UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN ISSUER

PURSUANT TO RULE 13A-16 OR 15D-16

OF THE SECURITIES AND EXCHANGE ACT OF 1934

 

Includes financial statements and their related notes for the nine-month period ended December 31, 2012 filed by Sociedad Química y Minera de Chile S.A. before the Chilean Securities and Insurance Commission (Superintendencia de Valores y Seguros) on March 5, 2012.

 

SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.

(Exact name of registrant as specified in its charter)

 

CHEMICAL AND MINING COMPANY OF CHILE INC.

(Translation of registrant's name into English)

 

El Trovador 4285, Santiago, Chile (562) 2425-2000

(Address and phone number of principal executive offices)

 

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 whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes ¨                                                            No x

 

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82_________

 

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

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

For the year ended

December 31, 2012

 

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

In Thousands of United States Dollars

 

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

 

 

This document includes:

 

  - Independent Auditor’s Report  
       
  - 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  

 

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

 

 

 

 

 

 

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

 

 

 

 

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

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

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    Foreign currency transactions 26
  2.6    Basis of consolidation 28
  2.7   Significant accounting judgments, estimates and assumptions 31
     
3 Significant accounting policies  
  3.1    Inventories 32
  3.2    Trade and other receivables 33
  3.3    Equity-accounted investees 33
  3.4    Property, plant and equipment 34
  3.5    Segment reporting 36
  3.6    Revenue recognition 37
  3.7    Income tax and deferred taxes 39
  3.8    Earnings per share 40
  3.9    Impairment of non-financial assets 41
  3.10  Financial assets 42
  3.11  Financial liabilities 43
  3.12  Environment 45
  3.13  Minimum dividend 45
  3.14  Consolidated statement of cash flows 45

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
1
 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)

 

Note   Page
     
  3.15  Obligations related to employee termination benefits and pension Commitments 45
  3.16  Financial derivatives and hedging transactions 47
  3.17  Leases 49
  3.18  Prospecting expenses 50
  3.19  Other provisions 50
  3.20  Compensation plans 51
  3.21  Good and service insurance expenses 51
  3.22  Intangible assets 51
  3.23  Research and development expenses 53
  3.24  Classification of balances as current and non-current 53
     
4 Financial risk management  
  4.1   Financial risk management policy 54
  4.2   Risk factors 55
  4.3   Risk measurement 58
     
5 Changes in estimates and accounting policies (consistent presentation)  
  5.1   Changes in accounting estimates 59
  5.2   Changes in accounting policies 59
     
6 Background of companies included in consolidation  
  6.1   Parent’s stand-alone assets and liabilities 60
  6.2   Parent entity 60
  6.3   Jointly arrangements of controlling interest 60
  6.4   Information on consolidated subsidiaries 62
  6.5   Detail of transactions between consolidated companies 68
     
7 Cash and cash equivalents  
  7.1  Types of cash and cash equivalents 69
  7.2   Short-term investments, classified as cash equivalents 70
  7.3   Information on cash and cash equivalents by currency 70
  7.4   Amount of significant restricted (unavailable) cash balances 71
  7.5   Short-term deposits, classified as cash equivalents 72
     
8 Inventories 73
     
9 Related party: disclosures  
  9.1   Related party disclosures 74
  9.2   Relationship between the Parent and the entity 74
  9.3   Intermediate parent that publicly issues financial statements 75
  9.4   Detailed identification of the relationship between the Parent and subsidiary 75

 

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

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)
 
Note   Page
     
  9.5   Detail of related parties and related party transactions 77
  9.6   Trade receivables due from related parties, current 79
  9.7   Trade payables due to related parties, current 80
  9.8   Board of Directors and Senior Management 81
  9.9   Key Management Personnel Compensation 83
     
10 Financial instruments  
  10.1   Types of other financial assets 84
  10.2   Trade and other receivables, current and non-current 84
  10.3   Hedging assets and liabilities 88
  10.4   Financial liabilities 90
  10.5   Trade and other payables 100
  10.6   Financial liabilities at fair value through profit or loss 100
  10.7   Financial asset and liability categories 101
  10.8   Financial assets pledged as guarantee 103
  10.9   Estimated fair value of financial instruments and financial derivatives 103
  10.10 Nature and scope of risks arising from financial instruments 105
     
11 Equity-accounted investees  
  11.1   Investments in associates recognized according to the equity method of accounting 105
  11.2   Assets, liabilities, revenue and expenses of associates 106
  11.3   Detail of investments in associates 107
     
12 Joint ventures  
  12.1   Policy for accounting for joint ventures in a Parent’s separate financial statements 108
  12.2   Disclosures of interest in joint ventures 108
  12.3   Detail of assets, liabilities and profit or loss of significant investments in joint ventures by company 109
  12.4   Detail of investments in joint ventures 110
     
13 Intangible assets and goodwill  
  13.1  Balances 111
  13.2  Disclosures on intangible assets and goodwill 111

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
3
 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)
 
Note   Page
     
     
14 Property, plant and equipment  
  14.1   Types of property, plant and equipment 115
  14.2   Reconciliation of changes in property, plant and equipment by type 117
  14.3   Detail of property, plant and equipment pledged as guarantee 119
  14.4   Additional information 119
     
15 Employee benefits  
  15.1   Provisions for employee benefits 120
  15.2   Policies on defined benefit plans 121
  15.3   Other long-term benefits 122
  15.4   Post-employment benefit obligations 123
  15.5   Staff severance indemnities 125
     
16 Executive compensation plan 125
     
17 Disclosures on equity  
  17.1   Capital management 127
  17.2   Disclosures on preferred share capital 128
  17.3   Disclosures on reserves in equity 130
  17.4   Dividend policies 131
  17.5   Provisional dividends 132
     
18 Provisions and other non-financial liabilities  
  18.1   Types of provisions 134
  18.2   Description of other provisions 135
  18.3   Other non-financial liabilities, current 135
  18.4   Changes in provisions 136
  18.5   Detail of main types of provisions 138
     
19 Contingencies and restrictions  
  19.1   Lawsuits or other relevant events 139
  19.2   Restrictions to management or financial limits 142
  19.3   Commitments 144
  19.4   Restricted or pledged cash 144
  19.5   Sureties obtained from third parties 144
  19.6   Indirect guarantees 145

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
4
 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)
 
Note   Page
     
20 Revenue 147
     
21 Earnings per share 147
     
22 Borrowing costs 148
     
23 Effect of fluctuations on foreign currency exchange rates 149
     
24 Environment  
  24.1   Disclosures on disbursements related to the environment 150
  24.2   Detail of information on disbursements related to the environment 151
  24.3   Description of each project indicating whether these are in process or have been finished 168
     
25 Other current and non-current non-financial assets 175
     
26 Operating segments  
  26.1   Operating segments 177
  26.2   Operating segments disclosures 179
  26.3   Statement of comprehensive income classified by operating segments based on groups of products 181
  26.4   Revenue from transactions with other company operating segments 183
  26.5   Disclosures on geographical areas 184
  26.6   Disclosures on main customers 184
  26.7   Segments by geographical areas 185
  26.8   Property, plant and equipment classified by geographical areas 186
     
27 Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature  
  27.1   Revenue 187
  27.2   Cost of sales 187
  27.3   Other income 188
  27.4   Administrative expenses 188
  27.5   Other expenses by function 189
  27.6   Other income (expenses) 189
  27.7   Summary of expenses by nature 190

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
5
 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)
 
Note   Page
     
28 Income tax and deferred taxes  
  28.1   Current tax assets 191
  28.2   Current tax liabilities 192
  28.3   Tax earnings 192
  28.4   Income tax and deferred taxes 193
     
29 Disclosures on the effects of fluctuations in foreign currency exchange rates 202
     
30 3.14  Consolidated statement of cash flows 207
     
31 Subsequent events  
  31.1   Authorization of the financial statements 208
  31.2   Disclosures on events occurring after the reporting date 209
  31.3   Detail of dividends declared after the reporting date 209

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
6
 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

CONSOLIDATED CLASSIFIED STATEMENTS OF FINANCIAL POSITION

 

ASSETS  Note
No.
   As of
December
 31, 2012
   As of
December
31, 2011
 
       ThUS$   ThUS$ 
               
Current assets               
Cash and cash equivalents   7.1    324,353    444,992 
Other current financial assets   10.1    316,103    169,261 
Other current non-financial assets   25    67,820    63,792 
Trade and other receivables, current   10.2    510,616    412,062 
Trade receivables due from related parties, current   9.6    101,372    117,139 
Current inventories   8    896,236    744,402 
Current tax assets   28.1    30,234    4,765 
Total current assets        2,246,734    1,956,413 
                
Non-current assets               
Other non-current financial assets   10.1    29,492    30,488 
Other non-current non-financial assets   25    17,682    24,651 
Trade receivables, non-current   10.2    1,311    1,070 
Investments in equity-accounted investees   11.1    70,298    60,694 
Intangible assets other than goodwill   13.1    24,013    4,316 
Goodwill   13.1    38,388    38,605 
Property, plant and equipment   14.1    1,988,290    1,755,042 
Deferred tax assets   28.4    223    304 
Total non-current assets        2,169,697    1,915,170 
Total assets        4,416,431    3,871,583 

 

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

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
7
 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

CONSOLIDATED CLASSIFIED STATEMENTS OF FINANCIAL POSITION, (continued)

 

Liabilities and Equity  Note
No.
   As of
December
31, 2012
   As of
December 31,
2011
 
       ThUS$   ThUS$ 
Liabilities               
Current liabilities               
Other current financial liabilities   10.4    152,843    161,008 
Trade and other payables, current   10.5    207,944    183,032 
Trade payables due to related parties, current   9.7    19    873 
Other current provisions   18.1    18,489    16,937 
Current tax liabilities   28.2    23,624    75,418 
Provisions for employee benefits, current   15.1    33,974    30,074 
Other current non-financial liabilities   18.3    172,200    161,961 
Total current liabilities        609,093    629,303 
                
Non-current liabilities               
Other non-current financial liabilities   10.4    1,446,194    1,237,027 
Other non-current provisions   18.1    7,357    8,595 
Deferred tax liabilities   28.4    125,445    98,594 
Provisions for employee benefits, non-current   15.1    40,896    33,684 
Total non-current liabilities        1,619,892    1,377,900 
Total liabilities        2,228,985    2,007,203 
                
Equity   17           
Share capital        477,386    477,386 
Retained earnings        1,676,169    1,351,560 
Other reserves        (20,772)   (16,112)
Equity attributable to owners of the Parent        2,132,783    1,812,834 
Non-controlling interests        54,663    51,546 
Total equity        2,187,446    1,864,380 
Total liabilities and equity        4,416,431    3,871,583 

 

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

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
8
 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

CONSOLIDATED STATEMENTS OF INCOME BY FUNCTION

 

       Between January and
December
 
   Note   2012   2011 
   No.   ThUS$   ThUS$ 
             
Revenue   20    2,429,160    2,145,286 
Cost of sales   27.2    (1,400,567)   (1,290,494)
Gross profit        1,028,593    854,792 
                
Other income   27.3    12,702    47,681 
Administrative expenses   27.4    (106,442)   (91,760)
Other expenses by function   27.5    (34,628)   (63,047)
Other gains (losses)   27.6    683    5,787 
Profit (loss) from operating activities        900,908    753,453 
Finance income        29,068    23,210 
Finance costs   22    (54,095)   (39,335)
Share of profit of associates and joint ventures accounted for using the equity method        24,357    21,808 
Foreign currency translation differences   23    (26,787)   (25,307)
Profit (loss) before taxes        873,451    733,829 
Income tax expense, continuing operations   28.4    (216,082)   (179,710)
                
Profit (loss) from continuing operations        657,369    554,119 
                
Profit for the year        657,369    554,119 
Profit attributable to               
Owners of the Parent        649,167    545,758 
Non-controlling interests        8,202    8,361 
Profit for the year        657,369    554,119 

 

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

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
9
 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

CONSOLIDATED STATEMENTS OF INCOME BY FUNCTION (continued)

 

       Between January and
December
 
   Note   2012   2011 
   No.   US$   US$ 
Earnings per share               
Common shares               
Basic earnings per share (US$ per share)   21    2.4665    2.0736 
                
Basic earnings per share (US$ per share) from continuing operations        2.4665    2.0736 
                
Diluted common shares               
Diluted earnings per share (US$ per share)   21    2.4665    2.0736 
                
Diluted earnings per share (US$ per share) from continuing operations        2.4665    2.0736 

 

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

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
10
 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

   Between January and
December
 
   2012   2011 
Statements of comprehensive income  ThUS$   ThUS$ 
         
Profit for the year   657,369    554,119 
Components of other comprehensive income before taxes and foreign currency translation differences          
Gain (loss) from foreign currency translation differences, before taxes   982    (2,890)
Other comprehensive income before taxes and foreign currency translation differences   982    (2,890)
Cash flow hedges          
(Gain) loss from cash flow hedges before taxes   (7,872)   (1,241)
Other comprehensive income before taxes and cash flow hedges   (7,872)   (1,241)
Other comprehensive income before taxes and actuarial gains (losses) from defined benefit plans   711    (918)
Other miscellaneous reserves   -    (1,677)
Other components of other comprehensive income before taxes   (6,179)   (6,726)
           
Income taxes associated with components of other comprehensive income          
Income taxes associated with cash flow hedges in other comprehensive income   1,580    218 
Income taxes associated with components of other comprehensive income   1,580    218 
           
Other comprehensive income   (4,599)   (6,508)
           
Total comprehensive income   652,770    547,611 
           
Comprehensive income attributable to          
Owners of the Parent   644,507    539,359 
Non-controlling interests   8,263    8,252 
Total comprehensive income   652,770    547,611 

 

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

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
11
 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Statement of Cash Flows  Note
No.
  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
            
Cash flows from (used in) operating activities             
              
Profit for the year      657,369    554,119 
Adjustment to reconcile profit for the year             
             
Adjustment for decreases (increases) in inventories      (167,826)   (147,238)
Adjustment for decreases (increases) in trade receivables      (52,993)   (135,401)
Adjustment for decreases (increases) in other receivables from operating activities      (57,300)   (37,393)
Adjustment for decreases (increases) in trade payables      (49,025)   (44,566)
Adjustment for decreases (increases) in other payables from operating activities      (204,067)   (72,976)
Adjustment for depreciation and amortization      196,158    195,897 
Adjustment for provisions      33,657    23,055 
Income tax expense      216,082    179,710 
Adjustment for unrealized foreign currency translation loss (gain)      26,787    25,307 
Adjustment for undistributed profit from associates      (24,357)   (21,808)
Other adjustments for items other than cash      67,244    54,369 
Other adjustments for the effects on cash from investing or financing activities      (200)   (3,680)
              
Reconciling adjustments      (15,840)   15,276 
              
Cash flows from (used in) operating activities      641,529    569,395 
              
Dividends received      15,126    4,299 
Interest paid      (6,449)   (2,349)
income taxes paid      -    - 
Net cash from (used in) operating activities      650,206    571,345 
              
Cash flows from (used in) investing activities             
             
Cash flows from loss of control of subsidiaries or other businesses      961    5,736 
Payments to acquire interests in joint ventures      (197)   (4,909)
Loans granted to related parties      (4,000)   - 
Proceeds from the sale of property, plant and equipment      2,050    43,231 
Acquisition of property, plant and equipment      (445,984)   (501,118)
Cash advances and loans granted to third parties      (623)   83 
Payment of loans granted to third parties      -    - 
Other cash inflows (outflows)      (115,092)   (59,251)
Net cash from (used in) investing activities      (562,885)   (516,228)

 

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

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
12
 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

 

   Note
No.
   12/31/2012
ThUS$
   12/31/2011
ThUS$
 
             
Cash flows from (used in) financing activities               
                
Proceeds from long-term loans        366,502    550,000 
Repayment of loans        (220,000)   (370,000)
Dividends paid        (334,762)   (277,334)
Other cash inflows (outflows)        (9,437)   (7,862)
                
Net cash from (used in) financing activities        (197,697)   (105,196)
                
Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate        (110,376)   (50,079)
                
Effects of exchange rate fluctuations on cash held        (10,263)   (29,581)
Net increase (decrease) in cash and cash equivalents        (120,639)   (79,660)
                
Cash and cash equivalents at beginning of year        444,992    524,652 
                
Cash and cash equivalents at end of year   7    324,353    444,992 

 

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

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
13
 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

STATEMENTS OF CHANGES IN EQUITY

 

   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    (1,251)   (10,230)   (2,954)   (1,677)   (16,112)   1,351,560    1,812,834    51,546    1,864,380 
                                                   
Restated opening balance of equity   477,386    (1,251)   (10,230)   (2,954)   (1,677)   (16,112)   1,351,560    1,812,834    51,546    1,864,380 
                                                   
Profit for the year                                 649,167    649,167    8,202    657,369 
                                                   
Other comprehensive income        921    (6,292)   711         (4,660)        (4,660)   61    (4,599)
                                                   
Comprehensive income        921    (6,292)   711    -    (4,660)   649,167    644,507    8,263    652,770 
                                                   
Dividends                                 (324,558)   (324,558)   (5,146)   (329,704)
                                                   
Increase (decrease) in transfers and other changes                                 -    -    -    - 
                                                   
Increase (decrease) in equity   -    921    (6,292)   711    -    (4,660)   324,609    319,949    3,117    323,066 
                                                   
Equity as of December 31, 2012   477,386    (330)   (16,522)   (2,243)   (1,677)   (20,772)   1,676,169    2,132,783    54,663    2,187,446 

 

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

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
14
 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

STATEMENTS OF CHANGES IN EQUITY

 

   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    1,530    (9,207)   (2,036)   -    (9,713)   1,155,131    1,622,804    48,016    1,670,820 
                                                   
Restated opening balance of equity   477,386    1,530    (9,207)   (2,036)   -    (9,713)   1,155,131    1,622,804    48,016    1,670,820 
                                                   
Profit for the year                                 545,758    545,758    8,361    554,119 
                                                   
Other comprehensive income        (2,781)   (1,023)   (918)   (1,677)   (6,399)        (6,399)   (109)   (6,508)
                                                   
Comprehensive income        (2,781)   (1,023)   (918)   (1,677)   (6,399)   545,758    539,359    8,252    547,611 
                                                   
Dividends                                 (349,329)   (349,329)   (3,706)   (353,035)
                                                   
Increase (decrease) in transfers and other changes                                 -    -    (1,016)   (1,016)
                                                   
Increase (decrease) in equity   -    (2,781)   (1,023)   (918)   (1,677)   (6,399)   196,429    190,030    3,530    193,560 
                                                   
Equity as of December 31, 2011   477,386    (1,251)   (10,230)   (2,954)   (1,677)   (16,112)   1,351,560    1,812,834    51,546    1,864,380 

 

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

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
15
 

 

Sociedad Química y Minera de Chile S.A. and subsidiaries

 

Notes to the Consolidated Financial
Statements as of December 31, 2012

Sociedad Química y Minera de Chile S.A.

and Subsidiaries

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
16
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 1 – Identification and Activities of the Company and Subsidiaries

 

1.1Historical 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 2 425-2000.

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.

 

1.2Main 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, Former Florencia office w/n - Sierra Gorda, 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, Pampa Yumbes w/n - Tal-tal.

 

1.3Codes 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)

 

1.4Description 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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
17
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 1 – Identification and Activities of the Company and Subsidiaries (continued)

 

1.4Description of the nature of operations and main activities, continued

 

From our caliche ore deposits, 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 nutrients: 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

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
18
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 1 – Identification and Activities of the Company and Subsidiaries (continued)

 

1.4Description 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.

 

1.5Other background:

 

Staff

 

As of December 31, 2012 and 2011, staff was detailed as follows:

 

   31/12/2012   31/12/2011 
           
Permanent staff   5,643    4,902 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
19
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 1 – Identification and Activities of the Company and

               subsidiaries (continued)

 

1.5Other 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 December 31, 2012 and 2011. 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:

 

Shareholders as of December 31, 2012  No. of Series A
with ownership
   % of Series A
shares
   No. O0f Series B
with ownership
   % of Series B
shares
   % of total
shares
 
Inversiones El Boldo Limitada   44,751,196    31.33%   17,571,676    14.60%   23.68%
Sociedad de Inversiones Pampa Calichera S.A.(*)   44,558,830    31.20%   9,003,799    7.48%   20.35%
The Bank of New York   -    -    46,559,106    38.68%   17.69%
Inversiones RAC Chile Limitada   19,200,242    13.44%   2,699,773    2.24%   8.32%
Potasios de Chile S.A.(*)   17,919,147    12.55%   -    -    6.81%
Inversiones Global Mining (Chile) Limitada (*)   8,798,539    6.16%   -    -    3.34%
Banco Itau on behalf of investors   -    -    4,579,293    3.80%   1.74%
Inversiones La Esperanza Limitada   3,693,977    2.59%   -    -    1.40%
Banco Santander on behalf of foreign investors   -    -    3,238,105    2.69%   1.23%
Banco de Chile on behalf of non-resident third parties   -    -    3,082,612    2.56%   1.17%

 

(*) Total Pampa Group 30,50%

 

Shareholders as of December 31, 2011  No. Of series A
with ownership
   % of Series A
shares
   No. of Series B
with ownership
   % of Series B
shares
   % of total
shares
 
Inversiones El Boldo Limitada   44,751,196    31.33%   17,571,676    14.60%   23.68%
Sociedad de Inversiones Pampa Calichera S.A.(*)   44,758,830    31.34%   12,241,799    10.17%   21.66%
The Bank of New York   -    -    42,036,912    34.92%   15.97%
Inversiones RAC Chile Limitada   19,200,242    13.44%   2,699,773    2.24%   8.32%
Potasios de Chile S.A.(*)   18,179,147    12.73%   156,780    0.13%   6.97%
Inversiones Global Mining (Chile) Limitada (*)   8,798,539    6.16%   -    -    3.34%
Banchile Corredores de Bolsa S.A.   136,919    0.10%   4,890,193    4.06%   1.91%
Corpbanca Corredores de Bolsa  S.A.   11,189    0.01%   4,264,250    3.54%   1.62%
Inversiones La Esperanza Limitada   3,693,977    2.59%   -    -    1.40%
Banco Itau on behalf of investors   -    -    3,693,080    3.07%   1.40%

 

(*) Total Pampa Group 31,97%

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
20
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 2 - Basis of presentation for the consolidated financial statements

 

2.1Accounting period

 

These consolidated financial statements cover the following periods

 

-Consolidated Statements of Financial Position for the years ended December 31, 2012 and 2011

 

-Consolidated Statements of Changes in Equity for the years ended December 31, 2012 and 2011.

 

-Consolidated Statements of Comprehensive Income for the years between January and December 31, 2012 and 2011.

 

-Statements of Cash Flows – Indirect method for the years ended December 31, 2012 and 2011.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
21
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

2.2Financial statements

 

The consolidated annual 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 and annual accounts comply with each IFRS in force at their date of presentation.

 

2.3Basis of measurement

 

The annual 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 financial liabilities at amortized cost;
-financial derivatives at fair value; and
-staff severance indemnities and pension commitments at actuarial value.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
22
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

2.4Accounting pronouncements

 

Accounting pronouncements

 

At the date of these consolidated financial statements, the following accounting pronouncements had been issued by the IASB but its application date is not effective.

 

Standards and interpretations   Mandatory for the
years beginning on
     
IAS 19 Revised “Employee Benefits”   01/01/2013
Issued in June 2011, supersedes IAS 19 (1998). This revised standard amends the recognition and measurement of defined benefit plan expenses and termination benefits. Additionally, it includes amendments to disclosures of all employee benefits.    
     
IAS 27 “Separate Financial Statements”   01/01/2013
Issued in May 2011, supersedes IAS 27 (2008). The scope of this standard is restricted from this change solely to separate financial statements, given that the aspects linked to the definition of control and consolidation were removed and included in IFRS 10.  Its early adoption is allowed together with IFRS 10, IFRS 11 and IFRS 12 and the amendment to IAS 28.    
     
IFRS 9 “Financial Instruments”   01/01/2015
Issued in December 2009, amends the classification and measurement of financial assets.    
Subsequently, this standard was amended in November 2010 to include the treatment and classification of financial liabilities. Its early adoption is permitted.    
     
IFRS  10 “Consolidated Financial Statements”   01/01/2013
Issued in May 2011, supersedes SIC 12 “Consolidation – Special Purpose Entities” and the focus on the control and consolidation of IAS 27 “Consolidated Financial Statements”. It establishes clarifications and new parameters for the definition of control, as well as the preparation of consolidated financial statements. Its early adoption is permitted together with IFRS 11, IFRS 12 and amendments to IAS 27 and IAS 28.    
     
NIIF 11 “Joint Arrangements”   01/01/2013
Issued in May 2011, supersedes IAS 31 “Interests in Joint Ventures” and SIC 13 “Joint Controlled Entities”. Provides a more realistic reflection of joint agreements focusing on the rights and obligations arising from agreements ore than their legal form. Its amendments include the elimination of the concept of jointly-controlled assets and the possibility of proportional consolidation of entities under common control. Its early adoption is permitted together with IFRS 10, IFRS 12 and amendments to IAS 27 and IAS 28.    

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
23
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

2.4Accounting pronouncements, continued

 

Standards and interpretations   Mandatory for the
years beginning on
    01/01/2013
IFRS 12 “Disclosure of Interests in Other Entities”    
Issued in May 2011, gathers in solely one standard all the disclosure requirements in the financial statements related to interests in other entities, Esther classified as subsidiaries, associates or joint operations. It is applicable to all entities with investments in subsidiaries, joint ventures and associates. Its early adoption is permitted together with IFRS 10, IFRS 11 and amendments to IAS 27 and IAS 28    
     
IFRS 13 “Fair Value Measurement”   01/01/2013
Issued in May 2011, gathers in one single standard the method for measuring fair value of assets and liabilities and disclosures required for this purpose and incorporates new concepts and clarifications for measurement.    

 

Amendments and improvements   Mandatory for the
years beginning on
     
IAS 1 “Presentation of Financial Statements”   01/07/2012
Issued in June 2011, the main amendment is that it requires that items in Other Comprehensive Income must be classified and grouped by assessing whether they will be reclassified to profit or loss in subsequent periods. Its early adoption is permitted.    
     
     
IFRS 7 “Financial Instruments” Disclosures”   01/01/2013
Issued in December 2011, requires improving the current disclosures of offsetting financial assets and financial liabilities with the aim of increasing convergence between IFRS and US GAAP. These disclosures are focused on quantitative information on financial instruments recognized which are offset in the Statement of Financial Position. Its early adoption is permitted.    

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
24
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

2.4Accounting pronouncements, continued

 

Amendments and improvements   Mandatory for the
years beginning on
     
IAS 32 “Financial Instruments” Presentation””   01/01/2014
Issued in December 2011. It clarifies the requirements for offsetting financial assets and financial liabilities in the Statement of Financial Position. Particularly, it indicates that the offsetting right should be available at the financial statement date and not depending on a future development. It also indicates that it must be legally binding for the counterparties both during the normal course of the business operations, as well as in the event of default, insolvency o bankruptcy. Its early adoption is permitted.    
     
Improvements to International Financial Reporting Standards issued in May 2012.   01/01/2013
     
IAS 16 “Property, Plant and Equipment” – This clarifies that spare-parts and service equipment will be classified as Property, plant and equipment more than as inventories when it meets the Property, plant and equipment definition.    
IAS 32 “Financial Instruments: Presentation” – This clarifies the treatment of income taxes related to distributions and transaction costs.    
IAS 34 “Interim Financial Reporting” – This clarifies the asset and liability exposure requirements by segments in interim periods, ratifying the same requirements applicable to the annual financial statements.    
     
IFRS 10“Consolidated Financial Statements”, IFRS 11 “Joint Arrangements” and IFRS 12 “Disclosures of Interests in Other Entities.”   01/01/2013
Issued in June 2012. This clarifies the transitional provisions for IFRS 10, indicating that their application is required on the first day of the period in which the Standard is adopted. Accordingly, it might be necessary that amendments be made to comparatives presented in that period, if the assessment of the control on investments differs from that recognized in accordance with IAS 27/SIC 12.    

