodicity												12/31/2013 Current maturities
Tax ID No.		Subsidiary		Country		Number of registration or ID of the instrument				Series		Maturity date Payment of interest		Currency or adjustment index		Payment of interest		Repayment		Effective rate				Nominal rate				Up to 90 days ThUS$				91 days to 1 year ThUS$				Total ThUS$
93.007.000-9		SQM S.A		Chile			-			ThUS$200,000		04/15/2014		US$		Semiannual		Upon maturity			6.32	%			6.13	%			-				2,586				2,586
93.007.000-9		SQM S.A		Chile			-			ThUS$250,000		04/21/2014		US$		Semiannual		Upon maturity			5.70	%			5.50	%			-				2,674				2,674
93.007.000-9		SQM S.A		Chile			-			ThUS$300,000		04/03/2014		US$		Semiannual		Upon maturity			3.87	%			3.63	%			-				2,658				2,658
93.007.000-9		SQM S.A		Chile			446			C		06/01/2014		UF		Semiannual		Semiannual			4.44	%			4.00	%			-				6,951				6,951
93.007.000-9		SQM S.A		Chile			563			G		01/05/2014		$		Semiannual		Upon maturity			7.50	%			7.00	%			41,377				-				41,377
93.007.000-9		SQM S.A		Chile			564			H		01/05/2014		UF		Semiannual		Semiannual			5.10	%			4.90	%			4,207				-				4,207
93.007.000-9		SQM S.A		Chile			563			I		04/01/2014		UF		Semiannual		Upon maturity			3.35	%			3.00	%			-				67,144				67,144
93.007.000-9		SQM S.A		Chile			563			J		04/01/2014		$		Semiannual		Upon maturity			6.23	%			5.50	%			-				100,466				100,466
93.007.000-9		SQM S.A		Chile			700			M		02/01/2014		UF		Semiannual		Upon maturity			3.62	%			3.30	%			606				-				606
93.007.000-9		SQM S.A		Chile			699			O		02/01/2014		UF		Semiannual		Upon maturity			3.95	%			3.80	%			1,045				-				1,045
							Total																						47,235				182,479				229,714
							Bond issuance costs																						(335	)			(1,727	)			(2,062	)
							Total																						46,900				180,752				227,652

 

 

Note 10 – Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

c)

Types of interest-bearing borrowings, non-current

 

Non-current interest-bearing borrowings as of March 31, 2014 and December 31, 2013 are detailed as follows:

 

Debtor						Creditor																		03/31/2014 Years to maturity
Tax ID No.		Subsidiary		Country		Tax ID No.		Financial institution		Country		Currency or adjustment index		Repayment		Effective rate				Nominal rate				Over 1 years to 2 ThUS$				Over 2 to 3 ThUS$				Over 3 to 4 ThUS$				Total ThUS$
93.007.000-9		SQM S.A.		Chile		Foreign		Banco Estado NY Branch		United States		US$		Upon maturity			3.21	%			2.39	%			-				-				140,000				140,000
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		Foreign		Scotiabank & Trust (Cayman) Ltd.		Cayman Islands		US$		Upon maturity			1.35	%			1.41	%			50,000				-				-				50,000
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		Foreign		Bank of America		United States		US$		Upon maturity			1.75	%			1.27	%			-				40,000				-				40,000
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		Foreign		Export Development Canada		Canada		US$		Upon maturity			1.69	%			1.30	%			-				40,000				-				40,000
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		Foreign		The Bank of Tokyo-Mitsubishi UFJ, Ltd (New York)		United States		US$		Upon maturity			1.37	%			1.01	%			-				40,000				-				40,000
Total																									50,000				120,000				140,000				310,000
		Borrowings costs																							(59	)			(308	)			(603	)			(430	)
Total																									49,941				119,692				139,937				309,570

 

Debtor						Creditor																		12/31/2013 Years to maturity
Tax ID No.		Subsidiary		Country		Tax ID No.		Financial institution		Country		Currency or adjustment index		Repayment		Effective rate				Nominal rate				Over 1 years to 2 ThUS$				Over 2 to 3 ThUS$				Over 3 to 4 ThUS$				Total ThUS$
93.007.000-9		SQM S.A.		Chile		Foreign		Banco Estado NY Branch		United States		US$		Upon maturity			3.10	%			2.39	%			-				-				140,000				140,000
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		Foreign		Scotiabank & Trust (Cayman) Ltd.		Cayman Islands		US$		Upon maturity			1.35	%			1.41	%			50,000				-				-				50,000
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		Foreign		Bank of America		United States		US$		Upon maturity			1.75	%			1.27	%			-				40,000				-				40,000
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		Foreign		Export Development Canada		Canada		US$		Upon maturity			1.69	%			1.30	%			-				-				40,000				40,000
Foreign		Royal Seed Trading Corporation A.V.V.		Aruba		Foreign		The Bank of Tokyo-Mitsubishi UFJ, Ltd (New York)		United States		US$		Upon maturity			1.37	%			1.01	%			-				40,000				-				40,000
Total																									50,000				80,000				180,000				310,000
		Borrowings costs																							(85	)			(237	)			(189	)			(511	)
Total																									49,915				79,763				179,811				309,489

 

 

Note 10 – Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

d)

Non-current unsecured interest-bearing bonds

 

The breakdown of non-current unsecured interest-bearing bonds as of March 31, 2014 and December 31, 2013 is detailed as follows:

 

Debtor																Periodicity
Tax ID No.		Subsidiary		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$200,000		04/15/2016		US$		Semiannual		Upon maturity			6.32	%			6.13	%
93.007.000-9		SQM S.A		Chile			-			ThUS$250,000		04/21/2020		US$		Semiannual		Upon maturity			5.70	%			5.50	%
93.007.000-9		SQM S.A		Chile			-			ThUS$300,000		04/03/2023		US$		Semiannual		Upon maturity			3.87	%			3.63	%
93.007.000-9		SQM S.A		Chile			446			C		12/01/2026		UF		Semiannual		Semiannual			4.44	%			4.00	%
93.007.000-9		SQM S.A		Chile			564			H		01/05/2030		UF		Semiannual		Semiannual			5.10	%			4.90	%
93.007.000-9		SQM S.A		Chile			700			M		02/01/2017		UF		Semiannual		Upon maturity			3.62	%			3.30	%
93.007.000-9		SQM S.A		Chile			699			O		02/01/2033		UF		Semiannual		Upon maturity			3.95	%			3.80	%

 

Non-current maturities
03/31/2014
Debtor
Tax ID No.		Subsidiary		Country		Series		Over 1 year to 2 ThUS$				Over 2 years to 3 ThUS$				Over 3 Years to 4 ThUS$				Over 4 Years to 5 ThUS$				Over 5 years ThUS$				Total ThUS$
93.007.000-9		SQM S.A.		Chile		MMUS$200			-				200,000				-				-				-				200,000
93.007.000-9		SQM S.A.		Chile		MMUS$250			-				-				-				-				250,000				250,000
93.007.000-9		SQM S.A.		Chile		MMUS$300			-				-				-				-				300,000				300,000
93.007.000-9		SQM S.A.		Chile		C			6,424				6,424				6,424				6,424				51,398				77,094
93.007.000-9		SQM S.A.		Chile		H			-				-				-				-				171,320				171,320
93.007.000-9		SQM S.A.		Chile		M			-				42,830				-				-				-				42,830
93.007.000-9		SQM S.A.		Chile		O			-				-				-				-				64,245				64,245
				Subtotal					6,424				249,254				6,424				6,424				836,963				1,105,489
				Bond issuance costs					(190	)			(720	)			(157	)			(140	)			(10,628	)			(11,835	)
				Total					6,234				248,534				6,267				6,284				826,335				1,093,654

 

 

Nota 10 - Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

 

e)

Unsecured interest-bearing liabilities, non-current, continued

 

As of March 31, 2014 and December 31, 2013, the breakdown of unsecured interest-bearing liabilities, non-current is as follows:

 

Debtor

Periodicity

Tax ID No.

Subsidiary

Country

Number of registration or ID of the instrument

Series

Maturity date

Adjustment unit of the bond

Payment of interest

Repayment

Effective rate

Nominal rate

93.007.000-9

SQM S.A.

Chile

-

MMUS$200

04/15/2016

US$

Semiannual

Upon maturity

6.32

%

6.13

%

93.007.000-9

SQM S.A.

Chile

-

MMUS$250

04/21/2020

US$

Semiannual

Upon maturity

5.70

%

5.50

%

93.007.000-9

SQM S.A.

Chile

-

MMUS$300

04/03/2023

US$

Semiannual

Upon maturity

3.87

%

3.63

%

93.007.000-9

SQM S.A.

Chile

446

C

12/01/2026

UF

Semiannual

Semiannual

4.44

%

4.00

%

93.007.000-9

SQM S.A.

Chile

564

H

01/05/2030

UF

Semiannual

Semiannual

5.10

%

4.90

%

93.007.000-9

SQM S.A.

Chile

700

M

02/01/2017

UF

Semiannual

Upon maturity

3.62

%

3.30

%

93.007.000-9

SQM S.A.

Chile

699

O

02/01/2033

UF

Semiannual

Upon maturity

3.95

%

3.80

%

Total

Bond issuance costs

Total

 

						Non-current maturities
						12/31/2013
Debtor
Tax ID No.		Subsidiary		country		Series		Over 1 year to 2 ThUS$				Over 2 years to 3 ThUS$				Over 3 Years to 4 ThUS$				Over 4 years to 5 ThUS$				Over 5 years ThUS$				Total ThUS$
93.007.000-9		SQM S.A.		Chile		MMUS$200			-				200,000				-				-				-				200,000
93.007.000-9		SQM S.A.		Chile		MMUS$250			-				-				-				-				250,000				250,000
93.007.000-9		SQM S.A.		Chile		MMUS$300			-				-				-				-				300,000				300,000
93.007.000-9		SQM S.A.		Chile		C			6,665				6,665				6,665				6,665				53,318				79,978
93.007.000-9		SQM S.A.		Chile		H			-				-				-				-				177,729				177,729
93.007.000-9		SQM S.A.		Chile		M			-				-				44,432				-				-				44,432
93.007.000-9		SQM S.A.		Chile		O			-				-				-				-				66,648				66,648
				Subtotal					6,665				206,665				51,097				6,665				847,695				1,118,787
				Bond issuance costs					(194	)			(543	)			(449	)			(144	)			(10.961	)			(12.291	)
				Total					6,471				206,122				50,648				6,521				836,734				1,106,496

 

Note 10 - Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

f)

Additional information

 

Bonds

  

On the 31th of March 2014 and the 31st of December 2013, short term bonds of MUS$ 25,449 and MUS$ 227,652 respectively were classified as short-term, consisting of the current portion due plus accrued interest to date, excluding bond issue costs. The non-current portion consisted of MUS$1,093,654 on the 31^th March 2014 and MUS$1,106,496 on the 31^st December 2013, corresponding to the issuance of series C bonds, Single series bonds (ThUS$ 200), series H bonds second issue single series bonds (ThUS$ 250), series M bonds, series O bonds and third issue single series bonds (ThUS$ 300), excluding debt issue costs.

 

As of March 31, 2014 and December 31, 2013, 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 December 31, 2013 and December 31, 2012, the Company has made the following payments with a charge to the Series C bonds:

 

Payments made		03/31/2014				12/31/2013
		ThUS$				ThUS$
Principal			-				6,858
Interest payment			-				4,004

 

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 March 31, 2014 and December 31, 2013, the Company has made the following payments with a charge to the Single Series bonds:

 

Payments made		03/31/2014 ThUS$				12/31/2013 ThUS$
Payments of interest			-				12,250

 

 

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 March 31, 2014 and December 31, 2013, the Company has made the following payments with a charge to the Series G and H bonds:

 

Payments made		03/31/2014 ThUS$				12/31/2013 ThUS$
Payment of principal of Series G bonds			39,713				-
Payments of interest, Series G bonds			1,366				2,845
Payments of interest, Series H bonds			4,271				8,565

  

Series “J” and “I” bonds

 

On May 8, 2009, the Company placed two bond series in the domestic market. Series J for ThCh$52,000,000 (ThUS$92,456) which was placed at a term of 5 years with single payment at the expiration date of the term and annual interest rate of 5.5% and Series I for UF 1,500,000 (ThUS$56,051) which was placed at a term of 5 years with single payment at the maturity of the term and annual interest rate of 3.00%.

 

As of March 31, 2014 and December 31, 2013, the Company has made the following payments with a charge to the Series J and I bonds:

 

Payments made		03/31/2014 ThUS$				12/31/2013 ThUS$
Payments of principal Series J bonds			94,454				-
Payment of interest, Series J bonds			2,563				5,879
Payments of principal Series I bonds			64,331				-
Payment of interest, Series I bonds			958				2,100

 

 

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 annual interest rate of 5.5% and destined to refinance long-term liabilities.

 

As of March 31, 2014 and December 31, 2013, the detail of payments charged to the line of single series bonds, second issue is as follows:

 

Payments made		03/31/2014 ThUS$				12/31/2013 ThUS$
Interest payment			-				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 March 31, 2014, and December 31, 2013 the Company has made the following payments with a charge to the Series M and O bonds:

 

Payments made		03/31/2014 ThUS$				12/31/2013 ThUS$
Payment of interest, Series M bonds			693				765
Payment of interest, Series O bonds			1,195				1,320

 

Single series bonds, third issue ThUS$300,000

On April 3, 2013, the Company issued in the United States 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 March 31, 2014 and December 31, 2013, the following payments have been made with a debit to the line of single-series bonds, third issue:

 

Payments made		03/31/2014 ThUS$				12/31/2013 ThUS$
Payment of interest			-				5,438

 

 

 

Note 10 - Financial instruments (continued)

 

10.5

Trade and other payables

 

		03/31/2014												12/31/2013
						Non-												Non-
		Current				current				Total				Current				current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Accounts payable			155,405				-				155,405				150,322				-				150,322
Deferred income			-				-				-				-				-				-
Retained  (or accrued)			608				-				608				638				-				638
Total			156,013				-				156,013				150,960				-				150,960

 

Purchase commitments held by the Company are recognized as liabilities when the goods and services are received by the Company. As of March 31, 2014, the Company has purchase orders amounting to ThUS$20,156 (ThUS$29,395 as of December 31, 2013).

 

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		03/31/2014				Effect on profit or loss as of 03/31/2014				12/31/2013				Effect on profit or loss as of 12/31/2013
		ThUS$				ThUS$				ThUS$				ThUS$
Current
Derivative instruments (forward)			4,786				2,749				423				5,100
Derivative instruments (options)			3,280				2,923				665				1,827
Derivative instruments (IRS)			1,299				173				1,339				251
			9,365				5,845				2,427				7,178

 

Balances in the column effect on profit or loss consider the annual effects of agreements which were in force as of March 31, 2014.

 

 

Note 10 - Financial instruments (continued)

 

10.7

Financial asset and liability categories

 

a)

Financial Assets

 

		03/31/2014												12/31/2013
		Current				Non-current				Total				Current				Non-current				Total
Description of financial assets		Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$
Financial assets measured at amortized cost			375,863				-				375,863				431,883				-				431,883
Investments held-to-maturity measured at amortized cost			-				98				98				-				95				95
Loans and receivables measured at amortized cost			421,752				-				421,752				330,992				1,282				332,274
Total financial assets measured at amortized cost			797,615				98				797,713				762,875				1,377				764,252
Financial assets at fair value through profit or loss			6,242				-				6,242				3,283				-				3,283
Financial assets at fair value through other comprehensive income			1,093				-				1,093				25,007				-				25,007
Total financial assets at fair value			7,335				-				7,335				28,290				-				28,290
Total financial assets			804,950				98				805,048				791,165				1,377				792,542

 

 

Note 10 - Financial instruments (continued)

 

10.7

Financial asset and liability categories (continued)

 

b)

Financial liabilities

 

		03/31/2014												12/31/2013
		Current				Non-current				Total				Current				Non-current				Total
Description of financial liabilities		Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$
Financial liabilities at fair value through profit or loss			9,365				7,105				16,470				2,427				1,405				3,832
Financial liabilities at fair value through profit or loss			9,365				7,105				16,470				2,427				1,405				3,832
Financial liabilities measured at amortized cost			332,414				1,403,224				1,735,638				549,959				1,415,985				1,965,944
Total financial liabilities measured at amortized cost			332,414				1,403,224				1,735,638				549,959				1,415,985				1,965,944
Total financial liabilities			341,779				1,410,329				1,752,108				552,386				1,417,390				1,969,776

 

 

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 (USD) 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 actual market value of guaranteed and non-guaranteed long-term obligations; bonds denominated in local currency ($/UF) and foreign currency (USD), credits denominated in foreign currency (USD).

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)

 

10.9

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 March 31, 2014 and December 31, 2013, assets pledged as guarantees are as follows:

 

Restricted cash		03/31/2014 ThUS$				12/31/2013 ThUS$
Isapre Norte Grande Ltda.			709				708
Total			709				708

 

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.

-

Other current financial liabilities are considered at fair value 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.

