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
For the six month period ended on June 30, 2003.
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, 6th Floor, Santiago, Chile (562) 425-2000
-----------------------------------------------------------
(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___________
On August 27, 2003, the Registrant filed with the Superintendencia de Valores y
Seguros of Chile (the "SVS") a report that included information as to the
Registrant's consolidated financial condition and results of operations for the
six-month period ended on June 30, 2003. Attached is a summary of such
consolidated financial information included in the summary and in the report
filed with the Superintendencia de Valores y Seguros of Chile. This financial
information was prepared on the basis of accounting principles generally
accepted in Chile and does not include a reconciliation of such information to
accounting principles generally accepted in the United States of America.
--------------------------------------------------------------------------------
THIS REPORT IS AN ENGLISH TRANSLATION OF, AND A CHILEAN GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES PRESENTATION OF, A SIX MONTH PERIOD ENDED JUNE 30, 2003
REPORT FILED WITH THE SUPERINTENDENCIA DE VALORES Y SEGUROS (SVS) IN CHILE, AND
UNLESS OTHERWISE INDICATED, FIGURES ARE IN US DOLLARS.
--------------------------------------------------------------------------------
Consolidated Financial Statements
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
As of June 30, 2003 and 2002
and for the years ended June 30, 2003 and 2002
(A translation of the original in Spanish- see note 2 (a))
Contents
Consolidated Financial Statements
Consolidated Balance Sheets .............................................. 2
Consolidated Statements of Income......................................... 4
Consolidated Statements of Cash Flows..................................... 5
Notes to the Consolidated Financial Statements ........................... 6
Ch$ - Chilean pesos
ThCh $ - Thousands of Chilean pesos
US$ - United States dollars
ThUS$ - Thousands of United States dollars
UF - The UF is an inflation-indexed, Chilean peso-denominated
monetary unit. The UF rate is set daily in advance, based
on the change in the Consumer Price Index of the previous
month.
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Consolidated Balance Sheets
(A translation of the original in Spanish- see note 2 (a))
As of June 30,
Note 2003 2002
---- ----
ThUS$ ThUS$
ASSETS
Current assets
Cash 14,800 7,979
Time deposits 8,806 2,247
Marketable securities 4 51,489 79,939
Accounts receivable, net 5 119,667 111,997
Other accounts receivable, net 5 8,547 9,792
Accounts receivable from related companies 6 34,931 30,326
Inventories, net 7 228,487 226,490
Recoverable taxes 11,589 12,236
Prepaid expenses 3,578 3,007
Deferred income taxes 14 -- 103
Other current assets 18,451 30,637
---------- ----------
Total current assets 500,345 514,753
---------- ----------
8 683,717 688,477
Property, plant and equipment, net
---------- ----------
Other Assets
Investments in related companies 9 76,755 79,545
Goodwill, net 10 12,962 12,541
Negative goodwill, net 10 (646) (1,060)
Intangible assets, net 4,847 4,072
Long-term accounts receivable, net 5 8,094 13,050
Long-term accounts receivable from related companies 6 380 734
Other long-term assets 11 50,154 52,780
---------- ----------
Total other assets 152,546 161,662
---------- ----------
Total assets 1,336,608 1,364,892
========== ==========
The accompanying notes form an integral part of these
consolidated financial statements.
2
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Consolidated Balance Sheets
(A translation of the original in Spanish- see note 2 (a))
As of June 30,
Note 2003 2002
---- ----
ThUS$ ThUS$
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term bank debt 12 520 2,869
Current portion of long-term debt 12 36,749 126,059
Dividends payable 253 224
Accounts payable 47,943 42,382
Other accounts payable 1,558 1,226
Notes and accounts payable to related companies 6 8,444 6,876
Accrued liabilities 13 13,696 10,947
Withholdings 2,292 2,850
Income taxes 814 1,215
Deferred revenues 4,299 2
Deferred income taxes 14 2,176 --
Other current liabilities 275 1,797
--------- ---------
Total current liabilities 119,019 196,447
--------- ---------
Long-term liabilities
Long-term bank debt 12 308,000 292,000
Other accounts payable 2,847 3,758
Deferred income taxes 14 19,999 10,062
Staff severance indemnities 15 9,376 8,360
--------- ---------
Total long-term liabilities 340,222 314,180
--------- ---------
Minority interest 16 23,178 22,268
--------- ---------
Shareholders' equity
Paid-in capital 17 477,386 477,386
Other reserves 17 127,760 127,807
Retained earnings 17 249,043 226,804
--------- ---------
854,189 831,997
Total shareholders' equity
--------- ---------
Total liabilities and shareholders' equity 1,336,608 1,364,892
========= =========
The accompanying notes form an integral part of these
consolidated financial statements.
3
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Consolidated Statements of Income
(A translation of the original in Spanish- see note 2 (a))
For the period ended
June 30,
Note 2003 2002
---- ----
ThUS$ ThUS$
Operating results
Sales 324,999 255,020
Cost of sales (260,439) (197,803)
-------- --------
Gross margin 64,560 57,217
Selling and administrative expenses (23,966) (21,247)
-------- --------
Operating income 40,594 35,970
-------- --------
Non-operating results
Non-operating income 19 10,696 7,346
Non-operating expenses 19 (20,024) (19,631)
-------- --------
Non-operating loss (9,328) (12,285)
-------- --------
Income before income taxes 31,266 23,685
Income tax expense 14 (7,762) (4,290)
-------- --------
Income before minority interest 23,504 19,395
Minority interest 16 (982) (812)
-------- --------
Net income before extraordinary items and negative goodwill 22,522 18,583
Amortization of negative goodwill 10 314 207
-------- --------
Net income for the year 22,836 18,790
======== ========
The accompanying notes form an integral part of these
consolidated financial statements.