 

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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
25
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

2.5Transactions in foreign currency

 

(a)Functional and presentation currency

 

The Company’s annual consolidated financial statements are presented in United States dollars (“U.S. dollars” or “USD”), 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 annual consolidated financial statements are presented in thousands of United States dollars without decimals.

 

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.

 

(b)Basis of conversion

 

Domestic subsidiaries:

 

Assets and liabilities denominated in Chilean pesos and other currencies other than the functional currency (U.S. dollar) as of December 31, 2012 and 2011 have been translated to U.S. dollars at the exchange rates prevailing at those dates. The corresponding Chilean pesos were converted at Ch$479.96 per US$1.00 as of December 31, 2012, and Ch$519.20 per US$1.00 as of December 31, 2011.

 

The values of the UF (a Chilean peso-denominated, inflation-indexed monetary unit) used to convert the UF denominated assets and liabilities as of December 31, 2012 amounted to Ch$22,840.75 (US$47.59), and as of December 31, 2011 amounted to Ch$22,294.03 (US$42.94).

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
26
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

2.5Transactions in foreign currency, continued

 

Foreign subsidiaries:

 

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:

 

   31/12/2012   31/12/2011 
   US$   US$ 
         
Brazilian real   2.04    1.88 
New Peruvian sol   2.75    2.77 
Argentinean peso   4.92    4.30 
Japanese yen   86.58    77.74 
Euro   0.76    0.77 
Mexican peso   12.99    13.98 
Australian dollar   1.05    1.03 
Pound Sterling   0.62    0.64 
South African rand   8.47    8.10 
Ecuadorian dollar   1.00    1.00 
Chilean peso   479.96    519.20 
UF   47.59    42.94 

 

(c)Transactions and balances

 

Non-monetary transaction balances denominated in a currency other than the functional currency (U.S. dollar) are translated using the exchange rate in force for the functional currency at the transaction date. Monetary assets and liabilities denominated in a foreign currency are translated at the exchange rate of the functional currency prevailing at the closing date of the consolidated statement of financial position. All differences are taken to the statement of income with the exception of all monetary items that provide an effective hedge for a net investment in a foreign operation. These items are recognized in other comprehensive income upon the disposal of the investment, at which time they are recognized in the statement of income. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.

 

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
27
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

2.5Transactions in foreign currency, continued

 

(d)Group entities

 

The profit or loss, assets and liabilities of all those entities with a functional currency other than the presentation currency are translated to the presentation currency as follows:

 

-Assets and liabilities are translated at the closing date exchange rate as of the date of the consolidated statement of financial position.
-Revenue and expenses in each profit or loss account are translated at average exchange rates for the year.
-All resulting foreign currency exchange differences are recognized as a component separate in the foreign currency translation difference reserve

 

In consolidation, foreign currency exchange differences which arise from the conversion of a net investment in foreign entities are taken to net equity (other reserves). At the disposal date, these exchange differences are recognized in the statement of comprehensive income as part of the loss or gain from the sale.

 

2.6Basis of consolidation

 

(a)Subsidiaries

 

Subsidiaries are all those entities on which Sociedad Química y Minera de Chile S.A. has the control to lead the financial and operating policies, which, in general, is accompanied by participation greater than half the voting rights. Subsidiaries are consolidated from the date in which control is transferred to the Company and are excluded from consolidation on the date in which this control ceases to exist. Subsidiaries apply the same accounting policies that its Parent.

 

In order to recognize the acquisition of an investment, the Company uses the acquisition method. Under this method, the acquisition cost is the fair value of assets delivered, of equity instruments issued and of liabilities incurred or assumed at the exchange date plus costs directly attributable to acquisition. Identifiable assets acquired and identifiable liabilities and contingencies assumed in a business combination are initially stated at their fair value at the acquisition date. For each business combination, the acquirer measures the non-controlling interests in the acquiree at fair value or as a proportional part of the acquiree’s net identifiable assets.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
28
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

2.6 Basis of consolidation, continued

 

Companies included in consolidation:

 

            Ownership interest 
      Country of      31/12/2012   31/12/2011 
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$   0.8600    99.1400    100.0000    100.0000 
Foreign  Soquimich S.R.L. Argentina  Argentina  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Soquimich European Holding B.V.  The 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 Perú 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$   2.7900    97.2100    100.0000    100.0000 
Foreign  SQM France S.A.  France  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Japan Co.  Ltd.  Japan  US$   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 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.  Cayman Islands  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.(c)  Spain  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Iodine Minera B.V.  The Netherlands  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 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
29
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

2.6Basis of consolidation, continued

 

Companies included in consolidation:

 

            Ownership interest 
       Country of     31/12/2012   31/12/2011 
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    99.9974    99.9974 
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  Chilean peso   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  Chilean peso   1.0000    99.0000    100.0000    100.0000 
79.876.080-7  Almacenes y Depósitos Ltda.  Chile  Chilean peso   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 
78.602.530-3  Minera Nueva Victoria Ltda.(d)  Chile  US$   0.0000    0.0000    0.0000    100.0000 
78.053.910-0  Proinsa Ltda.  Chile  Chilean peso   0.0000    60.5800    60.5800    60.5800 
76.534.490-5  Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.  Chile  Chilean peso   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  Chilean peso   0.0000    42.4468    42.4468    42.4468 
76.145.229-0  Agrorama S.A. (b)  Chile  Chilean peso   0.0000    60.6377    60.6377    60.6377 

 

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

 

(b) This subsidiary was incorporated on April 7, 2011.

 

(c) On December 14, 2011, Fertilizantes Naturales S.A. changed its company name to SQM Iberian S.A.

 

(d) On November 30, 2012, Minera Nueva Victoria Ltda. merged with SQM Potasio S.A. and was absorbed by it.

 

Subsidiaries are consolidated on a line by line basis by including in the consolidated financial statements all of their assets, liabilities, revenues, expenses and cash flows upon making the respective adjustments and eliminations of intragroup operations.

 

The results from subsidiary companies acquired or disposed of during the year are included in consolidated statement of income accounts from the effective date of acquisition or up to the effective date of disposal, as applicable.

 

Non-controlling interests represent the portion of subsidiary net assets and operating results not owned directly or indirectly by the parent.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
30
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

2.7Significant accounting judgments, estimates and assumptions

 

The information contained in these consolidated financial statements is the responsibility of the Company’s management, who expressly indicate that they have applied all the principles and criteria included in IFRS, issued by the IASB.

 

In the accompanying consolidated financial statements, judgments and estimates have been made by management to quantify certain assets, liabilities, revenues, expenses and commitments recorded and or disclosed therein. Basically, these estimates refer to the following:

 

-The useful lives of tangible and intangible assets and their residual values.
-Impairment evaluations of certain assets, including trade receivables.
-Assumptions used for the actuarial calculation of commitments for employee pensions and staff severance indemnities.
-Provisions for commitments assumed with third parties and contingent liabilities.
-Inventory provisions based on technical studies which cover the different variables affecting products in stock (density. humidity. among others) and allowances on slow-moving spare parts in inventory.
-Future costs for the closure of mining facilities.
-The determination of the fair value of certain financial and non-financial assets and derivative instruments.
-The determination and allocation of fair values in business combinations

 

Although these estimates have been made considering information available as of the date of preparation of these consolidated financial statements, it is possible that events that may occur in the future could make their modification necessary in future years. Changes would be recorded prospectively, recognizing the effects of the change in estimates in the respective future consolidated financial statements.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
31
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 - Significant accounting policies

 

3.1Inventories

 

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.

 

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.

 

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

 

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 annual average price method.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
32
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 - Significant accounting policies (continued)

 

3.2Trade 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 (which is equivalent to their face value, discounting implicit interest for installment sales) 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.

 

3.3Investments recognized using the equity method

 

Interests in companies in which control is exercised together with another company (joint ventures) or in which the Company has significant influence (associated companies) are recorded using the equity method. Significant influence is assumed to exist when the Company has interest exceeding 20% of the investee's equity.

 

Under this method, the investment is recognized in the consolidated classified statement of financial position at cost plus changes subsequent to the acquisition in an amount proportional to the net associated company’s equity using the ownership interest in the associate. The associated goodwill is included at the carrying value of the investee, and it is not subject to amortization. The debit or credit to profit or loss reflects the proportional amount in the associated companies’ results for the reporting period.

 

Unrealized profit on transactions with associates and subsidiaries are eliminated in consolidation of the ownership percentage that the Company has on these entities. Unrealized losses are also eliminated unless the transaction provided evidence of loss from impairment of the assets transferred.

 

Changes in equity of the associates are recognized proportionally with a debit or credit to “Other reserves” and classified according to their origin.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
33
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 - Significant accounting policies (continued)

 

3.3Investments recognized using the equity method, continued

 

The associated companies and the Company’s reporting dates and policies are similar for equivalent transactions and events under similar circumstances.

 

In the event that significant influence is lost or the investment is sold or is available-for-sale, the equity value method is discontinued, suspending the recognition of proportional income.

 

If the resulting amount according to the equity method is negative, the Company’s equity interest is reduced to zero in the consolidated financial statements, unless the Company has a contractual commitment to resolve the equity position. In this case, the respective provision for risks and expenses is recorded.

 

Dividends received in these companies are recorded by reducing the equity value and proportional profit or loss recognized in conformity with their interest, and are included in the consolidated statement of income under the caption “Equity in income (losses) of associates and joint ventures accounted for using the equity method”.

 

3.4Property, 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. The amount capitalized for this concept is ThUS$14,156 as of December 31, 2012 and ThUS$22,249 as of December 31, 2011.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
34
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 - Significant accounting policies (continued)

 

3.4Property, plant and 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.

 

Property, plant and equipment, net in the case of their residual values are depreciated using thee straight-line method over its estimated useful lives. When portions of a property, plant and equipment item have different useful lives, these portions are recorded as separate items.

 

The useful life is reviewed annually, and revised if necessary. The useful lives used for the depreciation and amortization of assets included in property, plant and equipment are presented below.

 

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. When portions of a property, plant and equipment item have different useful lives, these portions are recorded as separate items.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
35
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 - Significant accounting policies (continued)

 

3.4Property, plant and equipment, continued

 

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 

 

 

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.

 

The Company obtains property rights and mining concessions from the Chilean State Government. Property rights are usually obtained without any initial cost (other than the payment of mining licenses and minor registration expenses) and when rights are obtained on these concessions, the Company retains them while it pays the related annual license fees. Such license fees, which are paid annually, are recorded as prepaid expenses and amortized over the following twelve month period. Amounts attributable to mining concessions acquired from third parties, which are not from the Chilean State, are recorded at their acquisition cost in property, plant and equipment.

 

Costs derived from daily maintenance of property, plant and equipment are recognized when incurred.

 

3.5Financial information by operating segments

 

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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
36
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 - Significant accounting policies (continued)

 

3.6Financial information by operating segments, continued

 

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

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
37
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 - Significant accounting policies (continued)

 

3.6Revenue 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, the customer has total discretion on the distribution channel and the price at which products are sold 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.

 

(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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
38
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.6Revenue recognition, continued

 

(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.

 

3.7Income 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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
39
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.7Income tax and deferred taxes, continued

 

As of the date of these consolidated financial statements, 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.

 

3.8Earnings per share

 

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

 

The Company has not conducted any type of operation of potential dilutive effect that assumes diluted earnings per share other than the basic earnings per share.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
40
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.9Impairment 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 December 31, 2012 and 2011, the Company is unaware of any indication of impairment with regard to its assets.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
41
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.9Impairment of non-financial assets, continued

 

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

 

3.10Financial assets

 

The Company classifies their financial assets under the following categories: at fair value through profit or loss, loans and trade receivables, financial assets held-to-maturity and available-for-sale financial assets. The classification depends on the purpose for which financial assets were acquired. Management determines the classification of its financial assets at the time of initial recognition.

 

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

 

(a)   Financial assets at fair value through profit or loss

 

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if it is acquired mainly for the purpose of being sold in the short-term. Derivatives are also classified as acquired for trading unless they are designated as hedge accounts. Assets under this category are classified as current assets and variations generated in fair value are directly recognized in profit or loss.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
42
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.10Financial assets, continued

 

(b)    Loans and trade receivables

 

Loans and trade receivables are non-derivative financial assets with fixed o determinable payments not quoted in any active market. These are included in current assets, except for those with maturities exceeding 12 months from the closing date, which are classified as non-current assets. Loans and trade receivables are included under the caption “Trade and other receivables” in the consolidated classified statement of financial position and are stated at amortized cost. The subsequent measurement at amortized cost is calculated using the effective interest rate method less impairment.

 

(c)   Financial assets held-to-maturity

 

Financial assets held-to-maturity are non-derivative financial assets with fixed or determinable payments and fixed maturities which management has the positive intention and ability of holding to maturity. If a significant amount of financial assets held to maturity were to be sold, the full category would be reclassified as available for sale. Assets in this category are stated at amortized cost.

 

(d)   Financial assets available for sale

 

Financial assets available for sale are non-derivative instruments that have been designated in this category or are not classified in any of the other categories. They are included in non-current assets unless the Company intends to dispose of the investment in the 12 months following the closing date. These assets are stated at fair value, recognizing in other comprehensive income those variations in fair value, if any.

 

3.11Financial liabilities

 

The Company classifies its financial liabilities under the following categories: at fair value through profit or loss, trade payables, interest-bearing loans or derivatives designated as hedging instruments.

 

The Company’s management determines the classification of its financial liabilities at the time of initial recognition.

 

Financial debt obligations are recorded at face value and as non-current when maturity is over twelve months and as current when maturity is less than twelve months. Interest expenses are recorded the year in which they are accrued under a financial approach.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
43
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.11Financial liabilities, continued

 

In accordance with IAS 32 and 39, debt-related expenses are accounted for in the accompanying consolidated statement of financial position, deducting the associated debt and are imputed to the results of the year within the life of the debt using the effective interest rate method.

 

Financial liabilities are derecognized when the obligation is repaid, settled or it expires.

 

(a)   Financial liabilities at fair value through profit or loss

 

Financial liabilities are classified at fair value when these are held for trading or designated in their initial recognition at fair value through profit or loss. This category includes derivative instruments not designated for hedge accounting.

 

(b)   Trade payables

 

Trade payables to suppliers are subsequently stated at their amortized cost using the effective interest rate method.

 

(c)   Interest-bearing loans

 

Loans are subsequently stated 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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
44
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.12Environment

 

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

 

3.13Minimum dividend

 

According to the Corporations Act, a publicly traded corporation must pay dividends according to the policy decided at the General Shareholders' Meeting of each year, with a minimum of 30% of the profit for the year ended December 31, 2012 if the corporation does not have unabsorbed accumulated deficit from prior years, unless it is otherwise decided with the unanimous vote of the issued and subscribed shares.

 

3.14Consolidated statements of cash flows

 

Cash equivalents relate to short-term, highly liquid investments that are readily convertible into known amounts of cash and are subject to low risk of change in value, and expire in less than three months from the date of acquisition of the instrument

 

For the purposes of the consolidated statements of cash flows, cash and cash equivalents comprise the balance of cash and cash equivalents as defined previously.

 

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

 

3.15Obligations 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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
45
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.15Obligations related to employee termination benefits and pension commitments, continued

 

Actuarial losses and gains that may be generated by variations in previously defined obligations are directly recorded in profit or loss for the year.

 

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 December 31, 2012 and 2011.

 

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. The net balance of this obligation is presented under the non-current provisions for employee benefits.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
46
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.16Financial derivatives and hedge transactions

 

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 entries 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 entries.

 

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.

 

(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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
47
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.16Financial derivatives and hedging transactions, continued

 

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 reserves, 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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
48
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.17Leases

 

(a)   Lease – Finance lease

 

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

 

Each lease payment is distributed between the liability and the interest expenses to obtain ongoing interest on the pending balance of 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 lessor maintains a significant part of the risks and rewards derived from the ownership are classified as operating leases. Operating lease payments (net of any incentive received from the lessor) are debited to the statement of income or capitalized (as applicable) on a straight-line basis over the lease period.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
49
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.18Prospecting expenses

 

Those prospecting expenses associated with mineral reserves being exploited are included under Inventory and amortized according to the estimated mineral content reserves. Prospecting expenses associated with future mineral reserves are presented under other non-financial assets as and when minerals included in the future reserve have caliche ore-grade, which makes the mining property economically commercializable.

 

Those expenses incurred on mining properties in which the product has a low caliche ore-grade that is not economically commercializable, are directly charged to profit or loss.

 

3.19Other 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.

 

The Company determines and recognizes the cost related to employee vacation on an accrual basis.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
50
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.20Compensation 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).

 

3.21Good and service insurance expenses

 

Payments for the different insurance policies which the Company contracts are recognized in expenses considering the proportional amount related to the time that they cover, regardless of payment terms. Amounts paid and not consumed are recognized as prepayments within current assets.

 

Costs of claims are recognized in profit or loss immediately after they become known, net of recoverable amounts from insurance companies. Recoverable amounts are recorded as a reimbursable asset from the insurance company under “Trade and other receivables", calculated as established in the respective insurance policies.

 

3.22Intangible 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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
51
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.22Intangible 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.

 

(b)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.

 

(c)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.

 

(d)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.

 

No impairment of intangible assets exists as of December 31, 2012 and December 31, 2011.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
52
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 3 -    Significant accounting policies (continued)

 

3.23Research and development expenses

 

Research and development expenses are expensed in the period in which the disbursement is made, with the exception of property, plant and equipment acquired for use in research and development, which are recognized in the accounting under the respective item within property, plant and equipment.

 

3.24Classification 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 anticipated recovery date

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
53
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 4 -    Financial risk management

 

4.1Financial 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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
54
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 4 -    Financial risk management (continued)

 

4.2Risk factors

 

4.2.1Market 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.

 

At present, the Company has a direct annual expense close to US$130 million on account of petrol, gas and equivalents and close to US$ 60 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.

 

4.2.2Doubtful 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.

 

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

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
55
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 4 -    Financial risk management (continued)

 

4.2.3Currency 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$ 440 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.

 

As of December 31, 2011, 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$ 56.1 million. As of December 2012, this value amounts to US$ 100.6 million, both for SQM.

 

As of December 31, 2012, the Chilean peso to US dollar Exchange rate was Ch$ 479.96 per US$ 1.00, and as of December 31, 2011 it was Ch$ 519.20 per US$ 1.00.

 

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

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 4 -    Financial risk management (continued)

 

4.2.4Interest 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 December 31, 2012, approximately 21% of the Company’s financial obligations are valued at LIBOR; therefore significant increases in the rate may impact its financial position. A 100 point variation in this rate may trigger variations in the financial expenses close to US$ 3.1 million. Notwithstanding, this effect is significantly counterbalanced by the returns of the Company’s investments that also relate to LIBOR.

 

In addition, as of December 31, 2012, the Company's financial debt is mainly in the long-term, with 8% with maturities under 12 months which decreases the exposure to changes in the interest rates.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
57
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 4 -    Financial risk management (continued)

 

4.2.5Liquidity 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 operational results 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 December 31, 2012, the Company had non-committed and available bank credit lines for working capital for a total of approximately US$ 530 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.

 

4.3Risk 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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
58
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 5 - Changes in accounting estimates and policies (consistent presentation)

 

5.1Changes in accounting estimates

 

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

 

5.2Changes in accounting policies

 

As of December 31, 2012, 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 December 31, 2012 and December 31, 2011 and the statements of comprehensive income, equity and cash flows for the periods ended December 31, 2012 and December 31, 2011, have been prepared in accordance with IFRS, and accounting principles and criteria have been applied consistently.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
59
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 6 - Background of companies included in consolidation

 

6.1Parent’s stand-alone assets and liabilities

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
         
Assets   3,908,259    3,626,748 
Liabilities   (1,775,476)   (1,813,914)
Assets (liabilities)   2,132,783    1,812,834 

 

6.2Parent 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.

 

6.3Joint 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 30.50% as of December 31, 2012 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 2.08% 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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
60
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

6.3Joint 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.   20.35 
96.863.960-9  Inversiones Global Mining (Chile) Limitada   3.34 
76.165.311-5  Potasios de Chile S.A.   6.81 
Total Pampa Group      30.50 
         
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.   0.29 
59.023.690-k  La Esperanza Delaware Corporation   0.09 
Total Kowa Group      2.08 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
61
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

6.4Information on consolidated subsidiaries

 

Financial information as of December 31, 2012 of the companies in which the group exerts control and significant influence is as follows:

 

12/31/2012
      Country of     Ownership interest   Assets   Liabilities   Total equity   Net profit
(loss)
 
Subsidiary  Tax ID No.  incorporation  Functional currency  Direct   Indirect   Total   ThUS$   ThUS$   ThUS$   ThUS$ 
SQM Nitratos S.A.  96.592.190-7  Chile  US$   99.9999    0.0001    100.0000    735,546    534,869    200,677    148,768 
Proinsa Ltda.  78.053.910-0  Chile  Chilean peso   -    60.5800    60.5800    221    -    221    - 
SQMC Internacional  Ltda.  86.630.200-6  Chile  Chilean peso   -    60.6381    60.6381    292    -    292    2 
SQM Potasio S.A.  96.651.060-9  Chile  US$   99.9974    -    99.9999    1,149,717    14,306    1,135,411    259,578 
Serv. Integrales de Tránsito y Transf. S.A.  79.770.780-5  Chile  US$   0.0003    99.9997    100.0000    357,590    326,522    31,068    4,330 
Isapre Norte Grande Ltda.  79.906.120-1  Chile  Chilean peso   1.0000    99.0000    100.0000    1,527    872    655    263 
Ajay SQM Chile S.A.  96,592,180-K  Chile  US$   51.0000    -    51.0000    26,262    6,226    20,036    9,980 
Almacenes y Depósitos Ltda.  79.876.080-7  Chile  Chilean peso   1.0000    99.0000    100.0000    451    -    451    (11)
SQM Salar S.A.  79.626.800-K  Chile  US$   18.1800    81.8200    100.0000    1,611,208    464,669    1,146,539    318,275 
SQM Industrial S.A.  79.947.100-0  Chile  US$   99.0470    0.9530    100.0000    1,988,068    1,070,450    917,618    93,488 
Exploraciones Mineras S.A.  76.425.380-9  Chile  US$   0.2691    99.7309    100.0000    31,944    4,383    27,561    (236)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.  76.534.490-5  Chile  Chilean peso   -    100.0000    100.0000    1,037    902    135    17 
Soquimich Comercial S.A.  79.768.170-9  Chile  US$   -    60.6383    60.6383    186,462    73,470    112,992    8,555 
Comercial Agrorama Ltda.  76.064.419-6  Chile  Chilean peso   -    42.4468    42.4468    17,208    15,996    1,212    (185)
Comercial Hydro  S.A.  96.801.610-5  Chile  Chilean peso   -    60.6383    60.6383    8,100    230    7,870    430 
Agrorama S.A.  76.145.229-0  Chile  Chilean peso   -    60.6377    60.6377    14,250    14,093    157    47 
SQM North America Corp.  Foreign  United States  US$   40.0000    60.0000    100.0000    319,812    284,290    35,522    23,737 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
62
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

6.4Information on consolidated subsidiaries, continued

 

12/31/2012
      Country of     Ownership interest   Assets   Liabilities   Total equity   Net profit
(loss)
 
Subsidiary  Tax ID No.  incorporation  Functional currency  Direct   Indirect   Total   ThUS$   ThUS$   ThUS$   ThUS$ 
RS Agro Chemical Trading A.V.V.  Foreign  Aruba  US$   98.3333    1.6667    100.0000    5,214    -    5,214    (10)
Nitratos Naturais do Chile Ltda.  Foreign  Brazil  US$   -    100.0000    100.0000    290    5,005    (4,715)   (284)
Nitrate Corporation of Chile Ltd.  Foreign  United Kingdom  US$   -    100.0000    100.0000    5,076    -    5,076    - 
SQM Corporation N.V.  Foreign  Dutch Antilles  US$   0.0002    99.9998    100.0000    86,953    3,724    83,229    (3,314)
SQM Perú S.A.  Foreign  Peru  US$   0.9800    99.0200    100.0000    904    1,214    (310)   (165)
SQM Ecuador S.A.  Foreign  Ecuador  US$   0.0040    99.9960    100.0000    19,419    18,065    1,354    244 
SQM Brasil Ltda.  Foreign  Brazil  US$   2.7900    97.2100    100.0000    723    942    (219)   78 
SQI Corporation N.V.  Foreign  Dutch Antilles  US$   0.0159    99.9841    100.0000    17    43    (26)   (8)
SQMC Holding Corporation L.L.P.  Foreign  Aruba  US$   0.1000    99.9000    100.0000    24,597    1,657    22,940    2,422 
SQM Japan Co.  Ltd.  Foreign  Japan  US$   1.0000    99.0000    100.0000    2,476    711    1,765    (125)
SQM Europe N.V.  Foreign  Belgium  US$   0.8600    99.1400    100.0000    391,590    356,719    34,871    (14,928)
SQM Italia SRL  Foreign  Italy  US$   -    100.0000    100.0000    1,360    18    1,342    - 
SQM Indonesia S.A.  Foreign  Indonesia  US$   -    80.0000    80.0000    5    1    4    - 
North American Trading Company  Foreign  United States  US$   -    100.0000    100.0000    305    39    266    - 
SQM Virginia LLC  Foreign  United States  US$   -    100.0000    100.0000    29,204    14,829    14,375    (1)
SQM Comercial de México S.A. de C.V.  Foreign  Mexico  US$   0.0013    99.9987    100.0000    79,092    55,672    23,420    3,254 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
63
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

6.4Information on consolidated subsidiaries, continued

 

12/31/2012
      Country of     Ownership interest   Assets   Liabilities   Total equity   Net profit
(loss)
 
Subsidiary  Tax ID No.  incorporation  Functional currency  Direct   Indirect   Total   ThUS$   ThUS$   ThUS$   ThUS$ 
SQM Investment Corporation N.V.  Foreign  Dutch Antilles  US$   1.0000    99.0000    100.0000    64,264    40,239    24,025    743 
Royal Seed Trading Corporation A.V.V.  Foreign  Aruba  US$   1.6700    98.3300    100.0000    242,707    253,736    (11,029)   (2,435)
SQM Lithium Specialties LLP  Foreign  United States  US$   -    100.0000    100.0000    15,785    1,265    14,520    (1)
Soquimich SRL Argentina  Foreign  Argentina  US$   -    100.0000    100.0000    422    176    246    (39)
Comercial Caimán Internacional S.A.  Foreign  Panama  US$   -    100.0000    100.0000    333    1,146    (813)   (58)
SQM France S.A.  Foreign  France  US$   -    100.0000    100.0000    351    114    237    - 
Administración y Servicios Santiago S.A. de C.V.  Foreign  Mexico  US$   -    100.0000    100.0000    50    811    (761)   127 
SQM Nitratos México S.A. de C.V.  Foreign  Mexico  US$   -    51.0000    51.0000    33    23    10    - 
Soquimich European Holding B.V.  Foreign  The Netherlands  US$   -    100.0000    100.0000    179,048    102,950    76,098    (4,932)
SQM Iberian S.A  Foreign  Spain  US$   -    100.0000    100.0000    81,429    81,883    (454)   (2,135)
Iodine Minera B.V.  Foreign  The Netherlands  US$   -    100.0000    100.0000    16,929    -    16,929    3,708 
SQM Africa Pty Ltd.  Foreign  South Africa  US$   -    100.0000    100.0000    98,127    91,370    6,757    (2,921)
SQM Oceania Pty Ltd.  Foreign  Australia  US$   -    100.0000    100.0000    5,621    1,613    4,008    755 
SQM Agro India Pvt. Ltd.  Foreign  India  US$   -    100.0000    100.0000    18    11    7    (38)
SQM Beijing Commercial Co. Ltd.  Foreign  China  US$   -    100.0000    100.0000    3,637    1,779    1,858    1,621 
                                             