-

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:

 

		03/31/2014								12/31/2013
		Carrying value				Fair  value				Carrying value				Fair value
		ThUS$				ThUS$				ThUS$				ThUS$
Cash and cash equivalents			419,486				419,486				476,622				476,622
Current trade and other receivables			421,752				421,752				330,992				330,992
Other financial assets, current:
- Time deposits			375,863				375,863				431,883				431,883
- Derivative instruments			6,242				6,242				3,283				3,283
- Current hedging assets			1,093				1,093				25,007				25,007
Total other current financial assets			383,198				383,198				460,173				460,173
Non-Current Trade Receivables			-				-				1,282				1,282
Other non-current financial assets:			98				98				95				95
Other non-current financial assets:			98				98				95				95
Other financial liabilities, current:
- Bank loans			150,952				150,952				171,347				171,347
- Derivative instruments			8,066				8,066				1,088				1,088
- Hedging liabilities			1,299				1,299				1,339				1,339
- Unsecured obligations			25,449				25,449				227,652				227,652
Other financial liabilities, current			185,766				185,766				401,426				401,426
Current and non-current accounts payable			198,074				198,074				150,960				150,960
Other non-current financial liabilities:
- Bank loans			309,570				394,226				309,489				324,246
- Unsecured obligations			1,093,654				1,142,303				1,106,496				1,077,049
- Non-current hedging liabilities			7,105				7,105				1,405				1,405
Other non-current financial liabilities:			1,410,329				1,543,634				1,417,390				1,402,700

 

Fair value hierarchy

 

Fair value hierarchies are as follows:

 

-

Level 1: When only quoted (unadjusted) prices have been used in active markets.

-

Level 2: When in a phase in the valuation process variable other than prices quoted in Level 1 have been used which are directly observable in markets.

-

Level 3: When in a phase in the valuation process variable which are not based in observable market data have been used.

 

The valuation techniques used to determine the fair value of our hedging instruments are those indicated in level 2.

 

 

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 March 31, 2014 and December 31, 2013, in accordance with criteria established in Note 2.6 and Note 3.19, investment in associates recognized according to the equity method of accounting and joint ventures are as follows:

 

		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
Associates		03/31/2014				12/31/2013				03/31/204				12/31/2013				03/31/2014				12/31/2013				03/31/2014				12/31/2013
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Sales de Magnesio Ltda.			1,372				1,649				204				1,005				-				-				204				1,005
Abu Dhabi Fertilizer Industries WWL			12,087				11,453				772				1,596				-				-				772				1,596
Doktor Tarsa Tarim Sanayi AS			14,284				15,193				-				2,192				-				-				-				2,192
Ajay North America			11,661				13,125				1,527				7,919				-				-				1,527				7,919
Ajay Europe SARL			9,002				7,924				988				3,825				-				-				988				3,825
SQM Eastmed Turkey			142				142				-				132				-				-				-				132
Charlee SQM Thailand Co. Ltd.			1,550				1,589				-				237				-				-				-				237
Total			50,098				51,075				3,491				16,906				-				-				3,491				16,906

 

		Description of the nature of the				Country of		Share of ownership in				Dividends received
Associate		Relationship		Domicile		incorporation		associates				03/31/2014				12/31/2013
												ThUS$				ThUS$
Sales de Magnesio Ltda.		Commercialization of magnesium salts.		El Trovador 4285, Las Condes		Chile			50	%			362				892
Abu Dhabi Fertilizer Industries WWL		Distribution and commercialization of specialty plant nutrients in the Middle East.		PO Box 71871, Abu Dhabi		United Arab Emirates			50	%			-				-
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 commercialization of iodine derivatives.		1400 Industry RD Power Springs GA 30129		United States			49	%			3,569				10,437
Ajay Europe SARL		Production and commercialization of iodine derivatives.		Z.I. du Grand Verger BP 227 53602 Evron Cedex		France			50	%			-				5,093
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	%			-				-

 

 

Note 11 – Equity-accounted investees (continued)

 

11.2

Assets, liabilities, revenue and expenses of associates

 

		03/31/2014																				03/31/2014
																						Gain (loss)
		Assets								Liabilities												from				Other
						Non-								Non-								continuing				comprehensive				Comprehensive
		Current				current				Current				current				Revenue				operations				income				income
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Sales de Magnesio Ltda,			4,986				184				2,405				20				3,508				407				-				407
Abu Dhabi Fertilizer Industries WWL			27,995				2,687				6,508				-				13,901				1,544				-				1,544
Doktor Tarsa Tarim Sanayi AS			72,664				6,563				44,580				6,082				-				-				-				-
Ajay North America			22,345				9,335				7,882				-				18,377				3,116				-				3,116
Ajay Europe SARL			23,324				2,489				7,809				-				17,682				1,975				-				1,975
SQM Eastmed Turkey			149				305				169				-				-				-				-				-
Charlee SQM Thailand Co. Ltd.			7,904				581				4,611				-				-				-				-				-
Total			159,367				22,144				73,964				6,102				53,468				7,042				-				7,042

 

		12/31/2013																12/31/2013
																						Gain (loss)
		Assets								Liabilities												from				Other
						Non-								Non-								continuing				comprehensive				Comprehensive
		Current				current				Current				current				Revenue				operations				income				income
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Sales de Magnesio Ltda,			4,519				309				1,512				18				14,370				2,009				-				2,009
Abu Dhabi Fertilizer Industries WWL			26,645				2,321				6,059				-				44,689				3,192				-				3,192
Doktor Tarsa Tarim Sanayi AS			67,603				6,563				37,696				6,082				73,905				4,385				-				4,385
Ajay North America			23,728				9,289				6,230				-				72,297				16,161				-				16,161
Ajay Europe SARL			22,247				2,370				8,770				-				67,361				7,649				-				7,649
SQM Eastmed Turkey			149				305				169				-				139				265				-				265
Charlee SQM Thailand Co. Ltd.			6,104				572				2,706				-				19,179				593				-				593
Total			150,995				21,729				63,142				6,100				291,940				34,254				-				34,254

 

 

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 not accounted for according to the equity method of accounting.

 

The equity method was applied to the Statement of Financial Position as of March 31, 2014 and December 31, 2013.

 

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.

 

 

Note 12 - Joint Ventures

 

12.1

Policy for the accounting for equity accounted investment in joint ventures

 

The method for the recognition of joint ventures 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

 

12.2

Disclosures of interest in joint ventures

 

a)

Operations conducted in 2014

 

As of March 31, there are no changes in the composition of the interest in joint ventures.

 

b)

Operations conducted in 2013

 

As of December 31, there are no changes in the breakdown of interests in joint ventures.

 

 

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				03/31/2014				12/31/2013
												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		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 Crop 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 Brazil Agroindustria		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		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 Southern Africa Pty		Production and commercialization of specialty plant and animal nutrition and industrial hygiene		33 Waterford Office Park Waterford Drive Fourways, 2055 South Africa		South Africa			50	%			-				-
SQM Vitas Spain		Production and commercialization of specialty plant nutrition		C/Manuel Echeverria Manzana 2 Muelle de la Cab ( Puerto Real )		Spain			50	%			-				-
SQM Vitas Holland		Without information		Herikerbergweg 238, 1101 CM Amsterdam Zuidoost		Dutch Antilles			50	%			-				-
SQM Vitas Plantacote B.V.		Production and commercialization of controlled-released fertilizers		Herikerbergweg 238, 1101 CM Amsterdam Zuidoost		Dutch Antilles			50	%			-				-

 

 

Note 12 - Joint Ventures (continued)

 

12.3

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

 

		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
Joint Venture		03/31/2014				12/31/2013				03/31/2014				12/31/2013				03/31/2014				12/31/2013				03/31/2014				12/31/2013
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Sichuan SQM Migao Chemical Fertilizers Co Ltda.			12,539				11,504				74				255				(2	)			13				72				268
Coromandel SQM			751				801				-				90				-				-				-				90
SQM Vitas Fzco.			13,639				12,762				917				1,807				64				(339	)			981				1,468
SQM Star Qingdao Crop Nutrition Co.Ltd.			1,644				1,475				169				396				-				-				169				396
SQM Vitas Holland			(673	)			(599	)			(74	)			(667	)			-				-				(74	)			(667	)
			27,900				25,943				1,086				1,881				62				(326	)			1,148				1,555

 

The following companies are subsidiaries of SQM Vitas Fzco.

 

		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
		03/31/2014				12/31/2013				03/31/2014				12/31/2013				03/31/2014				12/31/2013				03/31/2014				12/31/2013
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Vitas Brazil			5,948				4,747				326				2,538				-				-				163				1,152
SQM Vitas Peru			4,683				4,314				390				(224	)			-				-				195				93
SQM Vitas Southern Africa			1,128				1,096				(60	)			55				-				-				(30	)			102
SQM Vitas Spain			(110	)			(225	)			115				-				-				-				58				(177	)
SQM Vitas Plantacote B.V.			(1,014	)			(751	)			(263	)			-				-				-				(132	)			(385	)
Total			10,635				9,181				508				2,369				-				-				254				785

 

 

Note 12 - Joint Ventures (continued)

 

12.4

Assets, liabilities, revenue and expenses from Joint Ventures:

 

		03/31/2014
																						Gain (loss)
		Assets								Liabilities												from				Other
						Non-								Non-								continuing				comprehensive				Comprehensive
		Current				current				Current				current				Revenue				operations				income				income
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Sichuan SQM Migao Chemical Fertilizers Co Ltda.			61,513				9,234				45,669				-				22,342				147				(4	)			143
Coromandel SQM			4,994				1,158				4,587				63				-				-				-				-
SQM Vitas Fzco.			13,051				15,181				956				-				5,871				1,834				128				1,962
SQM  Star Qingdao Crop Nutrition Co. Ltda.			4,453				215				1,379				-				2,565				339				-				339
SQM Vitas Brazil			30,209				7,360				23,048				8,573				14,124				326				-				326
SQM Vitas Peru			22,833				1,831				19,981				-				10,182				390				-				390
SQM Vitas Southern Africa			4,137				811				3,821				-				4,204				(60	)			-				(60	)
SQM Vitas Spain			2,945				927				3,982				-				3,394				115				-				115
SQM Vitas Holland			95				(1,125	)			316				-				-				(148	)			-				(148	)
SQM Vitas Plantacote B.V.			2,012				6,532				9,558				-				1,538				(263	)			-				(263	)
Total			146,242				42,124				113,297				8,636				64,220				2,680				124				2,804

 

		12/31/2013																12/31/2013
																						Gain (loss)
		Assets								Liabilities												from				Other
						Non-								Non-								continuing				comprehensive				Comprehensive
		Current				current				Current				current				Revenue				operations				income				income
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Sichuan SQM Migao Chemical Fertilizers Co Ltda.			68,241				9,414				54,650				-				41,744				509				26				535
Coromandel SQM			4,545				1,158				4,037				63				7,842				179				-				179
SQM Vitas Fzco.			12,790				13,772				1,039				-				18,779				3,614				(679	)			2,935
SQM  Star Qingdao Crop Nutrition Co. Ltda.			3,570				228				838				10				7,649				791				-				791
SQM Vitas Brazil			31,243				7,158				25,615				8,039				87,927				2,305				-				2,305
SQM Vitas Peru			21,481				1,722				18,890				-				35,267				185				-				185
SQM Vitas Southern Africa			5,164				829				4,896				-				21,234				204				-				204
SQM Vitas Spain			1,318				949				2,492				-				1,854				(355	)			-				(355	)
SQM Vitas Holland			95				-				316				977				-				(1,335	)			-				(1,335	)
SQM Vitas Plantacote B.V.			1,323				6,548				8,623				-				2,157				(770	)			-				(770	)
Total			149,770				41,778				121,396				9,089				224,453				5,327				(653	)			4,674

 

 

Note 12 - Joint Ventures (continued)

 

12.5

Other Joint Venture disclosures:

 

		Cash and cash equivalents								Other current financial liabilities								Other non-current financial liabilities
		03/31/2014				12/31/2013				03/31/2014				12/31/2013				03/31/2014				12/31/2013
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Sichuan SQM Migao Chemical Fertilizers Co Ltda.			154				8,049				-				7,660				-				-
Coromandel SQM			197				197				880				880				-				-
SQM Vitas Fzco.			9,384				10,605				-				-				-				-
SQM  Star Qingdao Crop Nutrition Co., Ltd.			2,031				1,988				-				-				-				-
SQM Vitas Brazil			762				854				-				-				8,573				8,600
SQM Vitas Peru			951				1,166				-				-				-				-
SQM Vitas Southern Africa			351				351				-				-				-				-
SQM Vitas Spain			938				310				-				-
SQM Vitas Holland			26				26				-				-				-				-
SQM Vitas Plantacote B.V.			253				109				5,620				5,567				-				-
Total			15,047				23,655				6,500				14,107				8,573				8,600

 

		Depreciation and amortization expense								Interest expense								Income tax expense, continuing operations
		03/31/2014				12/31/2013				03/31/2014				12/31/2013				03/31/2014				12/31/2013
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Sichuan SQM Migao Chemical Fertilizers Co Ltda.			(169	)			(549	)			(343	)			(813	)			25				(12	)
Coromandel SQM			-				(2	)			-				(87	)			-				(92	)
SQM Vitas Fzco.			(255	)			(1,001	)			-				(16	)			-				-
SQM  Star Qingdao Crop Nutrition Co., Ltd.			(14	)			(71	)			-				-				(114	)			(242	)
SQM Vitas Brazil			(34	)			(328	)			(261	)			(931	)			-				-
SQM Vitas Peru			(12	)			(82	)			-				(445	)			-				91
SQM Vitas Southern Africa			(22	)			(67	)			-				(104	)			-				-
SQM Vitas Spain			(78	)			-				(1	)			(14	)			-				-
SQM Vitas Holland			-				-				-				(2	)			-				-
SQM Vitas Plantacote B.V.			(1	)			-				(76	)			(176	)			-				-
Total			(585	)			(2,100	)			(681	)			(2,588	)			(89	)			(255	)

 

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

 

		03/31/2014				12/31/2013
		ThUS$				ThUS$
Intangible assets other than goodwill			104,515				104,363
Goodwill			38,388				38,388
Total			142,903				142,751

 

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 March 31, 2014 and December 31, 2013 are detailed as follows:

 

				03/31/2014
Intangible assets and goodwill		Useful life		Gross amount ThUS$				Accumulated Amortization ThUS$				Net Value ThUS$
Trademarks		Finite			3,821				(3,821	)			-
Software		Finite			8,302				(5,915	)			2,387
Intellectual property rights, patents and other industrial property rights, service and exploitation rights		Finite			1,555				(896	)			659
Intellectual property rights, patents and other industrial property rights, service and exploitation rights		Indefinite			99,389				(2,001	)			97,388
Other intangible assets		Indefinite			4,081				-				4,081
Intangible assets other than goodwill					117,148				(12,633	)			104,515
Goodwill		Indefinite			38,388				-				38,388
Total intangible assets and goodwill					155,536				(12,633	)			142,903

 

 

Note 13 - Intangible assets and goodwill (continued)

 

13.2

Disclosures on intangible assets and goodwill, continued

 

				12/31/2013
Intangible assets and goodwill		Useful life		Gross amount ThUS$				Accumulated Amortization ThUS$				Net Value ThUS$
Trademarks		Finite			3,821				(3,821	)			-
Software		Finite			5,342				(3,146	)			2,196
Intellectual property rights, patents and other industrial property rights, service and exploitation rights		Finite			1,576				(882	)			694
Intellectual property rights, patents and other industrial property rights, service and exploitation rights		Indefinite			97,392				-				97,392
Other intangible assets		Indefinite			4,081				-				4,081
Intangible assets other than goodwill					112,212				(7,849	)			104,363
Goodwill		Indefinite			38,388				-				38,388
Total intangible assets and goodwill					150,600				(7,849	)			142,751

 

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 which constitute its useful life.