4
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Consolidated Statements of Cash Flows
(A translation of the original in Spanish- see note 2 (a))
Period Ended June 30,
2003 2002
---- ----
ThUS$ ThUS$
Cash flows from operating activities
Net income for the year 22,836 18,790
Loss on sale of fixed assets (16) (20)
Charges (credits) to income not representing cash flows
Depreciation expense 30,065 31,134
Amortization of intangible assets 144 95
Write-offs and accruals 10,106 5,523
Gain on equity investments in related companies (3,742) (2,568)
Amortization of goodwill 529 567
Amortization of negative goodwill (314) (207)
Exchange difference (3,220) (77)
Other credits to income not representing cash flows (963) (2,289)
Other charges to income not representing cash flows 15,712 9,025
Net changes in operating assets and liabilities:
(Increase) decrease in trade accounts receivable (6,837) 7,096
Decrease (increase) in inventories 11,748 (14,616)
Increase in other assets 5,357 3,897
(Increase) decrease in accounts payable (7,982) 9,936
Increase in interest payable (1,849) (588)
Increase in net income taxes payable (1,481) 351
Decrease in other accounts payable (802) (2,159)
Decrease in VAT and taxes payable 4,105 169
Minority interest 982 812
-------- --------
Net cash provided from operating activities 74,378 64,871
-------- --------
Cash flows from financing activities
Payment of dividends (21,288) (16,042)
Payment of loans (3,886) (56,711)
Payment of documented loans to related companies (5,274) --
-------- --------
Net cash used in from financing activities (30,448) (72,753)
-------- --------
Cash flows from investing activities
Sales of property, plant and equipment 180 41
Sales of investments 532 13,800
Other income 7,293 614
Additions to property, plant and equipment (31,187) (12,949)
Capitalized interest (1,371) (1,035)
Purchase of permanent investments (6,117) (8,753)
Investments in financial instruments - (293)
Other disbursements (31) -
-------- --------
Net cash used in investing activities (30,701) (8,575)
-------- --------
Effect of inflation on cash and cash equivalents (100) (368)
-------- --------
Net change in cash and cash equivalents 13,129 (16,825)
Beginning balance of cash and cash equivalents 65,204 121,535
-------- --------
Ending balance of cash and cash equivalents 78,333 104,710
======== ========
The accompanying notes form an integral part of these
consolidated financial statements.
5
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 1 - Company Background
Sociedad Quimica y Minera de Chile S.A. (the "Company") was registered with the
Chilean Superintendency of Securities and Insurance ("SVS") on March 18, 1983.
Note 2 - Summary of Significant Accounting Policies
a) Basis for the preparation of the consolidated financial statements
The accompanying consolidated financial statements have been prepared in
U.S. dollars in accordance with accounting principles generally accepted
in Chile ("Chilean GAAP") and the regulations of the SVS. For the
convenience of the reader, the consolidated financial statements and
their accompanying notes have been translated from Spanish into English.
Certain accounting practices applied by the Company that conform with
Chilean GAAP may not conform with generally accepted accounting
principles in the United States ("US GAAP")
The consolidated financial statements include the accounts of Sociedad
Quimica y Minera de Chile S.A. (the "Parent Company") and subsidiaries
(companies in which the Parent Company holds a controlling participation,
generally equal to direct or indirect ownership of more than 50%). The
Parent Company and its subsidiaries are referred to as the "Company".
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities as of the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from
those estimates.
In accordance with regulations set forth by the SVS in its Circular No.
368 and Technical Bulletins Nos. 42 and 64 of the Chilean Association of
Accountants, the consolidated financial statements include the following
subsidiaries:
6
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
a) Basis for the preparation of the consolidated financial statements
(continued)
Direct or indirect ownership
2003 2002
---- ----
Foreign subsidiaries: % %
Nitrate Corporation of Chile Limited (United Kingdom) 100.00 100.00
Soquimich SRL - Argentina 100.00 100.00
Nitratos Naturais do Chile Ltda. (Brazil) 100.00 100.00
SQM Europe NV (Belgium) 100.00 100.00
SQM North America Corp. (USA) 100.00 100.00
North American Trading Company (USA) 100.00 100.00
SQM Peru S.A. 100.00 100.00
SQM Corporation NV (Holland) 100.00 100.00
S.Q.I. Corporation NV (Holland) 100.00 100.00
Soquimich European Holding BV (Holland) 100.00 100.00
PTM - SQM Iberica S.A. (Spain) 100.00 100.00
SQMC Holding Corporation LLP (USA) 100.00 100.00
SQM Ecuador S.A. 100.00 100.00
Cape Fear Bulk LLC (USA) 51.00 51.00
SQM Colombia Ltda. 100.00 100.00
SQM Investment Corporation NV (Holland) 100.00 100.00
PSH Limited (Cayman Islands) 100.00 100.00
SQM Brasil Ltda. 100.00 100.00
Royal Seed Trading Corporation AVV (Aruba) 100.00 100.00
SQM Japan K.K. 100.00 100.00
SQM Oceania PTY Limited (Australia) 100.00 100.00
SQM France S.A. 100.00 100.00
Fertilizantes Naturales S.A. (Spain) 50.00 50.00
Rs Agro-Chemical Trading AVV (Aruba) 100.00 100.00
SQM Comercial de Mexico S.A. de C.V. 100.00 100.00
SQM Indonesia 80.00 80.00
SQM Virginia LLC (USA) 100.00 100.00
Agricolima S.A. De C.V. (Mexico) 100.00 100.00
SQM Venezuela S.A. 100.00 100.00
SQM Italia SRL (Italy) 95.00 95.00
Comercial Caiman Internacional S.A. (Cayman Islands) 100.00 -
Fertilizantes Olmeca y SQM S.A. De C.V. (Mexico) 100.00 -
Mineag SQM Africa Limited 100.00 -
7
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
a) Basis for the preparation of the consolidated financial statements
(continued)
Direct or indirect ownership
2003 2002
---- ----
% %
Domestic subsidiaries:
Servicios Integrales de Transito y Transferencias S.A. 100.00 100.00
Cia. Industrial y Minera S.A. - 100.00
Soquimich Comercial S.A. 60.64 60.64
Sociedad Minera de Chile S.A. - 100.00
Energia y Servicios S.A. - 100.00
Isapre Norte Grande Ltda. 100.00 100.00
Almacenes y Depositos Ltda. 100.00 100.00
SQM Quimicos S.A. - 99.99
Ajay SQM Chile S.A. 51.00 51.00
SQM Nitratos S.A. 99.99 100.00
Proinsa Ltda. 60.58 60.58
SQM Potasio S.A. 100.00 100.00
SQMC International Limitada 60.64 60.64
SQM Salar S.A. 100.00 100.00
SCM SQM Boratos - 100.00
Norsk Hydro Chile S.A. 60.64 -
All significant inter-company balances, transactions and unrealized gains
and losses arising from transactions between these companies have been
eliminated in consolidation.