Total                           7,805,674    3,847,033    3,958,641    848,596 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
64
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

6.4Information on consolidated subsidiaries, continued

 

12/31/2011
      Country of     Ownership interest   Assets   Liabilities   Total equity   Net profit
(loss)
 
Subsidiary  Tax ID No.  incorporation  Functional currency  Direct   Indirect   Total   ThUS$   ThUS$   ThUS$   ThUS$ 
SQM Nitratos S.A.  96.592.190-7  Chile  US$   99.9999    0.0001    100.0000    819,424    665,515    153,909    106,473 
Proinsa Ltda.  78.053.910-0  Chile  Chilean peso   -    60.5800    60.5800    204    -    204    (1)
SQMC Internacional  Ltda.  86.630.200-6  Chile  Chilean peso   -    60.6381    60.6381    268    -    268    (4)
SQM Potasio S.A.  96.651.060-9  Chile  US$   99.9974    -    99.9974    771,112    120,138    650,974    246,439 
Serv. Integrales de Tránsito y Transf. S.A.  79.770.780-5  Chile  US$   0.0003    99.9997    100.0000    277,296    250,558    26,738    4,302 
Isapre Norte Grande Ltda.  79.906.120-1  Chile  Chilean peso   1.0000    99.0000    100.0000    1,127    716    411    28 
Ajay SQM Chile S.A.  96,592,180-K  Chile  US$   51.0000    -    51.0000    26,977    9,855    17,122    10,066 
Almacenes y Depósitos Ltda.  79.876.080-7  Chile  Chilean peso   1.0000    99.0000    100.0000    419    1    418    (17)
SQM Salar S.A.  79.626.800-K  Chile  US$   18.1800    81.8200    100.0000    1,438,672    610,538    828,134    286,239 
SQM Industrial S.A.  79.947.100-0  Chile  US$   99.0470    0.9530    100.0000    1,889,981    1,066,598    823,383    93,062 
Minera Nueva Victoria S.A.  78.602.530-3  Chile  US$   99.000    1.0000    100.0000    112,628    4,527    108,101    4,069 
Exploraciones Mineras S.A.  76.425.380-9  Chile  US$   0.2691    99.7309    100.0000    31,878    4,082    27,796    (207)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.  76.534.490-5  Chile  Chilean peso   -    100.0000    100.0000    757    648    109    (23)
Soquimich Comercial S.A.  79.768.170-9  Chile  US$   -    60.6383    60.6383    191,346    82,750    108,596    7,220 
Comercial Agrorama Ltda.  76.064.419-6  Chile  Chilean peso   -    42.4468    42.4468    11,555    10,264    1,291    29 
Comercial Hydro  S.A.  96.801.610-5  Chile  Chilean peso   -    60.6383    60.6383    7,681    241    7,440    334 
Agrorama S.A.  76.145.229-0  Chile  Chilean peso   -    60.6377    60.6377    328    226    102    (91)
SQM North America Corp.  Foreign  United States  US$   40.0000    60.0000    100.0000    188,554    176,816    11,738    (19,702)

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
65
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

6.4Information on consolidated subsidiaries, continued

 

12/31/2011
      Country of     Ownership interest   Assets   Liabilities   Total equity   Net profit
(loss)
 
Subsidiary  Tax ID No.  incorporation  Functional currency  Direct   Indirect   Total   ThUS$   ThUS$   ThUS$   ThUS$ 
RS Agro Chemical Trading A.V.V.  Foreign  Aruba  US$   98.3333    1.6667    100.0000    5,224    -    5,224    (4)
Nitratos Naturais do Chile Ltda.  Foreign  Brazil  US$   -    100.0000    100.0000    2,349    6,804    (4,455)   271 
Nitrate Corporation of Chile Ltd.  Foreign  United Kingdom  US$   -    100.0000    100.0000    5,076    -    5,076    - 
SQM Corporation N.V.  Foreign  Dutch Antilles  US$   0.0002    99.9998    100.0000    89,469    3,715    85,754    40,340 
SQM Perú S.A.  Foreign  Peru  US$   0.9800    99.0200    100.0000    6,466    6,611    (145)   (759)
SQM Ecuador S.A.  Foreign  Ecuador  US$   0.0040    99.9960    100.0000    9,724    9,176    548    (83)
SQM Brasil Ltda.  Foreign  Brazil  US$   2.7900    97.2100    100.0000    354    1,050    (696)   113 
SQI Corporation N.V.  Foreign  Dutch Antilles  US$   0.0159    99.9841    100.0000    17    36    (19)   6 
SQMC Holding Corporation L.L.P.  Foreign  Aruba  US$   0.1000    99.9000    100.0000    21,131    614    20,517    10,926 
SQM Japan Co.  Ltd.  Foreign  Japan  US$   1.0000    99.0000    100.0000    2,968    1,078    1,890    518 
SQM Europe N.V.  Foreign  Belgium  US$   0.8600    99.1400    100.0000    430,994    393,419    37,575    20,135 
SQM Italia SRL  Foreign  Italy  US$   -    100.0000    100.0000    1,333    17    1,316    - 
SQM Indonesia S.A.  Foreign  Indonesia  US$   -    80.0000    80.0000    5    1    4    (1)
North American Trading Company  Foreign  United States  US$   -    100.0000    100.0000    306    39    267    - 
SQM Virginia LLC  Foreign  United States  US$   -    100.0000    100.0000    29,207    14,830    14,377    (3)
SQM Comercial de México S.A. de C.V.  Foreign  Mexico  US$   0.0013    99.9987    100.0000    68,572    48,406    20,166    (1,061)

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
66
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

6.4Information on consolidated subsidiaries, continued

 

12/31/2011
      Country of     Ownership interest   Assets   Liabilities   Total equity   Net profit
(loss)
 
Subsidiary  Tax ID No.  incorporation  Functional currency  Direct   Indirect   Total   ThUS$   ThUS$   ThUS$   ThUS$ 
SQM investment Corporation N.V.  Foreign  Dutch Antilles  US$   1.0000    99.0000    100.0000    65,123    41,991    23,132    1,887 
Royal Seed Trading Corporation A.V.V.  Foreign  Aruba  US$   1.6700    98.3300    100.0000    196,735    203,543    (6,808)   1,251 
SQM Lithium Specialties LLP  Foreign  United States  US$   -    100.0000    100.0000    15,785    1,264    14,521    (3)
Soquimich SRL Argentina  Foreign  Argentina  US$   -    100.0000    100.0000    429    144    285    (78)
Comercial Caimán Internacional S.A.  Foreign  Panama  US$   -    100.0000    100.0000    477    1,232    (755)   (14)
SQM France S.A.  Foreign  France  US$   -    100.0000    100.0000    351    114    237    - 
Administración y Servicios Santiago S.A. de C.V.  Foreign  Mexico  US$   -    100.0000    100.0000    13    915    (902)   100 
SQM Nitratos México S.A. de C.V.  Foreign  Mexico  US$   -    51.0000    51.0000    27    17    10    - 
Soquimich European Holding B.V.  Foreign  The Netherlands  US$   -    100.0000    100.0000    153,211    72,969    80,242    38,850 
SQM Iberian S.A  Foreign  Spain  US$   -    100.0000    100.0000    27,225    25,638    1,587    258 
Iodine Minera B.V.  Foreign  The Netherlands  US$   -    100.0000    100.0000    13,228    7    13,221    3,100 
SQM Africa Pty Ltd.  Foreign  South Africa  US$   -    100.0000    100.0000    62,335    52,657    9,678    7,821 
SQM Venezuela S.A.  Foreign  Venezuela  US$   -    100.0000    100.0000    5    328    (323)   (157)
SQM Oceania Pty Ltd.  Foreign  Australia  US$   -    100.0000    100.0000    4,349    1,042    3,307    2,372 
SQM Agro India Pvt. Ltd.  Foreign  India  US$   -    100.0000    100.0000    63    18    45    (27)
SQM Beijing Commercial Co. Ltd.  Foreign  China  US$   -    100.0000    100.0000    2,147    1,910    237    140 
                                             
Total                           6,984,905    3,893,058    3,091,847    864,114 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
67
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

6.5Detail of transactions between consolidated companies

 

a)Transactions conducted in 2012

 

On November 30, 2012, SQM S.A. transferred and made a capital contribution of the 99% of the ownership interest in Minera Nueva Victoria Limitada to SQM Potasio S.A.; therefore, SQM Potasio S.A. obtains 100% of the ownership. As a result of the above, Minera Nueva Victoria Limitada merged into SQM Potasio S.A., which generates the dissolution of Minera Nueva Victoria Limitada.

 

Transactions conducted in 2011

 

On April 7, 2011, Agrorama S.A. was incorporated with ownership interest by Soquimich Comercial S.A. of 99.999% and by Sociedad Productora de Insumos Agrícolas Ltda. of 0.001%.  This new company will have share capital of ThCh$100,000 (ThUS$ 211), its lifespan will be indefinite and its line of business will be the trading and distribution of fertilizers, pesticides and agricultural products or supplies. 

 

On August 30, 2011, SQM Industrial S.A. made a capital contribution of ThUS$8,000 in its subsidiary SQMC Mexico S.A. de CV.

 

During September 2011, SQM Industrial S.A. made a capital contribution of ThUS$14,017 to its subsidiary, SQMC México S.A. de CV, increasing its ownership interest to 99.8739%.

 

During September 2011, the subsidiary, Soquimich European Holding B.V., acquires from its associate, Nutrisi Holding N.V. ownership interest of 66.6% which it maintained in the subsidiary, Fertilizantes Naturales S.A. for ThUS$3,179.

 

On December 12, 2011, the subsidiary, Comercial Agrorama Callegari Ltda. changed its name to “Comercial Agrorama Limitada”.

On December 14, 2011, Fertilizantes Naturales S.A. changed its name to SQM Iberian S.A.

 

During December 2011, the subsidiary, Soquimich European Holding B.V. sells its ownership interest of 50% in Nutrisi Holding N.V. for ThUS$5.736.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
68
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 7 - Cash and cash equivalents

 

7.1Types of cash and cash equivalents

 

As of December 31, 2012 and 2011, cash and cash equivalents are detailed as follows:

 

a)Cash

 

   12/31/2012   12/31/20111 
   ThUS$   ThUS$ 
         
Cash on hand   90    73 
Cash in banks   41,541    34,659 
Other demand deposits   833    3,291 
Total cash   42,464    38,023 

 

b)Cash equivalents

 

   12/31/2012   12/31/20111 
   ThUS$   ThUS$ 
         
Short-term deposits, classified as cash equivalents   139,943    263,396 
Short-term investments, classified as cash equivalents   141,946    143,573 
Total cash equivalents   281,889    406,969 
           
Total cash and cash equivalents   324,353    444,992 

  

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
69
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 7 - Cash and cash equivalents (continued)

 

7.2Short-term investments, classified as cash equivalents

 

As of December 31, 2012 and December 31, 2011, short-term investments, classified as cash and cash equivalents relate to mutual funds (investment liquidity funds) for investments in:

 

Institution  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Legg Mason - Western Asset Institutional Cash Reserves   47,408    47,162 
BlackRock - Institutional US Dollar Liquidity Fund   47,490    48,025 
JP Morgan US dollar Liquidity Fund Institutional   47,048    48,386 
Total   141,946    143,573 

 

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

 

7.3Information on cash and cash equivalents by currency

 

As of December 31, 2012 and December 31, 2011, information on cash and cash equivalents by currency is detailed as follows:

 

  12/31/2012   12/31/2011 
Original currency  ThUS$   ThUS$ 
Chilean Peso (*)   76,712    125,118 
US$   234,166    308,631 
Euro   3,601    3,070 
Mexican Peso   720    29 
South African Rand   7,421    5,450 
Japanese Yen   1,369    2,292 
Peruvian Sol   75    16 
Brazilian Real   20    22 
Chinese Yuan   181    300 
Indonesian rupee   5    5 
Indian rupee   13    45 
Pound sterling   70    14 
Total   324,353    444,992 

 

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

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
70
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 7 - Cash and cash equivalents (continued)

 

7.4Amount 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 December 31, 2012 and December 31, 2011, the Company has no significant cash balances with any type of restriction.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
71
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 7 - Cash and cash equivalents (continued)

 

7.5Short-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
ThUS$
   Interest accrued
to-date
   12/31/2012   12/31/2011 
                     ThUS$    ThUS$   ThUS$   ThUS$ 
Banco Crédito e Inversiones  Fixed term  Chilean peso   0.49    12/10/2012    01/17/2013    25,290    87    25,377    9,677 
Banco Crédito e Inversiones  Fixed term  Chilean peso   0.50    12/07/2012    02/07/2013    12,299    49    12,348    9,676 
Banco Crédito e Inversiones  -  -   -    -    -    -    -    -    25,209 
Banco Crédito e Inversiones  -  -   -    -    -    -    -    -    20,010 
Banco Crédito e Inversiones  -  -   -    -    -    -    -    -    20,531 
Banco Crédito e Inversiones  -  -   -    -    -    -    -    -    20,011 
Banco Crédito e Inversiones  -  -   -    -    -    -    -    -    20,014 
Banco Santander-Santiago  Fixed term  Chilean peso   0.49    12/06/2012    01/03/2013    11,609    47    11,656    12,093 
Banco Santander-Santiago  Fixed term  Chilean peso   0.49    12/06/2012    01/03/2013    7,493    30    7,523    20,110 
Banco Santander-Santiago  Fixed term  Chilean peso   0.45    12/28/2012    01/10/2013    6,252    3    6,255    20,110 
Banco Santander-Santiago  Fixed term  US$   1.12    12/07/2012    02/07/2013    8,005    6    8,011    20,110 
Banco Santander-Santiago  Fixed term  US$   0.70    12/21/2012    01/07/2013    3,500    1    3,501    3,001 
Banco Santander Santiago  Fixed term  US$   0.70    12/21/2012    01/07/2013    3,500    1    3,501    - 
Citibank New – York  Overnight  US$   0.01    12/31/2012    01/01/2013    20,146    -    20,146    115 
Citibank New – York  Overnight  US$   0.01    12/31/2012    01/01/2013    1,181    -    1,181    1,586 
Citibank New – York  Overnight  US$   0.01    12/31/2012    01/01/2013    17,256    -    17,256    - 
Citibank New – York  Overnight  US$   0.01    12/31/2012    01/03/2013    10,605    -    10,605    - 
Citibank New – York  Overnight  US$   0.01    12/31/2012    01/02/2013    2,582    -    2,582    - 
Corpbanca  Fixed term  Chilean peso   0.53    12/26/2012    02/01/2013    9,990    -    9,999    16,043 
Corpbanca  -  -   -    -    -    -    -    -    20,016 
Corpbanca  -  -   -    -    -    -    -    -    10,032 
Corpbanca  -  -   -    -    -    -    -    -    10,008 
IDBI Bank  -  -   -    -    -    -    -    -    2 
Banco BBVA Chile  Fixed term  Indian rupee   -    12/31/2012    01/31/2013    2    -    2    5,042 
Total                                  139,943    263,396 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
72
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 8 - Inventories

 

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

 

Type of inventory  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
         
Raw material reserves   8,675    10,111 
Supplies for production reserves   37,919    31,602 
Products-in-progress reserves   411,039    356,038 
Finished product reserves   438,603    346,651 
Total   896,236    744,402 

 

Inventory reserves recognized as of December 31, 2012 amount to ThUS$72,687, and as of December 31, 2011 amounted to ThUS$58,220. 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 December 31, 2012, the sum registered as cost of sale related to inventory in the statement of income amounts to ThUS$1,093,075 and as of December 31, 2011 to ThUS$1,016,119.

 

The breakdown of inventory reserves is detailed as follows:

 

Type of inventory  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
         
Raw material reserves   93    593 
Supplies for production reserves   500    500 
Products-in-progress reserves   46,635    33,811 
Finished product reserves   25,459    23,316 
           
Total   72,687    58,220 

 

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

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
73
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 9 - Related party disclosures

 

9.1Related 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 December 31, 2012, 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.

 

9.2Relationships 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 Global Mining Investments (Chile) S.A., collectively the Pampa Group, are the owners of a number of shares that are equivalent to 30.50% as of December 31, 2012 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 2.08% 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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
74
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 9 - Related party disclosures (continued)

 

9.2Relationship 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.   20.35 
96.863.960-9  Global Mining Investments (Chile) S.A.   3.34 
76.165.311-5  Potasios de Chile S.A.   6.81 
Total Pampa Group      30.50 
         
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.   0.29 
59.023.690-k  La Esperanza Delaware Corporation   0.09 
Total Kowa Group      2.08 

 

9.3Intermediate parent that publicly issues financial statements

 

The following intermediate parent of Sociedad Química y Minera de Chile S.A. publicly issues financial statements:

 

Soquimich Comercial S.A.

 

9.4Detailed identification of the link between the Parent and subsidiary

 

As of December 31, 2012 and December 31, 2011, the detail 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 Perú 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 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 Venezuela S.A.   Venezuela   US$   Subsidiary

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
75
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 9 - Related party disclosures (continued)

 

9.4Detailed identification of the link between the Parent and subsidiary, continued

 

As of December 31, 2012 and December 31, 2011, the detail is as follows:

 

Tax ID No.   Name   Country of
origin
  Functional currency   Nature
Foreign   SQM Italia SRL   Italy   US$   Subsidiary
Foreign   Comercial Caiman Internacional S.A.   Cayman Islands   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   Iodine Minera B.V.   The Netherlands   US$   Subsidiary
Foreign   SQM Agro India Pvt. Ltd.   India   US$   Subsidiary
Foreign   SQM Beijing Commercial Co. Ltd.   China   US$   Subsidiary
96.801.610-5   Comercial Hydro  S.A.   Chile   US$   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
78.602.530-3   Minera Nueva Victoria Ltda.(b)   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
77.557.430-5   Sales de Magnesio Ltda.   Chile   Chilean peso   Associate
Foreign   Abu Dhabi Fertilizer Industries WWL   Arabia   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   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   Kowa Company Ltd.   Japan   US$   Other related parties
96.511.530-7   Sociedad de Inversiones Pampa Calichera   Chile   US$   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 Perú S.A.C.   Peru   US$   Joint control or significant influence

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
76
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 9 - Related party disclosures (continued)

 

9.4Detailed identification of the link between the Parent and subsidiary, continued

 

Tax ID No.   Name   Country of
origin
  Functional currency   Nature
Foreign   SQM Vitas Southern Africa Pty.   South Africa   US$   Joint control or significant influence
Foreign   Misr Speciality Fertilizers (a)   Egypt   Egyptian pound   Associate
Foreign   NU3 N.V. (a)   Belgium   Euro   Associate
Foreign   NU3 B.V. (a)   The Netherlands   Euro   Associate

 

(a)Ownership relationship up to 2011.

 

(b)On November 30, 2012 Minera Nueva Victoria Ltda. merged with SQM Potasio S.A., being absorbed by the latter.

 

9.5Detail 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 December 31, 2012 and December 31, 2011, 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 December 31, 2012 and 2011, the detail of transactions with related parties is as follows:

 

Tax ID No.  Company  Nature  Country of origin  Transaction  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Foreign  Doktor Tarsa Tarim Sanayi As  Associate  Turkey  Sale of products   9,587    26,748 
Foreign  Ajay Europe S.A.R.L.  Associate  France  Sale of products   37,232    27,743 
Foreign  Ajay Europe S.A.R.L.  Associate  France  Dividends   3,564    824 
Foreign  Ajay North America LLC.  Associate  United States  Sale of products   42,081    47,501 
Foreign  Ajay North America LLC.  Associate  United States  Dividends   10,175    1,499 
Foreign  Abu Dhabi Fertilizer Industries WWL  Associate  United Arab Emirates  Sale of products   6,285    8,234 
Foreign  Abu Dhabi Fertilizer Industries WWL  Associate  United Arab Emirates  Dividends   525    - 
Foreign  NU3 B.V.  Associate  The Netherlands  Sale of products   -    15,708 
Foreign  NU3 N.V.  Associate  Belgium  Sale of products   -    9,993 
Foreign  SQM Thailand Co. Ltd.  Associate  Thailand  Sale of products   10,203    7,355 
Foreign  SQM Thailand Co. Ltd.  Associate  Thailand  Dividends   11    - 
77.557.430-5  Sales de Magnesio Ltda.  Associate  Chile  Sale of products   1,472    - 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
77
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 9 - Related party disclosures (continued)

 

9.5Detail of related parties and related party transactions, continued

 

Tax ID No.  Company  Nature  Country of origin  Transaction  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
77.557.430-5  Sales de Magnesio Ltda.  Associate  Chile  Dividends   1,052    491 
Foreign  Kowa Company Ltd.  Other related parties  Japan  Sale of products   123,581    138,818 
Foreign  SQM Vitas Brasil Agroindustria  Joint control or significant influence  Brazil  Sale of products   40,518    34,514 
Foreign  SQM Vitas Perú S.A.C.  Joint control or significant influence  Peru  Sale of products   26,123    13,608 
Foreign  SQM Vitas Southern Africa Pty.  Joint control or significant influence  South Africa  Sale of products   10,930    2,287 
Foreign  SQM Vitas Fzco.  Joint venture  United Arab Emirates  Sale of products   120    1,562 
Foreign  Sichuan SQM Migao Chemical Fertilizers Co Ltda.  Joint venture  China  Sale of services   62    - 
Foreign  Coromandel SQM  Joint venture  India  Sale of products   2,300    - 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
78
 

  

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 9 - Related party disclosures (continued)

 

9.6Trade receivables due from related parties, current:

 

Tax ID No.  Name  Nature  Country of origin  Currency  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
77.557.430-5  Sales de Magnesio Ltda.  Associate  Chile  Chilean peso   303    685 
Foreign  SQM Thailand Co. Ltd.  Associate  Thailand  US$   6,098    5,521 
Foreign  Doktor Tarsa Tarim Sanayi AS  Associate  Turkey  US$   -    3,899 
Foreign  Ajay Europe S.A.R.L.  Associate  France  US$   4,775    4,603 
Foreign  Ajay North America LLC.  Associate  United States  US$   4,633    7,387 
Foreign  Abu Dhabi Fertilizer Industries WWL  Associate  United Arab Emirates  US$   1,805    4,587 
Foreign  Misr Speciality Fertilizers  Associate  Egypt  US$   -    199 
Foreign  Kowa Company Ltd.  Jointly controlled entity  Japan  US$   29,929    44,188 
96.511.530-7  Soc.de Inversiones Pampa Calichera  Jointly controlled entity  Chile  US$   8    8 
Foreign  SQM  Star Qingdao Crop Nutrition Co., Ltd  Joint venture  China  US$   27    71 
Foreign  SQM Vitas Brasil Agroindustria  Joint venture  Brazil  US$   27,903    27,523 
Foreign  SQM Vitas Perú S.A.C.  Joint venture  Peru  US$   18,143    17,534 
Foreign  SQM Vitas Southern Africa PTY  Joint venture  South Africa  US$   1,478    597 
Foreign  SQM Vitas Fzco.  Joint venture  United Arab Emirates  Arab Emirates dirham   -    - 
Foreign  Coromandel SQM  Joint venture  India  Indian rupee   756    23 
Foreign  Sichuan SQM Migao Chemical Fertilizers Co Ltda.  Joint venture  China  US$   4,000    - 
79.049.778-9  Callegari Agrícola S.A.  Other related parties  Chile  Chilean peso   844    314 
Foreign  Coromandel Internacional  Other related parties  India  Indian rupee   670    - 
Total to-date         101,372    117,139 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
79
 

  

Notes to the Consolidated Financial Statements as of December 31, 2012

  

Note 9 - Related party disclosures (continued)

 

9.7Trade payables due to related parties, current:

 

Tax ID No.  Name  Nature  Country of origin  Currency  12/31/2012   12/31/2011 
               ThUS$   ThUS$ 
Foreign  SQM Vitas Fzco.  Joint venture  United Arab Emirates  Arab Emirates dirham   19    873 
Total to-date               19    873 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
80
 

  

Notes to the Consolidated Financial Statements as of December 31, 2012

  

Note 9 - Related party disclosures (continued)

 

9.8Board 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 28, 2011.

 

As of December 31, 2012, 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’ Company 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

 

2.1.1Board 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 50 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 2012.

 

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 0.04% of profit for the period effectively earned by the Company during fiscal years 2012 and 2011.

 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
81
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 9 - Related party disclosures (continued)

 

9.9Board 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, 2012 and 2011.

 

e)Therefore, the remunerations and profit sharing paid to members of the Board of Directors and Audit Committee during 2012 amount to ThUS$3,973 (ThUS$ 3,030 as of December 31, 2011).

 

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 2012 and 2011.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
82
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 9 - Related party disclosures (continued) 

 

9.8Board of Directors and Senior Management, continued

  

3)No guarantees have been constituted in favor of the directors.

 

4)Senior management compensation

 

As of December 31, 2012, the global compensation paid to the 120 main executives amounts to ThUS$32,888 (ThUS$ 22,509 as of December 31, 2011). 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 December 31, 2012 and the year ended December 31, 2011 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 December 31, 2012, the amount of operations with this Group is approximately ThUS$22,577 (ThUS$13,751 as of December 31, 2011).

 

9.9Key management personnel compensation

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
           
Key management personnel compensation   32,888    22,509 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
83
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 – Financial instruments

 

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

 

10.1Types of other financial assets

 

Types of other financial assets  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
         
Other current financial assets (1)   244,161    129,069 
Derivatives (2)   680    14,455 
Hedging assets, current   71,262    25,737 
Total other current financial assets   316,103    169,261 
           
Other non-current financial assets   107    117 
Hedging assets, non-current   29,385    30,371 
Total other non-current financial assets   29,492    30,488 

 

(1)Relates to term deposits with maturities exceeding 90 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  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Banco Santander   41,691    13,753 
BBVA   31,579    33,528 
Banco de Crédito e Inversiones   82,145    17,739 
Banco de Chile   42,992    44,849 
Corpbanca   10,499    19,200 
Banco Scotiabank   25,141    - 
Banco Itaú   10,114    - 
Total   244,161    129,069 

 

10.2Trade and other receivables, current and non-current

 

   12/31/2012   12/31/2011 
   Current   Non-
current
   Total   Current   Non-
current
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Trade receivables   490,770    -    490,770    387,607    -    387,607 
Prepayments   14,046    -    14,046    10,706    -    10,706 
Other receivables   5,800    1,311    7,111    13,749    1,070    14,819 
Total trade and other receivables   510,616    1,311    511,927    412,062    1,070    413,132 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
84
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 – Financial instruments (continued)

 

10.2Trade and other receivables, continued

 

   12/31/2012   12/31/2011 
   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   507,562    (16,792)   490,770    404,320    (16,713)   387,607 
                               
Trade receivables, current   507,562    (16,792)   490,770    404,320    (16,713)   387,607 
                               
Prepayments, current   14,046    -    14,046    10,706    -    10,706 
Other receivables, current   7,801    (2,001)   5,800    15,709    (1,960)   13,749 
                               
Current trade and other receivables   529,409    (18,793)   510,616    430,735    (18,673)   412,062 
                               
Other receivables, non-current   1,311    -    1,311    1,070    -    1,070 
                               
Non-current receivables   1,311    -    1,311    1,070    -    1,070 
                               
Total trade and other receivables   530,720    (18,793)   511,927    431,805    (18,673)   413,132 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
85
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 – Financial instruments (continued)

 

10.2Trade 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 December 31, 2012 and December 31, 2011, the detail of the unsecuritized portfolio is as follows:

 

12/31/2012
   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, non-renegotiated portfolio   2,666    2,241    545    409    367    308    325    279    311    33,724    41,041 
Non-renegotiated portfolio, gross   412,557    20,121    1,259    46,268    38    129    395    10,140    794    15,862    507,562 
Number of customers, renegotiated portfolio   -    -    -    -    -    -    -    -    -    -    - 
                                                        
Renegotiated portfolio, gross   -    -    -    -    -    -    -    -    -    -    - 
                                                        
Total portfolio, gross   412,557    20,121    1,259    46,268    38    129    395    10,140    794    15,862    507,562 

 

12/31/2011
   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, non-renegotiated portfolio   5,369    1,701    640    401    340    340    332    335    340    2,147    11,945 
Non-renegotiated portfolio, gross   348,299    27,945    4,778    12,058    817    87    407    103    299    8,673    403,466 
Number of customers, renegotiated portfolio   1    2    -    -    -    -    -    -    -    -    3 
                                                        
Renegotiated portfolio, gross   504    350    -    -    -    -    -    -    -    -    854 
                                                        
Total portfolio, gross   348,803    28,295    4,778    12,058    817    87    407    103    299    8,673    404,320 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
86
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 – Financial instruments (continued)

 

10.2Trade and other receivables, continued

 

The detail of allowance is as follows:

 

Allowance and write-offs  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
         
Allowance for non-renegotiated portfolio   20,191    21,961 
Write-offs for the period   (1,398)   (3,288)
Total   18,793    18,673 

 

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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
87
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.3Hedging 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 December 31, 2012, the face value of cash flows in Cross Currency Swap contracts agreed upon in US dollars amounted to ThUS$515,156 and as of December 31, 2011 such contracts amounted to ThUS$ 405,486.