 

The estimated useful life for software is 3 years for other finite useful life assets, the period in which they are amortized relate 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		3 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 March 31, 2014:

 

Movements in identifiable intangible assets		Trademarks Net ThUS$				Software Net ThUS$				Intellectual property rights, patents and other industrial property rights, service and exploitation right, rights of way, Net ThUS$				Intellectual property rights, patents and other industrial property rights, service and exploitation right, rights of way, Net ThUS$				Other intangible assets, Net ThUS$				Goodwill, Net ThUS$				Identifiable intangible assets, Net ThUS$
Opening balance			-				2,196				694				97,392				4,081				38,388				142,751
Additions							492				-				-				-				-				492
Amortization							(204	)			(15	)			(3	)			-				-				(222	)
Other increases (decreases)							(97	)			(20	)			(1	)			-				-				(118	)
Final balance			-				2,387				659				97,388				4,081				38,388				142,903

 

g)

Movements in identifiable intangible assets as of December 31, 2013:

 

Movements in identifiable intangible assets		Trademarks Net ThUS$				Software Net ThUS$				Intellectual property rights, patents and other industrial property rights, service and exploitation right, rights of way, Net ThUS$				Intellectual property rights, patents and other industrial property rights, service and exploitation right, rights of way, Net ThUS$				Other intangible assets, Net ThUS$				Goodwill, Net ThUS$				Identifiable intangible assets, Net ThUS$
Opening balance			-				1,650				378				96,366				1,360				38,388				138,142
Additions							1,577				377				3,394				2,721				-				8,069
Amortization							(1,019	)			(61	)			(12	)			-				-				(1,092	)
Other increases (decreases)							(12	)			-				(2,356	)			-				-				(2,368	)
Final balance			-				2,196				694				97,392				4,081				38,388				142,751

 

 

Note 14 - Property, plant and equipment

 

As of March 31, 2014 and December 31, 2013, the detail of property, plant and equipment is as follows:

 

14.1

Types of property, plant and equipment

 

Description of types of property, plant and equipment		03/31/2014 ThUS$				12/31/2013 ThUS$
Property, plant and equipment, net
Land			34,591				33,812
Buildings			206,304				190,529
Machinery			376,438				465,327
Transport equipment			104,392				105,979
Furniture and fixtures			8,601				9,534
Office equipment			6,011				6,062
Constructions in progress			421,046				415,740
Other property, plant and equipment (1)			857,488				827,394
Total			2,014,871				2,054,377
Property, plant and equipment, gross
Land			34,591				33,812
Buildings			369,244				364,695
Machinery			1,117,218				1,179,860
Transport equipment			259,436				263,268
Furniture and fixtures			29,517				27,575
Office equipment			32,815				39,142
Constructions in progress			421,046				415,740
Other property, plant and equipment			1,581,100				1,506,708
Total			3,844,967				3,830,800

 

 

Note 14 - Property, plant and equipment (continued)

 

14.1

Types of property, plant and equipment, continued

 

		03/31/2014				12/31/2013
		ThUS$				ThUS$
Accumulated depreciation and value impairment of property, plant and equipment, total
Accumulated depreciation and value impairment of buildings			162,940				174,166
Accumulated depreciation and value impairment of machinery			740,780				714,533
Accumulated depreciation and value impairment of transport equipment			155,044				157,289
Accumulated depreciation and value impairment of furniture and fixtures			20,916				18,041
Accumulated depreciation and value impairment of office equipment			26,804				33,080
Accumulated depreciation and value impairment of other property, plant and equipment			723,612				679,314
Total			1,830,096				1,776,423

 

(1)

The detail of other property, plant and equipment is as follows:

 

Other property, plant and equipment, net		03/31/2014 ThUS$				12/31/2013 ThUS$
Conveyor belt			55,639				53,783
Tank (TK)			38,360				25,781
Geomembrane / liner			153,188				169,255
Electric facilities			58,178				21,889
Lights			2,913				28,748
Other constructions			67,514				62,390
Piping			25,829				22,499
Pool			168,580				181,844
Well (water)			38,443				39,963
Pipes / HD lines			129,301				101,886
Railroad track			22,321				21,628
Other property, plant and equipment			97,222				97,728
Total			827,488				827,394

 

 

Note 14 - Property, plant and equipment (continued)

 

14.2

Reconciliation of changes in property, plant and equipment by type as of March 31, 2014 and December 31, 2013:

 

Reconciliation entries of changes in property, plant and equipment by type as of March 31, 2014		Land				Buildings, net				Machinery, net				Transport equipment, net				Furniture and fixtures, net				Office equipment, net				Constructions in progress				Other property, plant and equipment, net				Property, plant and equipment, net
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance			33,812				190,529				465,327				105,979				9,534				6,062				415,740				827,394				2,054,377
Changes
Additions			-				-				27				-				70				70				36,618				16				36,801
Divestitures			-				-				-				(19	)			(70	)			(1	)			(561	)			-				(651	)
Depreciation expense			-				(4,149	)			(22,592	)			(4,709	)			(606	)			(479	)			-				(24,345	)			(56,880	)
Increase(decrease) in foreign currency exchange			(33	)			1				(83	)			(6	)			-				(12	)			-				(78	)			(211	)
Reclassification			812				19,923				(66,272	)			3,147				(327	)			172				(10,919	)			53,464				-
Other increases (decreases) (*)			-				-				31				-				-				199				(19,832	)			1,037				(18,565	)
Total changes			779				15,775				(88,889	)			(1,587	)			(933	)			(51	)			5,306				30,094				(39,506	)
Final balance			34,591				206,304				376,438				104,392				8,601				6,011				421,046				857,488				2,014,871

 

(*) The net balance of Other increases (decreases) corresponds to: 1) investment plan expenses 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) projects corresponding mainly to exploration expenditures and stain development.

 

 

Note 14 - Property, plant and equipment (continued)

 

14.2

Reconciliation of changes in property, plant and equipment by type as of March 31, 2014 and December 31, 2013, continued:

 

Reconciliation entries of changes in property, plant and equipment by type as of December 31, 2013		Land				Buildings, net				Machinery, net				Transport equipment, net				Furniture and fixtures, net				Office equipment, net				Constructions in progress				Other property, plant and equipment, net				Property, plant and equipment, net
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Opening balance			33,320				169,731				438,331				88,954				6,736				5,249				423,184				747,044				1,912,549
Changes
Additions			778				47				2,100				3				60				845				416,471				3,327				423,631
Divestitures			-				(14	)			(49	)			(35	)			-				-				(5,045	)			(24	)			(5,167	)
Depreciation expense			-				(14,520	)			(87,989	)			(21,787	)			(2,112	)			(2,055	)			-				(88,358	)			(216,821	)
Increase(decrease) in foreign currency exchange			(36	)			(12	)			(12	)			(15	)			-				(36	)			-				(86	)			(197	)
Reclassification			-				35,700				115,281				38,845				4,874				2,156				(366,516	)			169,660				-
Other increases (decreases) (*)			(250	)			(403	)			(2,335	)			14				(24	)			(97	)			(52,354	)			(4,169	)			(59,618	)
Total changes			492				20,798				26,996				17,025				2,798				813				(7,444	)			80,350				141,828
Final balance			33,812				190,529				465,327				105,979				9,534				6,062				415,740				827,394				2,054,377

 

(*) The net balance of Other increases (decreases) corresponds to: 1) investment plan expenses 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) 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

Additional information

 

Interest capitalized in construction-in-progress:

 

The amount capitalized for this concept amounted to ThUS$3,010 as of March 31, 2014 and ThUS$ 17,232 as of December 31, 2013.

 

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.

 

14.5

Impairment of assets

 

As stated in Note 3.22, the recoverable amount of property, plant and equipment is measured whenever there is an indication that the asset may be impaired. As of December 31, 2013, certain assets have suffered impairment for which a provision has been recognized for an amount of ThUS$10,085. As of March 31, 2014, no impairment adjustments were generated.

 

14.6

Reclassifications

 

For comparative purposes, ThUS$75,740 were reclassified from the caption property, plant and equipment (land) to the caption intangible assets, corresponding to mining concessions that SQM has acquired from third-parties, which have been registered at acquisition cost, and amortized as the corresponding area is exploited based on the tons estimated to be extracted.

 

 

Note 15 - Employee benefits

 

15.1

Provisions for employee benefits

 

		03/31/2014				12/31/2013
Classes of benefits and expenses by employee		ThUS$				ThUS$
Current
Profit sharing and bonuses			14,738				25,236
Total			14,738				25,236
Non-current
Profit sharing and bonuses			553				277
Severance indemnity payments			31,171				32,137
Pension Plan			-				-
Total			31,724				32,414

 

 

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, mid-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.

 

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.

 

		03/31/2014				12/31/2013
Staff severance indemnities at actuarial value		ThUS$				ThUS$
Staff severance indemnities, Chile			30,494				31,470
Other obligations in companies elsewhere			677				667
Total other non-current liabilities			31,171				32,137

 

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 6%.

 

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 1980.

 

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-2010 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”, which 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 employees 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 March 31, 2014 and December 31, 2013, severance indemnities calculated at the actuarial value are as follows:

 

		2014 ThUS$				2013 ThUS$
Opening balance			(32,137	)			(34,431	)
Current cost of service			(657	)			(107	)
Interest cost			(545	)			(2,248	)
Actuarial gain/loss			337				(127	)
Exchange rate difference			1,664				2,946
Benefits paid during the year			167				1,830
Balance			(31,171	)			(32,137	)

 

 

Note 15 - Employee benefits (continued)

 

15.5

Staff severance indemnities, continued

 

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

 

		03/31/2014				12/31/2013
Mortality rate			RV - 2009				RV - 2009
Actual annual interest rate			6	%			6	%
Voluntary retirement rotation rate:
Men			0.7	%			0.9	%			annual
Women			0.98	%			1.53	%			annual
Salary increase			3.0	%			3.0	%			annual
Retirement age:
Men			65				65				years
Women			60				60				years

 

Note 16 - Executive compensation plan

 

The Company has established two compensation plans to motivate 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.

 

1)

Shares

 

Liquidated in cash, executives are able to exercise their rights until 2016.

 

Characteristics of the plan

 

This compensation plan is related with the company performance through the price of the Series B SQM share (Santiago Stock Exchange).

 

Participants in this plan

 

This compensation plan includes 10 executives of the Company, who are entitled to this benefit, provided they stay with the Company during the dates these options are executed. The dates for exercising the options will be the first 7 calendar days of May following to the fiscal year.

 

 

Note 16 - Executive compensation plan (continued)

 

Compensation

 

The compensation for each executive is the differential between the average prices of the share during April of each year compared to the base price established by Company’s management. The base price fixed by the Company for this compensation plan amounts to US$ 50 per share. The Company reserves the right to exchange that benefit by shares or share options.

 

The movement of the options in effect for the period, the average prices for the fiscal year of the options and the average contractual life of the options in effect as of December 31, 2013 and December 31, 2012 are the following:

 

Movement for the period		2014				2013
In effect as of January 1			1,536,000				2,200,500
Granted during the fiscal year			-				45,000
Redundant workers			-				(187,500	)
Exercised during the fiscal year			-				-
Changes in benefit plan			-				(522,000	)
In circulation as of December 31, 2013			1,536,000				1,536,000
Average contractual life			22 months				25 months
Executives			10				10

 

The amounts accrued by the plan, as of March 31, 2014 and December 31, 2013, amount to:

 

Effect on profit or loss		2014 ThUS$				2013 ThUS$
Effect on profit or loss			(277	)			8,200

 

2)

Average Share Price Spread

 

Plan characteristics

 

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

 

Plan participants

 

This compensation plan includes 30 Company’s executives, who obtain this benefit, provided they remain in the Company at the payment dates. The payments dates, if any, will be the first of January 2016, 2017 and 2018.

 

 

Compensation

 

The compensation for each executive is the differential between the average share price during each of the months of December 2015, December 2016 and December 2017, respectively, in its equivalent in US dollars and the reference prices, with the latter being the value between US$28 and the average weighted price of the trading of SQM Series B shares in the Santiago Stock Exchange during December 2014. The differential cannot exceed US$15.00 and will be multiplied by 5,000. If the amount calculated is negative or zero, no bonus will be paid during that period, but in such case, the bond of benefit payable in the following period to the employee, will be equal to the product of multiplying the difference by 10,000. If the value was negative or zero in December 2015 and also in December 2016, for calculating the bond of December 2017, the differential will be multiplied by 15,000.

 

The movement of the options in effect for the period, the average prices for the fiscal year of the options and the average contractual life of the options in effect as of March 31, 2014 and December 31, 2013 are the following:

 

Movement for the period		2014				2013
In effect as of January 1			450,000				450,000
Granted during the fiscal year			15,000				-
In circulation as of December 31, 2013			435,000				450,000
Average weighted contractual life			45 months				48 months
Executives			29				30

 

 

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 only 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 in 1.4 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, to oversight 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 2,8 times during the last periods.

 

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

 

CAPITAL MANAGEMENT		03/31/2014				12/31/2013				Description (1)		Calculation (1)
Net Financial Debt MUS$			793,411				882,020			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			4.2				3.40			Current Asset divided by Current Liability		Total Current Assets / Total Current Liabilities
Net Debt / Capitalization			0.24				0.27			Net Financial Debt divided by Total Equity		Net financial debt / ( Net financial debt + Total Equity)
ROE			16.3	%			19.5	%		Income divided by Total Equity		Total Income / Equity (UH 12 months)
ROA			14.2	%			16.4	%		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			0.89				0.96			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 with no par value 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 March 31, 2014 and December 31, 2013, 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		03/31/2014								12/31/2013
Description of type of capital in 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 March 31, 2014 and December 31, 2013, 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 March 31, 2014 and December 31, 2014, this caption comprises the following:

 

		03/31/2014 ThUS$				12/31/2013 ThUS$
Reserve for currency exchange conversion			(4,006	)			(3,817	)
Reserve for cash flow hedges			3,282				(3,766	)
Reserve for actuarial gains or losses in defined benefit plans			(1,231	)			(1,231	)
Other reserves			(1,677	)			(1,677	)
Total other reserves			(3,632	)			(10,491	)

 

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 Unidades de Fomento and Chilean pesos. Changes from the fair value of derivatives designated and classified as hedges are recognized under this classification.

 

Reserve for actuarial gains or losses in defined benefit plans

 

Our 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 6.5% interest rate for 2014 and 2013.

 

Other reserves

 

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).

 

 

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).

 

The Company’s dividend policy for 2013 is as follows:

 

-

Distribution and payment in favor of each shareholder of a final dividend which will be equivalent to 50% of Profit for the period obtained in 2013.

 

-

Distribution and payment, if possible during 2013, of a provisional dividend which will be recorded against the aforementioned final dividend. This provisional dividend will be paid probably during the last quarter of 2013 and its amount could not exceed 50% of the retained earnings for distribution obtained during 2013, which are reflected in the Company’s financial statements as of September 30, 2013.

 

-

The distribution and payment by the Company of the remaining balance of the final dividend related to Profit for the period for the 2013 commercial year in up to two installments, which will have to be effectively paid and distributed prior to June 30, 2014.

 

-

An amount equivalent to the remaining 50% of the Company’s Profit for the period for 2013 will be retained and destined to the financing of operations of one or more of the Company’s investment projects with no prejudice of the possible future capitalization of the entirety or a portion of this.

 

-

The Board of Directors does not consider the payment of any additional and interim dividends.

 

-

The Board of Directors considers as necessary to indicate that the aforementioned Dividends Policy correspond to the intention or expectation of the Board regarding this matter. Consequently, the enforcement of such Policy Dividends is necessarily conditioned to net incomes finally obtained, to the results indicating the Company’s regular forecasts or the existence of certain conditions that could affect them. Notwithstanding the above and to the extent that such policy dividend does not suffer a significant change, SQM S.A. will timely communicate its shareholders on this matter.

 

 

Note 17 - Disclosures on equity (continued)

 

17.5

Provisional dividends

 

On November 20, 2013, the Board of Directors of Sociedad Química y Minera de Chile S.A, agreed to pay and distribute to the Company’s shareholders, stating from December 12, 2013, a provisional dividend of US$0.75609 per share, equivalent, approximately, to ThUS$199,000 or 49.9% of the net distributable profit for the commercial year 2013, accumulated at September 30 of such year. The above, also, is charged against income of said commercial year, in favor of the Shareholders who appeared registered in SQM’s Shareholders Registry by the 5th working day prior to December 12, and in its equivalent in Chilean pesos according to the value of the “Observed dollar” or “USA dollar” that appears published in the Official Gazette on December 6, 2013.

 

On April 25th, 2013, at the 38th ordinary shareholders’ meeting, a definitive dividend payment of US$1.23323 per share was approved, based on the net profit earned during the commercial year 2012. US$0.94986 per share that was already paid as provisional dividend should be discounted from the abovementioned dividend, and the balance, amounting to US$0.28337 per share will paid and distributed in favor of the Shareholders who appeared registered in SQM’s Shareholders Registry by the 5th working day prior the day in which the dividend will be paid. The last amount, if corresponds, will be paid in its equivalent in Chilean pesos according to the value of the “Observed dollar” or “USA dollar” that appears published in the Official Gazette on April 25, 2013.

 

 

Note 17 - Disclosures on equity (continued)

 

17.5

Provisional dividends, continued

 

Dividends presented deducted from equity are:

 

		03/31/2014 ThUS$				12/31/2013 ThUS$
Dividends attributable to owners of the parent			-				203,401
Dividends payable			40,502				36,583
Total			40,502				239,984

 

 

Note 18 - Provisions and other non-financial liabilities

 

18.1

Types of provisions

 

		03/31/2014																12/31/2013
		Current				Non- current				Total				Current				Non- current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Provision for legal complaints (*)			8,567				3,000				11,567				8,567				3,000				11,567
Restructuring			-				-				-				-				-				-
Provision for dismantling, restoration and rehabilitation cost			-				5,633				5,633				-				5,633				5,633
Other provisions			10,074				-				10,074				9,386				-				9,386
Total			18,641				8,633				27,274				17,953				8,633				26,586

 

(*) 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 Brazil and United States (see note 19.1) and other litigations.

 

 

Note 18 - Provisions and other non-financial liabilities (continued)

 

18.2

Description of other provisions

 

Description of other provisions		03/31/2014 ThUS$				12/31/2013 ThUS$
Current provisions, other short-term provisions
Provision for tax loss in fiscal litigation			1,450				1,401
Royalties, agreement with CORFO (the Chilean Economic Development Agency)			5,197				4,782
Fine to Brazil			2,500				2,500
Miscellaneous provisions			927				703
Total			10,074				9,386
Other long-term provisions
Mine closure			5,633				5,633
Total			5,633				5,633

 

18.3

Other non-financial liabilities, current

 

Description of other liabilities		03/31/2014 ThUS$				12/31/2013 ThUS$
Tax withholdings			4,990				12,334
VAT payable			1,179				2,531
Guarantees received			874				1,000
Accrual for dividend			77,085				36,583
Monthly tax provisional payments			10,353				6,601
Deferred income			20,997				13,475
Withholdings from employees and salaries payable			5,116				4,087
Accrued vacations			15,905				18,652
Other current liabilities			179				90
Total			136,678				95,353

 

 

Note 18 - Provisions and other non-financial liabilities (continued)

 

18.4

Changes in provisions as of 03/31/2014

 

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			-				-				11,567				-				5,633				9,386				26,586
Changes in provisions:
Additional provisions			-				-				-				-				-				648				648
Provision used			-				-				-				-				-				(10	)			(10	)
Increase(decrease) in foreign currency exchange			-				-				-				-				-				50				50
Total provisions, final balance			-				-				11,567				-				5,633				10,074				27,274

 

 

Note 18 - Provisions and other non-financial liabilities (continued)

 

18.4

Changes in provisions as of 12/31/2013

 

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			-				-				8,567				-				4,357				12,922				25,846
Changes in provisions:
Additional provisions			-				-				3,000				-				1,276				12,608				16,884
Provision used			-				-				-				-				-				(15,943	)			(15,943	)
Increase (decrease) in foreign currency exchange			-				-				-				-				-				(201	)			(201	)
Total provisions, final balance			-				-				11,567				-				5,633				9,386				26,586

 

 

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 and U.S.A.).