As the Company exerts control over the subsidiary Fertilizantes Naturales
S.A. it has been included in the consolidation for the period ended June
30, 2003 and 2002.
At June 30, 2003 and 2002, the subsidiary Lithium Specialties LLP were in
the development stage and therefore were not included in the
consolidation.
At June 30, 2002, the subsidiary SCM Antucoya were in the development
stage and therefore were not included in the consolidation.
8
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
b) Period
These consolidated financial statements have been prepared for the
six-month period between January 1st and June 30, 2003 and 2002.
c) Reporting currency and monetary correction
The financial statements of the Company are prepared in U.S. dollars. As
a significant portion of the Company's operations are transacted in U.S.
dollars, the U.S. dollar is considered the currency of the primary
economic environment in which the Company operates.
The Parent Company and those subsidiaries which maintain their accounting
records in U.S. dollars are not required, or permitted, to restate the
historical dollar amounts for the effects of inflation.
The financial statements of domestic subsidiaries, which maintain their
accounting records in Chilean pesos have been restated to reflect the
effects of variations in the purchasing power of Chilean pesos during the
period. For this purpose, and in accordance with Chilean regulations,
non-monetary assets and liabilities, equity and income statement accounts
have been restated in terms of periods -end constant pesos based on the
change in the consumer price index during the period (1,1% and 0,6% in
2003 and 2002, respectively). The resulting net charge or credit to
income arises as a result of the gain or loss in purchasing power from
the holding of non-U.S. dollar denominated monetary assets and
liabilities exposed to the effects of inflation.
Prior period financial statements presented for comparative purposes have
not been restated to reflect the change in the purchasing power of the
Chilean pesos during the most recent year-end. In accordance with Chilean
GAAP, amounts expressed in U.S. dollars, including amounts included in
the consolidated financial statements as determined in prior years from
the translation of financial statements of those Chilean subsidiaries
which maintain their accounting records in Chilean pesos, are not
adjusted for price-level changes.
9
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
d) Foreign currency
i) Foreign currency transactions
Monetary assets and liabilities denominated in Chilean pesos and other
currencies have been translated to U.S. dollars at the observed
exchange rates determined by the Central Bank of Chile in effect at
each period-end of Ch$699.12 per US$1 at June 30, 2003 and Ch$688,05
per US$1 at June 30, 2002.
ii) Translation of non-U.S. dollar financial statements
In accordance with Chilean GAAP, the financial statements of
foreign and domestic subsidiaries that do not maintain their
accounting records in U.S. dollars are translated from the
respective local currencies to U.S. dollars in accordance with
Technical Bulletin No. 64 of the Chilean Association of
Accountants ("BT 64") as follows:
a) For those subsidiaries and affiliates located in Chile which
keep their accounting records in price-level adjusted Chilean
pesos:
- Balance sheet accounts are translated to U.S. dollars at
the period-end exchange rate without eliminating the
effects of price-level restatement.
- Income statement accounts are translated to U.S. dollars
at the average exchange rate each month. The monetary
correction account on the income statement, which is
generated by the inclusion of price-level restatement on
the non-monetary assets and liabilities and shareholders'
equity, is translated to U.S. dollars at the average
exchange rate for each month.
- Translation gains and losses, as well as the price-level
restatement to the balance sheet mentioned above, are
included as an adjustment in shareholders' equity, in
conformity with Circular No. 368 of the SVS.
10
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
b) The financial statements of those foreign subsidiaries that
keep their accounting records in currencies other than U.S.
dollar have been translated at historical exchange rates as
follows:
- Monetary assets and liabilities are translated at
period-end exchange rates between the US dollar and the
local currency.
- All non-monetary assets and liabilities and shareholders'
equity are translated at historical exchange rates between
the US dollar and the local currency.
- Income and expense accounts are translated at average
exchange rates between the US dollar and the local
currency.
- Any exchange differences are included in the results of
operations for the period.
d) Foreign currency (continued)
Foreign exchange differences for the period ended June 30, 2003 and 2002
generated net earnings of ThUS$ 3,220 and ThUS$ 77, respectively, which
have been charged to the consolidated statements of income in each
respective period.
The monetary assets and liabilities of foreign subsidiaries were translated
into U.S. dollars at the exchange rates per US dollar prevailing at June
30, as follows:
2003 2002
---- ----
Brazilian Real 2.88 2.86
New Peruvian Sol 3.47 3.51
Colombian Peso 2,812.31 2,398.44
Argentine Peso 2.80 3.80
Japanese Yen 119.80 119.50
Sucre Ecuador 1.00 1.00
Euro 0.88 1.05
Mexican Peso 10.42 9.96
Indonesian Rupee 8,940.00 8,729.93
Australian Dollar 1.54 1.87
Pound Sterling 0.61 0.69
Rand 7.57 -
The Company uses the "observed exchange rate", which is the rate
determined daily by the Chilean Central Bank based on the average
exchange rates at which bankers conduct authorized transactions.
11
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
e) Cash and cash equivalents
The Company considers all highly liquid investments with a remaining
maturity of less than 90 days as of the closing date of the financial
statements to be cash equivalents.
f) Time Deposits
Time deposits are recorded at cost plus accrued interest.
g) Marketable securities
Marketable securities are recorded at the lower of cost plus accrued
interest or market value.
h) Allowance for doubtful accounts
The Company records an allowance for doubtful accounts based on estimated
probable losses.
i) Inventories and materials
Inventories of finished products and work in process are valued at
average production cost. Raw materials and products acquired from third
parties are stated at average cost and materials-in-transit are valued at
cost. All such values do not exceed net realizable values.