 

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$ 
                     
December 31, 2012   100,647    49,853    (18,419)   3,684    (14,735)
                          
December 31, 2011   56,108    (39,719)   (12,184)   2,104    (10,080)

 

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$ 
                     
December 31, 2012   1,879    27    (1,786)   -    (1,786)
                          
December 31, 2011   270    (120)   (150)   -    (150)

 

The balances in the effect on profit or loss column consider the interim effects of the contracts in force as of December 31, 2012 and December 31, 2011.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
88
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.3Hedging assets and liabilities, continued

 

Derivative contract maturities are detailed as follows:

 

Series  

Contract

amount ThUS$

  Currency   Maturity date
C   71,841   UF   12/01/2026
G   33,673   Chilean peso   01/05/2014
H*   146,360   UF   01/05/2018
I   56,041   UF   04/01/2014
J   92,440   Chilean peso   04/01/2014
M   46,463   UF   02/01/2017
O   68,338   UF   02/01/2017

 

(*) Forward starting CCS for hedging series H bonds since 01/05/2012 to 01/05/2018

 

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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
89
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.3Hedging 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.

 

10.4Financial liabilities

 

Other current and non-current financial liabilities

 

As of December 31, 2012 and December 31, 2011, the detail is as follows:

 

   12/31/2012   12/31/2011 
   Current   Non-
current
   Total   Current   Non-
current
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Bank loans   122,373    379,119    501,492    141,436    329,150    470,586 
Obligations with the public (bonds payable)   20,135    1,067,075    1,087,210    17,129    907,877    925,006 
Other financial liabilities   10,335    -    10,335    2,443    -    2,443 
Total   152,843    1,446,194    1,599,037    161,008    1,237,027    1,398,035 

 

Current and non-current loans

 

As of December 31, 2012 and December 31, 2011, the detail is as follows:

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
         
Long-term loans   379,119    329,150 
           
Short-term loans   120,921    140,538 
Current portion of long-term loans   1,452    898 
Short-term loans and current portion of long-term loans   122,373    141,436 
Total loans assumed   501,492    470,586 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
90
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.4Financial liabilities, continued

 

a)Bank loans, current:

 

As of December 31, 2012 and December 31, 2011, the detail of this caption is as follows:

 

Debtor  Creditor  Currency              12/31/2012
Current maturities
 
Tax ID No.  Subsidiary  Country   Tax ID No.  Financial institution  Country  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   97.030.000-7  Banco Estado  Chile  US$  Upon maturity   1.70%   1.70%   -    20,175    20,175 
93.007.000-9  SQM.S.A.   Chile   97.030.000-7  Banco Estado  Chile  US$  Upon maturity   1.09%   1.09%   -    20,017    20,017 
93.007.000-9  SQM S.A.   Chile   Foreign  Banco Estado NY Branch  United States  US$  Upon maturity   3.01%   2.69%   1,139    -    1,139 
79.626.800-K  SQM Salar S.A.   Chile   97.032.000-8  Banco BBVA Chile  Chile  US$  Upon maturity   1.90%   1.90%   -    20,243    20,243 
79.626.800-K  SQM Salar S.A.   Chile   97.018.000-1  Scotiabank Sud Americano  Chile  US$  Upon maturity   1.03%   1.03%   20,153    -    20,153 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  Bank of America  United States  US$  Upon maturity   1.83%   1.52%   -    141    141 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  Export Development Canada  Canada  US$  Upon maturity   1.81%   1.46%   -    20    20 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  Scotiabank & Trust (Cayman) Ltd.  Cayman Islands  US$  Upon maturity   1.60%   1.54%   -    235    235 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  Scotiabank & Trust (Cayman) Ltd.  Cayman Islands  US$  Upon maturity   1.92%   1.62%   -    164    164 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  The Bank of Tokyo-Mitsubishi UFJ, Ltd. (New York)  United States  US$  Upon maturity   1.49%   1.26%   -    140    140 
79.947.100-0  SQM Industrial S.A.   Chile   97.030.000-7  Banco Estado  Chile  US$  Upon maturity   1.64%   1.64%   -    20,172    20,172 
79.947.100-0  SQM Industrial S.A.   Chile   97.018.000-1  Scotiabank Sud Americano  Chile  US$  Upon maturity   1.04%   1.04%   20,162    -    20,162 
Total                                    41,454    81,307    122,761 
Borrowing costs                         (26)   (362)   (388)
Total                                    41,428    80,945    122,373 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
91
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.4Financial liabilities, continued

 

Debtor  Creditor  Currency              12/31/2011
Current maturities
 
Tax ID No.  Subsidiary  Country   Tax ID No.  Financial institution  Country  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   97.032.000-8  Banco BBVA Chile  United States  US$  Upon maturity   1.00%   1.00%   20,094    -    20,094 
93.007.000-9  SQM.S.A.   Chile   97.030.000-7  Banco Estado  United States  US$  Upon maturity   0.95%   0.95%   20,089    -    20,089 
93.007.000-9  SQM S.A.   Chile   Foreign  Banco Estado NY Branch  United States  US$  Upon maturity   3.02%   2.72%   -    645    645 
79.626.800-K  SQM Salar S.A.   Chile   97.030.000-7  Banco Estado  Chile  US$  Upon maturity   1.24%   1.24%   -    20,114    20,114 
79.626.800-K  SQM Salar S.A.   Chile   97.004.000-5  Banco de Chile  Chile  US$  Upon maturity   1.03%   1.03%   20,085    -    20,085 
79.626.800-K  SQM Salar S.A.   Chile   97.018.000-1  Scotiabank Sud Americano  Chile  US$  Upon maturity   0.75%   0.75%   48    20,000    20,048 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  Bank of America  United States  US$  Upon maturity   2.56%   1.47%   -    140    140 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  Export Development Canada  Canada  US$  Upon maturity   2.36%   1.75%   -    24    24 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  Scotiabank & Trust (Cayman) Ltd.  Cayman Islands  US$  Upon maturity   1.74%   1.35%   207    -    207 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  The Bank of Tokyo-Mitsubishi UFJ, Ltd. (New York)  United States  US$  Upon maturity   2.17%   1.23%   -    137    137 
79.947.100-0  SQM Industrial S.A.   Chile   97.004.000-5  Banco de Chile  Chile  US$  Upon maturity   1.58%   1.58%   -    20,057    20,057 
79.947.100-0  SQM Industrial S.A.   Chile   97.018.000-1  Scotiabank Sud Americano  Chile  US$  Upon maturity   0.70%   0.70%   51    20,000    20,051 
Total                                    60,574    81,117    141,691 
Borrowing costs                            (61)   (194)   (255)
Total                                    60,513    80,923    141,436 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
92
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.4Financial liabilities, continued

 

b)Unsecured obligations, current:

 

As of December 31, 2012 and December 31, 2011, the detail of current unsecured interest-bearing obligations is composed of promissory notes and bonds, as follows:

 

Bonds

 

Debtor  Number of            Currency   Periodicity         12/31/2012
Current maturities
 
Tax ID No.  Subsidiary  Country   registration or
ID of the
instrument
   Series   Maturity date  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    -    Single   04/15/2013  US$   Semi-annual   Upon maturity   6.32%   6.13%   -    2,577    2,577 
93.007.000-9  SQM S.A   Chile    -    Single   04/21/2013  US$   Semi-annual   Upon maturity   5.70%   5.50%   -    2,667    2.667 
93.007.000-9  SQM S.A   Chile    446    C   06/01/2013  UF   Semi-annual   Semi-annual   4.44%   4.00%   -    7,464    7,464 
93.007.000-9  SQM S.A   Chile    563    G   01/05/2013  Ch$   Semi-annual   Upon maturity   7.50%   7.00%   1,465    -    1,465 
93.007.000-9  SQM S.A   Chile    564    H   01/05/2013  UF   Semi-annual   Semi-annual   5.10%   4.90%   4,484    -    4,484 
93.007.000-9  SQM S.A   Chile    563    I   04/01/2013  UF   Semi-annual   Upon maturity   3.35%   3.00%   -    532    532 
93.007.000-9  SQM S.A   Chile    563    J   04/01/2013  Ch$   Semi-annual   Upon maturity   6.23%   5.50%   -    1,470    1,470 
93.007.000-9  SQM S.A   Chile    700    M   02/01/2013  UF   Semi-annual   Upon maturity   3.62%   3.30%   644    -    644 
93.007.000-9  SQM S.A   Chile    699    O   02/01/2013  UF   Semi-annual   Upon maturity   3.95%   3.80%   1,110    -    1,110 
            Total                                 7,703    14,710    22,413 
            Bond issue costs                    (473)   (1,805)   (2,278)
            Total                                 7,230    12,905    20,135 

  

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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
93
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.4Financial liabilities, continued

 

Debtor  Number of               Periodicity         12/31/2011
Current maturities
 
Tax ID No.  Subsidiary  Country   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    -    Single   04/15/2012  US$   Semi-annual   Upon maturity   6.32%   6.13%   -    2,577    2,577 
93.007.000-9  SQM S.A   Chile    -    Single   04/21/2012  US$   Semi-annual   Upon maturity   5.70%   5.50%   -    2,667    2,667 
93.007.000-9  SQM S.A   Chile    446    C   06/01/2012  UF   Semi-annual   Semi-annual   4.44%   4.00%   -    6,754    6,754 
93.007.000-9  SQM S.A   Chile    563    G   01/05/2012  Ch$   Semi-annual   Upon maturity   7.50%   7.00%   1,354    -    1,354 
93.007.000-9  SQM S.A   Chile    564    H   01/05/2012  UF   Semi-annual   Semi-annual   5.10%   4.90%   4,045    -    4,045 
93.007.000-9  SQM S.A   Chile    563    I   04/01/2012  UF   Semi-annual   Upon maturity   3.35%   3.00%   -    477    477 
93.007.000-9  SQM S.A   Chile    563    J   04/01/2012  Ch$   Semi-annual   Upon maturity   6.23%   5.50%   -    1,351    1,351 
            Total                                 5,399    13,826    19,225 
            Bond issue costs                     (276)   (1,820)   (2,096)
            Total                                 5,123    12,006    17,129 

 

c)Types of non-current interest-bearing loans

 

Non-current interest-bearing loans as of December 31, 2012 and December 31, 2011 are detailed as follows:

 

Non-current interest-bearing bank loans

 

Debtor  Creditor                12/31/2012
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 3
ThUS$
   Over 3
to 5
ThUS$
   Over 5
years
ThUS$
   Total
ThUS$
 
93.007.000-9  SQM S.A.   Chile   Foreign  Banco Estado NY Branch  United States  US$  Upon maturity   3.01%   2.69%   -    140,000    -    140,000 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  Scotiabank & Trust (Cayman) Ltd.  Cayman Islands  US$  Upon maturity   1.60%   1.54%   50,000    -    -    50,000 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  Scotiabank & Trust (Cayman) Ltd.  Cayman Islands  US$  Upon maturity   1.92%   1.62%   50,000    -    -    50,000 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  Bank of America  United States  US$  Upon maturity   1.83%   1.52%   -    40,000    -    40,000 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  Export Development Canada  Canada  US$  Upon maturity   1.81%   1.46%   -    50,000    -    50,000 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  The Bank of Tokyo-Mitsubishi UFJ, Ltd (New York)  United States  US$  Upon maturity   1.49%   1,26%   -    50,000    -    50,000 
Total                                    100,000    280,000    -    380,000 
Borrowing costs                                 (235)   (646)   -    (881)
Total                                    99,765    279,354    -    379,119 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
94
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.4Financial liabilities, continued

 

Debtor  Creditor                12/31/2011
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 3
ThUS$
   Over 3
to 5
ThUS$
   Over 5
years
ThUS$
   Total
ThUS$
 
93.007.000-9  SQM S.A.   Chile   Foreign  Banco Estado NY Branch  United States  US$  Upon maturity   3.02%   2.72%   140,000    -    -    140,000 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  Scotiabank & Trust (Cayman) Ltd.  Cayman Islands  US$  Upon maturity   1.74%   1.35%   50,000    -    -    50,000 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  Bank of America  United States  US$  Upon maturity   2.56%   1.47%   -    40,000    -    40,000 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  Export Development Canada  Canada  US$  Upon maturity   2.36%   1.74%   -    50,000    -    50,000 
Foreign  Royal Seed Trading Corporation A.V.V.   Aruba   Foreign  The Bank of Tokyo-Mitsubishi UFJ, Ltd (New York)  United States  US$  Upon maturity   2.17%   1.23%   -    50,000    -    50,000 
Total                                    190,000    140,000    -    330,000 
   Borrowing costs                                 (104)   (746)   -    (850)
Total                                    189,896    139,254    -    329,150 

 

d)Non-current unsecured interest-bearing bonds

 

The breakdown of non-current unsecured interest-bearing bonds as of December 31, 2012 and December 31, 2011 is detailed as follows:

 

Debtor             Currency    Periodicity             12/31/2012
Current maturities
 
Tax ID No.  Subsidiary  Country   Number of
registration or ID
of the instrument
   Series   Maturity date  or
adjustment
index
  Payment of
interest
   Repayment  Effective
rate
   Nominal
rate
   Over 1 years
to 3
ThUS$
   Over 3
to 5
ThUS$
   Over 5
years
ThUS$
   Total
ThUS$
 
                                                     
93.007.000-9  SQM S.A   Chile    -    Single   15/04/2016  US$   Semi-annual   Upon maturity   6.32%   6.13%   -    200,000    -    200,000 
93.007.000-9  SQM S.A   Chile    -    Single   04/21/2020  US$   Semi-annual   Upon maturity   5.70%   5.50%   -    -    250,000    250,000 
93.007.000-9  SQM S.A   Chile    446    C   12/01/2026  UF   Semi-annual   Semi-annual   4.44%   4.00%   14,280    14,280    64,260    92,820 
93.007.000-9  SQM S.A   Chile    564    H   01/05/2030  UF   Semi-annual   Semi-annual   7.5%   4.90%   -    -    190,401    190,401 
93.007.000-9  SQM S.A   Chile    563    G   01/05/2014  Ch$   Semi-annual   Upon maturity   5.10%   7.00%   43,764    -    -    43,764 
93.007.000-9  SQM S.A   Chile    563    I   04/01/2014  UF   Semi-annual   Upon maturity   3.35%   3.00%   71,400    -    -    71,400 
93.007.000-9  SQM S.A   Chile    563    J   04/01/2014  Ch$   Semi-annual   Upon maturity   6.23%   5.50%   108,368    -    -    108,368 
93.007.000-9  SQM S.A   Chile    700    M   02/01/2017  UF   Semi-annual   Upon maturity   3.62%   3.30%   -    47,600    -    47,600 
93.007.000-9  SQM S.A   Chile    699    O   02/01/2033  UF   Semi-annual   Upon maturity   3.95%   3.80%   -    -    71,400    71,400 
            Total                                 237,812    261,880    576,061    1,075,753 
            Bond issue costs                     (631)   (1,420)   (6,627)   (8,678)
            Total                                 237,181    260,460    569,434    1,067,075 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
95
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.4Financial liabilities, continued

 

Debtor               Periodicity              12/31/2011
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
   Over 1 years
to 3
ThUS$
   Over 3
to 5
ThUS$
   Over 5
years
ThUS$
   Total
ThUS$
 
                                                  
93.007.000-9  SQM S.A  Chile   -   Single  04/15/2016  US$  Semi-annual  Upon maturity   6.32%   6.13%   -    200,000    -    200,000 
93.007.000-9  SQM S.A  Chile   -   Single  04/21/2020  US$  Semi-annual  Upon maturity   5.70%   5.50%   -    -    250,000    250,000 
93.007.000-9  SQM S.A  Chile   446   C  12/01/2026  UF  Semi-annual  Semi-annual   4.44%   4.00%   12,881    12,881    64,408    90,170 
93.007.000-9  SQM S.A  Chile   564   H  0105//2030  UF  Semi-annual  Semi-annual   7.5%   4.90%   -    -    171,753    171,753 
93.007.000-9  SQM S.A  Chile   563   G  01/05/2014  Ch$  Semi-annual  Upon maturity   5.10%   7.00%   40,446    -    -    40,446 
93.007.000-9  SQM S.A  Chile   563   I  04/01/2014  UF  Semi-annual  Upon maturity   3.35%   3.00%   64,408    -    -    64,408 
93.007.000-9  SQM S.A  Chile   563   J  04/01/2014  Ch$  Semi-annual  Upon maturity   6.23%   5.50%   100,152    -    -    100,152 
          Total                             217,887    212,881    486,161    916,929 
          Bond issue costs                (1,700)   (1,322)   (6,030)   (9,052)
          Total                             216,187    211,559    480,131    907,877 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
96
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.4Financial liabilities, continued

 

e)Additional information

 

Bonds

 

As of December 31, 2012 and December 31, 2011, ThUS$20,135 and ThUS$17,129, respectively are presented at short-term related to principal, current portion plus interest accrued at that date, not including bond issue costs. At the non-current portion, the Company presented ThUS$1,067,075 as of December 31, 2012 and ThUS$907,877 as of December 31, 2011 related to principal installments of Series C bonds, single Series bonds, Series G bonds, Series H bonds, Series I bonds, Series J bonds, single series second issue bonds, Series M bonds and Series O bonds.

 

As of December 31, 2012 and December 31, 2011, the details of each issue 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, 2012 and December 31, 2011, the Company has made the following payments with a charge to the Series C bonds:

 

Payments made  12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
Principal   6,858    6,678 
Interest payment   4,004    4,169 

 

Single series bonds

 

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 December 31, 2012 and December 31, 2011, the Company has made the following payments with a charge to the Single Series bonds:

 

   12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Payments of interest   12,250    12,250 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
97
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.4Financial 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 December 31, 2012 and December 31, 2011, the Company has made the following payments with a charge to the Series G and H bonds:

 

   12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Payment of interest, Series G bonds   2,845    3,094 
Payment of interest, Series H bonds   8,565    8,989 

 

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 December 31, 2012 and December 31, 2011, the Company has made the following payments with a charge to the Series J and I bonds:

 

   12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Payment of interest, Series J bonds   5,879    5,665 
Payment of interest, Series I bonds   2,100    1,954 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
98
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.4Financial liabilities, continued

 

Single series bonds, second issue

 

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 December 31, 2012 and December 31, 2011, the detail of payments charged to the line of single series bonds, second issue is as follows:

 

   12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Interest payment   13,750    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 December 31, 2012, the Company has made the following payments with a charge to the Series M and O bonds:

 

   12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Payment of interest, Series M bonds   765    - 
Payment of interest, Series O bonds   1,320    - 
SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
99
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.5Trade and other payables

 

   12/31/2012   12/31/2011 
   Current   Non-
current
   Total   Current   Non-
current
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Accounts payable   207,429    -    207,429    182,552    -    182,552 
Deferred income   -    -    -    -    -    - 
Retained  (or accrued)   515    -    515    480    -    480 
Total   207,944    -    207,944    183,032    -    183,032 

 

Purchase commitments held by the Company are recognized as liabilities when the goods and services are received by the Company. As of December 31, 2012, the Company has purchase orders amounting to ThUS$127,484 (ThUS$79,045 as of December 31, 2011).

 

10.6Financial 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
  12/31/2012   Effect on profit
or loss as of
12/31/2012
   12/31/2011   Effect on profit
or loss as of
12/31/2011
 
   ThUS$   ThUS$   ThUS$   ThUS$ 
Current                    
Derivative instruments (forward)   5,612    (4,559)   1,053    (1,053)
Derivative instruments (options)   2,492    (1,456)   1,036    (1,036)
Derivative instruments (IRS)   2,231    (240)   354    (150)
    10,335    (6,255)   2,443    (2,239)

 

Balances in the column effect on profit or loss consider the annual affects of agreements which were in force as of December 31, 2012.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
100
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.7Financial asset and liability categories

 

a)Financial Assets

 

   12/31/2012   12/31/2011 
   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 at fair value through profit or loss, classified as held-for-trading   244,161    -    244,161    129,069    -    129,069 
Financial assets at fair value through profit or loss, mandatorily measured at fair value   680    -    680    14,455    -    14,455 
Financial assets at fair value through profit or loss   244,841    -    244,841    143,524    -    143,524 
Investments held to maturity   -    107    107    -    117    117 
Loans and receivables   510,616    1,311    511,927    412,062    1,070    413,132 
Financial assets at fair value through other comprehensive income   71,261    29,385    100,646    25,737    30,371    56,108 
Total financial assets   826,718    30,803    857,521    581,323    31,558    612,881 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
101
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.7Financial asset and liability categories (continued)

 

b)Financial liabilities

 

   12/31/2012   12/31/2011 
   Current   Non-current   Total   Current   Non-current   Total 
Description of financial liabilities at fair value through profit or loss  Amount
ThUS$
   Amount
ThUS$
   Amount
ThUS$
   Amount
ThUS$
   Amount
ThUS$
   Amount
ThUS$
 
                         
Financial liabilities at fair value through profit or loss, designed as such at initial recognition   10,335    -    10,335    2,443    -    2,443 
Financial liabilities at fair value through profit or loss   10,335    -    10,335    2,443    -    2,443 
                               
Financial liabilities measured at amortized cost   350,452    1,446,194    1,796,646    341,597    1,237,027    1,578,624 
Total financial liabilities   360,787    1,446,194    1,806,981    344,040    1,237,027    1,581,067 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
102
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.8Financial 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 December 31, 2012 and December 31, 2011, assets pledged as guarantees are as follows:

 

Restricted cash  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Isapre Norte Grande Ltda.   571    428 
Total   571    428 

 

10.9Estimated 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.
SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
103
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.9Estimated 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:

 

   12/31/2012   12/31/2011 
   Carrying
value
   (*) Fair
value
   Carrying
value
   (*) Fair
value
 
   ThUS$   ThUS$   ThUS$   ThUS$ 
Cash and cash equivalents   324,353    324,353    444,992    444,992 
Current trade and other receivables   510,616    510,616    412,062    412,062 
Other financial assets, current:                    
- Time deposits   244,161    244,161    129,069    129,069 
- Derivative instruments   680    680    14,455    14,455 
- Current hedging assets   71,262    71,262    25,737    25,737 
Total other current financial assets   316,103    316,103    169,261    169,261 
Other non-current financial assets:   107    107    117    117 
Non-current hedging assets   29,385    29,385    30,371    30,371 
Other non-current financial assets:   29,492    29,492    30,488    30,488 
Other financial liabilities, current:                    
- Bank loans   122,373    122,373    141,436    141,436 
- Derivative instruments   8,456    8,456    2,174    2,174 
- Hedging liabilities   1,879    1,879    269    269 
- Unsecured obligations   20,135    20,135    17,129    17,129 
Other financial liabilities, current   152,843    152,843    161,008    161,008 
Current and non-current accounts payable   207,944    207,944    183,032    183,032 
Other non-current financial liabilities:                    
- Bank loans   379,119    401,065    329,150    348,218 
- Unsecured obligations   1,067,075    1,137,363    907,877    1,074,907 
Other non-current financial liabilities:   1,446,194    1,538,428    1,237,027    1,423,125 

 

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.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
104
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 10 - Financial instruments (continued)

 

10.10Nature 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

 

11.1Equity-accounted investees

 

As of December 31, 2012 and 2011, in accordance with criteria established in Note 2.6 and Note 3.3, investment in associates recognized according to the equity method of accounting and joint ventures are as follows:

 

      Investment  

Share on profit (loss) of

equity-accounted

investees

 
   Note
No.
  12/31/2012
ThUS$
   12/31/2011
ThUS$
   12/31/2012
ThUS$
   12/31/2011
ThUS$
 
                    
Equity-accounted investees  11.1 to 11.3   50,955    43,057    24,104    22,157 
Joint ventures  12 to 12.4   19,343    17,637    253    (349)
                        
Total      70,298    60,694    24,357    21,808 

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
105
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 11 – Equity-accounted investees (continued)

 

11.2Assets, liabilities, revenue and expenses of associates

 

12/31/2012
TAX ID
NUMBER
  Associate  Country of
incorporation
  Functional
currency
  Assets  
ThUS$
   Liabilities
ThUS$
   Revenue
ThUS$
   Net profit
(loss)
ThUS$
 
77.557.430-5   Sales de Magnesio Ltda.  Chile  Chilean Peso   5,026    1,713    14,436    2,177 
Foreign  Abu Dhabi Fertilizer Industries WWL  Arabia  Arab Emirates dirham   24,662    4,291    42,899    3,255 
Foreign  Doktor Tarsa Tarim Sanayi AS  Turkey  Turkish lira   77,084    44,635    77,839    8,267 
Foreign  Ajay North America  United States  US Dollar   44,889    6,292    83,340    22,300 
Foreign  Ajay Europe SARL  France  Euro   36,106    12,688    84,203    12,591 
Foreign  SQM Eastmed Turkey  Turkey  Euro   428    258    -    - 
Foreign  SQM Thailand Co. Ltd.  Thailand  Thai baht   17,068    13,048    13,536    81 
   Total         205,263    82,925    316,253    48,671 

 

12/31/2011
TAX ID
NUMBER
  Associate  Country of
incorporation
  Functional
currency
  Assets  
ThUS$
   Liabilities
ThUS$
   Revenue
ThUS$
   Net profit
(loss)
ThUS$
 
77.557.430-5   Sales de Magnesio Ltda.  Chile  Chilean Peso   4,484    1,595    8,652    1,335 
Foreign  Abu Dhabi Fertilizer Industries WWL  Arabia  Arab Emirates dirham   22,964    5,849    38,024    2,985 
Foreign  Doktor Tarsa Tarim Sanayi AS  Turkey  Turkish lira   78,090    53,752    67,205    5,160 
Foreign  Ajay North America  United States  US Dollar   47,866    9,876    80,923    23,689 
Foreign  Ajay Europe SARL  France  Euro   32,332    14,600    59,189    8,384 
Foreign  Misr Specialty Fertilizers  Egypt  Egyptian pound   5,476    2,802    -    (266)
Foreign  SQM Eastmed Turkey  Turkey  Euro   438    264    29    (94)
Foreign  SQM Thailand Co. Ltd.  Thailand  Thai baht   8,130    4,227    10,895    175 
                              
   Total         199,780    92,965    264,917    41,368 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Phone number: (56 2) 425 2000
www.sqm.com
106
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 11 – Investment in Associates (continued)

 

11.3Detail of investments in associates

 

The Company’s ownership in its associates is detailed as follows:

 

Associate  Main activities of the associate  Ownership %   Investment   Investment   Share on profit (loss) of equity-
accounted investees
 
          12/31/2012   12/31/2011   12/31/2012   12/31/2011 
          ThUS$   ThUS$   ThUS$   ThUS$ 
Sales de Magnesio Ltda.  Commercialization of magnesium salts.   50%   1,656    1,444    1,088    667 
Abu Dhabi Fertilizer Industries Co. W.W.L.  Distribution and commercialization of specialty plant nutrients in the Middle East.   50%   9,890    8,558    1,628    1,492 
Ajay North America L.L.C  Production and commercialization of iodine derivatives.   49%   15,357    14,866    10,927    11,608 
Doktor Tarsa Tarim Sanayi AS  Distribution and commercialization of specialty plant nutrients in Turkey.   50%   15,346    12,169    4,134    2,580 
Nutrisi Holding N.V.  Holding company   50%   -    -    -    1,720 
Ajay Europe SARL  Production and distribution of iodine and iodine derivatives.   50%   8,495    3,102    6,295    4,192 
Misr Specialty Fertilizers S.A.E.  Production and commercialization of liquid specialty plant nutrients for Egypt.   47.4857%   -    1,270    -    (126)
SQM Eastmed Turkey  Production and commercialization of specialty products.   50%   85    87    -    (46)
SQM Thailand Co. Ltd.  Distribution and commercialization of specialty plant nutrients.   40%   126    1,561    32    70 
Total           50,955    43,057    24,104    22,157 

 

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 December 31, 2012 and 2011.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Phone number: (56 2) 425 2000
www.sqm.com
107
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 12 - Joint Ventures

 

12.1Policy for accounting for joint ventures in a Parent’s separate financial statements

 

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

 

12.2Disclosures of interest in joint ventures

 

a)Operations conducted in 2012

 

On March 2012, the Company Coromandel SQM increased its capital by ThUS$394. This Company has an ownership of 50% in Soquimich European Holding B.V.