 

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.

 

CORFO (Economic Development Agency) Royalties agreement: 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 those lawsuits in which the probability to lose 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	:	JB Comércio de Fertilizantes and Defensivos Agrícolas Ltda. (JB)
	Defendant	:	Nitratos Naturais do Chile Ltda. (NNC)
	Date	:	December 1995
	Court	:	MM 1ª, Vara Civel de Comarca de Barueri, Brazil.
	Reason	:	Compensation claim filed by JB against NNC for having appointed a distributor in a territory of Brazil for which JB had an exclusive contract.
	Status	:	Lower court ruling against Nitratos Naturais do Chile Ltda. and recourse of appeal pending resolution.
	Nominal value	:	ThUS$ 1,800
2.	Plaintiff	:	Nancy Erika Urra Muñoz
	Defendants	:	Fresia Flores Zamorano, Duratec-Vinilit S.A. and SQM S.A. and their insurers
	Date	:	December 2008
	Court	:	1st Civil Court of Santiago
	Reason	:	Labor Accident
	Status	:	Evidence
	Nominal value	:	ThUS$550

 

 

Note 19 - Contingencies and restrictions (continued)

 

19.1

Lawsuits and other relevant events, continued

 

3.	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	:	Conditional waiver as a result of pending appeal. Appeal will be reviewed in a hearing in October of 2013. Sentence pending.
	Nominal value	:	Not possible to determine
4.	Plaintiff	:	City of Lindsay, California USA
	Defendant	:	SQM North America Corporation
			The lawsuit also was filed against Sociedad Química y Minera de Chile S.A. this lawsuit has not yet been notified to the Company
	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	:	Claim. Suspended procedure
	Nominal value	:	Not possible to determine
5.	Plaintiff	:	Metalúrgica FAT Limitada
	Defendant	:	SQM Salar S.A.
	Date	:	August 2011
	Court	:	9th Civil Court in Santiago
	Reason	:	Compensation for early termination of supply contract and installation of metal structures
	Status	:	.Verdict of $40m in damages. Appeal pending.
	Nominal value	:	ThUS$175

 

 

Note 19 - Contingencies and restrictions (continued)

 

19.1

Lawsuits and other relevant events, continued

 

6.	Plaintiff	:	Angelina Castillo Figueroa and others
	Defendant	:	SQM Nitratos S.A. and its insurers
	Date	:	June 2012
	Court	:	2nd Civil Court in Santiago
	Reason	:	Compensation claim for alleged civil liability under tort derived from explosion occurred on September 6, 2010 near Baquedano causing the death of 6 workers
	Status	:	Abandonment of proceedings pending.
	Nominal value	:	ThUS$9,400
7.	Plaintiff	:	María Angélica Alday Fuentes
	Defendant	:	Vladimir Roco Alvarez, Compass Catering S.A. and SQM S.A.
	Date	:	August 2012
	Court	:	1st Civil Court in Antofagasta
	Reason	:	Compensation for moral damages for attempt to sexual abuse.
	Status	:	Replay to claim.
	Nominal value	:	ThUS$200
8.	Plaintiff	:	Workers Union of the Sociedad Industrial Minera Nueva Victoria
	Defendant	:	SQM S.A. and SQM Industrial S.A.
	Date	:	May 2013
	Court	:	Iquique Labor Court of First Instance
	Reason	:	Charging of benefits allegedly owed due to possible application of bonus for meeting goals
	Status	:	Trial Preparation Hearings (2)
	Nominal value	:	ThUS$400
9.	Plaintiff	:	E-CL S.A
	Defendant	:	Sociedad Química y Minera de Chile S.A.
	Date	:	September 2013
	Court	:	Arbitration
	Reason	:	Early termination of the Power Supply Contract entered into on February 12, 1999 (which matures in March 2016), on the basis of the alleged incompliance of a prior sentence between both parties that was resolved in favor of SQM S.A.
	Status	:	Evidentiary stage
	Nominal value	:	ThUS$5,100

 

 

Note 19 - Contingencies and restrictions (continued)

 

19.1

Lawsuits and other relevant events, continued

 

10.	Plaintiff	:	Workers Union of the Sociedad Industrial Minera Nueva Victoria
	Defendant	:	SQM S.A. and SQM Industrial S.A.
	Date	:	October 2013
	Court	:	Iquique Labor Court of First Instance
	Reason	:	Charging of benefits allegedly owed due to possible application of bonus for meeting goals
	Status	:	Response to law suit (2)
	Nominal value	:	ThUS$400

 

 

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 being involved either as plaintiffs or defendants in certain judicial proceedings that have been and will be heard by the Arbitral 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$700.

 

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 not received legal notice of any claims other than those mentioned in paragraph I above. The claims detailed above seek to annul certain mining claims that were purchased by SQM S.A. and Subsidiaries, the proportional purchase value of which, with respect to the portion affected by the superimposition, exceeds the nominal and approximate amount of ThUS$150. The claims seek payment of certain amounts allegedly owed by the Company due to its own activities, which exceed the approximate, nominal and individual amount of ThUS$150.

 

 

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 for issuance of bonuses in the local and international market, requires the Company complies 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$900,000.

-

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

-

To maintain a Total Indebtedness Ratio not higher than 1.4 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 March 31, 2014, the aforementioned financial indicators are as follows:

 

Indicator		03/31/2014				12/31/2013
Equity ThUS$			2,480,278				2,432,241
Net Financial Debt/ EBITDA			1.05				1.06
Indebtedness			0.89				0.96
SQM Industrial and SQM Salar debt / Current assets			0.02				0.02

 

Issuance contracts for bonuses issued abroad require the Company does not 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 United States’ 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

Commitments

 

The subsidiary SQM Salar S.A. has signed a rental contract with the Economic Development Agency (CORFO), which establishes that this subsidiary will pay rent to CORFO for the concept of commercialization of certain mining properties owned by CORFO and for the products resulting from this commercialization. The annual rent stated in the aforementioned contract is calculated on the basis of sales of each type of product. The contract is in force until 2030, and rent began being paid in 1996 reflecting an expense amount of ThUS$ 5,283 as of March 31, 2014 (ThUS$ 22,885 as of December 31, 2013).

 

On 15 November 2013, Corporación de Fomento de la Producción (CORFO) sent a letter to SQM Salar S.A. (SQMS) stating its intention to a) collect the amount of Ch$2,530,298,919 (ThUS$4,823) that in CORFO’s opinion, SQMS would owe to it for the calculation and payment of rental payments according to the “Lease Agreement of OMA Mining Claims located in the Atacama Salt Flat” entered into between CORFO and SQMS on November 12, 1993 (the AGREEMENT) and b) require the constitution of an instance of arbitrage stated in the AGREEMENT with the purpose that the arbitrator appointed by the “Arbitration Center of the Santiago Chamber of Commerce” determines if other alleged lese payment obligations may exist that SQMS could owe to CORFO under the AGREEMENT. SQMS differs completely form CORFO’s claims. In fact, the AGREEMENT has been in force for more than 20 years and during all this time, SQMS has paid to CORFO more than 80 quarterly payments in their entirety and on a timely basis that CORFO has received satisfactorily. Each of the parties, CORFO and SQMS, have requested the formation of an appropriate arbitration and such processes have not yet began.

 

19.4

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 March 31, 2014, the guarantee amounts to ThUS$709.

 

 

Note 19 - Contingencies and restrictions (continued)

 

19.5

Securities obtained from third parties

 

The main security received from third parties (exceeding ThUS$ 100) 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$11,339 and ThUS$14,178 on March 31, 2014 and December 31, 2013 respectively; which is detailed as follows:

 

Grantor		Relationship		03/31/2014				12/31/2013
				MUS$				MUS$
Agrícola Lobert Ltda.		Unrelated third party			656				1,271
Agroc Patricio Bornand L. Eirl		Unrelated third party			373				392
Agrocomercial Bornand Ltda.		Unrelated third party			-				344
Agroindustrial Orzonaga Ltda.		Unrelated third party			127				133
Aldo Epple Davazno		Unrelated third party			303				935
Bernardo Guzman Schmidt		Unrelated third party			132				139
Coop. Ag. Lechera Bio Bio Ltda.		Unrelated third party			2,744				3,431
Comercial Agrosal Ltda.		Unrelated third party			110				116
Contador Frutos S.A.		Unrelated third party			1,706				1,447
Dante Hauri Gomez		Unrelated third party			120				126
Gilberto Rivas Y Cia. Ltda.		Unrelated third party			129				136
Hortofruticola La Serena		Unrelated third party			307				323
Jose Antonio Gonzalez		Unrelated third party			-				118
Juan Luis Gaete Chesta		Unrelated third party			404				425
Lemp Martin Julian		Unrelated third party			118				124
Neyib Farran Y Cia. Ltda.		Unrelated third party			127				133
Patricio Meneses Saglieto		Unrelated third party			-				953
Sebastian Urrutia Araya		Unrelated third party			111				116
Soc.Agr. Huifquenco Cia Ltda.		Unrelated third party			112				117
Soc. Agrocom. Julio Polanco		Unrelated third party			126				132
Tattersall S.A.		Unrelated third party			2,000				1,789
Vicente Oyarce Castro		Unrelated third party			499				525
Vito Leopolo Llanos		Unrelated third party			1,135				953
Total					11,339				14,178

 

 

Note 19 - Contingencies and restrictions (continued)

 

19.6

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.

 

Pending balances as of the closing date of the financial statements

Creditor of the guarantee

Debtor

Type of

03/31/2014

12/31/2013

Name

Relationship

Guarantee

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

50,031

50,189

Scotiabank & Trust (Cayman) Ltd.

Royal Seed Trading A.V.V.

Subsidiary

Bond

50,315

50,139

Bank of America

Royal Seed Trading A.V.V.

Subsidiary

Bond

40,246

40,120

Export Development Canada

Royal Seed Trading A.V.V.

Subsidiary

Bond

50,177

50,014

The Bank of Tokyo-Mitsubishi UFJ Ltd.

Royal Seed Trading A.V.V.

Subsidiary

Bond

50,235

50,108

JP Morgan Chase Bank

SQM Industrial S.A.

Subsidiary

Bond

-

-

The Bank of Nova Scotia

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

-

-

 

 

Note 19 - Contingencies and restrictions (continued)

 

19.6

Indirect guarantees, continued

 

Pending balances as of the closing date of the financial statements

Creditor of the guarantee

Debtor

Type of

03/31/2014

12/31/2013

Name

Relationship

Guarantee

ThUS$

ThUS$

HSBC

SQM Investment Corp. N.V.

Subsidiary

Bond

-

-

Deutsche Bank AG

SQM Investment Corp. N.V.

Subsidiary

Bond

-

-

Credit Suisse International

SQM Investment Corp. N.V.

Subsidiary

Bond

-

-

  

 

Note 20 - Revenue

 

As of March 31, 2014 and 2013, revenue is detailed as follows:

 

		March
Types of revenue		2014				2013
		ThUS$				ThUS$
Sales of goods			532,069				620,957
Provision of services			2,003				2,440
Total			534,072				623,397

  

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		03/31/2014 ThUS$				03/31/2013 ThUS$
Earnings (losses) attributable to owners of the parent			81,005				151.805

 

		03/31/2014 Units				12/31/2013 Units
Number of common shares in circulation			263,196,524				263,196,524

 

		03/31/2014				03/31/2013
Basic earnings per share (US$ per share)			0.3078				0.5768

 

The Company has not made any operation with a potential dilutive effect that assumes diluted earnings per share 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 March 31, 2014, total interest expenses incurred amount to ThUS$15,725 (ThUS$13,132 as of March 31, 2013).

 

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.

 

Costs of capitalized interest, property, plant and equipment

 

The cost of capitalized interest is determined by applying the average or weighted average of all financing costs incurred by the Company to the monthly end balances of works-in-progress meeting the requirements of IAS 23.

 

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

 

		03/31/2014				03/31/2013
Capitalization rate of costs for capitalized interest, property, plant and equipment			7	%			7	%
Amount of costs for interest capitalized in ThUS$			3,010				4,602

 

 

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:

 

		03/31/2014 ThUS$				03/31/2013 ThUS$
Conversion foreign exchange gains (losses) recognized in the result of the year.			(1,682	)			(4,763	)
Conversion foreign exchange reserves attributable to the owners of the controlling entity			(189	)			(694	)
Conversion foreign exchange reserves attributable to the non-controlling entity			(57	)			15

 

b)

Reserves for foreign currency exchange differences:

 

As of March 31, 2014, and December 31, 2013, foreign currency exchange differences are detailed as follows:

 

Detail		03/31/2014 ThUS$				12/31/2013 ThUS$
Changes in equity generated through the equity method:
Comercial Hydro S.A.			1,004				1,004
SQMC Internacional Ltda.			14				22
Proinsa Ltda.			11				16
Comercial Agrorama Ltda.			(29	)			36
Isapre Norte Grande Ltda.			(17	)			15
Almacenes y Depósitos Ltda.			49				69
Sales de Magnesio Ltda.			(16	)			103
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.			2				9
Agrorama S.A.			20				(16	)
Doktor Tarsa			(3,683	)			(3,647	)
SQM Vitas Fzco			(594	)			(657	)
Ajay Europe			144				146
SQM Eastmed Turkey			(42	)			(42	)
Charlee SQM (Thailand) Co. Lta.			(123	)			(129	)
Coromandel SQM India			(231	)			(231	)
SQM Italia SRL			89				89
SQM Oceania Pty Limited			(619	)			(619	)
SQM Indonesia S.A.			15				15
Total			(4,006	)			(3,817	)

 

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 US dollar.

 

 

Note 23 - Effect of fluctuations on foreign currency exchange rates (continued)

 

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 Maria 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, and 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 March 31, 2014 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$10,240 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 03/31/2014

Identification of the Parent or subsidiary

Name of the project with which the disbursement is associated

Concept for which the disbursement was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of disbursement for the Period

Actual or estimated date on which disbursements were or will be made

Miscellaneous

Environmental-operational area

Not classified

Expense

Not classified

289

31/12/2014

SQM Industrial S.A.

IQWZ - Normalization TK NV liquid fuels

Sustainability: Environment and Risk Prevention

Asset

Not classified

24

01/04/2014

SQM Industrial S.A.

MNYS – Measures for the diffusion of cultural heritage, technological change Maria Elena

Environmental processing

Expense

Not classified

37

31/12/2012

SQM Industrial S.A.

MP5W - Normalization TK´s Fuels

Sustainability: Environment and Risk Prevention

Asset

Not classified

2,131

30/06/2008

SQM Industrial S.A.

MQBM-Archaeological Digging Deployment Maria Elena - Toco

Sustainability: Environment and Risk Prevention

Expense

Not classified

14

31/12/2012

SQM Industrial S.A.

MQK2-Elimination of PCBs I

Sustainability: Environment and Risk Prevention

Expense

Not classified

17

31/03/2014

SQM Industrial S.A.

PPZU - Standardizing and Certifying Plant Fuel Tanks

Environmental processing

Asset

Not classified

2,655

01/07/2011

SQM Industrial S.A.

PQLV – Pedro de Valdivia mine site DIA

Environmental processing

Asset

Not classified

271

01/06/2013

SQM Industrial S.A.

TQA2 - Drainage Improvement Villa Prat

Sustainability: Environment and Risk Prevention

Expense

Not classified

21

31/12/2012

SQM S.A.

IPFT – Cultural Heritage I Region

Sustainability

Expense

Not classified

174

31/12/2012

SQM S.A.

IQ1M - PSA Re-injection of water to Puquíos Llamara

Sustainability: Environment and Risk Prevention

Asset

Not classified

2,442

31/03/2013

SQM S.A.

IQ3S – Standardization of Hazardous Materials Handling

Sustainability

Asset/Expense

Not classified

385

30/12/2012

SQM S.A.

IQOW – Enablement of Humberstone heritage deposit

Sustainability: Environment and Risk Prevention

Expense

Not classified

1

31/12/2012

SQM S.A.

IQWS – Heritage measures in Mine Areas Stage II

Sustainability: Environment and Risk Prevention

Expense

Not classified

79

30/04/2014

SQM S.A.

IQX6 – Environmental management plan of Tamarugos Pampa del Tamarugal 2013-2014

Sustainability: Environment and Risk Prevention

Asset

Not classified

249

01/04/2015

SQM S.A.

IQXB – Environmental management plan of Tamarugos Salar de Llamara (Llamara Saltpeter deposit) 2013-2014

Sustainability: Environment and Risk Prevention

Asset

Not classified

141

01/04/2015

SQM Salar S.A

LQG8 – Waste room Toconao campsite

Sustainability: Natural Resources

Expense

Not classified

15

31/12/2012

 

 

Identification of the Parent or subsidiary

Name of the project with which the disbursement is associated

Concept for which the disbursement was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of disbursement for the Period

Actual or estimated date on which disbursements were or will be made

SQM Salar S.A.