Inventories of non-critical spare parts and supplies are classified as
other current assets, except for those items which the Company estimates
to have a turnover period of one year or more, which are classified as
other long-term assets.
j) Income taxes and deferred income taxes
Prior to 2000, income taxes were charged to results in the same period in
which the income and expenses were recorded and were calculated in
accordance with the enacted tax laws in Chile and the other jurisdictions
in which the Company operated.
12
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
j) Income and deferred taxes (continued)
Under Chilean law, the Parent Company and its subsidiaries are required
to file separate tax declarations.
Beginning January 1, 2000, the Company records deferred income taxes in
accordance with Technical Bulletin Nos. 60, 69, 71 and 73 of the Chilean
Association of Accountants, and with Circular No. 1466 issued on January
27, 2000 by the SVS, recognizing the deferred tax effects of temporary
differences between the financial and tax values of assets and
liabilities, using the liability method.
The effect of the temporary differences at December 31, 1999 were
recorded in complementary asset and liability accounts, which are
recognized in the statement of operations over the estimated period in
which they reverse.
k) Property, plant and equipment
Property, plant, equipment and property rights are recorded at cost,
except for certain assets that were restated according to a technical
appraisal in 1988. Depreciation expense has been calculated using the
straight-line method based upon the estimated useful lives of the assets
and is charged directly to expense.
Fixed assets acquired through financing lease agreements are accounted
for at the present value of the minimum lease payments plus the purchase
option based on the interest rate included in each contract. The Company
does not legally own these assets and therefore cannot freely dispose of
them.
In conformity with Technical Bulletin No. 31 of the Chilean Association
of Accountants, the Company capitalizes interest cost associated with the
financing of new assets during the construction period of such assets.
Maintenance costs of plant and equipment are charged to expenses as
incurred.
The Company obtains property rights and mining concessions from the
Chilean state. Other than minor filing fees, the property rights are
usually obtained without initial cost, and once obtained, are retained
perpetually by the Company as long as the annual fees are paid. Such
fees, which are paid annually in March, are recorded as prepaid assets to
be amortized over the following twelve months. Values attributable to
these original mining concessions are recorded in property, plant and
equipment and are being amortized on a straight-line basis over 50 years.
13
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
l) Investments in related companies
Investments in related companies over which the Company has significant
influence, are included in other assets and are recorded using the equity
method of accounting. Accordingly, the Company's proportional share in
the net income or loss of each investee is recognized in the
non-operating income and expense classification in the consolidated
statements of income on an accrual basis, after eliminating any
unrealized profits from transactions with the related companies.
The translation adjustment to U.S. dollars of investments in domestic
subsidiaries, which maintain their accounting records and are controlled
in Chilean pesos is recognized in the other reserves component of
stockholders' equity. Direct and indirect investments in foreign
subsidiaries or affiliates are controlled in U.S. dollars.
m) Goodwill and negative goodwill
Goodwill is calculated as the excess of the purchase price of companies
acquired over their net book value, whereas negative goodwill occurs when
the net book value exceeds the purchase price of companies acquired.
Goodwill and negative goodwill resulting from equity method investments
are maintained in the same currency in which the investment was made and
are amortized based on the estimated period of investment return,
generally 20 and 10 years for goodwill and negative goodwill,
respectively.
n) Intangible assets
Intangible assets are stated at cost plus acquisition expenses and are
amortized over a period of up to a maximum of 40 years, in accordance
with Technical Bulletin No. 55 of the Chilean Association of Accountants.
o) Mining development cost
Mining development costs are recorded in other long-term assets and are
amortized utilizing the unit of production basis.
14
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
p) Accrued employee severance
The Company calculates the liability for staff severance indemnities
based on the present value of the accrued benefits for the actual years
of service worked assuming an average employee tenure of 24 years and a
real annual discount rate of 9%.
q) Vacations
The cost of employee vacations is recognized in the financial statements
on an accrual basis.
r) Dividends
Dividends are generally declared in U.S. dollars but are paid in
Chilean pesos.
s) Derivative Contracts
The Company maintains derivative contracts to hedge against movements in
foreign currencies, which are recorded in conformity with Technical
Bulletin No. 57 of the Chilean Association of Accountants. Such contracts
are recorded at fair value with net losses recognized on the accrual
basis and gains recognized when realized.
t) Reclassifications
Certain reclassifications have been made in the 2003 and 2002 numbers to
conform to the current period presentation.
u) Revenue recognition
Revenue is recognized on the date goods are physically delivered or when
they are considered delivered according to the terms of the contract.
15
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
v) Computer software
In accordance with Circular No. 981 dated March 28, 1990 of the SVS,
computer systems acquired by the Company are recorded at cost.
w) Research and development expenses
Research and development cost are charged to the income statement in the
period in which they are incurred. Fixed assets which are acquired for
their use in research and development activities and are determined to
provide additional benefits to the Company are recorded under the
relevant item within property, plant and equipment.
16
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 3 - Changes in Accounting Principles
There were no changes in the accounting principles used by the Company during
2003 and 2002.