 

b)Operations conducted in 2011

 

On January 27, 2011, the subsidiary SQM Industrial S.A. conducted a contribution amounting to ThUS$2,500 in Sichuan SQM Migao Chemical Fertilizer Co.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Phone number: (56 2) 425 2000
www.sqm.com
108
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 12 - Policy for accounting for joint ventures in a Parent’s separate financial statements (continued)

 

12.3Detail of assets, liabilities and profit or loss of significant investments in joint ventures by company as of December 31, 2012 and 2011, respectively:

 

12/31/2012
            Asset   Liability       Ownership-     
TAX ID
NUMBER
  Joint ventures  Country of
incorporation
  Functional currency  Current
ThUS$
   Non-current  
ThUS$
   Total 
ThUS$
   Current
ThUS$
   Non-current
ThUS$
   Total
ThUS$
   Revenue
ThUS$
   related
expenses
ThUS$
   Profit or
loss
ThUS$
 
Foreign  Sichuan SQM Migao Chemical Fertilizers Co Ltda.  China  US Dollar   21,843    9,984    31,827    6,899    4,072    10,971    29,980    (29,407)   573 
Foreign  Coromandel SQM  India  Indian rupee   5,059    1,397    6,456    4,419    -    4,419    5,633    (5,264)   369 
Foreign  (1,059)  Arab Emirates  Arab Emirates dirham   22,536    10,522    33,058    785    -    785    19,643    (20,175)   (532)
Foreign  SQM  Star Qingdao Crop Nutrition Co., Ltd.  China  US Dollar   1,986    304    2,290    132    -    132    5,028    (4,933)   95 
   Total         51,424    22,207    73,631    12,235    4,072    16,307    60,284    (59,779)   505 

 

12/31/2011
            Asset   Liability       Ownership-     
TAX ID
NUMBER
  Joint ventures  Country of
incorporation
  Functional currency  Current
ThUS$
   Non-current  
ThUS$
   Total 
ThUS$
   Current
ThUS$
   Non-current
ThUS$
   Total
ThUS$
   Revenue
ThUS$
   related
expenses
ThUS$
   Profit or
loss
ThUS$
 
Foreign  Sichuan SQM Migao Chemical Fertilizers Co Ltda.  China  US Dollar   18,014    10,576    28,590    8,306    -    8,306    23,818    (23,455)   363 
Foreign  Coromandel SQM  India  Indian rupee   559    1,074    1,633    62    -    62    23    (60)   (37)
Foreign  SQM Vitas Fzco.  Arab Emirates  Arab Emirates dirham   24,887    8,920    33,807    1,005    -    1,005    25,207    (26,266)   (1,059)
Foreign  SQM  Star Qingdao Crop Nutrition Co., Ltd.  China  US Dollar   1,974    403    2,377    314    -    314    5,065    (5,028)   37 
   Total         45,434    20,973    66,407    9,687    -    9,687    54,113    (54,809)   (696)

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
109
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 12 - Policy for accounting for joint ventures in a Parent’s separate financial statements (continued)

 

12.4Detail of investments in joint ventures:

 

Joint venture  Main activities of the joint venture  Ownership %  Investment
12/31/2012
ThUS$
   Investment
12/31/2011
ThUS$
 
Coromandel SQM   Production and distribution of potassium nitrate.  50%   683    786 
Sichuan SQM Migao Chemical Fertilizers Co Ltda. Ltda.  Production and distribution of soluble fertilizers.  50%   10,428    10,142 
SQM Vitas Fzco.  Production and commercialization of specialty plant and animal nutrition and industrial hygiene.  50%   7,153    5,677 
SQM Quindao-Star Co. Ltda.  Production and distribution of nutrient plant solutions with specialties NPK soluble  50%   1,079    1,032 
Total         19,343    17,637 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
110
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 13 - Intangible assets and goodwill

 

13.1Balances

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
         
Intangible assets other than goodwill   24,013    4,316 
Goodwill   38,388    38,605 
           
Total   62,401    42,921 

 

13.2Disclosures on intangible assets and goodwill

 

Intangible assets relate to goodwill, water rights, trademarks, industrial patents, rights of way and software.

 

Balances and movements in the main classes of intangible assets as of December 31, 2012 and 2011 are detailed as follows:

 

      12/31/2012 
Intangible assets and goodwill  Useful life  Gross amount
ThUS$
   Accumulated
Amortization
ThUS$
   Net Value
ThUS$
 
                
Trademarks  Finite   3,821    (3,821)   - 
Software  Finite   3,765    (2,115)   1,650 
Intellectual property rights, patents and other industrial property rights, service and exploitation rights  Finite   1,198    (820)   378 
Intellectual property rights, patents and other industrial property rights, service and exploitation rights  Finite   22,612    (1,987)   20,625 
Intangible assets other than goodwill  Indefinite   1,512    (152)   1,360 
Intangible assets other than goodwill      32,908    (8,895)   24,013 
                   
Goodwill  Indefinite   40,178    (1,790)   38,388 
                   
Total intangible assets and goodwill      73,086    (10,685)   62,401 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
111
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 13 - Intangible assets and goodwill (continued)

 

13.2Disclosures on intangible assets and goodwill, continued

 

      12/31/2011 
Intangible assets and goodwill  Useful life  Gross
amount
ThUS$
   Accumulated
Amortization
ThUS$
   Net Value
ThUS$
 
                
Trademarks  Finite   3,821    (3,821)   - 
Software  Finite   3,476    (1,538)   1,938 
Intellectual property rights, patents and other industrial property rights, service and exploitation rights  Finite   1,198    (758)   440 
Intellectual property rights, patents and other industrial property rights, service and exploitation rights  Finite   3,536    (1,994)   1,542 
Intangible assets other than goodwill  Indefinite   548    (152)   396 
Intangible assets other than goodwill      12,579    (8,263)   4,316 
                   
Goodwill  Indefinite   40,178    (1,573)   38,605 
                   
Total intangible assets and goodwill      52,757    (9,836)   42,921 

 

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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
112
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 13 - Intangible assets and goodwill (continued)

 

13.2Disclosures 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 Finite Finite
     
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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
113
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 13 - Intangible assets and goodwill (continued)

 

13.2Disclosures on intangible assets and goodwill, continued

 

e)Movements in identifiable intangible assets as of December 31, 2012:

 

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   -    1,938    440    1,542    396    38,605    42,921 
Additions        501    -    19,080    964    -    20,545 
Amortization        (789)   (62)   -    -    -    (851)
Other increases (decreases)        -    -    3    -    (217)   (214)
                                    
Final balance   -    1,650    378    20,625    1,360    38,388    62,401 

 

f)Movements in identifiable intangible assets as of December 31, 2011:

 

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   4    823    501    1,546    396    38,388    41,658 
Additions   -    1,812    -    -    -    217    2,029 
Amortization   (4)   (697)   (61)   -    -    -    (762)
Other increases (decreases)   -    -    -    (4)   -    -    (4)
                                    
Final balance   -    1,938    440    1,542    396    38,605    42,921 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
114
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 14 - Property, plant and equipment

 

As of December 31, 2012 and 2011, the detail of property, plant and equipment is as follows:

 

14.1Types of property, plant and equipment

 

Description of types of property, plant and equipment  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
         
Property, plant and equipment, net          
           
Land   109,060    108,992 
Buildings   169,731    146,532 
Machinery   438,331    424,460 
Transport equipment   88,954    82,822 
Furniture and fixtures   6,736    5,015 
Office equipment   5,249    5,312 
Constructions in progress   423,184    297,996 
Other property, plant and equipment   747,045    683,913 
Total   1,988,290    1,755,042 
           
Property, plant and equipment, gross          
           
Land   109,060    108,992 
Buildings   329,397    291,401 
Machinery   1,065,641    972,179 
Transport equipment   224,462    199,998 
Furniture and fixtures   22,667    19,090 
Office equipment   36,215    34,480 
Constructions in progress   423,184    297,996 
Other property, plant and equipment   1,336,991    1,194,765 
Total   3,547,617    3,118,901 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
115
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 14 - Property, plant and equipment (continued)

 

14.1Types of property, plant and equipment, continued

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
Accumulated depreciation and value impairment of property, plant and equipment, total          
Accumulated depreciation and value impairment of buildings   159,666    144,869 
Accumulated depreciation and value impairment of machinery   627,310    547,719 
Accumulated depreciation and value impairment of transport equipment   135,508    117,176 
Accumulated depreciation and value impairment of furniture and fixtures   15,931    14,075 
Accumulated depreciation and value impairment of office equipment   30,966    29,168 
Accumulated depreciation and value impairment of other property, plant and equipment   589,946    510,852 
Total   1,559,327    1,363,859 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
116
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 14 - Property, plant and equipment (continued)

 

14.2Reconciliation of changes in property, plant and equipment by type as of December 31, 2012 and 2011:

 

Reconciliation entries of changes in
property, plant and equipment by type
as of December 31, 2012
  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   108,992    146,532    424,460    82,822    5,015    5,312    297,996    683,913    1,755,042 
                                              
Changes                                             
Additions   36    -    1,092    34    70    323    443,349    972    445,876 
Divestitures   -    -    (115)   -    (67)   (12)   (2,936)   (78)   (3,208)
Depreciation expense   -    (14,800)   (79,534)   (18,400)   (1,858)   (1,857)   -    (79,709)   (196,158)
Increase(decrease) in foreign currency exchange   32    (1)   5    15    -    (13)   -    68    106 
Reclassification   -    37,916    92,441    24,535    3,576    1,478    (287,291)   127,345    - 
Other increases (decreases) (*)   -    84    (18)   (52)   -    18    (27,934)   14,534    (13,368)
                                              
Total changes   68    23,199    13,871    6,132    1,721    (63)   125,188    63,132    233,248 
                                              
Final balance   109,060    169,731    438,331    88,954    6,736    5,249    423,184    747,045    1,988,290 

 

(*) 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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
117
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 14 - Property, plant and equipment (continued)

 

14.2Reconciliation of changes in property, plant and equipment by type as of December 31, 2012 and 2011, continued:

 

Reconciliation entries of changes in
property, plant and equipment by type
as of December 31, 2011
  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   107,869    88,320    295,467    48,936    4,450    5,705    356,551    546,674    1,453,972 
                                              
Changes                                             
Additions   1,251    178    424    558    39    302    474,042    1,054    477,848 
Divestitures   (85)   (1,371)   (64)   (451)   -    -    -    -    (1,971)
Depreciation expense   -    (11,477)   (97,046)   (14,902)   (1,281)   (2,053)   -    (69,137)   (195,896)
Increase(decrease) in foreign currency exchange   (42)   -    1    (23)   -    122    -    (24)   34 
Reclassification        69,410    228,116    48,717    1,805    1,442    (546,769)   197,279    - 
Other increases (decreases) (*)   (1)   1,472    (2,438)   (13)   2    (206)   14,172    8,067    21,055 
                                              
Total changes   1,123    58,212    128,993    33,886    565    (393)   (58,555)   137,239    301,070 
                                              
Final balance   108,992    146,532    424,460    82,822    5,015    5,312    297,996    683,913    1,755,042 

 

(*) 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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
118
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 14 - Property, plant and equipment (continued)

 

14.3Detail 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.

 

14.4Additional information

 

Interest capitalized in construction-in-progress:

 

The amount capitalized for this concept amounted to ThUS$14,156 as of December 31, 2012 and ThUS$ 22,249 as of December 31, 2011.

 

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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
119
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 15 - Employee benefits

 

15.1Provisions for employee benefits

 

   12/31/2012   12/31/2011 
Classes of benefits and expenses by employee  ThUS$   ThUS$ 
Current        
Profit sharing and bonuses   33,974    30,074 
Total   33,974    30,074 
           
Non-current          
Profit sharing and bonuses   6,056    4,083 
Severance indemnity payments   34,431    28,188 
Pension Plan   409    1,413 
Total   40,896    33,684 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
120
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 15 Employee benefits (continued)

 

15.2Policies 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.

 

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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
121
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 15 - Employee benefits (continued)

 

15.3Other long-term benefits

 

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

 

   12/31/2012   12/31/2011 
Staff severance indemnities at actuarial value  ThUS$   ThUS$ 
Staff severance indemnities, Chile   33,731    27,574 
Other obligations in companies elsewhere   700    614 
Total other non-current liabilities   34,431    28,188 
           
SQM North America’s pensions plan   409    1,413 
Total post-employment obligations   409    1,413 

 

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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
122
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 15 - Employee benefits (continued)

 

15.3Other 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.

 

15.4Post-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 for 2012 and 2011.

 

Since 2003, SQM North America offers to its employee’s benefits related to pension plans based on the 401-K system, which do not generate obligations for the Company.

 

The following table represents the plan financing status and the amounts recognized in the consolidated classified statements of financial position.

 

Reconciling table  2012   2011 
   ThUS$   ThUS$ 
Changes in benefit obligation          
Benefit obligation at the beginning of the year   6,620    6,548 
Service costs   1    1 
Interest costs   406    413 
Actuarial loss   (236)   (46)
Other benefits   (309)   (297)
Benefit obligation at the year-end   6,482    6,619 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
123
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 15 - Employee benefits (continued)

 

15.4Post-employment benefit obligations, continued

 

Fluctuations in the plan assets:          
Plan assets fair value at the beginning of the year   5,206    5,847 
Employer’s contributions   436    189 
Plan assets actual return (losses)   740    (533)
Benefits paid   (309)   (297)
Plan assets fair value at the year-end   6,073    5,206 
           
Statement of Income   (409)   1,413 
Items not recognized yet as regular social security payment expenses, net:          
Actuarial loss net at the beginning of the year   (2,954)   (2,111)
Amortization during the year   131    84 
Net profit or loss estimated for the year   580    (927)
Adjustment to recognize the minimal social security payment obligation   (2,243)   (2,954)

 

As of December 31, 2012 and 2011, net regular social security payment expense was comprised as follows:

 

   2012   2011 
Reconciliation  ThUS$   ThUS$ 
         
Service cost or benefit earned during the year   2    1 
Interest cost in benefit obligation   406    413 
Plan assets actual return   739    (532)
Loss amortization for prior periods   131    84 
Net profit during the year   (344)   973 
Regular social security payment expenses, net   142    57 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
124
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 15 - Employee benefits (continued)

 

15.5Staff Severance indemnities

 

As of December 31, 2012 and 2011, severance indemnities calculated at the actuarial value are as follows:

 

   2012
ThUS$
   2011
ThUS$
 
Opening balance   (28,188)   (27,208)
Current cost of service   (8,087)   (7,871)
Interest cost   (1,037)   (1,106)
Actuarial gain/loss   40    (151)
Exchange rate difference   (2,237)   2,693 
Contributions paid   5,078    5,455 
Balance   (34,431)   (28,188)

 

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

 

   12/31/2012   12/31/2011     
             
Mortality rate   RV - 2011    RV - 2010      
Actual annual interest rate   6%   6%     
Voluntary retirement rotation rate:               
Men   0.9%   0.9%   annual 
Women   1.53%   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 counts on a compensation plan for its executives, by means of the granting of payments based on the SQM share price change, paid in cash, and the executives may exercise their rights until the year 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 40 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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
125
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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, 2012 and 2011 are the following:

 

Movement for the period  2012   2011 
In effect as of January 1   2,340,000    3,370,025 
Granted during the fiscal year   103,500      
Redundant workers   103,500      
Exercised during the fiscal year   139,500    1,030,025 
In circulation as of December 31   2,200,500    2,340,000 
Average contractual life   40 months    48 months 

 

The amounts accrued by the plan, as of December 31, 2012 and 2011, amount to:

 

Effect on profit or loss  2012
ThUS$
   2011
ThUS$
 
Amount accrued during the year   3,142    11,200 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
126
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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.

 

17.1Capital 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 3 times during the last periods.

 

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

 

CAPITAL
MANAGEMENT
  12/31/2012 12/31/2011   Description (1) Calculation (1)
Net Financial Debt   929,197 753,410   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   3.69 3.11   Current Asset divided by Current Liability Total Current Assets / Total Current Liabilities
Net Debt / Capitalization   0.30 0.29   Net Financial Debt divided by Total Equity Net financial debt / ( Net financial debt + Total Equity)
ROE   30.1% 29.7%   Income divided by Total Equity Total Income / Equity (UH 12 months)
ROA   25.1% 24.1%   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   1.02 1.08   Total Liability on Equity Total Liabilities / Total Equity
             
          (1) Assumes the absolute value of the accounting records

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
127
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 17 - Disclosures on equity (continued)

 

17.117.1 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.

 

17.217.2 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 December 31, 2012 and 2011, the Group does not maintain shares in the parent either directly or through its companies in which it has investments.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
128
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 17 - Disclosures on equity (continued)

 

17.2Disclosures on preferred share capital, continued

 

Detail of types of capital in preference shares:

 

Type of capital in preferred shares  12/31/2012   12/31/2011 
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 December 31, 2012 and 2011, the Company has not placed any new issuances of shares on the market.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
129
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 17 - Disclosures on equity (continued)

 

17.3Disclosures on reserves in equity

 

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 2012 and 2011.

 

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).

 

   12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Revaluation surplus          
Reserve for currency exchange conversion   (330)   (1,251)
Reserve for cash flow hedges   (16,522)   (10,230)
Reserve for actuarial gains or losses in defined benefit plans   (2,243)   (2,954)
Reserve of gains and losses for new measurement of available-for-sale financial assets   -    - 
Other reserves   (1,677)   (1,677)
           
Total other reserves   (20,772)   (16,112)

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
130
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 17 - Disclosures on equity (continued)

 

17.4Dividend 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 2012 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 2012.

 

-Distribution and payment, if possible during 2012, 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 2012 and its amount could not exceed 50% of the retained earnings for distribution obtained during 2012, which are reflected in the Company’s financial statements as of September 30, 2012.

 

-The distribution and payment by the Company of the remaining balance of the final dividend related to Profit for the period for the 2012 commercial year in up to two installments, which will have to be effectively paid and distributed prior to June 30, 2013.

 

-An amount equivalent to the remaining 50% of the Company’s Profit for the period for 2012 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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
131
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 17 - Disclosures on equity (continued)

 

17.5Provisional dividends

 

On November 20, 2012, the Board of Directors of Sociedad Química y Minera de Chile S.A, agreed to pay and distribute to the Company’s shareholders a provisional of US$0.94986 per share. The above, since December 12, 2012, is charged against the income accrued during the first 9 months of said fiscal year, in favor of the Shareholders who appeared registered in SQM’s Shareholders Registry by the 5th working day prior to the date the dividend will be paid, 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 5, 2012.

 

On April 26, 2012, at the 36th General Shareholders' meeting it was agreed to pay a final dividend of US$1.03679 per share in relation to net profit for the commercial year 2011. US$0.73329 per share was already paid as an interim dividend, and this amount should be subtracted from the dividend detailed above. In line with this, the balance, amounting to US$0.30350 per share, will be paid and distributed among shareholders of the Company who are registered with their respective shareholders registry as of the fifth business day prior to the day in which this dividend will be paid. Such amount, if appropriate, 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 26, 2012.

 

The Company’s Board of Directors (SQM), in its meeting on November 22, 2011, unanimously agreed to pay and distribute the provisional dividend referred to in SQM’s current “2011 Dividends Policy” which was informed to SQM’s General Annual Ordinary Shareholders Meeting that was held on April 28 of this year. This, for the essential purpose of being able to pay and distribute as of December 19, 2011, a provisional dividend of US$0.73329 per share –and which is approximately equivalent to the total amount of US$193 million and the latter corresponds to 50% of the distributable net income of the fiscal year 2011 that has been accrued at September 30, 2011. The above, is charged against the net income of said fiscal year, in favor of the Shareholders who appeared registered in SQM’s Shareholders Registry by the 5th working day prior to December 19th, 2011, 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 13, 2011.

 

At the Annual Board of Directors meeting held on April 28, 2011, the Directors unanimously agreed to pay a final dividend of US$0.7259 per share in relation to net profit for the year. Notwithstanding the above, US$0.41794 per share was already paid as an interim dividend, and this amount should be subtracted from the final dividend detailed above, In line with this, the balance, amounting to US$0.30798 per share, will be paid and distributed among shareholders of the Company who are registered with their respective shareholders registry as of the fifth business day prior to the day in which this dividend will be paid.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
132
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 17 - Disclosures on equity (continued)

 

17.5Provisional dividends, continued

 

Dividends presented deducted from equity are:

 

   12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Dividends attributable to owners of the parent   253,438    270,915 
Dividends payable   76,267    82,120 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
133
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 18 - Provisions and other non-financial liabilities

 

18.1Types of provisions

 

   12/31/2012   12/31/2011 
   Current   Non-current   Total   Current   Non-current   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Provision for legal complaints (*)   5,567    3,000    8,567    4,571    3,000    7,571 
Provision for dismantling, restoration and rehabilitation cost   -    4,357    4,357    -    3,724    3,724 
Other provisions   12,922    -    12,922    12,366    1,871    14,237 
Total   18,489    7,357    25,846    16,937    8,595    25,532 

 

(*) 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 minor litigations.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
134
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

18.2Description of other provisions

 

Description of other provisions  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Current provisions, other short-term provisions          
Provision for tax loss in fiscal litigation   1,606    1,441 
Royalties, agreement with CORFO (the Chilean Economic Development Agency)   7,712    6,800 
Fine to Brazil   2,500    2,500 
Indemnity Yara South Africa   -    624 
Miscellaneous provisions   1,104    1,001 
Total   12,922    12,366 
Other long-term provisions          
Mine closure   4,357    3,724 
Indemnity Yara South Africa   -    1,871 
Total   4,357    5,595 

 

18.3Other non-financial liabilities, current

 

Description of other liabilities  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
         
Tax withholdings   11,887    9,837 
VAT payable   16,481    21,087 
Guarantees received   872    920 
Accrual for dividend   76,267    81,325 
Monthly tax provisional payments   22,073    11,239 
Deferred income   16,291    15,284 
Withholdings from employees and salaries payable   7,546    5,554 
Accrued vacations   20,710    15,874 
Other current liabilities   73    841 
Total   172,200    161,961 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
135
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

18.4Changes in provisions as 12/31/2012

 

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   -    -    7,571    -    3,724    14,237    25,532 
                                    
Changes in provisions:                                   
                                    
Additional provisions   -    -    1,000    -    633    8,863    10,496 
                                    
Provision used   -    -    (4)   -    -    (10,061)   (10,065)
Increase(decrease) in foreign currency exchange   -    -    -    -    -    (117)   (117)
                                    
Total provisions, final balance   -    -    8,567    -    4,357    12,922    25,846 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
136
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

18.4Changes in provisions as 12/31/2011

 

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   -    -    4,590    -    3,500    12,424    20,514 
                                    
Changes in provisions:                                   
                                    
Additional provisions   -    -    3,000    -    224    13,076    16,300 
                                    
Provision used   -    -    (19)   -    -    (11,080)   (11,099)
Increase (decrease) in foreign currency exchange   -    -    -    -    -    (183)   (183)
                                    
Total provisions, final balance   -    -    7,571    -    3,724    14,237    25,532 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
137
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

18.5Detail 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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
138
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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:

 

19.1Lawsuits 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$ 1,880

 

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

 

3. Plaintiffs : Eduardo Fajardo Nuñez, Ana Maria Canales Poblete, Raquel Beltran Parra, Eduardo Fajardo Beltran and Martina Fajardo Beltran.
  Defendants : SQM Salar S.A. and its insurers
  Date : November 2009
  Court : 20th Civil Court in Santiago  
  Reason : Labor Accident
  Status : Summon to hear the sentence
  Nominal value : ThUS$1,880

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
139
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 19 - Contingencies and restrictions (continued)

 

19.1Lawsuits and other relevant events, continued

 

4. 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 : Pending of the appeal
  Nominal value : Not possible to determine

 

5. 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

 

6. 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 : Evidence
  Nominal value : ThUS$200

 

7.  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 : Replay to claim.
  Nominal value : ThUS$9,400

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
140
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 19 - Contingencies and restrictions (continued)

 

19.1Lawsuits and other relevant events, continued

 

8. Plaintiff : Nilda Ester Muñoz Muñoz and others
  Defendants : Alejandro Reyes R., Transportes Transerik Limitada, Constructora Excon SQM Salar S.A. and its insurers
  Date : July 2012
  Court : 15th Civil Court in Santiago
  Reason : Compensation claim for alleged civil liability under tort derived from accident occurred on October 22, 2010 at the Salar de Atacama causing the death of Mr. Daniel Opazo Muñoz
  Status : Replay to claim.
  Nominal value : ThUS$2,400

 

9. Plaintiff : Sociedad Industrial Seguel and Ortíz Limitada
  Defendant : SQM Salar S.A.
  Date : August 2012
  Court : Arbitral
  Reason : Compensation for early termination of service rendering contract
  Status : Replay to claim.
  Nominal value : ThUS$3,500

 

10. 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

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
141
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 19 - Contingencies and restrictions (continued)

 

19.2Lawsuits 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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
142
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 19 - Contingencies and restrictions (continued)

 

19.2Restrictions to management or financial limits

 

Credit contracts subscribed by the Company and its subsidiaries 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 December 31, 2012, the aforementioned financial indicators are as follows:

 

Indicator  12/31/2012   12/31/2011 
Equity ThUS$   2,187,446    1,864,380 
Net Financial Debt/ EBITDA   0.83    0.79 
Indebtedness   1.02    1.08 
SQM Industrial and SQM Salar debt / Current assets   0.04    0.05 

 

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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
143
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 19 - Contingencies and restrictions (continued)

 

19.3Commitments

 

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$27,193 as of December 31, 2012 (ThUS$ 23,951 as of December 31, 2011).

 

19.4Restricted 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 December 31, 2012, the guarantee amounts to ThUS$571.

 

19.5Securities obtained from third parties

 

The main security received from third parties (distributors) 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$4,126 as of December 31, 2012; as of December 31, 2011 these amounted to ThUS $4,467 which is detailed as follows:

 

 

Entity name  12/31/2012
ThUS$
  

12/31/2011

ThUS$

 
         
Llanos y Wammes Soc. Com. Ltda   2,084    1,926 
Fertglobal Chile Ltda.   1,042    1,541 
Tattersall Agroinsumos S.A.   1,000    1,000 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
144
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 19 - Contingencies and restrictions (continued)

 

19.6Indirect 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.