LQDM – Certification of tanks

Sustainability: Replacement of equipment

Asset

Not classified

256

31/03/2014

SQM Salar S.A.

LQI6 - EIA Operating maintenance at Salar de Atacama (Atacama Saltpeter deposit)

Environmental processing

Asset

Not classified

466

31/12/2013

 

Note 24- Environment (continued)

 

24.2

Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 03/31/2014, continued

 

Identification of the Parent or subsidiary

Name of the project with which the disbursement is associated

Concept for which the disbursement was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of disbursement for the Period

Actual or estimated date on which disbursements were or will be made

SIT S.A.

TQAV – Paving roads IV

Sustainability

Asset

Development

3

01/12/2011

SIT S.A.

TQQ5 – Environmental curtain Field No.8

Sustainability: Environment and Risk Prevention

Expense

Not classified

221

27/04/2013

SQM Nitratos S.A.

IQMH – Normalization of Operations mine area NV

Sustainability: Environment and Risk Prevention

Asset

Not classified

246

31/12/2012

SQM Industrial S.A.

PQXM – Elaboration DIA Operation with batteries in PV

Environmental processing

Asset

Not classified

101

01/12/2014

SQM S.A.

S0001 – Sumo Project

Environmental processing

Expense

Not classified

2

31/12/2014

Total

10,240

 

 

 

Note 24- Environment (continued)

 

24.2

Detail of information on disbursements related to the environment, continued

 

Future expenses as of 03/31/2014

 

Identification of the Parent or subsidiary

Name of the project with which the disbursement is associated

Concept for which the disbursement was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of disbursement for the Period

Actual or estimated date on which disbursements were or will be made

SQM Industrial S.A.

IQWZ – Normalization TK NV liquid fuels

Sustainability: Environment and Risk Prevention

Asset

Not classified

800

01/04/2014

SQM Industrial S.A.

MP5W – Normalization of TK´s Fuels

Sustainability: Environment and Risk Prevention

Asset

Not classified

782

30/06/2008

SQM Industrial S.A.

MQBM – Archeological Digging Deployment María Elena – Toco

Sustainability: Environment and Risk Prevention

Expense

Not classified

63

31/12/2012

SQM Industrial S.A.

MQK2 – Elimination of PCBs I

Sustainability: Environment and Risk Prevention

Expense

Not classified

33

31/03/2014

SQM Industrial S.A.

PPZU – Standardize and certify Plant Fuel Tanks

Environmental processing

Asset

Not classified

590

01/07/2011

SQM Industrial S.A.

PQLV - DIA Pedro de Valdivia Mine

Environmental processing

Asset

Not classified

103

01/06/2013

SQM S.A.

IPFT – Cultural Heritage Region I

Sustainability

Expense

Not classified

1

31/12/2012

SQM S.A.

IQ1M-PSA Re-injection of water to Puquíos Llamara

Sustainability: Environment and Risk Prevention

Asset

Not classified

178

31/03/2013

SQM S.A.

IQ3S-Hazardous Materials Management Standardization

Sustainability

Asset/Expense

Not classified

5

30/12/2012

SQM S.A.

IQOW-Deposit authorization for Humberstone heritage

Sustainability: Environment and Risk Prevention

Expense

Not classified

10

31/12/2012

SQM S.A.

IQWS - Mine Area equity measures Stage II

Sustainability: Environment and Risk Prevention

Expense

Not classified

29

30/04/2014

SQM S.A.

IQX6 – Environmental management plan of Tamarugos Pampa del Tamarugal 2013-2014

Sustainability: Environment and Risk Prevention

Asset

Not classified

539

01/04/2015

SQM S.A.

IQXB – Environmental management plan of Tamarugos Salar de Llamara 2013-2014

Sustainability: Environment and Risk Prevention

Asset

Not classified

266

01/04/2015

SQM Salar S.A.

LQDM – Certification of tanks

Sustainability: replacement of equipment

Asset

Not classified

94

31/03/2014

SQM Salar S.A.

LQI6 - EIA Operating Maintenance at Salar de Atacama

Environmental processing

Asset

Not classified

59

31/12/2013

SIT S.A.

TQQ5 – Environmental curtains Field No.8

Sustainability: Environment and Risk Prevention

Expense

Not classified

9

27/04/2013

 

 

Note 24- Environment (continued)

 

24.2

Detail of information on disbursements related to the environment, continued

 

Future expenses as of 03/31/2014

 

SQM Nitratos S.A.

IQMH – Normalization of NV mine area operations NV

Sustainability: Environment and Risk Prevention

Asset

Not classified

5

31/12/2012

SQM Industrial S.A.

PQXM – Elaboration DIA Operation with batteries in PV

Environmental processing

Asset

Not classified

199

01/12/2014

SQM S.A.

I0032 – Standardization of hazardous materials

Sustainability

Asset

Not classified

100

31/12/2014

SQM Industrial S.A.

J0006 – Gas scrubbing system NPT III Boilers

Sustainability: Environment and Risk Prevention

Asset

Not classified

250

31/12/2014

SQM S.A.

S0001 – Sumo Project

Environmental processing

Expense

Not classified

1.171

31/12/2014

SQM Salar S.A.

LQXW – White water

Environmental processing

Asset

Not classified

52

31/12/2015

Total

5.338

 

 

Note 24- Environment (continued)

 

24.2

Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 12/31/2013

Identification of the Parent or subsidiary

Name of the project with which the disbursement is associated

Concept for which the disbursement was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of disbursement for the Period

Actual or estimated date on which disbursements were or will be made

Others

Environmental-operational area

Not classified

Expense

Not-classified

1,753

12-31-2013

SQM Industrial S.A.

CQLX-S Carmen and Lagarto hazardous waste yard

Sustainability

Asset/expense

Not classified

98

12-31-2012

SQM Industrial S.A.

FP55 - FPXA-EIA Pampa Blanca Expansion

Environmental processing

Asset

Not classified

1,493

12-30-2012

SQM Industrial S.A.

IQWZ - Normalization TK NV liquid fuels

Sustainability: Environment and Risk prevention

Asset

Not classified

24

04-01-2014

SQM Industrial S.A.

JQ8K – DIA Line 4 Floor Drying, Coya Sur

Environmental processing

Asset

Not classified

32

09-01-2012

SQM Industrial S.A.

JQB6 - DIA Plant NPT4, Coya Sur

Environmental processing

Asset

Not classified

84

04-30-2012

SQM Industrial S.A.

JQH9 – Purchase of Bertrams Boiler

Sustainability: Environment and Risk prevention

Asset

Development

612

08-01-2013

SQM Industrial S.A.

MNYS - Measures of Technological Change Cultural Heritage Dissemination Maria Elena

Environmental processing

Expense

Not classified

37

12-31-2012

SQM Industrial S.A.

MP5W - Normalization TK´s Combustibles

Sustainability: Environment and Risk prevention

Asset

Not classified

2,114

06-30-2008

SQM Industrial S.A.

MPQU - Construction of Hazardous Chemical Supplies warehouse

Sustainability: Environment and Risk prevention

Asset

Development

449

12-15-2010

SQM Industrial S.A.

MQA8- Normalization gas system, external cafeterias (Stage 1: projects)

Sustainability: Environment and Risk prevention

Asset/Expense

Not classified

139

12-31-2012

SQM Industrial S.A.

MQBM-Archaeological Digging Deployment Maria Elena - Toco

Sustainability: Environment and Risk prevention

Expense

Not classified

14

12-31-2012

SQM Industrial S.A.

MQHF -Sustaining of batteries ME

Sustainability: Environment and Risk prevention

Asset/Expense

Not classified

310

08-01-2013

SQM Industrial S.A.

MQK2-Elimination of PCBs I

Sustainability: Environment and Risk prevention

Expense

Not classified

17

03-31-2014

SQM Industrial S.A.

PPC1-Remove switches park PCB sub 3 and 1/12 Pedro de Valdivia

Sustainability: Environment and Risk prevention

Asset/ Expense

Not classified

147

05-31-2009

SQM Industrial S.A.

PPZU - Standardize and certify Plant Fuel Tanks

Environmental processing

Asset

Not classified

2,644

07-01-2011

SQM Industrial S.A.

PQLV-DIA Pedro de Valdivia Mine

Environmental processing

Asset

Not classified

271

06-01-2013

SQM Industrial S.A.

SQ7X-Reach 2011-2013

Sustainability: Environment and Risk prevention

Expense

Not classified

341

01-31-2014

SQM Industrial S.A.

TQA2 - Drainage Improvement Villa Prat

Sustainability: Environment and Risk prevention

Expense

Not classified

17

12-31-2012

SQM Industrial S.A.

PQXM – Elaboration DIA Operation with batteries in PV

Environmental processing

Asset

Not classified

89

12-01-2014

 

 

 

Note 24- Environment (continued)

 

24.2

Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 12/31/2013 (continued)

Identification of the Parent or subsidiary

Name of the project with which the disbursement is associated

Concept for which the disbursement was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of disbursement for the Period

Actual or estimated date on which disbursements were or will be made

SQM S.A.

IP83-DIA Expansion TLN-15

Environmental Processing

Asset

Not Classified

23

12-31-2009

SQM S.A.

IPFT-Cultural Heritage Region I

Sustainability

Expense

Not classified

174

12-31-2012

SQM S.A.

IPXE-Environmental monitoring plan Llamara Salt Flat

Cost Reduction

Expense

Not classified

1,013

12-31-2012

SQM S.A.

IPXF-Environmental monitoring plan Pampa del Tamarugal

Sustainability: Environment and Risk prevention

Expense

Not Classified

951

12-31-2012

SQM S.A.

IQ1M-PSA Re-injection of water to Puquíos Llamara

Sustainability: Environment and Risk prevention

Asset

Not Classified

2,320

03-31-2013

SQM S.A.

IQ3S-Hazardous Materials Management Standardization

Sustainability

Asset-Expense

Not Classified

378

12-30-2012

SQM S.A.

IQ54-Cultural heritage Pampa Hermosa

Minor projects (between ThUS$50 and ThUS$299)

Asset

Not Classified

506

12-31-2012

SQM S.A.

IQOW-Deposit authorization for Humberstone heritage

Sustainability: Environment and Risk prevention

Expense

Not Classified

1

12-31-2012

SQM S.A.

IQPJ-Mine Area equity measures Stage I

Sustainability

Expense

Not Classified

110

03-31-2013

SQM S.A.

IQWS - Mine Area equity measures Stage II

Sustainability: Environment and Risk prevention

Expense

Not Classified

79

04-30-2014

SQM S.A.

IQX6 – Environmental management plan of Tamarugos Pampa del Tamarugal 2013-2014

Sustainability: Environment and Risk prevention

Asset

Not Classified

193

04-01-2015

SQM S.A.

IQXB - Environmental management plan of Tamarugos Llamara Salt Flat 2013-2014

Sustainability: Environment and Risk prevention

Asset

Not Classified

141

04-01-2015

SQM S.A.

MQLQ- Gas scrubbing system

Not Classified

Asset

Development

468

01-01-2013

SQM Salar S.A

LQG8 – Waste room  Toconao Campsite

Sustainability: Natural Resources

Expense

Not Classified

15

12-31-2012

SQM Salar S.A.

LQDM – Certification of tanks

Sustainability: Replacement of equipment

Asset

Not classified

256

03-31-2014

SQM Salar S.A.

LQI6-EIA Operating maintenance at Salar de Atacama

Environmental processing

Asset

Not classified

466

12-31-2013

SQM Salar S.A.

LQNI-DIA KCI Floor Drying and compacting expansion

Environmental processing

Asset

Not classified

59

03-30-2014

SIT S.A.

TPYX - Enabling the dust collector of the crib and court seal 3 Tocopilla

Sustainability: Environment and Risk prevention

Asset / Expense

Development

1,708

12-31-2011

 

 

Note 24- Environment (continued)

  

24.2

Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 12/31/2013, continued

 

Identification of the Parent or subsidiary

Name of the project with which the disbursement is associated

Concept for which the disbursement was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of disbursement for the Period

Actual or estimated date on which disbursements were or will be made

SIT S.A.

TQAV - Paving paths IV

Sustainability:

Asset

Development

3

12-01-2011

SIT S.A.

TQQ5- Environmental curtains Field No. 8

Sustainability: Environment and Risk prevention

Expense

Not classified

221

04-27-2013

SQM Nitratos S.A.

IQMH - Normalization Mine NV area operation

Sustainability: Environment and Risk prevention

Asset

Not classified

222

12-31-2012

SQM Nitratos S.A.

PQI9 – Mine waste water treatment plant

Sustainability: Environment and Risk prevention

Asset

Not classified

51

08-01-2013

Total

20,043

 

 

Note 24- Environment (continued)

 

24.2 Detail of information on disbursements related to the environment, continued

 

Future expenses as of 12/31/2013

 

Identification of the Parent or subsidiary

Name of the project with which the disbursement is associated

Concept for which the disbursement was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of disbursement for the Period

Actual or estimated date on which disbursements were or will be made

SQM Industrial S.A.

FP55 - FPXA-EIA Pampa Blanca Expansion

Environmental processing

Asset

Not classified

1

30-12-2012

SQM Industrial S.A.

IQWZ - Normalization TK NV liquid fuels

Sustainability: Environment and Risk prevention

Asset

Not classified

800

01-04-2014

SQM Industrial S.A.

MP5W - Normalization TK´s Combustibles

Sustainability: Environment and Risk prevention

Asset

Not classified

795

30-06-2008

SQM Industrial S.A.

MQBM-Archaeological Digging Deployment Maria Elena - Toco

Sustainability: Environment and Risk prevention

Expense

Not classified

63

31-12-2012

SQM Industrial S.A.

MQK2-Elimination of PCBs I

Sustainability: Environment and Risk prevention

Expense

Not classified

33

31-03-2014

SQM Industrial S.A.

PPZU - Standardize and certify Plant Fuel Tanks

Environmental processing

Asset

Not classified

533

01-07-2011

SQM Industrial S.A.

PQLV-DIA Pedro de Valdivia Mine

Environmental processing

Asset

Not classified

103

01-06-2013

SQM S.A.

IP83-DIA Expansion TLN-15

Environmental Processing

Asset

Not Classified

0

31-12-2009

SQM S.A.

IPFT-Cultural Heritage Region I

Sustainability

Expense

Not classified

1

31-12-2012

SQM S.A.

IQ1M-PSA Re-injection of water to Puquíos Llamara

Sustainability: Environment and Risk prevention

Asset

Not Classified

300

31-03-2013

SQM S.A.

IQ3S-Hazardous Materials Management Standardization

Sustainability

Asset-Expense

Not Classified

12

30-12-2012

SQM S.A.

IQOW-Deposit authorization for Humberstone heritage

Sustainability: Environment and Risk prevention

Expense

Not Classified

10

31-12-2012

SQM S.A.

IQWS - Mine Area equity measures Stage II

Sustainability: Environment and Risk prevention

Expense

Not Classified

29

30-04-2014

SQM S.A.

IQX6 – Environmental management plan of Tamarugos Pampa del Tamarugal 2013-2014

Sustainability: Environment and Risk prevention

Asset

Not Classified

595

01-04-2015

SQM S.A.

IQXB - Environmental management plan of Tamarugos Llamara Salt Flat 2013-2014

Sustainability: Environment and Risk prevention

Asset

Not Classified

266

01-04-2015

 

 

Note 24- Environment (continued) 

 

24.2

Detail of information on disbursements related to the environment, continued

 

Future expenses as of 12/31/2013

 

SQM Salar S.A.

LQDM – Certification of tanks

Sustainability: Replacement of equipment

Asset

Not Classified

94

31-03-2014

SQM Salar S.A.

LQI6-EIA Operating Maintenance at Salar de Atacama

Environmental Processing

Asset

Not Classified

59

31-12-2013

SIT S.A.

TQQ5- Environmental curtains Field No. 8

Sustainability: Environment and Risk prevention

Expense

Not Classified

90

27-04-2013

SQM Industrial S.A.

PQXM – Elaboration DIA Operation with batteries in PV

Environmental processing

Asset

Not classified

212

01-12-2014

Total

3,996

 

 

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: Perform an analysis of the Tank facilities (civil works, mechanical work, piping, electrical work and instrumentation) by a company specialized in liquid fuels and that is a Certifying Entity. After that, performing the detail engineering and then implementing the modifications required to normalize the TKs facilities and leave them in conditions to be declared and filed with the SEC. The budget of ThUS$123 only covers expenses related to the analysis and detail engineering. The project is in process.

 

J0006: This project is intended to design a rapidly-implemented gas scrubbing system that complies with the standard on the emission of gases involved. This project is in process.

 

MNYS: Preparation and execution of a project of geoglyphs conservation; editing and publishing a book and implementing a diffusion center. Construction of a collection deposit. All these are compensation measures of the project Technological Change Maria Elena. The project is in process.

 

MP5W: Normalization of the fuel storage and distribution system in SQM installations. The project is in process.

 

MQBM: Implementing archeological measures in Maria Elena – Toco site, such as the archeological registry, analysis of lithic materials, and generation of reports. The project is in process.

 

MQK2: The project involves the decontamination of equipment and items contaminated with PCBs and / or final disposal in accordance with applicable regulations. The project is in process.