Note 4 - Marketable Securities
As of June 30 marketable securities are detailed as follows:
2003 2002
---- ----
ThUS$ ThUS$
Mutual funds 51,489 79,939
----------- ------------
Total 51,489 79,939
=========== ============
Note 5 - Short-term and long-term Accounts Receivable
a) Short term accounts receivable and other accounts receivable as of
June 30 are detailed as follows:
Between 90 days Total
Up to 90 days and 1 year 2003 Short-term (net)
2003 2002 2003 2002 Subtotal 2003 2002
---- ---- ---- ---- -------- ---- ----
ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Trade accounts receivable 98,938 87,898 9,971 7,516 108,909 102,709 95,414
Allowance for doubtful accounts (6,200)
Notes receivable 15,800 13,946 3,450 2,637 19,250 16,958 16,583
Allowance for doubtful accounts (2,292)
-------- --------
Accounts receivable, net 119,667 111,997
======== ========
Other accounts receivable 8,399 8,352 928 1,440 9,327 8,547 9,792
Allowance for doubtful accounts (780)
-------- --------
Other accounts receivable, net 8,547 9,792
======== ========
17
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 5 - Short-term and Long-term Accounts Receivable (continued)
Consolidated Short-term and Long-term Receivables - by Geographic Location
Europe, Africa and Asia and
Chile the Middle East Oceania
2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ----
ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
-------------------------------------------------------------
Net short-term trade accounts receivable
Balance 23,201 21,990 29,308 23,608 2,806 1,548
% of total 22.59% 23,05% 28.53% 24.74% 2.73% 1.62%
Net short-term notes receivable
Balance 14,622 13,371 537 803 13 215
% of totalb 86.22% 80.63% 3.17% 4.84% 0.08% 1.30%
Net short-term other accounts
receivable
Balance 5,274 5,926 1,089 631 3 118
% of total 61.71% 60,52% 12.74% 6.44% 0.04% 1.21%
-------------------------------------------------------------
Subtotal short-term accounts receivable, net
Balance 43,097 41,287 30,934 25,042 2,822 1,881
% of total 33.25% 33.55% 23.87% 20.35% 2.18% 1.53%
Long-term accounts receivable, net
Balance 6,982 11,877 68 80 - -
% of total 86.26% 91.01% 0.84% 0.61% - -
-------------------------------------------------------------
Total short and long-term accounts
receivable, net
Balance 50,079 53,164 31,002 25,122 2,822 1,881
% of total 36.37% 39.06% 22.52% 18.46% 2.05% 1.38%
=============================================================
USA, Mexico Latin America
and Canada and the Caribbean Total
2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ----
ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
-----------------------------------------------------------------
Net short-term trade accounts receivable
Balance 29,157 29,152 18,237 19,116 102,709 95,414
% of total 28.39% 30.56% 17.76% 20,03% 100% 100%
Net short-term notes receivable
Balance 361 429 1,425 1,765 16,958 16,583
% of totalb 2.13% 2.59% 8.40% 10.64% 100% 100%
Net short-term other accounts
receivable
Balance 1,838 2,763 343 354 8,547 9,792
% of total 21.50% 28.21% 4.01% 3.62% 100% 100%
-----------------------------------------------------------------
Subtotal short-term accounts receivable, net
Balance 31,356 32,344 20,005 21,235 128,214 121,789
% of total 25.26% 27.31% 15.44% 17.26% 100% 100%
Long-term accounts receivable, net
Balance 54 1,044 1,039 8,094 13,050
% of total 0.41 12.90% 7.97% 100% 100%
-----------------------------------------------------------------
Total short and long-term accounts
receivable, net
Balance 31,356 32,398 21,049 22,274 136,308 134,839
% of total 23.77% 24.73% 15.29% 16.37% 100% 100%
=================================================================
18
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 6 - Balances and Transactions with Related Parties
Accounts receivable from and payable to related companies are stated in US
dollars and accrue no interest. Transactions are made under terms and conditions
which are similar to those offered to unrelated third parties.
a) Amounts included in balances with related parties as of June 30 2003
and 2002 are as follows:
--------------------------------------------------------------------------------------------------------
Short-term Long-term
2003 2002 2003 2002
---- ---- ---- ----
Accounts receivable ThUS$ ThUS$ ThUS$ ThUS$
--------------------------------------------------------------------------------------------------------
Ajay Europe S.A.R.L. 4,357 4,828 - -
Nutrisi Holding N.V. 2,228 - - -
Generale de Nutrition Vegetale S.A. 171 164 - -
Fertilizantes Olmeca S.A. - 3,421 - -
Mineag SQM Africa Limited - 4,017 - -
Abu Dhabi Fertilizer Ind. WLL 4,602 3,950 - -
NU3 N.V. 1,137 3,448 - -
Doktor Tarsa -SQM Turkey 856 803 - -
Comercial Caiman Internacional S.A. - 872 - -
SQM Lithium Specialties Limited 665 94 - -
Empresas Melon S.A. - - 380 734
Sales de Magnesio S.A. 11 77 - -
Ajay North America LLC 1,644 1,510 - -
Norsk Hydro ASA 69 96 - -
Hydro Agri Int.-France 899 179 - -
Hydro Asia Trade 484 530 - -
Hydro Agri France S.A. 2,097 920 - -
Hydro Poland SP 388 184 - -
Hydro Agri Benelux B.V 585 278 - -
Hydro Agri Hellas S.A. 1,182 457 - -
Hydro Agri Australia Ltd. 396 629 - -
Hydro Agri UK Ltd.. 204 282 -
Hydro Agri GMBH & CO KG 258 96 - -
Hydro Agri AB 51 38 - -
Hydro Agri Colombia 1,304 - - -
PCS Yumbes - 2,402 - -
NU3 B.V. 1,164 274 - -
Hydro Agri Argentina 4,150 5 - -
Adubo Trevo S.A. 900 88 - -
Hydro Plant Nutr. OSLO 38 40 - -
Hydro Agri Benelux - 185 - -
Hydro Czech Republic 8 - - -
Hydro Fertilizantes Ltda. - 309 - -
Hydro Agricola Internacional 468 - - -
Impronta SRI 4,548 - - -
Nutrichem Benelux 29 - - -
Rotem Amfert Negev ltda. 31 - - -
Hydro Agri Espana S.A. - 74 - -
Hydro Agri North America - 66 - -
Hydro Agri Norge - 10 - -
Hydro Agri Mexico S.A. de C.V. 1 - - -
Hydro Agri Specilities 6 - - -
------------ ------------ ---------- ------------
Total 34,931 30,326 380 734
============ ============ ========== ============
19