 

   Debtor     Pending balances as of
the closing date of the
financial statements
 
Creditor of the guarantee  Name  Relationship  Type of
guarantee
  12/31/2012
ThUS$
   12/31/2011
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   50,235    50,207 
Scotiabank & Trust (Cayman) Ltd.  Royal Seed Trading A.V.V.  Subsidiary  Bond   50,164    - 
Bank of America  Royal Seed Trading A.V.V.  Subsidiary  Bond   40,141    40,140 
Export Development Canada  Royal Seed Trading A.V.V.  Subsidiary  Bond   50,020    50,024 
The Bank of Tokyo-Mitsubishi UFJ Ltd.  Royal Seed Trading A.V.V.  Subsidiary  Bond   50,140    50,137 
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   -    - 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
145
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 19 - Contingencies and restrictions (continued)

 

19.6Indirect guarantees, continued

 

  Debtor    Pending balances as of
the closing date of the
financial statements
 
Creditor of the guarantee  Name  Relationship  Type of
guarantee
  12/31/2012
ThUS$
   12/31/2011
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   -    - 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
146
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 20 - Revenue

 

As of December 31, 2012 and 2011, revenue is detailed as follows:

 

   December 
   2012   2011 
Types of revenue  ThUS$   ThUS$ 
         
Sales of goods   2,420,357    2,138,165 
Provision of services   8,803    7,121 
Total   2,429,160    2,145,286 

 

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  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
         
Earnings (losses) attributable to owners of the parent   649,167    545,758 

 

   12/31/2012
Units
   12/31/2011
Units
 
Number of common shares in circulation   263,196,524    263,196,524 

 

   12/31/2012   12/31/2011 
         
Basic earnings per share (US$ per share)   2.4665    2.074 

 

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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
147
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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 December 31, 2012, total interest expenses incurred amount to ThUS$54,095 (ThUS$39,335 as of December 31, 2011).

 

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:

 

 

   12/31/2012   12/31/2011 
         
Capitalization rate of costs for capitalized interest, property, plant and equipment   7%   7%
           
Amount of costs for interest capitalized in ThUS$   14,156    22,249 

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
148
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

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

 

   12/31/2012
ThUS$
   12/31/2011
ThUS$
 
         
Conversion foreign exchange gains (losses) recognized in the result of the year.   (26,787)   (25,307)
           
Conversion foreign exchange reserves attributable to the owners of the controlling entity   921    (2,781)
           
Conversion foreign exchange reserves attributable to the non-controlling entity   61    (109)

 

b)Reserves for foreign currency exchange differences:

 

As of December 31, 2012, and 2011, foreign currency exchange differences are detailed as follows:

 

Detail  12/31/2012
ThUS$
  

12/31/2011

ThUS$

 
         
Changes in equity generated through the equity method:          
Comercial Hydro S.A.   937    937 
SQMC Internacional Ltda.   36    23 
Proinsa Ltda.   27    17 
Agrorama Callegari Ltda.   152    102 
Isapre Cruz del Norte Ltda.   89    55 
Almacenes y Depósitos Ltda.   103    57 
Sales de Magnesio Ltda.   177    48 
Sociedad de Servicios de Salud S.A.   33    24 
Agrorama S.A.   (11)   (11)
Doktor Tarsa   (1,035)   (1,964)
Nutrisi Holding   (42)   (42)
SQM Vitas Fzco   (318)   (159)
Ajay Europe   (275)   (176)
Misr Specialty Ferti   (39)   (39)
SQM Eastmed Turkey   (42)   (40)
SQM Thailand Co. Lta.   (32)   (52)
Coromandel SQM India   (118)   (31)
SQM Italia SRL   28    - 
Total   (330)   (1,251)

 

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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
149
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 23 - Effect of fluctuations on the 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

 

24.1Disclosures 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.

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
150
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24- Environment (continued)

 

24.1Disclosures 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.

 

24.2Detail of information on disbursements related to the environment

 

The accumulated disbursements in which the Company incurred as of December 31, 2012 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$23,207 and are detailed as follows:

 

SQM S.A.
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
151
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24- Environment (continued)

 

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

 

Accumulated expenses as of 12/31/2012

 

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 Industrial S.A.  Environmental and Community Management (Expense as the fourth quarter of 2012)  Not classified  Expense  Not classified   1,808   12-31-2012
SQM Industrial S.A.  IQ8G – Improvement of Bureau of Exchange, offices and facilities  Medium projects (between ThUS$300 and ThUS$999)  Asset  Not classified   72   12-31-2012
SQM Industrial S.A.  JQEZ – Change of Bertrams Prilling Boiler CS  Sustainability: Replacement of equipment  Asset  Development   235   12-31-2012
SQM Industrial S.A.  JQH9 – Purchase of Bertrams Boiler  Sustainability: Environment and Risk prevention  Asset  Development   600   12-31-2012
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   841   12-31-2012
SQM Industrial S.A.  MPQU - Construction of Hazardous Chemical Supplies warehouse  Sustainability: Environment and Risk prevention  Asset  Development   211   12-31-2012
SQM Industrial S.A.  MQ8M - Reconditioning monitoring station ME  Sustainability: Natural Resources  Expense  Not classified   8   12-31-2012
SQM Industrial S.A.  MQA8- Normalization gas system, external cafeterias (Stage 1: projects)  Sustainability: Environment and Risk prevention  Expense  Not classified   106   12-31-2012
SQM Industrial S.A.  MQAJ - Improvements to Camp Water and Sewage (P Contesse commitment to DDSS)  Sustainability: Natural Resources  Expense  Not classified   8   12-31-2012
SQM Industrial S.A.  MQHF -Sustaining of batteries ME  Sustainability: Environment and Risk prevention  Asset - Expense  Not classified   161   12-31-2012

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
152
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24- Environment (continued)

 

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

 

Accumulated expenses as of 12/31/2012, 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 Industrial S.A.  PPC1-Remove switches park OCB sub 3 and 1/12 Pedro de Valdivia  Sustainability: Environment and Risk prevention  Expense  Not classified   147   12-31-2012
SQM Industrial S.A.  PPNK-Management of Ammonia PV stoppage plant  Sustainability: Environment and Risk prevention  Asset / Expense  Not classified   193   12-31-2012
SQM Industrial S.A.  PPZU - Standardize and certify Plant Fuel Tanks  Environmental processing  Asset  Not classified   1,763   12-31-2012
SQM Industrial S.A.  SQ7X-Reach 2011-2013  Sustainability: Environment and Risk prevention  Expense  Not classified   199   12-31-2012
SQM Industrial S.A.  TQA2 - Drainage Improvement Villa Prat  Sustainability: Environment and Risk prevention  Expense  Not classified   16   12-31-2012
SQM Industrial S.A.  CQLX- SCarmen and Lagarto hazardous waste yard  Sustainability:  Expense  Not classified   47   12-31-2012
SQM Industrial S.A.  MQBM - Archaeological Digging Deployment Maria Elena - Toco  Sustainability: Environment and Risk prevention  Expense  Not classified   7   12-31-2012
SQM Industrial S.A.  MQK2 – Elimination of PCBs I  Sustainability: Environment and Risk prevention  Expense  Not classified   16   12-31-2012
SQM Industrial S.A.  JQ8K – DIA Line 4 Floor Drying, Coya Sur  Environmental processing  Asset  Not classified   32   12-31-2012
SQM Industrial S.A.  FP55 - FPXA-EIA Pampa Blanca Expansion  Environmental processing  Asset  Not classified   1,425   12-31-2012
SQM Industrial S.A.  JQB6 - DIA Plant NPT4, Coya Sur  Environmental processing  Asset  Not classified   65   12-31-2012
SQM Industrial S.A.  PQLV-DIA Pedro de Valdivia Mine  Environmental processing  Asset  Not classified   131   12-31-2012
SQM S.A.  AQ0A - Well Drilling 4 Uptake Change Point Tamarugal Pampa  Capacity Expansion  Asset  Development   534   12-31-2012

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
153
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24- Environment (continued)

 

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

 

Accumulated expenses as of 12/31/2012, 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.  IPFT - Cultural Heritage Region I  Sustainability:  Expense  Not classified   166   12-31-2012
SQM S.A.  IPXE - Environmental Monitoring Plan Llamara Salt flat  Cost reduction  Expense  Not classified   872   12-31-2012
SQM S.A.  IPXF - Environmental Monitoring Plan Pampa del Tamarugal  Sustainability: Environment and Risk prevention  Expense  Not classified   881   12-31-2012
SQM S.A.  IQ08 - PSA Llamara & Pampa del Tamarugal  Sustainability: Environment and Risk prevention  Asset  Development   1,759   12-31-2012
SQM S.A.  IQ0C - Mine Area Enhancement NV  Sustainability: Environment and Risk prevention  Expense  Not classified   66   12-31-2012
SQM S.A.  IQ1K - Construction of 3 observation wells in Sur Viejo  Capacity Expansion  Asset  Development   195   12-31-2012
SQM S.A.  IQ1M - PSA Re-injection of water to Puquios Llamara  Sustainability: Environment and Risk prevention  Asset  Not classified   1,653   12-31-2012
SQM S.A.  IQ3S- Hazardous Materials Management Standardization  Sustainability:  Asset - Expense  Not classified   251   12-31-2012
SQM S.A.  IQ52 - New Victoria Environment Office  Minor projects (between ThUS$50 and ThUS$299)  Expense  Not classified   29   12-31-2012
SQM S.A.  IQ53 - Cultural heritage route Soronal adduction (Pampa Hermosa)  General projects (< ThUS$50)  Expense  Not classified   24   12-31-2012
SQM S.A.  IQ54 - Cultural heritage Pampa Hermosa  Minor projects (between ThUS$50 and ThUS$299)  Asset  Not classified   500   12-31-2012
SQM S.A.  IQ9V – Quillagua Project  Minor projects (between ThUS$50 and ThUS$299)  Expense  Not classified   788   12-31-2012

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
154
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24- Environment (continued)

 

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

 

Accumulated expenses as of 12/31/2012, 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.  PQB9-PQB9 - Change of exhaust extractor SO2 gas  Not classified  Asset  Not classified   178   12-31-2012
SQM S.A.  MQLQ- Gas scrubbing system  Not classified  Asset  Development   324   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   61   12-31-2012
SQM S.A.  IQ6M -IQ6N-DIA  Nueva Victoria Sur Mine Expansion  Environmental processing  Asset  Not classified   115   12-31-2012
SQM S.A.  IP83 - DIA Expansion TLN-15  Environmental processing  Asset  Not classified   23   12-31-2012
SQM Salar S.A.  CQ4M – Regularization of Contractor facilities  Sustainability: Environment and Risk prevention  Asset  Not classified   17   12-31-2012
SQM Salar S.A.  CQ8U - New Changing Room CL - HL  Sustainability: Environment and Risk prevention  Asset  Not classified   242   12-31-2012
SQM Salar S.A.  LP82 - Project for the Promotion of Agricultural Activity in Communities of the Salt deposit  Sustainability: Environment and Risk prevention  Expense  Development   1,126   12-31-2012
SQM Salar S.A.  LPTF – Environmental study and exploration 2010  Environmental processing  Expense  Not classified   398   12-31-2012
SQM Salar S.A.  LPTJ - Improvements Sanitary Works  Sustainability:  Asset  Not classified   206   12-31-2012
SQM Salar S.A.  LQDM – Certification of tanks  Sustainability: Replacement of equipment  Asset  Not classified   146   12-31-2012
SQM Salar S.A.  LQI6-EIA Operating maintenance at Salar de Atacama  Environmental processing  Asset  Not classified   358   12-31-2012
SQM Salar S.A.  LQNI-DIA KCI Floor Drying and compacting expansion  Environmental processing  Asset  Not classified   19   12-31-2012

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
155
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24- Environment (continued)

 

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

 

Accumulated expenses as of 12/31/2012, 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.  MQ6Y-MQ6Y - Maintenance and repair of ME and Tocopilla bureau of exchange  Sustainability: Environment and Risk prevention  Expense  Not classified   20   12-31-2012
SIT S.A.  TPR8 - Disposal of liquid waste generation by aspiration  Sustainability:  Expense  Not classified   64   12-31-2012
SIT S.A.  TPYX - Enabling the dust collector of the crib and court seal 3 Tocopilla  Sustainability: Environment and Risk prevention  Asset / Expense  Development   1,658   12-31-2012
SIT S.A.  TQAP - Paving Field No. 3 and No. 4  Capacity Expansion  Expense  Not classified   13   12-31-2012
SIT S.A.  TQAV - Paving paths IV  Sustainability:  Asset  Development   3   12-31-2012
SIT S.A.  TQM2- Unloading/loading encapsulation project/Field 1 and 8  Sustainability:  Asset  Not classified   8   12-31-2012
SIT S.A.  TQLY- Dust extractor packing machine No. 1  Environmental processing  Asset  Not classified   25   12-31-2012
SIT S.A.  TQNA- Tocopilla weather station (Tocopilla Decontamination Plan Network)  Sustainability: Environment and Risk prevention  Asset  Not classified   15   12-31-2012
SIT S.A.  TQQ5- Environmental curtains Field No. 8  Sustainability: Environment and Risk prevention  Expense  Not classified   22   12-31-2012
SQM Nitratos S.A  IQDN - Storage Rises – Maintenance of Mine NV  Not classified  Asset  Not classified   26   12-31-2012
Minera Nueva Victoria S.A.  IQ4C - Development Camp (Osmosis and Others)  Minor projects (between ThUS$50 and ThUS$299)  Asset  Not classified   1,987   12-31-2012
SQM Nitratos S.A  PQI9 – Mine waste water treatment plant  Sustainability: Environment and Risk prevention  Asset  Not classified   47   12-31-2012
SQM Nitratos S.A  IQMH - Normalization Mine NV area operation  Sustainability: Environment and Risk prevention  Asset  Not classified   99   12-31-2012
SQM Salar S.A.  LQFD – Bureaus of exchange  Not classified  Asset  Not classified   160   12-31-2012
                23,207    

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
156
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24- Environment (continued)

 

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

 

Future expenses as of 12/31/2012

 

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 Industrial S.A.  Environmental and Community Management (Budget available for the second quarter of 2012)  Not classified  Expense  Not classified   2,027   12-31-2013
SQM Industrial S.A.  MNYS - Measures of Technological Change Cultural Heritage Dissemination Maria Elena  Environmental processing  Expense  Not classified   68   12-31-2013
SQM Industrial S.A.  MP5W - Normalization TK´s Combustibles  Sustainability: Environment and Risk prevention  Asset  Not classified   1,600   12-31-2013
SQM Industrial S.A.  MPQU - Construction of Hazardous Chemical Supplies warehouse  Sustainability: Environment and Risk prevention  Asset  Development   152   30-062013.
SQM Industrial S.A.  MQHF -Sustaining of batteries ME  Sustainability: Environment and Risk prevention  Asset - Expense  Not classified   16   08-01-2013
SQM Industrial S.A.  PPC1-Remove switches park OCB sub 3 and 1/12 Pedro de Valdivia  Sustainability: Environment and Risk prevention  Expense  Not classified   44   12-31-2013
SQM Industrial S.A.  PPZU - Standardize and certify Plant Fuel Tanks  Environmental processing  Asset  Not classified   1,315   12-31-2013
SQM Industrial S.A.  SQ7X-Reach 2011-2013  Sustainability: Environment and Risk prevention  Expense  Not classified   20   01-31-2014
SQM Industrial S.A.  TQA2 - Drainage Improvement Villa Prat  Sustainability: Environment and Risk prevention  Expense  Not classified   104   06-30-2013
SQM Industrial S.A.  CQLX- SCarmen and Lagarto hazardous waste yard  Sustainability:  Asset  Not classified   53   03-31-2013
SQM Industrial S.A.  JQL7- KNO3 prilled dust collection and drying engineering and project  Sustainability:  Asset  Research   200   08-01-2013
SQM Industrial S.A.  MQBM - Archaeological Digging Deployment Maria Elena - Toco  Sustainability: Environment and Risk prevention  Expense  Not classified   49   03-31-2013
SQM Industrial S.A.  MQK2 – Elimination of PCBs I  Sustainability: Environment and Risk prevention  Expense  Not classified   554   03-31-2014
SQM Industrial S.A.  FP55 - FPXA-EIA Pampa Blanca Expansion  Environmental processing  Asset  Not classified   135   08-31-2013

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
157
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24- Environment (continued)

 

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

 

Future expenses as of 12/31/2012

 

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 Industrial S.A.  JQB6 - DIA Planta NPT4, Coya Sur  Environmental processing  Asset  Not classified   5   11-30-2013
SQM Industrial S.A.  PQLV-DIA Pedro de Valdivia Mine  Environmental processing  Asset  Not classified   243   09-30-2013
SQM S.A.  IPFT - Cultural Heritage Region I  Sustainability:  Expense  Not classified   17   03-31-2013
SQM S.A.  IPXE - Environmental Monitoring Plan Llamara Salt flat  Cost reduction  Expense  Not classified   87   03-31-2013
SQM S.A.  IPXF - Environmental Monitoring Plan Pampa del Tamarugal  Sustainability: Environment and Risk prevention  Expense  Not classified   168   06-30-2013
SQM S.A.  IQ1M - PSA Re-injection of water to Puquios Llamara  Sustainability: Environment and Risk prevention  Asset  Not classified   441   12-31-2013
SQM S.A.  IQ3S- Hazardous Materials Management Standardization  Sustainability:  Asset - Expense  Not classified   148   12-31-2013
SQM S.A.  IQ54 - Cultural heritage Pampa Hermosa  Minor projects (between ThUS$50 and ThUS$299)  Asset  Not classified   219   12-31-2013
SQM S.A.  MQLQ- Gas scrubbing system  Not classified  Asset  Development   288   06-30-2013
SQM S.A.  IQOW- Deposit authorization for Humberstone heritage  Sustainability: Environment and Risk prevention  Expense  Not classified   38   03-31-2013
SQM S.A.  IQ6M -IQ6N-DIA Nueva Victoria Sur Mine Expansion  Environmental processing  Asset  Not classified   2   03-31-2013
SQM Salar S.A.  LQDM – Certification of tanks  Sustainability: Replacement of equipment  Asset  Not classified   600   12-31-2013
SQM Salar S.A.  LQI6-EIA Operating maintenance at Salar de Atacama  Environmental processing  Asset  Not classified   265   06-30-2013
SQM Salar S.A.  LQNI-DIA KCI Floor Drying and compacting expansion  Environmental processing  Asset  Not classified   16   08-31-2013
SIT S.A.  TPYX - Enabling the dust collector of the crib and court seal 3 Tocopilla  Sustainability: Environment and Risk prevention  Asset / Expense  Development   40   12-31-2013

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
158
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24- Environment (continued)

 

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

 

Future expenses as of 12/31/2012

 

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

SIT S.A.   TQAV - Paving paths IV   Sustainability:   Asset   Development   162   12-31-2013
SIT S.A.   TQQ5- Environmental curtains Field No. 8   Sustainability: Environment and Risk prevention   Expense   Not classified   30   04-27-2013
SQM Nitratos S.A   IQMH - Normalization Mine NV area operation   Sustainability: Environment and Risk prevention   Asset   Not classified   157   03-31-2013
SQM Salar S.A.   LQG8 – Waste room  Toconao Campsite   Sustainability: Natural Resources   Expense   Not classified   16   03-31-2012
                Total   9,279    

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
159
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24- Environment (continued)

 

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

 

Accumulated expenses as of 12/31/2011

 

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 ThUS$

 

Actual or estimated date on

which disbursements were

or will be made

SQM Industrial S.A.   Environment management (Expense 2011 to December)   Not classified   Expense   Not classified   1,868   12-31-2011
SQM Industrial S.A.   SQ7X - Reach 2011-2013   Sustainability   Expense   Not classified   59   1-31-2014
SQM Industrial S.A.   ANMI -  Infrastructure consulting for the storage of dangerous chemical substances   Sustainability: Environment and Risk prevention   Asset   Development   46   6-30-2011
SQM Industrial S.A.   FNWR EID Discard field Pampa Blanca   Sustainability: Environment and Risk prevention   Expense   Development   30   12-31-2011
SQM Industrial S.A.   FP55 - FPXA - Mine Area EIS PB - PB Expansion EIS (Projects: Pampa Blanca Saltwater - Saltwater Stage I   Sustainability   Asset   Development   945   12-31-2012
SQM Industrial S.A.   JNTU - Assessment of waters at San Isidro   Sustainability: Environment and Risk prevention   Asset   Not classified   556   12-31-2011
SQM Industrial S.A.   JPX9 - Enhanced Ground Granulated EID-Prilado Coya Sur (Project: Pilot Plant TD and Pilot Testing of Resin)   Sustainability: Research and Development   Asset   Research   11   6-30-2011
SQM Industrial S.A.   MNYS - Measures of Technological Change Cultural Heritage Dissemination Maria Elena   Sustainability: Environment and Risk prevention   Asset   Not classified   29   12-1-2011
SQM Industrial S.A.   MP17 - Standardization Water Chlorination ME / CS / PV   Sustainability   Asset   Not classified   7   6-30-2011
SQM Industrial S.A.   MP5W - TK's Fuel Standards   Sustainability   Asset   Not classified   613   12-31-2011
SQM Industrial S.A.   MPIS - Stabilization of streets and sidewalks dust suppression   Sustainability   Asset   Development   736   6-30-2011
SQM Industrial S.A.   MPL5 - Repair sanitary and electrical services   Sustainability   Asset   Development   184   6-30-2011
SQM Industrial S.A.   Automation and Alarm Monitoring Station Hospital information   Not classified    Asset   Not classified   10   6-30-2011

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
160
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Nota 24 - Environment (continued)

 

24.2Detail of information on disbursements related to the environment (continued)

 

Accumulated expenses, as of December 31, 2011

 

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 ThUS$

 

Actual or estimated date

on which disbursements

were or will be made

SQM Industrial S.A.   MQ51 - Terms of Reference Project ME equity measures   Sustainability: Environment and Risk prevention    Expense   Not classified   2   12-31-2011
SQM Industrial S.A.   PPNK - Management of Ammonia PV stoppage plant   Sustainability: Environment and Risk prevention   Asset   Not classified   22   12-31-2011
SQM Industrial S.A.   PPZU - Standardize and certify Plant Fuel Tanks   Sustainability: Environment and Risk prevention    Asset - Expense   Not classified   785   12-1-2011
SQM Industrial S.A.   JQ8K – DIA Line 4  Floor Drying , Coya Sur (Project: Drying Line 4)   Capacity Upgrade   Asset   Development   17   9-1-2012
SQM Industrial S.A.   IQ8G – Improvement of Bureau of Exchange, offices and facilities   Sustainability   Asset    Not classified   45   12-31-2011
SQM Industrial S.A.   MQ7P - ME Village sewer lids change   Sustainability    Expense   Not classified   19   12-31-2011
SQM Industrial S.A.   JQB6 - EID Ground NPT4, Coya Sur (Project: NPTIV)   Capacity Upgrade   Asset   Development   5   4-30-2012
SQM Industrial S.A.   TQ78 - motorized sweepers   Sustainability: Equipment Replacement    Asset   Development   206   12-31-2011
Minera Nueva Victoria Ltda.   IPMN - Capacity Expansion Sanitary Iris   Capacity Upgrade    Asset   Development   85   6-30-2011
SQM Industrial S.A.   MPQU - Construction of Hazardous Chemical Supplies warehouse   Sustainability: Environment and Risk prevention    Asset   Development   199   12-31-2011
SQM Industrial S.A.   PPC1 - Remove switches park OCB sub 3 and 1/12 Pedro de Valdivia   Sustainability: Equipment Replacement   Asset – Expense   Not classified   68   12-31-2012
SQM Industrial S.A.   MQ8M - Reconditioning monitoring station ME   Sustainability: Repair    Asset   Not classified   7   12-31-2011
SQM Industrial S.A.   MQAJ - Improvements to Camp Water and Sewage (P Contesse commitment to DDSS)   Not classified    Asset   Not classified   3   12-31-2011

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
161
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24 - Environment (continued)

 

24.2Detail of information on disbursements related to the environment (continued)

 

Accumulated expenses as of December 31, 2011, 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 ThUS$

 

Actual or estimated date on

which disbursements were

or will be made

Minera Nueva Victoria Ltda.   IPNW - Improvements Halls C / D / B Iris   Sustainability    Asset   Not classified   44   8-31-2011
Minera Nueva Victoria Ltda.   IQ4C - Development Camp (Osmosis and Others)   Capacity Upgrade    Asset   Not classified   1,630   12-31-2012
SIT S.A.   TPLR - Implementation sewage pumping system to sewer   Sustainability: Environment and Risk prevention    Asset   Not classified   68   6-30-2011
SIT S.A.   TPM7 – Environmental nets field 3 and 4   Not classified   Asset - Expense   Not classified   524   6-30-2011
SIT S.A.   TPR8 - Disposal of liquid waste generation by aspiration   Sustainability: Environment and Risk prevention   Asset - Expense   Not classified   64   12-31-2011
SIT S.A.   TPYX - Enabling the dust collector of the crib and court seal 3 Tocopilla   Sustainability: Environment and Risk prevention    Asset   Development   1,496   12-31-2011
SIT S.A.   TQAV - Paving paths IV   Sustainability: Environment and Risk prevention   Expense   Development   3   12-1-2011
SIT S.A.   TQAP - Paving Field No. 3 and No. 4   Capacity Upgrade   Expense   Not classified   4   10-30-2012
SQM Nitratos S.A    IP6W - Treatment Plant Riles   Sustainability: Environment and Risk prevention    Asset   Not classified   39   6-30-2011
SQM Nitratos S.A   PP0V - Environmental Projects Maintenance ME-PV-NV-PB   Sustainability: Environment and Risk prevention   Asset - Expense   Development   82   6-30-2011
SQM S.A.   AQ0A - Well Drilling 4 Uptake Change Point Tamarugal Pampa   Sustainability: Natural Resources    Asset   Development   534   12-31-2011
SQM S.A.   IPFT - Cultural Heritage Region I   Sustainability: Environment and Risk prevention    Expense   Not classified   127   12-31-2011
SQM S.A.   IPXE - Environmental Monitoring Plan Llamara Salt flat   Sustainability: Environment and Risk prevention    Expense   Not classified   465   12-31-2012

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
162
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24 – Environment (continued)

 

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

 

Accumulated expenses as of December 31, 2011, 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 ThUS$

 

Actual or estimated date on

which disbursements were

or will be made

SQM S.A.   IPXF - Environmental Monitoring Plan Tamarugal Pampa   Sustainability: Environment and Risk prevention    Expense   Not classified   230   12-31-2012
SQM S.A.   IQ08 - PSA Llamara & Pampa Tamarugal   Sustainability: Environment and Risk prevention    Expense   Development   1,740   12-31-2011
SQM S.A.   IQ0C - Mine Area Enhancement NV   Sustainability: Environment and Risk prevention    Expense   Not classified   65   12-31-2011
SQM S.A.   IQ1K - Construction of 3 observation wells in Sur Viejo   Sustainability: Natural Resources    Asset   Development   195   12-31-2011
SQM S.A.   IQ1M - PSA Re-injection of water to Puquios Llamara   Not classified    Asset   Not classified   962   12-31-2011
SQM S.A.   IQ3S - Hazardous Materials Management Standardization   Sustainability: Environment and Risk prevention    Asset   Not classified   100   12-31-2012
SQM S.A.   IQ52 - New Victoria Environment Office   Not classified    Asset   Not classified   29   12-31-2011
SQM S.A.   IQ53 - Cultural heritage route Soronal adduction (Pampa Hermosa)   Sustainability: Environment and Risk prevention   Asset   Not classified   9   12-31-2011
SQM S.A.   IQ54 - Cultural heritage Pampa Hermosa   Sustainability: Environment and Risk prevention   Asset   Not classified   188   12-31-2012
SQM S.A.   SCI6 - Environmental Studies - Project Region I   Not classified    Asset   Not classified   2,376   12-31-2011
SQM S.A.   IQ6M - DIA Expansion Nueva Victoria Sur Mine   Sustainability: Natural Resources   Asset   Not classified   262   1-31-2012
SQM S.A.   IQ9V – Quillagua Project   Not classified    Asset   Not classified   323   12-31-2014
SQM Salar S.A   CPTP - Installing emergency showers drinking water   Sustainability    Asset   Not classified   26   12-31-2011