 

PPZU: The necessary actions to normalize and certify certified fuel tanks in the plants in María Elena, Coya Sur and Pedro de Valdivia were performed. The project is in process.

 

PQLV: Preparation and filing of EID Pedro de Valdivia. The project is in process.

 

PQXM: Elaborate a project to enter into the Environmental Impact Assessment System (SEIA), with the intention of obtaining the environmental approval for the operation of Batteries in Pedro de Valdivia. This project is in process.

 

Note 24 - Environment (continued)

 

24.3

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

 

TQA2: This project aims to improve the sewerage system of Villa Prat. The project is in finishing stage.

 

 

SQM S.A.

 

IPFT: The project contemplates the implementation of measures committed in projects in the area of the Nueva Victoria mine, update of operations in Nueva Victoria, evaporation ducts and pits in Iris. The project is in finishing stage.

 

IQ1M: To implement environmental commitments included in the EIS of project “Pampa Hermosa” to safeguard the puquíos zone that is in the Salar de Llamara water reservoir. The project is in process. The project is in finishing stage.

 

IQ3S: Improvements in the storage installations of dangerous raw materials in Nueva Victoria. The project is in process.

 

IQOW: Enable a deposit in Humberstone Saltpeter to store material of heritage interest recovered in land campaigns of Project ZMNV (performed and to be performed). The project is in finishing stage.

 

IQWS: Implementation of heritage-related environmental commitments, to make available Mining areas in 2013, required to develop the mining exploitation of the VPONV, in compliance with the commitments agreed through the Environmental Assessment System (SEA). The project is in process.

 

IQX6: Implementation of environmental commitments of the Pampa Hermosa Project at Pampa del Tamarugal contemplated for the years 2013-2014. The project is in process.

 

IQXB: Implementation of environmental commitments of the Pampa Hermosa Project at Salar de Llamara contemplated for the years 2013-2014. The project is in process.

 

I00032: presenting departures from the standard currently in force with respect to storage of hazardous substances and provisions of SD 78/2010. The project is in process.

 

Note 24 - Environment (continued)

 

24.3

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

 

SQM Salar S.A.

 

LQG8: Increase the capacity of the waste room of Toconao Camp, in order to avoid accumulation problems and waste handling. The project is in process.

 

LQDM: Certification of the liquid fuel storage tanks. The project is in process.

 

LQI6: Preparation and processing of the EIA Update Operations in the Salar de Atacama (Atacama Saltpeter Deposit). The project is in process.

 

LQXW: Increasing the availability of brine ponds. The greater capacity of water wells implies the possibility of re-injecting more water to the saltpeter deposit, resulting in an increase in brine extraction. The expense considered solely includes environmental processing. The project is in process

 

 

SIT S.A.

 

TQAV: Paving and maintenance of internal roads of the port of Tocopilla, to decrease pollution and to comply with the Supreme Decree related to the saturated zone. The project is in process.

 

TQQ5: This project aims to contain emissions of particulate material to prevent contamination to adjacent communities. The project is in process

 

SQM Nitratos S.A.

 

IQMH: Creation of an area allowing to store hazardous substances. The project is in process.

 

Note 25 - Other current and non-current non-financial assets

 

As of March 31, 2014, and December 31, 2013, the detail of other current and non-current assets is as follows:

 

		03/31/2014				12/31/2013
Other non-financial  assets, current		ThUS$				ThUS$
Domestic Value Added Tax			9,965				21,263
Foreign Value Added Tax			7,588				5,842
Prepaid mining licenses			7,025				1,522
Prepaid insurance			5,806				9,767
Other prepayments			1,155				623
Other assets			4,392				5,213
Total			35,931				44,230

 

		03/31/2014				12/31/2013
Other non-financial  assets, non-current		ThUS$				ThUS$
Stain development expenses and prospecting expenses (1)			31,628				33,388
Guarantee deposits			709				708
Pension plan			987				987
Other assets			1,427				1,422
Total			34,751				36,505

 

 

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 March 31, 2014, and December 31, 2013:

 

		03/31/2014				12/31/2013
Reconciliation		ThUS$				ThUS$
Assets for the exploration and evaluation of mineral resources, net, opening balance			33,388				22,496
Changes in assets for exploration and assessment of mineral resources:
Additions, other than business combinations			-				13,064
Depreciation and amortization			(501	)			(2,059	)
Increase (Decrease) due to transfers and other charges			(1,259	)			(113	)
Assets for exploration and assessment of mineral resources, net, closing balance			31,628				33,388

 

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

 

Note 26 - Operating segments

 

26.1

Operating 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.

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 and 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 - Operating segments (continued)

 

26.1

Operating 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".

 

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 to which these are affect and since this information is not used by management in decisions 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 to which these are affected and 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 - Operating segments (continued)

 

26.2 Operating segment disclosures as of March 31, 2014 and March 31, 2013:

 

03/31/2014
Operating segment items		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				Significant reconciliation entries				Total  03/31/2014
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Revenue			192,412				91,182				52,154				34,065				151,890				12,369				534,072				534,072				-				-				-				534,072
Revenues from transactions with other operating segments of the same entity			27,962				146,828				26,276				66,585				94,231				63,284				425,166				425,166				(425,166	)			-				-				-
Revenues from external customers and transactions with other operating segments of the same entity			220,374				238,010				78,430				100,650				246,121				75,653				959,238				959,238				(425,166	)			-				-				534,072
Interest revenue			-				-				-				-				-				-				-				-				-				-				-				-
Interest expense			-				-				-				-				-				-				-				-				43,220				(58,946	)			-				(15,726	)
depreciation and amortization expense			(20,492	)			(9,711	)			(5,555	)			(3,628	)			(16,177	)			(1,317	)			(56,880	)			(56,880	)			-				-				-				(56,880	)
The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				-				-				(74	)			4,649				-				4,575
income tax expense, continuing operations			-				-				-				-				-				-				-				-				-				(28,865	)			-				(28,865	)
Other items other tan significant cash			-				-				-				-				-				-				-				-				-								-				-
Income (loss) before taxes			41,781				39,232				21,906				13,435				36,785				1,683				154,822				154,822				(108,480	)			64,260				-				110,602
Net income (loss) from continuing operations			41,781				39,232				21,906				13,435				36,785				1,683				154,822				154,822				(108,480	)			35,395				-				81,737
Net income (loss) from discontinued operations
Net income (loss)			41,781				39,232				21,906				13,435				36,785				1,683				154,822				154,822				(10,480	)			35,395				-				81,737
Assets			-				-				-				-				-				-				-				-				(7,339,187	)			11,978,222				-				4,639,035
Equity-accounted investees			-				-				-				-				-				-				-				-				(3,470,262	)			3,548,260				-				77,998
Increase of non-current assets			-				-				-				-				-				-				-				-								(40,128	)			-				(40,128	)
Liabilities			-				-				-				-				-				-				-				-				(3,550,271	)			5,709,028				-				2,158,757
Equity																																															2,480,278
Equity and liability																																															4,639,035
Impairment loss recognized in profit or loss			-				(867	)			-				-				-				-				(867	)			(867	)			-				(141	)			-				(1,008	)
Reversal of impairment losses recognized in profit or loss for the period			5,917				-				28				1,519				199				16				7,679				7,679																7,679
Cash flows from (used in) operating activities			-				-				-				-				-				-				-				-				-				651,713				-				651,713
Cash flows from (used in) investing activities			-				-				-				-				-				-				-				-				-				(487,385	)			-				(487,385	)
Cash flows from (used in) financing activities			-				-				-				-				-				-				-				-				-				(2,285	)			-				(2,285	)

 

 

Note 26 - Operating segments (continued)

 

26.2

Operating segment disclosures as of March 31, 2014 and March 31, 2013:

 

31/03/2013
Items of operating segments		Specialty plant nutrients				Iodine and its derivatives				Lithium and its derivatives				Industrial chemicals				Potassium				Other products and services				Reporting segments				Operating segments				Elimination of inttrasegment amounts				Amounts not assigned				Significant reconciliation items				Total  03/31/2013
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Revenue			196,739				147,898				41,887				70,884				152,945				13,044				623,397				623,397				-				-				-				623,397
Revenues from transactions with other operating segments of the same entity			52,274				153,152				31,403				56,674				118,045				131,118				542,666				542,666				(542,666	)			-				-				-
Revenues from external customers and transactions with other operating segments of the same entity			249,013				301,050				73,290				127,558				270,990				144,162				1,166,063				1,166,063				(542,666	)			-				-				623,397
Interest revenue			-				-				-				-				-				-				-				-				-				-				-				-
Interest expense			-				-				-				-				-				-				-				-				42,706				(55,838	)			-				(13,132	)
depreciation and amortization expense			(16,301	)			(12,254	)			(3,471	)			(5,873	)			(12,672	)			(1,081	)			(51,652	)			(51,652	)			-				-				-				(51,652	)
The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				-				-				-				5,921				-				5,921
income tax expense, continuing operations			-				-				-				-				-				-				-				-				-				(46,096	)			-				(46,096	)
Other items other tan significant cash			-				-				-				-				-				-				-				-				-								-				-
Income (loss) before taxes			58,115				86,883				20,465				22,395				48,474				2,526				238,858				238,858				(228,664	)			188,560				-				198,754
Net income (loss) from continuing operations			58,115				86,883				20,465				22,395				48,474				2,526				238,858				238,858				(228,664	)			142,464				-				152,658
Net income (loss) from discontinued operations
Net income (loss)			58,115				86,883				20,465				22,395				48,474				2,526				238,858				238,858				(228,664	)			142,465				-				152,658
Assets			-				-				-				-				-				-				-				-				(7,815,573	)			12,376,101				-				4,560,528
Equity-accounted investees			-				-				-				-				-				-				-				-				(3,699,343	)			3,766,158				-				66,815
Increase of non-current assets			-				-				-				-				-				-				-				-								48,232				-				48,232
Liabilities			-				-				-				-				-				-				-				-				(3,696,382	)			5,917,634				-				2,221,252
Equity																																															2,339,276
Equity and liability																																															4,560,528
Impairment loss recognized in profit or loss			(2,830	)			(996	)			(282	)			31				(1,124	)			(88	)			(5,289	)			(5,289	)			-				(2,899	)			-				(8,188	)
Cash flows from (used in) operating activities			-				-				-				-				-				-				-				-				-				137,480				-				137,480
Cash flows from (used in) investing activities			-				-				-				-				-				-				-				-				-				(231,506	)			-				(231,506	)
Cash flows from (used in) financing activities			-				-				-				-				-				-				-				-				-				(3	)			-				(3	)

 

 

Note 26 - Operating segments (continued)

 

26.3

Statement of comprehensive income classified by operating segments based on groups of products as of March 31, 2014:

 

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			192,412				91,182				52,154				34,065				151,890				12,369				-				534,072
Cost of sales			(150,631	)			(51,950	)			(30,248	)			(20,629	)			(115,105	)			(10,686	)			-				(379,249	)
Gross profit			41,781				39,232				21,906				13,436				36,785				1,683				-				154,823
Other incomes by function			-				-				-				-				-				-				1,759				1,759
Administrative expenses			-				-				-				-				-				-				(21,335	)			(21,335	)
Other expenses by function			-				-				-				-				-				-				(15,244	)			(15,244	)
Other gains (losses)			-				-				-				-				-				-				439				439
Financial income			-				-				-				-				-				-				2,992				2,992
Financial costs			-				-				-				-				-				-				(15,725	)			(15,725	)
interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				4,575				4,575
Exchange differences			-				-				-				-				-				-				(1,682	)			(1,682	)
Profit (loss )before taxes			41,781				39,232				21,906				13,435				36,785				1,683				(44,221	)			110,602
Income tax expense			-				-				-				-				-				-				(28,865	)			(28,865	)
Profit (loss )from continuing operations			41,781				39,232				21,906				13,435				36,785				1,683				(73,086	)			81,737
Profit (loss ) from discontinued operations			-				-				-				-				-				-				-				-
Profit (loss)			41,781				39,232				21,906				13,435				36,785				1,683				(73,086	)			81,737
Profit (loss, attributable to
Profit (loss ) attributable to the controller´s owners			-				-				-				-				-				-				-				81,005
Profit (loss ) attributable to the non-controllers			-				-				-				-				-				-				-				732
Profit (loss)			-				-				-				-				-				-				-				81,737

 

 

Note 26 - Operating segments (continued)

 

26.3

Statement of comprehensive income classified by operating segments based on groups of products as of March 31, 2013:

 

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			196,739				147,898				41,887				70,884				152,945				13,044				-				623,397
Cost of sales			(138,624	)			(61,016	)			(21,422	)			(48,490	)			(104,471	)			(10,517	)			-				(384,540	)
Gross profit			58,115				86,882				20,465				22,394				48,474				2,527				-				238,857
Other incomes by function			-				-				-				-				-				-				4,285				4,285
Administrative expenses			-				-				-				-				-				-				(23,301	)			(23,301	)
Other expenses by function			-				-				-				-				-				-				(13,247	)			(13,247	)
Other gains (losses)			-				-				-				-				-				-				(237	)			(237	)
Financial income			-				-				-				-				-				-				4,371				4,371
Financial costs			-				-				-				-				-				-				(13,132	)			(13,132	)
interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				5,921				5,921
Exchange differences			-				-				-				-				-				-				(4,763	)			(4,763	)
Profit (loss )before taxes			58,115				86,882				20,465				22,394				48,474				2,527				(40,103	)			198,754
Income tax expense			-				-				-				-				-				-				(46,096	)			(46,096	)
Profit (loss )from continuing operations			58,115				86,882				20,465				22,394				48,474				2,527				(86,199	)			152,658
Profit (loss ) from discontinued operations			-				-				-				-				-				-				-				-
Profit (loss)			58,115				86,882				20,465				22,394				48,474				2,527				(86,199	)			152,658
Profit (loss, attributable to
Profit (loss ) attributable to the controller´s owners			-				-				-				-				-				-				-				151,805
Profit (loss ) attributable to the non-controllers			-				-				-				-				-				-				-				853
Profit (loss)			-				-				-				-				-				-				-				152,658

 

 

Note 26 - Operating segments (continued)

 

26.4

Revenue from transactions with other Company operating segments as of March 31, 2014

 

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			192,412				91,182				52,154				34,065				151,890				12,369				534,072

 

26.4

Revenue from transactions with other Company operating segments as of March 31, 2013

 

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			196,739				147,898				41,887				70,884				152,945				13,044				623,397

 

 

Note 26 - Operating segments (continued)

 

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 - Operating segments (continued)

 

26.7

Segments by geographical areas as of March 31, 2014 and March 31, 2013

 

		Chile				Latin America and the Caribbean				Europe				North America				Asia and others				03/31/2014
Items		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Revenue			33,442				118,995				142,009				133,533				106,093				534,072
Non-current assets:			2,177,183				423				37,040				15,106				40,771				2,270,523
Investment accounted for under the equity method			1,372				-				24,977				11,662				39,987				77,998
Intangible assets other than goodwill			104,211				-				-				301				3				104,515
Goodwill			26,929				86				11,373				-				-				38,388
Property, plant and equipment, net			2,011,105				140				690				2,155				781				2,014,871
Investment property			-				-				-				-				-				-
Other non-current assets			33,566				197				-				988				—				34,751

 

		Chile				Latin America and the Caribbean				Europe				North America				Asia and others				03/31/2013
Items		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Revenue			32,443				115,362				174,864				173,740				126,988				623,397
Non-current assets:			2,107,170				484				35,967				14,679				28,603				2,186,903
Investment accounted for under the equity method			1,978				-				24,315				12,235				28,287				66,815
Intangible assets other than goodwill			23,589				-				-				363				5				23,957
Goodwill			26,929				86				11,373				-				-				38,388
Property, plant and equipment, net			2,036,975				176				279				2,081				311				2,039,822
Investment property			-				-				-				-				-				-
Other non-current assets			17,699				222				-				-				—				17,921

 

 

Note 26 - Operating 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 March 31, 2014 and December 31, 2013:

 

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 potassium sulfate
Salar del Carmen		Production of Lithium carbonate and lithium hydroxide
Tocopilla		Port facilities

 

 

Nota 27 - Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature

 

				03/31/2014				03/31/2013
				ThUS$				ThUS$
27.1		Revenue
		Products			532,069				620,957
		Services			2,003				2,440
		Total			534,072				623,397

 

				03/31/2014				03/31/2013
				ThUS$				ThUS$
27.2		Cost of sales
		Raw material and supplies			(145,203	)			(221,773	)
		Types of employee benefits expenses
		Salaries and wages			(25,719	)			(35,636	)
		Other short-term employee benefits			(18,157	)			(18,517	)
		Termination benefit expenses			(2,690	)			(1,259	)
		Total employee benefits expenses			(46,566	)			(55,412	)
		Depreciation expense			(56,813	)			(51,545	)
		Amortization expense			-				-
		Impairment loss (review of impairment losses) recognized in profit or loss for the year			6,812				(5,289	)
		Changes in inventories for the period			(1,416	)			98,208
		Other expenses, by nature (*)			(136,063	)			(148,729	)
		Total			(379,249	)			(384,540	)
		(*)      Include the variation of finished and products in-process

 

 

Note 27 - Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

				03/31/2014				03/31/2013
				ThUS$				ThUS$
27.3		Other income
		Discounts obtained from suppliers			125				405
		Compensation received and insurance claim recovery			-				1,501
		Penalties charged to suppliers			11				159
		Taxes recovered			-				4
		Insurance recoveries			263				623
		Excess in the provision of liabilities with 3rd parties			239				423
		Excess in allowance for doubtful accounts			151				-
		Sale of Property, plant and equipment			68				98
		Sale of materials, spare parts and supplies			237				454
		Sale of mining concessions (1)			-				314
		Sale of scrap			35				-
		Excess indemnity provision Yara South Africa			53				-
		Overstatement of inventories			397				-
		Miscellaneous services			-				88
		Other operating results			180				216
		Total			1,759				4,285

 

(1)

Sociedad Química y Minera de Chile S.A., Antofagasta Minerals S.A. and Minera Antucoya entered into an amendment to the Mining Claim Sale Contract between these parties in relation to the “Antucoya Project”. During 2013, the mining claims were sold for an amount of ThUS$84,000.