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 6 - Balances and Transactions with Related Parties (continued)
a) Amounts included in balances with related parties as of June 30, 2003 and
2002, continued:
Short-term
2003 2002
---- ----
ThUS$ ThUS$
Accounts payable
Ajay Europe S.A.R.L. 432 430
Adm. y Servicios Santiago S.A. de C.V. 81 28
Abu Dhabi Fertilizar Ind. WLL 94 54
NU3 N.V. 1,544 2,322
SCM Antucoya - 100
Rotem Amfert Negev Limited 1,162 2,016
Hydro Agri Porsgrunn 27 14
Hydro Agricola Internacional 158 85
Hydro Agri North America 134 168
Hydro Agri Mexico de S.A de C.V. 11 361
Hydro Agri Int - France 3,372 62
Hydro Agri France 15 114
NU3 B.V. 57 207
Hydro Fertilizante Ltda. 1,261 902
Hydro Agri Benelux 23 -
PCS Yumbes 51 -
Hidro Plant Nutr, CIS Regl, Oslo - 11
Hidro Agri Australia 11 -
Agrys Ltda. 11 -
Nutrisi Holding (N.V.) - 2
--------- ---------
Total 8,444 6,876
========= =========
There were no outstanding long-term accounts payable with related parties
as June 30, 2003 and 2002
20
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 6 - Balances and Transactions with Related Parties (continued)
b) During 2003 and 2002, principal transactions with related parties were as
follows:
Amount of Impact on income
Company Relationship Type of transaction Transaction (charge) credit
------- ------------ ------------------- ----------- ---------------
2003 2002 2003 2002
---- ---- ---- ----
ThUS$ ThUS$ ThUS$ ThUS$
NU3 N.V. (Belgica) Indirect Sales of products 2,447 847 628 124
Doktor Tarsa Indirect Sales of products 783 1,290 205 350
Mineag SQM Africa Ltd. Indirect Sales of products - 7,045 - 1,574
Abu Dhabi Fertilizer WLL Indirect Sales of products 1,068 - 188 -
Nutrisi Holding N.V. Indirect Sales of products - 1,538 - 473
Ajay Europe S.A.R.L. Indirect Sales of products 3,763 3,781 1,221 978
NU3 B.V. Indirect Sales of products 2,177 1,541 814 504
Adubo Trevo S.A. Indirect Sales of products 3,487 332 1,179 164
PCS Yumbes SCM Shareholder Sales of products 2,867 6,674 1,941 4,526
Purchases of 8,580 - 1,489 -
products
Hydro Agri (U.K) Ltd. Shareholder Sales of product 569 679 152 166
Hydro Asia trade Pte Ltd. Shareholder Sales of product 2,451 3,076 485 533
Hydro Agri France S.A. Shareholder Sales of product 4,137 2,380 876 380
Hydro Agri Internacional Shareholder Sales of product 896 196 285 6
Hydro Agri International Shareholder Sales of product - 509 - 75
Hydro Agri International Shareholder Sales of product 843 1,584 94 589
France
Hydro Agri Hellas S.A. Shareholder Sales of product 1,119 427 243 123
Hydro Agri Benelux B.V. Shareholder Sales of product 4,179 3,326 703 269
Hidro agri Rotterdam B.V. Shareholder Sales of product - 534 - 169
Hydro Agri Australia Ltd. Shareholder Sales of product 644 740 170 132
Hydro Agri Espana S.A. Shareholder Sales of product 2,045 68 407 18
Hydro Agri Argentina Shareholder Sales of product 4,470 - 308 -
Hydro Agri Colombia Ltda Shareholder Sales of product 1,381 - 246 -
Hydro Agri GMBH & CO KG Shareholder Sales of products 641 214 167 55
Hydro Agri Planta Nutri Shareholder Sales of products 697 - 265 -
Poland
Ajay North America LLC Indirect Sales of products 3,656 537 3,789 1,240
21
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 7 - Inventories
Inventories are summarized as follows:
2003 2002
---- ----
ThUS$ ThUS$
Finished products 126,147 120,875
Work in process 89,649 95,697
Supplies 12,691 9,918
----------- ----------
Total 228,487 226,490
=========== ==========
22
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 8 - Property, Plant and Equipment
Property, plant and equipment are summarized as follows:
2003 2002
---- ----
ThUS$ ThUS$
Land
Land 13,453 13,453
Mining Concessions 36,340 16,708
Other Lands 13,165 12,862
------- -------
62,958 43,023
------- -------
Buildings and infrastructure
Buildings 157,049 156,099
Installations 267,914 261,106
Construction-in-progress 37,570 25,223
Other 19,920 19,101
------- -------
482,453 461,529
------- -------
Machinery and Equipment
Machinery 389,830 384,020
Equipment 102,873 96,906
Construction-in-progress 14,603 14,929
Other 14,435 10,471
------- -------
521,741 506,326
------- -------
Other fixed assets
Tools 11,583 7,888
Furniture and office equipment 11,048 13,801
Project-in-progress 15,095 18,212
Other 5,560 5,332
------- -------
43,286 45,233
------- -------
23
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 8 - Property, Plant and Equipment (continued)
2003 2002
---- ----
ThUS$ ThUS$
Amounts relating to technical revaluation of fixed assets
Land 8,650 8,651
Buildings and infrastructure 40,627 40,627
Machinery and equipment 12,110 12,127
Other assets 53 53
---------- ----------
61,440 61,458
---------- ----------
Total property, plant and equipment 1,171,878 1,117,569
---------- ----------
Less: Accumulated depreciation
Buildings and infrastructure (182,505) (156,818)
Machinery and equipment (257,273) (226,576)
Other fixed assets (16,183) (15,232)
Technical appraisal (32,200) (30,466)
---------- ----------
Total accumulated depreciation (488,161) (429,092)
---------- ----------
Net property, plant and equipment 683,717 688,477
========== ==========
2003 2002
Depreciation for the period ended June 30: ThUS$ ThUS$
Buildings and infrastructure 12,607 12,785
Machinery and equipment 15,929 16,778
Other fixed assets 657 692
Technical revaluation 872 879
---------- ----------
Total depreciation 30,065 31,134
========== ==========
The Company has capitalized assets obtained through leasing, which are included
in other fixed assets and are as follows:
2003 2002
ThUS$ ThUS$
----- -----
Administrative office buildings 2,081 1,988
Accumulated depreciation (401) (347)
------ ------
Total assets in leasing 1,680 1,641
====== ======
24
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 9 - Investments in and Receivables from Related Parties
a) Information on foreign investments:
There are no plans for the foreign investments to pay dividends, as it is
the Company's policy to reinvest those earnings.