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
163
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Nota 24 – Environment (continued)

 

24.2Detail of information on disbursements related to environment, continued

 

Accumulated expenses as of December 31, 2011, 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 ThUS$

 

Actual or estimated date on

which disbursements were

or will be made

SQM Salar S.A   CPZH - Management of Descartes Filter Presses Hydroxide   Sustainability: Environment and Risk prevention    Expense   Not classified   39   12-31-2011
SQM Salar S.A   LP5J - Water Recharge Study Atacama Salt flat   Sustainability: Environment and Risk prevention    Expense   Research   105   12-31-2011
SQM Salar S.A   LP82 - Project for the Promotion of Agricultural Activity in Communities of the Salt deposit   Sustainability    Expense   Development   761   12-31-2014
SQM Salar S.A   LPTF – Environmental study and exploration 2010   Sustainability    Expense   Not classified   370   12-31-2011
SQM Salar S.A   LPTJ - Improvements Sanitary Works   Sustainability   Asset   Not classified   206   12-31-2011
SQM Salar S.A   LQ38 - Field Drying Sludge   Sustainability: Environment and Risk prevention   Asset - Expense   Not classified   26   12-31-2011
SQM Salar S.A   CQ8U - New Changing Room CL - HL   Capacity Upgrade    Asset   Not classified   238   12-31-2011
SQM Salar S.A   LQAK - garbage rooms MOP and  SOP   Sustainability    Expense   Not classified   25   12-31-2011
                Total   19,912    

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
164
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24 – Environment (continued)

 

24.2Detail of information on disbursements related to environment, continued

 

Future Expenses

 

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

ThUS$

 

Actual or estimated date on

which disbursements were or

will be made

SQM Industrial S.A.   Environment management (Budget 2011- expenses as of December 2011)   Not classified    Expense   Not classified   2,243   12-31-2011
SQM Industrial S.A.   SQ7X - Reach 2011-2013   Sustainability    Expense   Not classified   551   1-31-2014
SQM Industrial S.A.   FP55 - FPXA - Mine Area EIS PB - PB Expansion EIS (Projects: Pampa Blanca Saltwater - Saltwater Stage I)   Sustainability   Asset   Development   800   12-31-2012
SQM Industrial S.A.   MNYS - Measures of Technological Change Cultural Heritage Dissemination Maria Elena   Sustainability: Environment and Risk prevention   Asset   Not classified   107   12-1-2011
SQM Industrial S.A.   MP5W - TK's Fuel Standards   Sustainability   Asset   Not classified   487   12-31-2011
SQM Industrial S.A.   MPQU - Construction of Hazardous Chemical Supplies warehouse   Sustainability: Environment and Risk prevention   Asset   Development   264   12-31-2011
SQM Industrial S.A.   PPC1 - Remove switches park OCB sub 3 and 1/12 Pedro de Valdivia   Sustainability: Equipment Replacement   Asset - Expense   Not classified   122   12-31-2012
SQM Industrial S.A.   PPNK - Management of Ammonia PV stoppage plant   Sustainability: Environment and Risk prevention   Asset   Not classified   178   12-31-2011
SQM Industrial S.A.   PPZU - Standardize and certify Plant Fuel Tanks   Sustainability: Environment and Risk prevention   Asset - Expense   Not classified   2,715   12-1-2011
SQM Industrial S.A.   JQ8K – DIA Line 4  Floor Drying , Coya Sur (Project: Drying Line 4)   Capacity Upgrade   Asset   Development   13   9-1-2012
SQM Industrial S.A.   IQ8G – Improvement of Bureau of Exchange, offices and facilities   Sustainability   Asset   Not classified   30   12-31-2011
SQM Industrial S.A.   JQB6 - EID Ground NPT4, Coya Sur (Project: NPTIV)   Capacity Upgrade   Asset   Development   50   4-30-20122
SQM Industrial S.A.   TQA2 - Drainage Improvement Villa Prat   Not classified   Asset   Not classified   170   12-31-2011

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
165
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24 – Environment (continued)

 

24.2Detail of information on disbursements related to environment, continued

 

Future expenses (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
ThUS$
  Actual or estimated date on
which disbursements were or
will be made
SQM Industrial S.A.   MQAJ - Improvements to Camp Water and Sewage (P Contesse commitment to DDSS)   Not classified   Asset   Not classified   297   12-31-2011
SQM Industrial S.A.   MQA8 - Normalization gas system, external cafeterias (Stage 1: projects)   Not classified   Asset   Not classified   150   12-30-20111
SQM Industrial S.A.   MQBM - Archaeological Digging Deployment Maria Elena - Toco   Sustainability: Environment and Risk prevention    Expense   Not classified   56   12-31-2011
Minera Nueva Victoria Ltda.   IQ4C - Camp Development (Osmosis and Others)   Capacity Upgrade    Asset   Not classified   1,370   12-31-2012
SIT S.A.   TPR8 - Disposal of liquid waste generation by aspiration   Sustainability: Environment and Risk prevention   Asset- expense   Not classified   86   12-31-2011
SIT S.A.   TPYX - Enabling the dust collector of the crib and court seal 3 Tocopilla   Sustainability: Environment and Risk prevention   Asset   Development   204   12-31-2011
SIT S.A.   MQ6Y - Maintenance and repair and bureau of exchange Tocopilla ME   Sustainability: Environment and Risk prevention   Asset   Not classified   20   12-30-2011
SIT S.A.   TQAV - Paving paths IV   Sustainability: Environment and Risk prevention    Expense   Development   297   12-1-2011
SQM Nitratos S.A   IQDN - Storage Rises – Maintenance of Mine NV   Sustainability: Environment and Risk prevention   Asset   Not classified   40   7-30-2012
SQM S.A.   IPFT - Cultural Heritage Region I   Sustainability: Environment and Risk prevention    Expense   Not classified   96   12-31-2011
SQM S.A.   IPXE - Environmental Monitoring Plan Llamara Salt flat   Sustainability: Environment and Risk prevention    Expense   Not classified   1,276   12-31-2012
SQM S.A.   IPXF - Environmental Monitoring Plan Tamarugal Pampa   Sustainability: Environment and Risk prevention    Expense   Not classified   1,836   31-12-2012
SQM S.A.   IQ08 - PSA Llamara & Pampa Tamarugal   Sustainability: Natural Resources    Expense   Development   27   12-31-2011

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
166
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24 – Environment (continued)

 

24.2Detail of information on disbursements related to environment, continued

 

Future expenses (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
ThUS$
  Actual or estimated date on
which disbursements were or
will be made
SQM S.A.   IQ0C - Mine Area Enhancement NV   Sustainability: Environment and Risk prevention    Expense   Not classified   11   12-31-2011
SQM S.A.   IQ1K - Construction of 3 observation wells in Sur Viejo   Sustainability: Natural Resources   Asset   Development   2   12-31-2011
SQM S.A.   IQ1M - PSA Re-injection of water to Puquios Llamara   Not classified   Asset   Not classified   783   12-31-2011
SQM S.A.   IQ3S - Hazardous Materials Management Standardization   Sustainability: Environment and Risk prevention   Asset   Not classified   300   12-31-2012
SQM S.A.   IQ52 - New Victoria Environment Office   Not classified   Asset   Not classified   1   12-31-2011
SQM S.A.   IQ53 - Cultural heritage route Soronal adduction (Pampa Hermosa)   Sustainability: Environment and Risk prevention   Asset   Not classified   15   12-31-2011
SQM S.A.   IQ54 - Cultural heritage Pampa Hermosa   Sustainability: Environment and Risk prevention   Asset   Not classified   764   12-31-2012
SQM S.A.   IQ9V – Quillagua Project   Not classified   Asset- expense   Not classified   849   12-31-2014
SQM S.A.   PQB9 - Change of exhaust SO2 gas   Sustainability   Asset   Not classified   178   12-1-2011
SQM Salar S.A   CQ4M – Regularization of Contractor facilities   Sustainability: Environment and Risk prevention   Asset   Not classified   26   12-31-2012
SQM Salar S.A   LP82 - Project for the Promotion of Agricultural Activity in Communities of the Salt deposit   Sustainability    Expense   Development   822   12-31-2014
SQM Salar S.A   CQ8U - New Changing Room CL - HL   Capacity Upgrade   Asset   Not classified   102   12-31-2011
                Total   17,338    

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
167
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Nota 24 – Environment (continued)

 

24.3Description of each project, indicating whether they are in process or have been finished

 

SQM Industrial S.A.

 

IQ8G: This project contemplates the improvement of restrooms and the expansion of their capacity. In addition to water storage sector would be improved. The project is closing process.

 

JQEZ: This Project includes purchasing and installing Bertrams Boilers in Coya Sur Prill, in order to improve the level of combustion, decreasing and controlling the emission of fumes to the environment. The project is finished.

 

JQH9: The purpose of this project is to purchase Bertram’s boilers in order to improve the combustion levels, decreasing and controlling the emission of fumes to the environment. The 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.

 

MPQU: Construction of warehouses for dangerous chemicals supplies in order to decrease the chance of accidents and pollution. The project is in process.

 

MQ8M: Performing maintenance to structures and closing monitoring stations in Maria Elena. The project is finished.

 

MQA8: Normalization of gas networks of periferical casinos (stage 1: projects): CS, Lagarto, Iodum, PV, Toco and Rancho 6. The Project is in process.

 

MQAJ: Improve the water and sewerage network in Maria Elena for better operations. The project is finished.

 

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.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
168
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24 – Environment (continued)

 

24.3Description of each project indicating whether they are in process or have been finished (continued)

 

MQHF: Enable a wastewater plant in Toco according to SD 594, a change room for operators and contractors, among other things. 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.

 

PPC1: Purchase and replacement of equipment contaminated with PCB and obsolete equipment without spare parts. The project is in process.

 

PPNK: Project to ensure the control of the ammonia gas in the crystal plant stoppage. The project is finished.

 

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.

 

SQ7X: The purpose of this project is obtaining and recording information of components and finished products of SQM in the ECHA database to comply with the requirements set forth by the REACH regulation of the European Union. The project is in process.

 

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

 

CQLX: The project includes the construction at each location a courtyard of 145 m2 approx. The project is in process.

 

JQL7: This project aims to improve product recovery, and control emissions. The project is in process.

 

JQ8K: This project has the purpose of building a new drying plant in Coya Sur. The projected expenses correspond only to the environmental filing. The project is in process

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
169
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24 - Environment (continued)

 

24.3Description of each Project indicating whether they are in process or have been finished (continued)

 

FP55 – FPXA: These 2 projects have a final objective consisting in the installation of a sea water sucking system of 87 km from the Mejillones area to the SQM facilities located in Pampa Blanca. The projected expenses correspond only to the filing of the EIA of the PB mine zone and the EIA of the PB expansion. Both projects are in process.

 

JQB6: Preparation and filing of the EID of project NPT4 of Coya Sur, which increases the salt production capacity. The project is in process.

 

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

 

SQM S.A.

 

AQ0A: To enable the use of water rights that have been granted in several pits of the Conaf reservation Pampa del Tamarugal and to take them outside of the tamarugo forest and of the reservation, reducing the environmental impact of its exploitation. The project is in process.

 

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 process.

 

IPXE: To implement the plan of environment follow-up of Project Pampa Hermosa in Salar de Llamara. The project is in process.

 

IPXF: To implement the environment plan follow-up of the project Pampa Hermosa in Pampa del Tamarugal. The project is in process.

 

IQ08: The project considers the following works for the water reservoirs in Pampa del Tamarugal and Salar de Llamara: constructing and enabling observation and monitoring pits, pumping tests, construction of roads over hard sand terrain and Salar crust. The project is finished.

 

IQ0C: This project consists in implementing a program of adding value and area adjacent to route 5, which will enable the development of a self-guided tour of the area called Cantón de Lagunas in the context of the saltpeter history. The project is finished.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
170
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24 - Environment (continued)

 

24.4Description of each project indicating whether they are in process or have been finished (continued)

 

IQ1K: Construction of 3 observation pits in Sur Viejo to comply with the environmental commitments proposed in the EIS of Pampa Hermosa and to be able to monitor the water reservoir near said pits. The project is finished.

 

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.

 

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

 

IQ52: This project includes the enabling and expansion of the environment offices in Nueva Victoria. The project is finished.

 

IQ53: To perform equity assay to the new location of the Soronal abduction trace Project Pampa Hermosa approved through N° 890/2010. The project is in process.

 

IQ54: This corresponds to the implementation of environmental commitments acquired through the environment assessment of the project Pampa Hermosa (RCA N°890/2010). The project is in process.

 

IQ9V: To support the development of agriculture and tourist industry in the location of Quillagua, in order to enhance the activity through productive measures, technical assistance and marketing. The project is in process.

 

PQB9: installation of two larger SO2 extractors at the end of the process. The project is in process.

 

IQLR: The scope of this stage includes the updating of the Design, Implementation and Operation of the mitigation measure of puquios in Salar de Llamara. The project is finished.

 

MQLQ: Design and implement a system to scrub gases allowing mitigating SO2 emissions, this system should be aligned to SQM´s Sustainable Development Policy. The project is in process

 

IQ6M – IQ6N: Preparation and filing of the EID of the Project “Expansion of Mina Nueva Victoria”. The projected expenses only include the environment document filing. The project is in process.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
171
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24 - Environment (continued)

 

24.3Description of each Project indicating whether they are in process or have been finished (continued)

 

IP83: Preparation and filing of the EID of the Project “Extension TLN-15”. The projected expenses only include the environment document filing. 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. The Project is in process.

 

IQPJ: The project consists of the implementation of heritage measures involved in the Environmental Assessment for the mine areas. The measures will be implemented according to the requirements of the mining operation VPONV. The Project is in process.

 

SQM Salar S.A.

 

LQFD: The project includes the construction of currency exchange offices in order to comply with the rules and comfort to our workers. The project is finished.

 

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.

 

LQ38: This project has the purpose to comply with the current regulations and with observations raised by the SEREMI of Health. The project is in process.

 

LQAK: The project considers the construction of garbage rooms in lunchrooms in MOP and SOP, in order to increase the waste storage capacity. The project is finished.

 

LQNI:. Preparation and processing of EID of project "Expansion of Drying and KCI Compacting Plant". The expenses considered include environmental processing only. The project is in process.

 

CQ4M: The project contemplates the regularization of the electric facilities, change of cables, electric and illumination control panels. It also contemplates the installation of enough restroom with showers for the contractor’s permanent personnel. The project is finished.

 

CQ8U: To improve the condition and capacity of the exchange rooms in Salar del Carmen. The project is finished.

 

LP82: To support the development of demonstration lots, provide technical assistance for the improvement of agriculture practices such as watering. The project is in process.

 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
172
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24 - Environment (continued)

 

24.3Description of each Project indicating whether they are in process or have been finished (continued)

 

LPTF: To perform semi-annual reports, given that it is necessary to present improvements and optimizations at environmental control points, and the knowledge on geologic and hydrogeologic variables must be improved near Salar de Atacama. The project is finished.

 

LPTJ: The plan considers the acquisition of stand equipment to ensure the operating continuity of the TAS and OR plants, the change in the current control system of TK's regarding the accumulation of drinking water, wastewater, and wastewater elevation chambers, among others. The project is finished.

 

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. The project is in process.

 

SIT S.A.

 

TQNA: Installation of a meteorological station to measure wind speed and direction in the Southern Sector of Tocopilla in order to fulfill the commitment with the authority. The project is in process.

 

MQ6Y: To maintain and repair the bureau of exchange in María Elena and Tocopilla, in order to comply with Decree No.594. The project is finished.

 

TPR8: This project pretends to increase the generation of industrial waste through the use of vacuum and no-washing technologies, through the implementation of a vacuum system that avoids the use of water and therefore the generation of liquid industrial waste. The project is finished.

 

TPYX: To comply with the commitment of decreasing the emission of particulate material towards the city of Tocopilla. The project is in process.

 

TQAP: to decrease the environmental pollution and losses produced by the product’s storage. The project is finished.

 

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.

 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
173
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 24 - Environment (continued)

 

24.3Description of each Project indicating whether they are in process or have been finished (continued)

 

TQM2: The project involves recovering operating conditions by changing the pitch pipe No.1 thus reducing the environmental pollution. The project is in process.

 

TQLY: This project aims at eliminating environmental contamination that may exist in the areas of work of operators. 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 POTASIO S.A.

 

IQ4C: Supply, construction and assembly of the osmosis and septic pits plant required to enable the camp in plant Iris and other. The project is finished.

 

SQM Nitratos S.A.

 

IQDN: Construction of a parapet forming a square pool (or rectangular) with an impermeable membrane that covers its entire length, to serve as a reservoir of sludge (Rises). The project is in process.

 

PQI9: Construction of a new pit replacing the current with a new waste water treatment technology. The project is in process.

 

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

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
174
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

As of December 31, 2012, and December 31, 2011, the detail of other current and non-current assets is as follows:

 

Other non-financial  assets, current  12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
Domestic Value Added Tax   42,136    46,243 
Foreign Value Added Tax   9,306    5,879 
Prepaid mining licenses   1,512    1,228 
Prepaid insurance   8,278    6,979 
Other prepayments   494    308 
Other assets   6,095    3,155 
Total   67,821    63,792 

 

Other non-financial  assets, non-current  12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
Stain development expenses and prospecting expenses (1)   16,839    21,395 
Guarantee deposits   571    428 
Other assets   272    2,829 
Total   17,682    24,652 

 

(1)Assets for the exploration or evaluation of mineral resources are amortized to the extent that the explored or evaluated area has been exploited. For this purpose, a variable rate is applied to extracted tons, which is determined based on the measured initial reserve and evaluation cost. The Company presents expenses associated with Exploration and Evaluation of Mineral Resources. Of these expenses, those that are under exploitation are included under Inventory and are amortized according to the estimated ore reserves contained, and expenses associated with future reserves are presented under Other non-current assets. Those expenses incurred on properties with low ore grade that are not economically exploitable are directly charged to income. As of December 31, 2012 balances associated with the exploration and assessment of mineral resources is presented under Inventory for ThUS$ 6,174 (ThUS$ 3,699 as of December 31, 2011).

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
175
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 25 - Other current and non-current non-financial assets (continued)

 

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 December 31, 2012 and December 31, 2011:

 

Reconciliation  12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
           
Assets for the exploration and evaluation of mineral resources, net, opening balance   21,395    21,350 
Changes in assets for exploration and assessment of mineral resources:          
Additions, other than business combinations   843    3,777 
Depreciation and amortization   (2,080)   (1,883)
Increase (Decrease) due to transfers and other charges   (3,319)   (1,849)
Assets for exploration and assessment of mineral resources, net, closing balance   16,839    21,395 

 

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

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
176
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 26 - Operating segments

 

26.1Operating segments

 

General information:

 

The amount of each item presented in each operating segment is equal to that reported to the maximum authority who 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.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
177
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 26 - Operating segments (continued)

 

26.1Operating 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.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
178
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 26 - Operating segments (continued)

 

26.2Operating segment disclosures as of December 31, 2012 and December 31, 2011:

 

12/31/2012
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
12/31/2012
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                                 
Revenue   675,350    578,091    222,238    245,208    605,059    103,214    2,429,160    2,429,160    -    -    -    2,429,160 
Revenues from transactions with other operating segments of the same entity   265,814    848,243    154,248    348,667    569,219    493,884    2,680,075    2,680,075    (2,680,075)   -    -    - 
                                                             
Revenues from external customers and transactions with other operating segments of the same entity   941,164    1,426,334    376,486    593,875    1,174,278    597,098    5,109,235    5,109,235    (2,680,075)   -    -    2,429,160 
                                                             
Interest revenue   -    -    -    -    -    -    -    -    -    -    -    - 
Interest expense   -    -    -    -    -    -    -    -    225,396    (279,491)   -    (54,095)
depreciation and amortization expense   (54,383)   (47,100)   (17,896)   (19,745)   (48,723)   (8,311)   (196,158)   (196,158)   -    -    -    (196,158)
The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method   -    -    -    -    -    -    -    -    -    24,357    -    24,357 
income tax expense, continuing operations   -    -    -    -    -    -    -    -    -    (216,082)   -    (216,082)
Other items other tan significant cash   -    -    -    -    -    -    -    -    -         -    - 
Income (loss) before taxes   217,880    362,518    110,695    83,055    246,027    8,419    1,028,594    1,028,594    (786,634)   631,491    -    873,451 
                                                             
Net income (loss) from continuing operations   217,880    362,518    110,695    83,055    246,027    8,419    1,028,594    1,028,594    (786,634)   415,409    -    657,369 
Net income (loss) from discontinued operations                                                            
Net income (loss)   217,880    362,518    110,695    83,055    246,027    8,419    1,028,594    1,028,594    (786,634)   415,409    -    657,369 
                                                             
Assets   -    -    -    -    -    -    -    -    (7,296,791)   11,713,222    -    4,416,431 
Equity-accounted investees   -    -    -    -    -    -    -    -    (3,423,758)   3,494,056    -    70,298 
Increase of non-current assets   -    -    -    -    -    -    -    -         255,363    -    255,363 
Liabilities   -    -    -    -    -    -    -    -    (3,393,525)   5,622,510    -    2,228,985 
Equity                                                          2,187,446 
Equity and liability                                                          4,416,431 
Impairment loss recognized in profit or loss   (10,281)   (2,081)   (162)   (3,043)   (2,471)   (120)   (18,158)   (18,158)   -    (2,900)   -    (21,058)
Cash flows from (used in) operating activities   -    -    -    -    -    -    -    -    -    650,206    -    650,206 
Cash flows from (used in) investing activities   -    -    -    -    -    -    -    -    -    (562,885)   -    (562,885)
Cash flows from (used in) financing activities   -    -    -    -    -    -    -    -    -    (197,697)   -    (197,697)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
179
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 26 - Operating segments (continued)

 

26.2Operating segment disclosures as of December 31, 2012 and December 31, 2011:

 

12/31/2011
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
12/31/2011
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                                 
Revenue   721,696    454,468    183,403    139,508    555,742    90,469    2,145,286    2,145,286    -    -    -    2,145,286 
Revenues from transactions with other operating segments of the same entity   268,628    620,516    136,894    265,298    568,393    365,225    2,224,954    2,224,954    (2,224,954)   -    -    - 
                                                             
Revenues from external customers and transactions with other operating segments of the same entity   990,324    1,074,984    320,297    404,806    1,124,135    455,694    4,370,240    4,370,240    (2,224,954)   -    -    2,145,286 
                                                             
Interest revenue   -    -    -    -    -    -    -    -    -    -    -    - 
Interest expense   -    -    -    -    -    -    -    -    196,461    (235,796)   -    (39,335)
depreciation and amortization expense   (65,902)   (41,500)   (16,747)   (12,739)   (50,748)   (8,261)   (195,897)   (195,897)   -    -    -    (195,897)
The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method   -    -    -    -    -    -    -    -    -    21,808    -    21,808 
income tax expense, continuing operations   -    -    -    -    -    -    -    -    -    179,710    -    179,710 
Other items other tan significant cash   -    -    -    -    -    -    -    -    -         -    - 
Income (loss) before taxes   227,476    262,361    85,230    56,005    218,264    5,456    854,792    854,792    (757,832)   636,869    -    733,829 
                                                             
Net income (loss) from continuing operations   227,476    262,361    85,230    56,005    218,264    5,456    854,792    854,792    (757,832)   457,159    -    554,119 
Net income (loss) from discontinued operations                                                            
Net income (loss)   227,476    262,361    85,230    56,005    218,264    5,456    854,792    854,792    (757,832)   457,159    -    554,119 
                                                             
Assets   -    -    -    -    -    -    -    -    (6,740,071)   10,611,654    -    3,871,583 
Equity-accounted investees   -    -    -    -    -    -    -    -    (2,595,886)   2,656,580    -    60,694 
Increase of non-current assets   -    -    -    -    -    -    -    -         207,320    -    207,320 
Liabilities   -    -    -    -    -    -    -    -    (3,699,768)   5,706,971    -    2,007,203 
Equity                                                          1,864,380 
Equity and liability                                                          3,871,583 
Reversal of impairment losses recognized in profit and loss for the year                       1,543         1,543    1,543         179         1,722 
Impairment loss recognized in profit or loss   (3,379)   (596)   (420)   (3,085)   -    (207)   (7,687)   (7,687)   -    (5,364)   -    (13,051)
Cash flows from (used in) operating activities   -    -    -    -    -    -    -    -    -    571,345    -    571,345 
Cash flows from (used in) investing activities   -    -    -    -    -    -    -    -    -    (516,228)   -    (516,228)
Cash flows from (used in) financing activities   -    -    -    -    -    -    -    -    -    (105,196)   -    (105,196)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
180
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 26 - Operating segments (continued)

 

26.3Statement of comprehensive income classified by operating segments based on groups of products as of December 31, 2012:

 

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   675,350    578,091    222,238    245,208    605,059    103,214    -    2,429,160 
Cost of sales   (457,470)   (215,573)   (111,543)   (162,153)   (359,032)   (94,796)   -    (1,400,567)
                                         
Gross profit   217,880    362,518    110,695    83,055    246,027    8,418    -    1,028,593 
                                         
Other incomes by function   -    -    -    -    -    -    12,702    12,702 
Administrative expenses   -    -    -    -    -    -    (106,442)   (106,442)
Other expenses y function   -    -    -    -    -    -    (34,628)   (34,628)
Other gains (losses)   -    -    -    -    -    -    683    683 
Financial income   -    -    -    -    -    -    29,068    29,068 
Financial costs   -    -    -    -    -    -    (54,095)   (54,095)
interest in the profit or loss of associates and joint ventures accounted for by the equity method   -    -    -    -    -    -    24,357    24,357 
Exchange differences   -    -    -    -    -    -    (26,787)   (26,787)
Profit (loss )before taxes   217,880    362,518    110,695    83,055    246,027    8,418    (155,142)   873,451 
Income tax expense   -    -    -    -    -    -    (216,082)   (216,082)
Profit (loss )from continued operations   217,880    362,518    110,695    83,055    246,027    8,418    (371,224)   657,369 
Profit (loss ) from discontinued operations   -    -    -    -    -    -    -    - 
Profit (loss)   217,880    362,518    110,695    83,055    246,027    8,418    (371,224)   657,369 
Profit (loss, attributable to                                        
Profit (loss ) attributable to the controller´s owners   -    -    -    -    -    -    -    649,167 
Profit (loss ) attributable to the non controllers   -    -    -    -    -    -    -    8,202 
Profit (loss)   -    -    -    -    -    -    -    657,369 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
181
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 26 - Operating segments (continued)

 

26.3Statement of comprehensive income classified by operating segments based on groups of products as of December 31, 2011:

 

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   721,696    454,468    183,403    139,508    555,742    90,469    -    2,145,286 
Cost of sales   (494,220)   (192,107)   (98,173)   (83,503)   (337,478)   (85,013)   -    (1,290,494)
                                         
Gross profit   227,476    262,361    85,230    56,005    218,264    5,456    -    854,792 
                                         
Other incomes by function   -    -    -    -    -    -    47,681    47,681 
Administrative expenses   -    -    -    -    -    -    (91,760)   (91,760)
Other expenses y function   -    -    -    -    -    -    (63,047)   (63,047)
Other gains (losses)   -    -    -    -    -    -    5,787    5,787 
Financial income   -    -    -    -    -    -    23,210    23,210 
Financial costs   -    -    -    -    -    -    (39,335)   (39,335)
interest in the profit or loss of associates and joint ventures accounted for by the equity method   -    -    -    -    -    -    21,808    21,808 
Exchange differences   -    -    -    -    -    -    (25,307)   (25,307)
Profit (loss )before taxes   227,476    262,361    85,230    56,005    218,264    5,456    (120,963)   733,829 
Income tax expense   -    -    -    -    -    -    (179,710)   (179,710)
Profit (loss )from continued operations   227,476    262,361    85,230    56,005    218,264    5,456    (300,673)   554,119 
Profit (loss ) from discontinued operations   -    -    -    -    -    -    -    - 
Profit (loss)   227,476    262,361    85,230    56,005    218,264    5,456    (300,673)   554,119 
Profit (loss, attributable to                                        
Profit (loss ) attributable to the controller´s owners   -    -    -    -    -    -    -    545,758 
Profit (loss ) attributable to the non controllers   -    -    -    -    -    -    -    8,361 
Profit (loss)   -    -    -    -    -    -    -    554,119 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
182
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 26 - Operating segments (continued)

 

26.4Revenue from transactions with other operating segments of the Company as of December 31, 2012

 

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   675,350    578,091    222,238    245,208    605,059    103,214    2,429,160 

 

26.4Revenue from transactions with other operating segments of the Company as of December 31, 2011

 

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   721,696    454,468    183,403    139,508    555,742    90,469    2,145,286 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
183
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 26 - Operating segments (continued)

 

26.5Disclosures 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.