 

				03/31/2014				03/31/2013
				ThUS$				ThUS$
27.4		Administrative expenses
		Employee benefit expenses by nature
		Salaries and wages			(9,768	)			(9,389	)
		Other short-term benefits to employees			(337	)			(1,231	)
		Total employee benefit expenses			(10,105	)			(10,620	)
		Other expenses, by nature			(11,230	)			(12,681	)
		Total			(21,335	)			(23,301	)

 

 

Nota 27 - Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

				03/31/2014				03/31/2013
				ThUS$				ThUS$
27.5		Other expenses by function
		Employee benefit expenses by nature
		Other short-term benefits to employees			-				(6	)
		Depreciation and amortization expenses
		Depreciation of stopped assets			(67	)			(107	)
		Impairment loss (review of impairment losses) recognized in profit or loss for the year
		Impairment of allowance for doubtful accounts			(141	)			(2,899	)
		Subtotal to date			(141	)			(2,899	)
		Other expenses, by nature
		Legal Expenses			(17	)			(3,084	)
		Worksite stoppage expenses			(24	)			(26	)
		VAT and other unrecoverable tax			(288	)			(269	)
		Fines paid			(73	)			(82	)
		Provisions, investment and material plan expenses			(14,233	)			(4,737	)
		Donations rejected as expense			(292	)			(560	)
		Provision for work closing			-				(58	)
		Indemnities paid			-				(146	)
		Other operating expenses			(110	)			(1,273	)
		Subtotal to date			(15,037	)			(10,235	)
		Total			(15,245	)			(13,247	)

 

				03/31/2014				03/31/2013
				ThUS$				ThUS$
27.6		Other income (expenses)
		Adjustment of Equity Method, prior year			439				(281	)
		Other			-				44
		Total			439				(237	)

 

 

 

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 March
		2014				2013
			ThUS$				ThUS$
Raw material and supplies used			(145,203	)			(221,773	)
Types of employee benefits expenses
Salaries and wages			(35,487	)			(45,025	)
Other short-term employee benefits			(18,494	)			(19,748	)
Termination benefit expenses			(2,690	)			(1,259	)
Total employee benefit expenses			(56,671	)			(66,032	)
Depreciation and amortization expenses
Depreciation expense			(56,880	)			(51,652	)
Amortization expense			-				-
Impairment loss (reversal of impairment losses) recognized in profit or loss for the year			6,671				(8,188	)
Other expenses, by nature			(163,744	)			(73,680	)
Total expenses, by nature			(415,827	)			(421,325	)

 

This table corresponds to the summary from Note 27.2 to 27.6 required by the Chilean Superintendence of Securities and Insurance

 

27.8

Finance expenses

 

		January to March
		2014				2013
		ThUS$				ThUS$
Interest expense from bank borrowings and overdrafts			(783	)			(686	)
Interest expense from bonds			(15,626	)			(14,695	)
Interest expense from loans			(2,025	)			(2,167	)
Capitalized interest expenses			3,010				4,602
Other finance costs			(301	)			(186	)
Total			(15,725	)			(13,132	)

 

 

Nota 28 - Income tax and deferred taxes

 

Accounts receivable from taxes as of March 31, 2014 and December 31, 2013, are as follows:

 

28.1

Current tax assets:

 

		03/31/2014				12/31/2013
		ThUS$				ThUS$
Monthly provisional income tax payments, Chilean companies current year			48,842				44,018
Monthly provisional payment Royalty			12,229				10,417
Monthly provisional income tax payments, foreign companies			2,122				1,444
Corporate tax credits (1)			1,013				2,025
Corporate tax absorbed by tax losses (2)			29				1,572
Total			64,235				59,476

 

(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 2014 and 2013.

 

(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 (20%, 17%, 16.5%, 16%, 15%, 10% 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.

 

 

Note 28 - Income tax and deferred taxes (continued)

 

28.1

Current tax assets, continued

 

Taxpayers 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		03/31/2014				12/31/2013
		ThUS$				ThUS$
1st Category income tax			30,240				21,466
Foreign company income tax			10,098				10,113
Article 21 Single Tax			139				128
Total			40,477				31,707

 

Income tax is determined on the basis of the determination of tax result to which the tax rate currently in force in Chile is applied. As established by Law 20.630, beginning on 2012 and after this tax rate is 20%.

 

The provision for royalty is determined by applying the tax rate determined for the Net operating income (NOI).

 

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

 

28.3

Tax earnings

 

As of March 31, 2014, and December 31, 2013, the Company and its subsidiaries have recorded the following consolidated balances for retained tax earnings, income not constituting revenue subject to income tax, accumulated tax losses and credit for shareholders:

 

		03/31/2014 ThUS$				12/31/2013 ThUS$
Taxable profits with credit rights (1)			1,396,802				1,321,643
Taxable profits without credit right(1)			112,380				90,628
Taxable loss			7,800				7,425
Credit for shareholders			339,693				321,006

 

 

Note 28 - Income tax and deferred taxes (continued)

 

28.3

Tax earnings, continued

 

The Retained Taxable Profits Registry (FUT) is a chronological registry where the profits generated and distributed by the company are recorded. The object of the FUT is to control the accumulated tax profits of the company that may be distributed, withdrawn or remitted to the owners, shareholders or partners, and the final taxes that must be imposed, called in Chile Global Aggregate Tax (that levies persons resident or domiciled in Chile), or Withholding Tax (that levies persons “Not” resident or domiciled in Chile).

 

The FUT Register contains profits with credit rights and profits without credit rights, which arise out of the inclusion of the net taxable income determined by the company or the profits received by the company that may be dividends received or withdrawals made during the period.

 

Profits without credit rights represent the tax payable by the company within the year and filed the following year, therefore they will be deducted from the FUT Registry the following year.

 

Profits with credit rights may be used to reduce the final tax burden of owners, shareholders or partners, which upon withdrawal are entitled to use the credits associated with the relevant profits.

 

In summary, companies use the FUT Registry to maintain control over the profits they generate that have not been distributed to the owners and the relevant credits associated with such profits.

 

28.4

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.

 

 

Note 28 - Income tax and deferred taxes (continued)

 

28.4

Income tax and deferred taxes, continued

 

Deferred income tax assets recognized are those income taxes 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

 

d.1

Income tax assets and liabilities as of March 31, 2014 are detailed as follows:

 

		Net position, assets								Net position, liabilities
		Assets				Liabilities				Assets				Liabilities
Description of deferred income tax assets and liabilities		ThUS$				ThUS$				ThUS$				ThUS$
Depreciation			11				-				-				166,119
Doubtful accounts impairment			56				-				7,007				-
Accrued vacations			-				-				2,639				-
Manufacturing expenses			-				-				-				64,029
Unrealized gains (losses) from sales of products			-				-				73,472				-
Fair value of bonds			-				-				-				1,047
Severance indemnity			-				-				-				5,234
Hedging			-				-				1,989				-
Inventory of products, spare parts and supplies			45				-				19,904				-
Research and development expenses			-				-				-				6,911
Tax losses			-				-				5,190				-
Capitalized interest			-				-				-				21,834
Expenses in assumption of bank loans			-				-				-				2,779
Unaccrued interest			-				-				53				-
Fair value of property, plant and equipment			-				-				-				601
Employee benefits			-				-				362				-
Royalty deferred income taxes			-				-				-				7,575
Provision for lawsuits and legal expenses			-				-				1,878				-
Provision for investment plan			-				-				7,026				-
Provision of fines and crushing site closure			-				-				1,600				-
Other			281				-				-				180
Balance to date			393				-				121,120				276,309
Net balance			393				-				-				155,189

 

 

Note 28 - Income tax and deferred taxes (continued)

 

28.4

Income tax and deferred taxes, continued

 

d.2

Income tax assets and liabilities as of December 31, 2013 are detailed as follows

 

		Net position, assets								Net position, liabilities
		Assets				Liabilities				Assets				Liabilities
Description of deferred income tax assets and liabilities		ThUS$				ThUS$				ThUS$				ThUS$
Depreciation			-				-				-				162,378
Doubtful accounts impairment			-				-				7,030				-
Accrued vacations			-				-				3,566				-
Manufacturing expenses			-				-				-				66,759
Unrealized gains (losses) from sales of products			-				-				84,711				-
Fair value of bonds			-				-				661				-
Severance indemnity			-				-				-				4,628
Hedging			-				-				-				5,261
Inventory of products, spare parts and supplies			1				-				20,828				-
Research and development expenses			-				-				-				7,018
Tax losses			-				-				468				-
Capitalized interest			-				-				-				21,759
Expenses in assumption of bank loans			-				-				-				2,917
Unaccrued interest			-				-				39				-
Fair value of property, plant and equipment			-				-				-				603
Employee benefits			-				-				381				-
Royalty deferred income taxes			-				-				-				7,923
Purchase of intangible assets			-				-				-				235
Provision for lawsuits and legal expenses			-				-				1,878				-
Provision for investment plan			-				-				4,225				-
Provision of fines and crushing site closure			-				-				1,600				-
Other			530				-				-				201
Balance to date			531				-				125,387				279,682
Net balance			531				-				-				154,295

  

 

Note 28 - Income tax and deferred taxes (continued)

 

28.4

Income tax and deferred taxes, continued

 

d.3

Reconciliation of changes in deferred tax liabilities (assets) as of March 31, 2014

 

		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
Depreciation			162,378				3,730				-				3,730				166,108
Doubtful accounts impairment			(7,030	)			(33	)			-				(33	)			(7,063	)
Accrued vacations			(3,566	)			927				-				927				(2,639	)
Manufacturing expenses			66,759				(2,730	)			-				(2,730	)			64,029
Unrealized gains (losses) from sales of products			(84,711	)			11,239				-				11,239				(73,472	)
Fair value of bonds			(661	)			-				1,708				1,708				1,047
Severance indemnity			4,628				606				-				606				5,234
Hedging			5,261				(7,250	)			-				(7,250	)			(1,989	)
Inventory of products, spare parts and supplies			(20,829	)			880				-				880				(19,949	)
Research and development expenses			7,018				(107	)			-				(107	)			6,911
Capitalized interest			21,759				75				-				75				21,834
Expenses in assumption of bank loans			2,917				(138	)			-				(138	)			2,779
Unaccrued interest			(39	)			(14	)			-				(14	)			(53	)
Fair value of property, plant and equipment			603				(2	)			-				(2	)			601
Employee benefits			(381	)			19				-				19				(362	)
Royalty deferred income taxes			7,923				(348	)			-				(348	)			7,575
Unused tax losses			(468	)			(4,722	)			-				(4,722	)			(5,190	)
Purchase of intangible assets			235				(235	)			-				(235	)			-
Provision for lawsuits and legal expenses			(1,878	)			-				-				-				(1,878	)
Provision for investment plan			(4,225	)			(2,801	)			-				(2,801	)			(7,026	)
Provision of fines and crushing site closure			(1,600	)			-				-				-				(1,600	)
Other ID			(329	)			228				-				228				(101	)
Total temporary differences, losses and unused fiscal credits			153,764				(676	)			1,708				1,032				154,796

 

 

Note 28 - Income tax and deferred taxes (continued)

 

28.4

Income tax and deferred taxes, continued

 

d.3

Reconciliation of changes in deferred tax liabilities (assets) as of December 31, 2013

 

		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
Depreciation			145,251				17,127				-				17,127				162,378
Doubtful accounts impairment			(5,807	)			(1,223	)			-				(1,223	)			(7,030	)
Accrued vacations			(3,971	)			405				-				405				(3,566	)
Manufacturing expenses			60,160				6,599				-				6,599				66,759
Unrealized gains (losses) from sales of products			(105,879	)			21,168				-				21,168				(84,711	)
Fair value of bonds			(3,684	)			-				3,023				3,023				(661	)
Severance indemnity			4,483				145				-				145				4,628
Hedging			22,890				(17,629	)			-				(17,629	)			5,261
Inventory of products, spare parts and supplies			(15,027	)			(5,802	)			-				(5,802	)			(20,829	)
Research and development expenses			4,917				2,101				-				2,101				7,108
Capitalized interest			20,449				1,310				-				1,310				21,759
Expenses in assumption of bank loans			2,243				674				-				674				2,917
Unaccrued interest			(215	)			176				-				176				(39	)
Fair value of property, plant and equipment			2,743				(2,140	)			-				(2,140	)			603
Employee benefits			(2,027	)			1,646				-				1,646				(381	)
Royalty deferred income taxes			8,430				(507	)			-				(507	)			7,923
Unused tax losses			(3,243	)			2,775				-				2,775				(468	)
Purchase of intangible assets			-				235				-				235				235
Provision for lawsuits and legal expenses			(1,823	)			(55	)			-				(55	)			(1,878	)
Provision for investment plan			(2,487	)			(1,738	)			-				(1,738	)			(4,225	)
Provision of fines and crushing site closure			(745	)			(855	)			-				(855	)			(1,600	)
Other			(1,436	)			1,107				-				1,107				(329	)
Total temporary differences, losses and unused fiscal credits			125,222				25,519				3,023				28,542				153,764

 

 

Note 28 - Income tax and deferred taxes (continued)

 

28.4

Income tax and deferred taxes, continued

 

d.4

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 March 31, 2014 and December 31, 2013, tax loss carryforwards (NOL carryforwards) are detailed as follows:

 

		03/31/2014				12/31/2013
		ThUS$				ThUS$
Chile			5,190				468
Other countries			-				-
Other countries			5,190				468

 

Tax losses as of March 31 correspond mainly to Servicios Integrales de Tránsitos y Transferencias S.A., Exploraciones Mineras S.A. e Isapre Norte Grande Ltda.

 

d.5

Unrecognized deferred income tax assets and liabilities

 

Unrecognized deferred tax assets and liabilities as of March 31, 2014 and December 31, 2013 are as follows:

 

		03/31/2014				12/31/2013
		ThUS$				ThUS$
		Assets (liabilities)				Assets (liabilities)
Tax losses (NOL’s)			139				139
Doubtful accounts impairment			81				81
Inventory impairment			1,020				1,020
Pensions plan			(536	)			(536	)
Accrued vacations			29				29
Depreciation			(57	)			(57	)
Other			(19	)			(19	)
Balances to date			657				657

 

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

 

 

Note 28 - Income tax and deferred taxes (continued)

 

28.4

Income tax and deferred taxes, continued

 

d.6

Movements in deferred tax assets and liabilities

 

Movements in deferred tax assets and liabilities as of March 31, 2014 and December 31, 2013 are detailed as follows:

 

		03/31/2014				12/31/2013
		ThUS$				ThUS$
		Liabilities (assets)				Liabilities (assets)
Deferred tax assets and liabilities, net opening balance			153,764				125,222
Increase (decrease) in deferred taxes in profit or loss			(676	)			25,519
Tax Recovery of first category credit absorbed by tax losses			-				-
Increase (decrease) in deferred taxes in equity			1,708				3,023
Balances to date			154,796				153,764

 

d.7

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

 

 

Note 28 - Income tax and deferred taxes (continued)

 

28.4

Income tax and deferred taxes, continued

 

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

 

		03/31/2014				03/31/2013
		ThUS$				ThUS$
		Income (expenses)				Income (expenses)
Current income tax expense
Current income tax expense			(28,189	)			(39,587	)
Adjustments to prior year current income tax			-				-
Current income tax expense, net, total			(28,189	)			(39,587	)
Deferred tax expense
Deferred tax expense (income) relating to the creation and reversal of temporary differences			(676	)			(6,509	)
Deferred tax expense (income) relating changes in tax rates or the application of new taxes			-				-
Deferred tax expense, net, total			(676	)			(6,509	)
Tax expense (income)			(28,865	)			(46,096	)

 

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

 

		03/31/2014				03/31/2013
		ThUS$				ThUS$
		Income (expenses)				Income (expenses)
Current income tax expense by foreign and domestic parties, net
Current income tax expense, foreign parties, net			(35	)			(516	)
Current income tax expense, domestic, net			(28,154	)			(39,071	)
Current income tax expense, net, total			(29,189	)			(39,587	)
Deferred tax expense by foreign and domestic parties, net
Deferred tax expense, foreign parties, net			(65	)			(33	)
Deferred tax expense, domestic, net			(611	)			(6,476	)
Deferred tax expense, net, total			(676	)			(6,509	)
Income tax expense			(28,865	)			(46,096	)

 

 

Note 28 - Income tax and deferred taxes (continued)

 

28.4

Income tax and deferred taxes, continued

 

d.8

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.