The Company has not designated their foreign investments as net
investment hedges.
b) Transactions performed during the year 2003
On January 27, 2003, SQM Comercial de Mexico S.A. de C.V. and SQM
Nitratos S.A. acquired 8,750 shares of the related company Fertilizantes
Olmeca y SQM S.A. de C.V. which represented 50% of its ownership.
Consequently, Fertilizantes Olmeca y SQM S.A. de C.V. became a subsidiary
of SQM S.A. This transaction gave rise to goodwill for the amount of
ThUS$279.
Subsequently, SQM Nitratos S.A. acquired from SQM Comercial de Mexico
S.A. de C.V. 8,749 shares in Fertilizantes Olmeca y SQM S.A. de C.V. This
transaction gave rise to no goodwill or negative goodwill.
On January 31, 2003, SQM S.A. acquired shares owned by SQM Nitratos S.A.
in Sociedad Contractual Minera Antucoya for an amount of ThUS$ 100. This
gave rise to the ownership of all the shares of SCM Antucoya in just one
shareholder. Consequently, this transaction resulted in the legal and
immediate liquidation of SCM Antucoya and the acquisition by SQM S.A. of
all this company's equity, assets and liabilities.
On March 30, 2003, Fertilizantes Olmeca y SQM S.A. de C.V. increased its
capital by ThUS$2,000 through the issuance of 431,200 share, which were
subscribed in full by SQM Nitratos S.A. As a result, SQM Nitratos S.A.
has ownership interest of 78.29% and SQM Comercial de Mexico has
ownership interest of 21.71%.
On March 30, 2003, Soquimich European Holding acquired 50% of the
ownership interest of Mineag SQM Africa Ltd. from Ravlin Investment
Limited for an amount of ThUS$990. This transaction gave rise to goodwill
of ThUS$705. Consequently, Mineag SQM Africa Ltd. became a subsidiary of
SQM S.A.
On April 28, 2003, SQM Comercial S.A. acquired from Norsk Hydro ASA ,
819,999 shares from Norsk Hydro Chile S.A. and SQM Comercial
Internacional Ltda., as subsidiary company of SQMC, acquired one
remaining share, with which, SQMC becomes the owner and controls 100% of
Norsk Hydro Chile S.A. This transaction generated a goodwill of ThUS$
1,282.
25
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 9 - Investments in and Receivables from Related Parties (continued)
On June 30, 2003, SQM Nitratos S.A. acquired the shares owned by SQM S.A.
in Sociedad Energia y Servicios S.A.. This transaction amounted to
ThUS$2,422. The above mentioned operation resulted in the consolidation
of all the shares of Energia y Servicios, in one single shareholder, SQM
Nitratos S.A., and as a consequence, through this fact and in full right,
this resulted in the immediate dissolution of Energia y Servicios S.A.
SQM Nitratos S.A. acquired 100% of the Company's shareholder, the assets
and liabilities from the dissolved company.
As of June 30, 2003, the subsidiaries SQM Virginia LLC and North
American Trading Company, made a capital contribution in the subsidiary
SQM Lithium Specialties LLP. This capital contribution amounted to ThUS$
1,678, by 99% and 1%, respectively.
c) Transactions performed during the year 2002.
On March 21, 2002, SQM North America Corporation acquired ownership
interest of 50% of the related company SQM Venezuela S.A. for ThUS$ 250,
which added to the ownership interest maintained by SQM Nitratos S.A. in
the aforementioned company, results in SQM Venezuela S.A. being a 100%
indirect subsidiary of SQM S.A. This transaction gave rise to goodwill of
ThUS$ 166.
On April 5, 2002, the subsidiary Royal Seed Trading Corportaion A.V.V.
made a contribution of Th.US$ 120.5 to form a joint venture with Rui Xin
Packaging Materials, Sanhe Co. Ltd.
On May 1, 2002, the subsidiary Soquimich European Holdings B.V. acquired
50% ownership of the affiliate Nutrichem N.V., which subsequently changed
its name to Nutrisi Holding N.V.
On May 7, 2002, SQM Nitratos S.A. concurred to a capital increase in SQM
Brasil Ltda., which resulted in ownership of 88.54%, SQM Quimicos S.A.
did not concur to this increase and reduced its ownership to 11.46%.
26
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 9 - Investments in and Receivables from Related Parties (continued)
During May 2002, P.S.H. Limited made a capital increase of Th.US$ 250 in
its affiliate Ajay Europe S.A.R.L.
On June 12, 2002, Soquimich European Holding acquired 50% of Impronta
S.R.L.
During the first quarter, Soquimich European Holding increased its
ownership in its affiliate FNC Italy S.R.L. to 95%, thereby becoming an
indirect subsidiary of SQM S.A. Subsequently, FNC Italy S.R.L. changed
its name to SQM Italia S.R.L.
On May 28, 2002, the subsidiary Inversiones y Asesorias SQM Limitada
changed its name to Almacenes y Depositos Limitada.
27
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 9 - Investments in and Receivables from Related Companies (continued)
d) Detail of investments in related companies
----------------------------------------------------------------------------------------------------------------------------------
Ownership Equity of Book value Net income
Tax Country Number interest companies of investment (loss)
Registration of Controlling of ------------ ------------- ------------- -------------
Number Company origin currency shares 2003 2002 2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ---- ---- ----
% % ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
----------------------------------------------------------------------------------------------------------------------------------
93390000-2 Empresas Melon S.A.. Chile - 653,748,837 14.05 14.05 281,140 264,481 39,500 37,160 16,345 15,595
0-E SQM Lithium USA US$ - 100.00 100.00 26,525 24,996 26,525 24,996 (1,064) -
Specialties Limited*
0-E Ajay North America USA US$ - 49.00 49.00 13,931 14,038 6,826 6,879 599 308
LLC
77093830-9 SCM Antucoya* Chile - 490 100.00 100.00 - 6,650 - 6,650 - -
0-E Abu Dhabi Fertilizer
Industries WL UAE US$ 1,961 37.00 37.00 3,175 3,675 1,175 1,360 174 -
0-E Fertilizantes Olmeca
y SQM S.A. de C.V. Mexico Mex. $ 183,000 100.00 50.00 - 1,692 - 846 - 321
0-E Nutrisi Holding N.V. Belgium US$ - 50.00 50.00 2,591 1,072 1,296 536 1,304 88
0-E Doktor Tarsa Turkey US$ - 50.00 50.00 560 471 280 236 123 -
0-E Mineag SQM Africa South US$ - 100.00 50.00 - 640 - 320 - -
Limited Africa
0-E Ajay Europe S.A.R.L. France US$ 36,700 50.00 50.00 650 635 325 318 - -
77557430-5 Sales de Magnesio Chile US$ - 50.00 50.00 261 152 131 76 66 46
Ltda.