 

26.6Disclosures 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.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
184
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 26 - Operating segments (continued)

 

26.7Segments by geographical areas as of December 31, 2012 and 2011

 

Items  Chile   Latin America
and the
Caribbean
   Europe   North
America
   Asia and
others
   12/31/2012 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Revenue   269,421    416,089    558,245    619,667    565,738    2,429,160 
                               
Non-current assets:   2,054,806    488    35,709    18,066    29,602    2,138,671 
Equity-accounted investees   1,656    -    24,051    15,357    29,234    70,298 
Intangible assets other than goodwill   23,630    -    -    378    5    24,013 
Goodwill   26,929    86    11,373    -    -    38,388 
Property, plant and equipment, net   1,985,128    183    285    2,331    363    1,988,290 
Investment property   -    -    -    -    -    - 
Other non-current assets   17,463    219    -    -        17,682 

 

Items  Chile   Latin America
and the
Caribbean
   Europe   North
America
   Asia and
others
   12/31/2011 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Revenue   247,510    284,605    837,126    445,048    330,997    2,145,286 
                               
Non-current assets:   1,809,871    1,757    28,681    15,335    27,664    1,883,308 
Equity-accounted investees   1,444    -    16,919    14,867    27,464    60,694 
Intangible assets other than goodwill   3,877    -    -    439    -    4,316 
Goodwill   27,146    86    11,373    -    -    38,605 
Property, plant and equipment, net   1,752,991    1,433    389    29    200    1,755,042 
Investment property   -    -    -    -    -    - 
Other non-current assets   24,413    238    -    -    -    24,651 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
185
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 26 - Operating segments (continued)

 

26.8Property, 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, 2012 and December 31, 2012 and December 31, 2011:

 

Location   Products:
Pedro de Valdivia   Production of nitrite, sulfate, and iodine
María Elena   Production of nitrite, sulfate, and iodine
Coya Sur   Production of nitrite, sulfate, and iodine
Nueva Victoria   Production of iodine and nitrate salts
Salar de Atacama   Potassium chloride, Lithium chloride and boric acid
Salar del Carmen   Production of Lithium carbonate and lithium hydroxide, production of boron
Tocopilla   Port facilities

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
186
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

27.1Revenue

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
         
Products   2,420,357    2,138,264 
Services   8,803    7,022 
Total   2,429,160    2,145,286 

 

27.2Cost of sales

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
         
Raw material and supplies   (1,066,803)   (762,350)
           
Types of employee benefits expenses          
Salaries and wages   (134,400)   (104,757)
Other short-term employee benefits   (66,370)   (52,804)
Termination benefit expenses   (4,325)   (4,646)
Total employee benefits expenses   (205.095)   (162,207)
           
Depreciation and amortization expenses   (190,509)   (163,438)
Impairment loss (review of impairment losses) recognized in profit or loss for the year   (18,158)   (6,144)
Other expenses, by nature (*)   79,998    (196,355)
Total   (1,400,567)   (1,290,494)

 

(*)Include the variation of finished and products in-process

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
187
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

27.3Other income

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
         
Discounts obtained from suppliers   648    777 
Compensation received   53    876 
Penalties charged to suppliers   312    453 
Taxes recovered   15    12 
Insurance recovered   5,187    395 
Excess in the provision of liabilities with 3rd parties   669    630 
Excess in allowance for doubtful accounts   154    178 
Sale of Property, plant and equipment   281    2,213 
Sale of materials, spare parts and supplies   1,388    959 
Sale of mining concessions   1,578    613 
Sale of scrap   176    141 
Indemnity Minera Esperanza   28    192 
Excess indemnity provision Yara South Africa   335    - 
Excess inventory provision   -    559 
Other services   2    84 
Other operating results   1,876    1,920 
Sale of mining concessions Sierra Gorda SCM   -    37,679 
Total   12,702    47,681 

 

27.4Administrative expenses

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
         
Employee benefit expenses by nature          
Salaries and wages   (44,429)   (42,609)
Other short-term benefits to employees   (2,868)   (3,884)
Total employee benefit expenses   (47.297)   (46,493)
Other expenses, by nature   (59,145)   (45,267)
Total   (106,442)   (91,760)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
188
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

27.5Other expenses by function

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
         
Employee benefit expenses by nature          
Other short-term benefits to employees   (24)   (16)
           
Depreciation and amortization expenses          
Depreciation of stopped assets   (5,649)   (32,459)
           
Impairment loss (review of impairment losses) recognized in profit or loss for the year          
Impairment of allowance for doubtful accounts   (1,054)   (3,364)
Provision for loss in auction of materials and spare parts   (2,000)   (2,000)
           
Subtotal to date   (3,054)   (5,364)
           
Other expenses, by nature          
Legal Expenses   (1,984)   (2,422)
           
VAT and other unrecoverable tax   (1,182)   (685)
Investment plan expenses   (13,578)   (11,462)
Donations rejected as expense   (5,517)   (2,557)
Provision for work closing   (634)   (224)
Trial in Brazil   -    (3,500)
Indemnities paid   (281)   (3,495)
Other operating expenses   (2,725)   (863)
           
Subtotal to date   (25,901)   (25,208)
           
Total   (34,628)   (63,047)

 

27.6Other income (expenses)

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
Adjustment of Equity Method, prior year   736    422 
Sale of investment in associates   (404)   1,467 
Provision for retirement plan   -    880 
Adjustment of prior year equity value   -    - 
Provision for closure in El Toco   -    3,016 
Other   351    2 
           
Total   683    5,787 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
189
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

27.7Summary of expenses by nature :

 

   January to December   September to
December
 
   2012   2011   2012   2011 
   ThUS$   ThUS$   ThUS$   ThUS$ 
                 
Raw material and supplies used   (1,066,803)   (762,350)   (305,380)   (242,713)
                     
Types of employee benefits expenses                    
                     
Salaries and wages   (178,829)   (147,366)   (51,350)   (40,092)
Other short-term employee benefits   (69,262)   (56,704)   (15,566)   (16,744)
Termination benefit expenses   (4,325)   (4,646)   (2,034)   (1,238)
Total employee benefit expenses   (252,416)   (208,716)   (68,950)   (58,074)
Depreciation and amortization expenses                    
Depreciation expense   (196,158)   (195,897)   (50,181)   (56,695)
Impairment loss (reversal of impairment losses) recognized in profit or loss for the year   (21,212)   (11,508)   4,230    (3,982)
Other expenses, by nature   (5,048)   (266,830)   11,697    (8,641)
                     
Total expenses, by nature   (1,541,637)   (1,445,301)   (408,584)   (370,105)

 

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

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
190
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Nota 28 - Income Tax and Deferred Taxes

 

Accounts receivable from taxes as of December 31, 2012 and December 31, 2011, are as follows:

 

28.1Current tax assets:

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
Monthly provisional income tax payments, Chilean companies current year   23,713    1,758 
Monthly provisional payment Royalty   2,430    - 
Monthly provisional income tax payments, foreign companies   1,979    857 
Corporate tax credits (1)   144    394 
Corporate tax absorbed by tax losses (2)   1,968    1,756 
Total   30,234    4,765 

 

(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 2012 and 2011.

 

(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.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
191
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 28 - Income Tax and Deferred Taxes (continued)

 

28.1Current 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.

 

28.2Current tax liabilities:

 

Current tax liabilities  12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
Companies incorporated in Chile   13,408    67,543 
Companies incorporated abroad   10,206    7,868 
Tax under article 21   10    7 
Total   23,624    75,418 

 

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.

 

28.3Tax earnings

 

As of December 31, 2012, and December 31, 2011, 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:

 

   12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Taxable profits with credit rights (1)   1,262,201    1,053,651 
Taxable profits without credit right(1)   138,535    150,234 
Taxable loss   9,931    15,069 
Credit for shareholders   294,146    242,143 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
192
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 28 - Income Tax and Deferred Taxes (continued)

 

28.3Tax 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.

 

28.4Income tax and deferred taxes

 

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

 

1The Company has legally recognized before the tax authority the right to offset the amounts recognized in these entries; and

 

2Deferred 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.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
193
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 28 - Income Tax and Deferred Taxes (continued)

 

28.4Income 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.1Income tax assets and liabilities as of December 31, 2012 are detailed as follows:

 

   Net position, assets   Net position,
liabilities
 
Description of deferred income tax assets and  Assets   Liabilities   Assets   Liabilities 
liabilities  ThUS$   ThUS$   ThUS$   ThUS$ 
Depreciation   -    -    -    145,251 
Doubtful accounts impairment   -    -    5,807    - 
Accrued vacations   -    -    3,971    - 
Manufacturing expenses   -    -    -    60,160 
Unrealized gains (losses) from sales of products   -    -    105,879    - 
Fair value of bonds   -    -    3,684    - 
Severance indemnity   -    -    -    4,483 
Hedging   -    -    -    22,890 
Inventory of products, spare parts and supplies   37    -    14,990    - 
Research and development expenses   -    -    -    4,917 
Tax losses   -    -    1,509    - 
Capitalized interest   -    -    -    20,449 
Expenses in assumption of bank loans   -    -    -    2,243 
Unaccrued interest   -    -    215    - 
Fair value of property, plant and equipment   -    -    -    2,743 
Employee benefits   -    -    2,027    - 
Royalty deferred income taxes   -    -    -    8,430 
Other   186    -    8,039    - 
Balance to date   223    -    146,121    271,566 
Net balance   223    -    -    125,445 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
194
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 28 - Income Tax and Deferred Taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

d.2Income tax assets and liabilities as of December 31, 2012 are detailed as follows

 

   Net position, assets   Net position, liabilities 
Description of deferred income tax assets  Assets   Liabilities   Assets   Liabilities 
and liabilities  ThUS$   ThUS$   ThUS$   ThUS$ 
Depreciation   -    -    -    114,151 
Doubtful accounts impairment   16         4,045    - 
Vacation accrual   9    -    2,633    - 
Production expenses   -    -    -    54,747 
Unrealized gains (losses) from sales of products   -    -    97,441    - 
Bonds fair value   -    -    2,104    - 
Employee termination benefits   -    -    -    3,036 
Hedging   -    -    -    16,636 
Inventory of products, spare parts and supplies   85    -    7,781    - 
Research and development expenses   -    -    -    4,598 
Tax losses   -    -    1,046    - 
Capitalized interest   -    -    -    17,461 
Expenses in assumption of bank loans   -    -    -    1,855 
Unaccrued interest   -    -    386    - 
Fair value of property, plant and equipment   -    -    1,539    - 
Employee benefits   -    -    1,177    - 
Royalty deferred income taxes   -    -    -    10,035 
Other   194    -    5,773    - 
Balance to date   304    -    123,925    222,519 
Net balance   304    -    -    98,594 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
195
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 28 - Income Tax and Deferred Taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

d.3Deferred 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 December 31, 2012 and December 31, 2011, tax loss carryforwards (NOL carryforwards) are detailed as follows:

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
         
Chile   1,509    1,046 
Other countries   -    - 
           
Other countries   1,509    1,046 

 

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

 

d.4Unrecognized deferred income tax assets and liabilities

 

Unrecognized deferred tax assets and liabilities as of December 31, 2012 and December 31, 2011 are as follows:

 

   12/31/2012   12/31/2011 
   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)
Depreciation   (19)   (19)
           
Balances to date   657    657 

 

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

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
196
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 28 - Income Tax and Deferred Taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

d.5Movements in deferred tax assets and liabilities

 

Movements in deferred tax assets and liabilities as of December 31, 2012 and December 31, 2011 are detailed as follows:

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
   Liabilities
(assets)
   Liabilities
(assets)
 
         
Deferred tax assets and liabilities, net opening balance   98,290    100,416 
Increase (decrease) in deferred taxes in profit or loss   28,512    (3,664)
Tax Recovery of first category credit absorbed by tax losses   -    1,756 
Increase (decrease) in deferred taxes in equity   (1,580)   (218)
           
Balances to date   125,222    98,290 

 

d.6Disclosures 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

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
197
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 28 - Income Tax and Deferred Taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

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

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
   Income
(expenses)
   Income
(expenses)
 
         
Current income tax expense          
Current income tax expense   (187,715)   (181,424)
Adjustments to prior year current income tax   145    (1,950)
           
Current income tax expense, net, total   (187,570)   (183,374)
           
Deferred tax expense          
Deferred tax expense (income) relating to the creation and reversal of temporary differences   (28,512)   3,664 
Deferred tax expense (income) relating changes in tax rates or the application of new taxes   -    - 
Deferred tax expense, net, total   (28,512)   3,664 
           
Tax expense (income)   (216,082)   (179,710)

 

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

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
   Income
(expenses)
   Income
(expenses)
 
         
Current income tax expense by foreign and domestic parties, net          
Current income tax expense, foreign parties, net   (14,790)   (5,231)
Current income tax expense, domestic, net   (172,780)   (178,143)
           
Current income tax expense, net, total   (187,570)   (183,374)
           
Deferred tax expense by foreign and domestic parties, net          
Deferred tax expense, foreign parties, net   474    (651)
Deferred tax expense, domestic, net   (28,986)   4,315 
           
Deferred tax expense, net, total   (28,512)   3,664 
           
Income tax expense   (216,082)   (179,710)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
198
 

  

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 28 - Income Tax and Deferred Taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

d.7Equity 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.8Disclosures on the tax effects of other comprehensive income components:

 

       12/31/2012     
      ThUS$     
Income tax related to components of other  Amount before   (Expense)     
income and expense with a charge or credit to  taxes   income for   Amount 
net equity  (expense) gain   income taxes   after taxes 
Cash flow hedge   (6,236)   1,580    (4,656)
                
Total   (6,236)   1,580    (4,656)

 

       12/31/2011     
      ThUS$     
Income tax related to components of other  Amount before   (Expense)     
income and expense with a charge or credit to  taxes   income for   Amount 
net equity  (expense) gain   income taxes   after taxes 
             
Cash flow hedge   (1,091)   218    (873)
                
Total   (1,091)   218    (873)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
199
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 28 - Income Tax and Deferred Taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

d.9Explanation 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

 

   12/31/2012   12/31/2011 
   ThUS$   ThUS$ 
   Income (expense)   Income (expense) 
         
Consolidated income before taxes   873,451    733,829 
Income tax rate in force in Chile   20%   20%
           
Tax expense using the legal rate   (174,690)   (146,766)
Effect of royalty tax expense   (25,486)   (24,487)
Tax effect of non-taxable revenue   7,419    6,865 
Effect of taxable rate of non-deductible expenses for determination of taxable income (loss)   (3,091)   (2,548)
Tax effect of tax rates supported abroad   (5,265)   (3,173)
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)   (14,969)   (9,601)
Tax expense using the effective rate   (216,082)   (179,710)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
200
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 28 - Income Tax and Deferred Taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

d.10Tax 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.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
201
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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   12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Current assets:               
Cash and cash equivalents   BRL    20    22 
Cash and cash equivalents   CLP    76,712    125,118 
Cash and cash equivalents   CNY    181    300 
Cash and cash equivalents   EUR    3,601    3,070 
Cash and cash equivalents   GBP    70    14 
Cash and cash equivalents   IDR    5    5 
Cash and cash equivalents   INR    13    45 
Cash and cash equivalents   MXN    720    29 
Cash and cash equivalents   PEN    75    16 
Cash and cash equivalents   YEN    1,369    2,292 
Cash and cash equivalents   ZAR    7,421    5,450 
Subtotal cash and cash equivalents        90,187    136,361 
Other current financial assets   CLP    182,427    129,069 
Subtotal other current financial assets        182,427    129,069 
Other current non-financial assets   ARS    29    35 
Other current non-financial assets   AUD    -    91 
Other current non-financial assets   BRL    5    4 
Other current non-financial assets   CLF    23    22 
Other current non-financial assets   CLP    42,378    46,366 
Other current non-financial assets   CNY    29    16 
Other current non-financial assets   EUR    8,534    4,504 
Other current non-financial assets   INR    -    17 
Other current non-financial assets   MXN    736    606 
Other current non-financial assets   PEN    55    37 
Other current non-financial assets   YEN    15    - 
Other current non-financial assets   ZAR    702    1,443 
Subtotal other current non-financial assets        52,506    53,141 
Trade and other receivables   AUD    14    - 
Trade and other receivables   BRL    58    41 
Trade and other receivables   CLF    826    1,172 
Trade and other receivables   CLP    78,112    107,973 
Trade and other receivables   CNY    2,014    1,811 
Trade and other receivables   EUR    47,962    60,382 
Trade and other receivables   GBP    399    488 
Trade and other receivables   MXN    200    141 
Trade and other receivables   PEN    114    211 
Trade and other receivables   ZAR    16,004    16,004 
Subtotal trade and other receivables        145,703    188,223 
Receivables from related parties   AED    -    379 
Receivables from related parties   CLP    1,154    999 
Receivables from related parties   EUR    34    150 
Receivables from related parties   YEN    28    93 
Receivables from related parties   ZAR    3,312    - 
Subtotal receivables from related parties        4,528    1,621 
Current tax assets   AUD    452    - 
Current tax assets   CLP    457    590 
Current tax assets   EUR    72    70 
Current tax assets   INR    5    - 
Current tax assets   MXN    698    6 
Current tax assets   PEN    363    239 
Current tax assets   YEN    135    34 
Subtotal current tax assets        2,182    939 
Total current assets        477,533    509,354 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
202
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

Class of asset  Currency  12/31/2012
ThUS$
   12/31/2011
ThUS$
 
Non-current assets:             
Other non-current financial assets  BRL   30    30 
Other non-current financial assets  CLP   20    20 
Other non-current financial assets  EUR   -    3 
Other non-current financial assets  YEN   54    61 
Subtotal other non-current financial assets      104    114 
Other non-current non-financial assets  BRL   219    238 
Other non-current non-financial assets  CLP   624    477 
Subtotal other non-current non-financial assets      843    715 
Non-current rights receivable  CLF   602    362 
Non-current rights receivable  CLP   709    709 
Subtotal non-current rights receivable      1,311    1,071 
Equity-accounted investees  AED   17,044    14,236 
              
Equity-accounted investees  CLP   1,656    1,444 
Equity-accounted investees  EGP   -    1,270 
Equity-accounted investees  EUR   8,495    3,102 
Equity-accounted investees  INR   683    785 
Equity-accounted investees  THB   1,608    1,561 
Equity-accounted investees  TRY   15,431    12,256 
Subtotal equity-accounted investees      44,917    34,654 
Intangible assets other than goodwill  CLP   170    42 
Intangible assets other than goodwill  CNY   6    - 
Subtotal intangible assets other than goodwill      176    42 
Property, plant and equipment  CLP   3,639    3,264 
Subtotal property, plant and equipment      3,639    3,264 
Total non-current assets      50,990    39,860 
Total assets      528,523    549,214 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
203
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

Liabilities held in foreign currencies are detailed as follows:

 

      12/31/2012   12/31/2011 
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   5,967    7,465    13,432    3,906    6,640    10,546 
Other current financial liabilities  CLP   1,265    1,470    2,735    1,217    799    2,016 
Subtotal other current financial liabilities      7,232    8,935    16,167    5,123    7,439    12,562 
Trade and other payables  ARS   1    -    1    3    -    3 
Trade and other payables  BRL   71    -    71    320    -    320 
Trade and other payables  CHF   155    -    155    221    -    221 
Trade and other payables  CLP   132,037    35    132,072    115,694    236    115,930 
Trade and other payables  CNY   1,642    -    1,642    1,821    -    1,821 
Trade and other payables  EUR   18,983    279    19,262    12,265    181    12,446 
Trade and other payables  GBP   142    -    142    24    -    24 
Trade and other payables  INR   4    -    4    1    -    1 
Trade and other payables  MXN   808    2    810    426    -    426 
Trade and other payables  PEN   36    -    36    31    -    31 
Trade and other payables  YEN   66    49    115    124    -    124 
Trade and other payables  ZAR   1,810    -    1,810    2,831    108    2,939 
Subtotal trade and other payables      155,755    365    156,120    133,761    525    134,286 
Other short-term provisions  ARS   -    -    -    62    -    62 
Other short-term provisions  BRL   17    1,606    1,623    -    1,459    1,459 
Other short-term provisions  CLP   28    -    28    29    -    29 
Other short-term provisions  EUR   248    -    248    140    -    140 
Other short-term provisions  MXN   -    -    -    -    250    250 
Subtotal other short-term provisions      293    1,606    1,899    231    1,709    1,940 
Current tax liabilities  INR   5    -    5    -    -    - 
Current tax liabilities  BRL   -    3    3    -    -    - 
Current tax liabilities  CLP   -    2,660    2,660    -    2,129    2,129 
Current tax liabilities  CNY   -    22    22    49    -    49 
Current tax liabilities  EUR   -    2,742    2,742    -    2,011    2,011 
Current tax liabilities  MXN   36    -    36    140    -    140 
Current tax liabilities  YEN   -    -    -    -    386    386 
Current tax liabilities  ZAR   -    55    55    -    109    109 
Subtotal current tax liabilities      41    5,482    5,523    189    4,635    4,824 
Current provisions for employee benefits  CLP   7,557    14,760    22,317    6,915    22,807    29,722 
Current provisions for employee benefits  MXN   -    212    212    -    334    334 
Subtotal current provisions for employee benefits      7,557    14,972    22,529    6,915    23,141    30,056 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
204
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

      12/31/2012   12/31/2011 
Class of liabilities  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  ARS   ,    ,    ,    -    -    - 
Other current non-financial liabilities  BRL   12    44    56    12    44    56 
Other current non-financial liabilities  CLP   9,561    26,714    36,275    7,464    36,006    43,470 
Other current non-financial liabilities  CNY   26    -    26    12    -    12 
Other current non-financial liabilities  EUR   637    -    637    631    -    631 
Other current non-financial liabilities  MXN   250    103    353    1,331    53    1,384 
Other current non-financial liabilities  PEN   70    -    70    118    -    118 
Other current non-financial liabilities  YEN   -    -    -    -    -    - 
Other current non-financial liabilities  ZAR   9    -    9    -    -    - 
Subtotal other current non-financial liabilities      10,565    26,861    37,426    9,568    36,103    45,671 
Total current liabilities      181,443    58,221    239,664    155,787    73,552    229,339 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
205
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

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

 

      12/31/2012   12/31/2011 
Class of liabilities  Currency  Over 1
 year up to
 3 years
ThUS$
   Over 3
years up
to 5 years
ThUS$
   Over 5
years
ThUS$
   Total
ThUS$
   Over 1
year up
to 3 years
ThUS$
   Over 3
years up
to 5 years
ThUS$
   Over 5
years
ThUS$
   Total
ThUS$
 
Non-current liabilities                                           
Other non-current financial liabilities  CLF   85,681    61,119    321,857    468,657    76,417    12,510    232,938    321,865 
Other non-current financial liabilities  CLP   151,500    -    -    151,500    139,770    -    -    139,770 
Subtotal other non-current financial liabilities      237,181    61,119    321,857    620,157    216,187    12,510    232,938    461,635 
Deferred tax liabilities  CLP   -    -    43    43    57    -    56    113 
Deferred tax liabilities  MXN   159    -    -    159    590    -    -    590 
Subtotal deferred tax liabilities      159    -    43    202    647    -    56    703 
Non-current provisions for employee benefits  CLP   -    -    33,766    33,766    -    -    27,573    27,573 
Non-current provisions for employee benefits  MXN   -    -    132    132    -    -    520    520 
Non-current provisions for employee benefits  YEN   -    -    532    532    -    -    94    94 
Subtotal non-current provisions for employee benefits      -    -    34,430    34,430    -    -    28,187    28,187 
Total non-current liabilities      237,340    61,119    356,330    654,789    216,834    12,510    261,181    490,525 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
206
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 30 – Consolidated Statement of Cash Flows

 

As established in Circular N°2058 of the Superintendence of Securities and Insurance, the statement of cash flow as of December 31, 2012, using the direct method, is presented as follows:

 

Direct Statement of Cash Flow    
     
   12/31/2012
ThUS$
 
     
Cash flows from (used in) operating activities     
      
Classes of flows by operating activities     
      
Flows from sales of goods and provision of services   2,387,979 
Other flows from operating activities   - 
      
Classes of payments     
      
Payments to suppliers for the supply of goods and services   (1,492,399)
Other payments for operating activities   (8,396)
Dividends paid   - 
Dividends received   15,126 
Interests paid   (59,509)
Interests received   24,368 
Reimbursed (paid) income taxes   (250,201)
Other incomes (outflows) of cash   33,238 
      
Net Cash Flows from (used in) operating activities   650,206 
      
Cash Flows from (used in) investing activities     
Cash flows from the loss of control of subsidiaries or other businesses   961 
Other payments to acquire stakes in joint ventures   (197)
Loans to related entities   (4,000)
Amounts from the sale of property, plant and equipment   2,050 
Acquisition of Property, plant and equipment   (445,984)
Advances of cash and loans granted to third parties   (623)
Other incomes (outflows) of cash    (115,092)
Net Cash Flows from (used in) investing activities   (562,885)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
207
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 30 - Consolidated Statement of Cash Flows (continued)

 

Direct Statement of Cash Flow    
     
Statement of Cash Flow  12/31/2012
ThUS$
 
Cash Flows from (used in) financing activities     
      
Amounts from the issuance of other capital instruments   - 
Amounts from long-term loans   366,502 
Amounts from short-term loans     
Total amounts from loans   366,502 
Payments of loans   (220,000)
Dividends paid   (334,762)
Other incomes (outflows) of cash   (9,437)
      
Net Cash Flows from (used in) financing activities   (197,697)
      
Net increase (decrease) in cash and cash equivalent before the effect of changes in exchange rate   (110,376)
      
Effects of variation  in exchange rate on cash and cash equivalent   (10,263)
Net increase (decrease) of cash and cash equivalent   (120,640)
      
Initial balance of Cash and cash equivalent   444,992 
      
Final balance of Cash and cash equivalent   324,353 

 

Note 31 – Subsequent events

 

31.1Authorization 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 December 31, 2012 were approved and authorized for issuance by the Board of Directors at their meeting held on March 5, 2013.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
208
 

 

Notes to the Consolidated Financial Statements as of December 31, 2012

 

Note 31 - Subsequent events (continued)

 

31.2Disclosures on events occurring after the reporting date

 

Management is not aware of any other significant events that occurred between December 31, 2012 and the date of issuance of these consolidated financial statements that may significantly affect them.

 

31.3Detail of dividends declared after the reporting date

 

As of the closing date of these financial statements, there are no dividends declared after the reporting date.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
209
 

 

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.

 

SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.

 

  Conf:   /s/ Ricardo Ramos R.  
     
  Ricardo Ramos R.  
     
  Chief Financial Officer  

 

Date: April 11, 2013.

 

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