 

d.9

Disclosures on the tax effects of other comprehensive income components:

 

Income tax related to components of other		03/31/2014
income and expense with a charge or credit to						ThUS$
net  equity		Amount before taxes (expense) gain				(Expense) income for income taxes				Amount after taxes
Cash flow hedge			8,542				(1,708	)			6,834
Total			8,542				(1,708	)			6,834

 

Income tax related to components of other		03/31/2013
income and expense with a charge or credit to						ThUS$
net  equity		Amount before taxes (expense) gain				(Expense) income for income taxes				Amount after taxes
Cash flow hedge			(451	)			90				(361	)
Total			(451	)			90				(361	)

 

 

Note 28 - Income tax and deferred taxes (continued)

 

28.4

Income tax and deferred taxes, continued

 

d.10

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.)

 

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

 

		03/31/2014				03/31/2013
		ThUS$				ThUS$
		Income (expense)				Income (expense)
Consolidated income before taxes			110,602				198,754
Income tax rate in force in Chile			20	%			20	%
Tax expense using the legal rate			(22,120	)			(39,751	)
Effect of royalty tax expense			(3,897	)			(3,533	)
Tax effect of non-taxable revenue			1,239				1,680
Effect of taxable rate of non-deductible expenses for determination of taxable income (loss)			(501	)			(523	)
Tax effect of tax rates supported abroad			(507	)			(3,070	)
Effect on the tax rate arising from changes in the tax rate			-				-
Other tax effects from the reconciliation between the accounting income and tax expense (income)			(3,079	)			(899	)
Tax expense using the effective rate			(28,865	)			(46,096	)

 

 

Note 28 - Income tax and deferred taxes (continued)

 

28.4

Income tax and deferred taxes, continued

 

d.11

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:

 

a)

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.

 

b)

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.

 

c)

Mexico:

 

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

 

d)

Spain:

 

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

 

e)

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.

 

f)

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 asset		Currency		03/31/2014 ThUS$				12/31/2013 ThUS$
Current assets:
Cash and cash equivalents		ARS			160				-
Cash and cash equivalents		BRL			425				73
Cash and cash equivalents		CLP			43,397				25,391
Cash and cash equivalents		CNY			1,407				384
Cash and cash equivalents		EUR			12,150				9,230
Cash and cash equivalents		GBP			14				14
Cash and cash equivalents		IDR			620				4
Cash and cash equivalents		INR			305				7
Cash and cash equivalents		MXN			5				428
Cash and cash equivalents		PEN			2				2
Cash and cash equivalents		THB			-				2,161
Cash and cash equivalents		YEN			-				1,435
Cash and cash equivalents		ZAR			4,665				7,229
Subtotal cash and cash equivalents					63,150				46,358
Other current financial assets		CLP			169,905				108,892
Subtotal other current financial assets					169,905				108,892
Other current non-financial assets		ARS			-				21
Other current non-financial assets		AUD			20				95
Other current non-financial assets		BRL			600				1
Other current non-financial assets		CLF			45				75
Other current non-financial assets		CLP			12,059				25,814
Other current non-financial assets		CNY			1				33
Other current non-financial assets		EUR			6,839				5,383
Other current non-financial assets		AED			897				-
Other current non-financial assets		INR			39				-
Other current non-financial assets		MXN			-				793
Other current non-financial assets		PEN			-				3
Other current non-financial assets		THB			18				13
Other current non-financial assets		ZAR			-				801
Subtotal other current non-financial assets					20,518				33,032
Trade and other receivables		ARS			44				-
Trade and other receivables		AUD			43				-
Trade and other receivables		BRL			275				32
Trade and other receivables		CLF			1,146				507
Trade and other receivables		CLP			76,266				50,112
Trade and other receivables		CNY			-				9
Trade and other receivables		EUR			50,592				31,975
Trade and other receivables		GBP			-				261
Trade and other receivables		MXN			92				240
Trade and other receivables		PEN			-				92
Trade and other receivables		THB			2,527				1,823
Trade and other receivables		INR			13				-
Trade and other receivables		ZAR			13,115				14,742
Subtotal trade and other receivables					144,113				99,793
Receivables from related parties		AED			-				379
Receivables from related parties		CLP			550				517
Receivables from related parties		EUR			1,876				845
Receivables from related parties		YEN			218				197
Receivables from related parties		ZAR			4,313				9,157
Subtotal receivables from related parties					6,957				11,095
Current tax assets		AUD			-				-
Current tax assets		CLP			2,218				1,033
Current tax assets		EUR			75				75
Current tax assets		INR			-				-
Current tax assets		MXN			647				230
Current tax assets		PEN			-				267
Subtotal current tax assets					2,940				1,605
Total current assets					407,583				300,775

 

 

Note 29 - Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

Class of asset		Currency		03/31/2014 ThUS$				12/31/2013 ThUS$
Non-current assets:
Other non-current financial assets		BRL			29				27
Other non-current financial assets		CLP			20				20
Other non-current financial assets		YEN			46				45
Subtotal other non-current financial assets					95				92
Other non-current non-financial assets		BRL			-				191
Other non-current non-financial assets		CLP			758				758
Subtotal other non-current non-financial assets					758				949
Non-current rights receivable		CLF			-				465
Non-current rights receivable		CLP			-				818
Subtotal non-current rights receivable					-				1,283
Equity-accounted investees		AED			25,725				24,215
Equity-accounted investees		CLP			1,372				1,649
Equity-accounted investees		IDR			751				802
Equity-accounted investees		EUR			9,002				7,924
Equity-accounted investees		INR			-				-
Equity-accounted investees		THB			1,907				1,876
Equity-accounted investees		TRY			14,425				15,336
Subtotal equity-accounted investees					53,182				51,802
Intangible assets other than goodwill		CLP			471				507
Intangible assets other than goodwill		CNY			2				3
Subtotal intangible assets other than goodwill					473				510
Property, plant and equipment		CLP			4,236				5,633
Subtotal property, plant and equipment					4,236				5,633
Total non-current assets					58,744				60,269
Total assets					466,327				361,044

 

 

Note 29 - Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

Liabilities held in foreign currencies are detailed as follows:

 

				03/31/2014												12/31/2013
Class of liability		Currency		Up to 90 days ThUS$				Over 90 days up to 1 year ThUS$				Total ThUS$				Up to 90 days ThUS$				Over 90 days up to 1 year ThUS$				Total ThUS$
Current liabilities
Other current financial liabilities		CLF			7,422				2,182				9,604				1,455				77,866				79,321
Other current financial liabilities		CLP			-				-				-				-				141,704				141,704
Subtotal other current financial liabilities					7,422				2,182				9,604				1,455				219,570				221,025
Trade and other payables		ARS			64				-				64				3				-				3
Trade and other payables		BRL			2,075				7				2,082				64				-				64
Trade and other payables		CHF			-				24				24				1				-				1
Trade and other payables		CLP			58,791				3,865				62,656				55,785				26,224				82,009
Trade and other payables		CNY			-				-				-				117				-				117
Trade and other payables		EUR			15,709				288				15,997				18,654				-				18,654
Trade and other payables		GBP			1				-				1				6				-				6
Trade and other payables		INR			-				-				-				1				-				1
Trade and other payables		MXN			-				-				-				485				-				485
Trade and other payables		PEN			5				-				5				3				-				3
Trade and other payables		YEN			-				-				-				-				-				-
Trade and other payables		ZAR			1,644				-				1,644				2,517				-				2,517
Subtotal trade and other payables					78,289				4,184				82,473				77,636				26,224				103,860

 

 

Note 29 - Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

				03/31/2014												12/31/2013
Class of liability		Currency		Up to 90 days ThUS$				Over 90 days up to 1 year ThUS$				Total ThUS$				Up to 90 days ThUS$				Over 90 days up to 1 year ThUS$				Total ThUS$
Other current provisions		ARS			52				-				52				62				-				62
Other current provisions		BRL			15				-				15				821				595				1,416
Other current provisions		CLP			-				-				-				6				-				6
Other current provisions		EUR			7				-				7				7				-				7
Other current provisions		INR			2				-				2				1				-				1
Subtotal other current provisions					76				-				76				897				595				1,492
Current tax liabilities		INR			-				-				-				-				-				-
Current tax liabilities		BRL			-				-				-				-				-				-
Current tax liabilities		CLP			-				-				-				-				33				33
Current tax liabilities		CNY			-				-				-				-				-				-
Current tax liabilities		EUR			-				1,553				1,553				-				1,553				1,553
Current tax liabilities		MXN			-				17				17				-				-				-
Current tax liabilities		ZAR			-				-				-				-				-				-
Subtotal current tax liabilities					-				1,570				1,570				-				1,586				1,586
Current provisions for employee benefits		CLP			4,469				8,957				13,426				24,172				-				24,172
Current provisions for employee benefits		MXN			158				-				158				156				-				156
Subtotal current provisions for employee benefits					4,627				8,957				13,584				24,328				-				24,328

 

 

Note 29 - Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

				03/31/2014												12/31/2013
Class of liability		Currency		Up to 90 days ThUS$				Over 90 days up to 1 year ThUS$				Total ThUS$				Up to 90 days ThUS$				Over 90 days up to 1 year ThUS$				Total ThUS$
Other current non-financial liabilities		BRL			297				129				426				55				-				55
Other current non-financial liabilities		CLP			10,439				16,473				26,912				7,055				19,922				26,977
Other current non-financial liabilities		CNY			29				-				29				18				-				18
Other current non-financial liabilities		EUR			2,775				-				2,775				2,442				-				2,442
Other current non-financial liabilities		MXN			74				-				74				720				62				782
Other current non-financial liabilities		AUD			-				-				-				-				-				-
Other current non-financial liabilities		PEN			-				-				-				70				-				70
Other current non-financial liabilities		THD			-				-				-				-				-				-
Other current non-financial liabilities		ZAR			8				-				8				8				-				8
Subtotal other current non-financial liabilities					13,622				16,602				30,224				10,368				19,984				30,352
Total current liabilities					104,036				33,495				137,531				114,684				267,959				382,643

 

 

Note 29 - Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

Class of liabilities		Currency		Over 1 year up to 2 years ThUS$				Over 2 years up to 3 years ThUS$				Over 3 years up to 4 years ThUS$				Over 4 years up to 5 years ThUS$				Over 5 years ThUS$				Total ThUS$
Non-current liabilities
Other non-current financial liabilities		CLF			6,234				48,827				6,267				6,284				283,193				350,805
Other non-current financial liabilities		CLP			-				-				-				-				-				-
Subtotal other non-current financial liabilities					6,234				48,827				6,267				6,284				283,193				350,805
Deferred tax liabilities		CLP			-				-				-				-				-				-
Deferred tax liabilities		MXN			-				-				-				-				-				-
Subtotal deferred tax liabilities					-				-				-				-				-				-
Non-current provisions for employee benefits		CLP			-				-				-				-				27,606				27,606
Non-current provisions for employee benefits		MXN			-				-				-				-				129				129
Non-current provisions for employee benefits		YEN			-				-				-				-				505				505
Subtotal non-current provisions for employee benefits					-				-				-				-				28,240				28,240
Total non-current liabilities					6,234				48,827				6,267				6,284				311,433				379,045

 

				12/31/2013
Class of liabilities		Currency		Over 1 year up to 2 years ThUS$				Over 2 years up to 3 years ThUS$				Over 3 years up to 4 years ThUS$				Over 4 years up to 5 years ThUS$				Over 5 years ThUS$				Total ThUS$
Non-current liabilities
Other non-current financial liabilities		CLF			6,471				6,488				50,648				6,521				293,841				363,969
Other non-current financial liabilities		CLP			-				-				-				-				-				-
Subtotal other non-current financial liabilities					6,471				6,488				50,648				6,521				293,841				363,969
Deferred tax liabilities		CLP			-				-				-				-				-				-
Deferred tax liabilities		MXN			-				-				-				-				-				-
Subtotal deferred tax liabilities					-				-				-				-				-				-
Non-current provisions for employee benefits		CLP			-				-				-				-				28,532				28,532
Non-current provisions for employee benefits		MXN			-				-				-				-				131				131
Non-current provisions for employee benefits		YEN			-				-				-				-				494				494
Subtotal non-current provisions for employee benefits					-				-				-				-				29,157				29,157
Total non-current liabilities					6,471				6,488				50,648				6,521				322,998				393,126

 

 

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 March 31, 2014 and December 31, 2013, the balance amounts to ThUS$20,606 and ThUS$ 28,568, 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 March 31, 2014 and December 31, 2013, the balance amounts to ThUS$ 31,628 and ThUS$ 33,388 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 March 31, 2014 and December 31, 2013, the balance amounts to ThUS$1,062 and ThUS$3,696, respectively.

 

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 March 31, 2014 and December 31, 2013, the balance amounts to ThUS$1,889 and ThUS$ 630, respectively.

 

For the amount of capitalized expenditure, the total amount disbursed in exploration and evaluation of mineral resources during the first quarter was ThUS$2,354, 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 – Events occurred after the reporting date

 

31.1

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 March 31, 2014 were approved and authorized for issuance by the Board of Directors at their meeting held on May 20, 2014.

 

31.2

Disclosures on events occurring after the reporting date

 

a)

On April 25, 2014, at the Thirty-Ninth Ordinary Shareholders’ Meeting, the shareholders approved the payment of a dividend declared of US$0.88738 per share from the profit for 2013. Such dividend declared should be discounted the amount of US$0.75609 per share already paid as provisional dividend and the remaining balance of US$0.13129 per share will be paid and distributed in favor of the Shareholders of SQM that are registered with the related Registry during the fifth business day prior to the business day where such dividend will be paid. Where applicable, such amount will be paid in its equivalent in Chilean pesos using the Observed rate for U.S. dollars as published in the Official Gazette on April 25, 2014.

 

b)

The Chilean Economic Development Agency (CORFO) has filed a lawsuit against SQM Salar S.A. (SQMS) –and, Sociedad Química y Minera de Chile S.A. (SQM), as guarantor and co-debtor of SQMS– and SQMS has filed a lawsuit against CORFO. Both lawsuits relate to the Lease Contract entered into by CORFO and SQMS on November 12, 1993, (CONTRACT) related to certain OMA Mining Properties of CORFO that are constituted on part of the area of the Salar de Atacama in the Region of Antofagasta in Region II of Chile (POPERTIES). In particular:

 

1.

Those two lawsuits were filed on Friday, May 16, 2014, with the “mixed” arbitrator or Arbitrator Ex Aequo et Bono for the procedure and legal arbitrator with respect to the judgment, which was appointed by the Arbitrage and Mediation Center of the Santiago Chamber of Commerce. These lawsuits were noticed to the parties involved on May 19, 2014.

 

2.

The term of the CONTRACT ranges between November 12, 1993 and December 31, 2030, and has been effective for over 21 consecutive years with no disruption and no record of any legal or arbitrage conflict between the parties or any query that has not been immediately clarified by SQMS. During the period, SQMS has always provided CORFO, every three calendar months, with the related “rent settlements” and also has fully paid to CORFO the related “quarterly rent”. Those rent settlements are already 81 and have contained all the background information required to support each such “settlements” and the related calculation and payment of the related “quarterly rent”.

 

 

Note 31 – Events occurred after the reporting date (continued)

 

31.2

Disclosures on events occurred after the reporting date, continued

 

3.

Notwithstanding the above, the Board of Directors of SQM, with respect to the lawsuit filed by CORFO, became aware of the main terms and allegations in such lawsuit where basically CORFO request that the arbitrator –i– states that SQMS has not fully and timely paid the quarterly rents that should have paid to CORFO starting from the year 2009 amounting to a total of US$8,940,829 plus applicable interest –ii– states that SQMS has not complied with its obligation of preserving, maintaining and replenishing the Survey Monuments of the PROPERTIES –iii– states the early termination of the CONTRACT as a result of that indicated in paragraph –i– or, alternatively, that indicated in paragraph –ii– above –iv– states that SQMS must pay to CORFO a compensation equivalent to the lease rent that CORFO should receive up to December 31, 2030 – conventional CONTRACT expiration date– –v– states that SQMS must pay to CORFO, for the concept of moral damages, an amount equivalent to 30% of material damages as determined by the arbitrage lawsuit and –vi– states that SQMS must restitute to CORFO the PROPERTIES with their patents paid. The lawsuit alternatively and should the arbitrator reject the CONTRACT early termination request, partially reproduces that indicated above and basically requests and in that related to the arbitrator states that SQMS must pay to CORFO the amount of US$8,940,829 plus applicable interest, that SQMS must maintain and replenish the Survey Monuments of the Properties AND THAT SQMS must pay to CORFO, for the concept of moral damage, the amount equivalent to 30% of the material damages that are determined as a result of the lawsuit.

 

4.

Additionally, the Board of Directors of SQM, with respect to the lawsuit filed by SQMS, became aware of the reasons for which SQMS states it does not owe any amount to CORFO related to the CONTRACT and, as a result, requests that the arbitrator states that the settlements provided and payments made by SQMS to CORFO are fully in accordance with the provisions of the CONTRACT and the agreements between the parties.

 

5.

The lawyers of SQMS and SQM have informed that the lawsuit filed by CORFO should not result in any negative outcome as it is contrary to the consistent interpretation and application that the PARTIES have provided to the CONTRACT for over 21 consecutive years and also because SQMS has fully and timely complied with its obligation of protecting the PROPERTIES and that these, as a result of this, are currently and fully in force and supported by the contract.

 

Management is not aware of any other significant subsequent events occurred between March 31, 2014 and the date of issuance of these financial statements that may affect them significantly.

 

31.3

Detail of dividends declared after the reporting date

 

At the date of these financial statements, there are no dividends declared after the balance sheet 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: June 9, 2014
	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.