81767200-0 Asoc. Garantizadora Chile - - 3.31 3.31 665 739 22 24 - -
Pensiones
O-E Rui Xin Packaging
Materials Sanhe China US$ - 25.00 25.00 480 480 120 120 - -
Co.Ltd
O-E Impronta SRL Italia Euros - 50.00 50.00 1,109 48 555 24 683 -
------ ------
Total 76,755 79,545
====== ======
------------------------------------------------------
Equity participation
Tax in net income (loss)
Registration ---------------------
Number Company 2003 2002
---- ----
ThUS$ ThUS$
-----------------------------------------------------
93390000-2 Empresas Melon S.A.. 2,296 2,191
0-E SQM Lithium - -
Specialties Limited*
0-E Ajay North America 294 151
LLC
77093830-9 SCM Antucoya* - -
0-E Abu Dhabi Fertilizer
Industries WL 64 -
0-E Fertilizantes Olmeca
y
SQM S.A. de C.V. - 161
0-E Nutrisi Holding N.V. 652 44
0-E Doktor Tarsa 61 -
0-E Mineag SQM Africa - -
Limited
0-E Ajay Europe S.A.R.L. - -
77557430-5 Sales de Magnesio 33 23
Ltda.
81767200-0 Asoc. Garantizadora - -
Pensiones
O-E Rui Xin Packaging
Materials Sanhe - -
Co.Ltd
O-E Impronta SRL 341 -
Total
o In development stage
28
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 10 - Goodwill and Negative Goodwill
Goodwill and negative goodwill and the related amortization is summarized as
follows:
a) Goodwill
June 30, 2003 June 30, 2002
Tax Registration Amount amortized Goodwill Amount amortized Goodwill
Number Company during the period balance during the period balance
ThUS$ ThUS$ ThUS$ ThUS$
0-E PTM - SQM Iberica S.A. 10 69 10 90
0-E Doktor Tarsa 34 123 11 382
79768170-9 Soquimich Comercial 75 347 75 498
S.A.
78208790-8 SCM SQM Boratos - - 8 57
93390000-2 Empresas Melon S.A. 238 7,456 259 8,102
79626800-K SQM Salar S.A. 22 104 22 147
0-E SQM Mexico S.A. de C.V. 28 1,031 28 1,086
96864750-4 SQM Potassium S.A. 72 1,952 72 2,096
0-E SQM Venezuela S.A. - - 82 83
0-E Comercial Caiman Int. 11 211 - -
S.A.
96801610-5 Norsk Hydro Chile S.A. 11 1,280 - -
0-E Fertilizantes Olmeca 28 251 - -
O-E Impronta Italy S.R.L. - 138 - -
------------------- ----------------- ------------------- --------------
Total 529 12,962 567 12,541
=================== ================= =================== ==============
b) Negative Goodwill
June 30, 2003 June 30, 2002
Tax Negative Negative
Registration Amount amortized Goodwill Amount amortized goodwill
Number Company during the period Balance during the period balance
ThUS$ ThUS$ ThUS$ ThUS$
79626800-K SQM Salar S.A. 105 70 105 281
96575300-1 Minera Mapocho S.A. 102 576 102 779
O-E Mineag SQM Africa 107 - - -
Limited
------------------- ----------------- ------------------- --------------
Total 314 646 207 1,060
=================== ================= =================== ==============
29
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 11 - Other Long-term Assets
Other long-term assets are summarized as follows:
2003 2002
---- ----
ThUS$ ThUS$
Engine and equipment spare-parts, net 24,009 27,869
Nitrate deposit development costs 6,350 3,925
Mineral development costs 12,669 11,775
Pension plan 1,137 2,090
Construction of Salar-Baquedano road 1,830 1,950
Deferred loan issuance costs 3,029 4,253
Other 1,130 918
----------- ----------
Total 50,154 52,780
=========== ==========
Note 12 - Bank Debt
a) Short-term bank debt is detailed as follows:
2003 2002
---- ----
ThUS$ ThUS$
Bank or financial institution
Other banks 520 2,280
--------------- ---------------
Total 520 2,280
=============== ===============
Annual average interest rate 3.29% 4.25%
30
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 12 - Bank Debt (continued)
b) Long-term bank debt is detailed as follows:
2003 2002
--------------- ---------------
Bank or financial institution ThUS$ ThUS$
Union Bank of Switzerland (1) 204,541 204,577
Bank of America (2) 80,195 80,231
Royal Bank of Canada (3) 60,013 121,106
Corpbanca - 12,145
--------------- ---------------
Total 344,749 418,059
--------------- ---------------
Less: Current portion (36,749) (126,059)
--------------- ---------------
Long-term portion 308,000 292,000
=============== ===============
(1) U.S. dollar-denominated loan without guarantee, interest rate of 7.7%
per annum, paid semi-annually. The principal is due on September 15,
2006.
(2) U.S. dollar-denominated loan without guarantee, interest rate of 2.582%
per annum, paid semi-annually. The principal is divided into five equal
semi-annual partial installments, beginning in November 2003 with the
final installment ending in November 2005.
(3) U.S. dollar-denominated loan without guarantee, interest rate of 1.99%
per annum, paid semi-annually. The principal is divided into five equal
semi-annual partial installments, beginning in December 2005 with the
final installment ending in December 2006.
c) The maturity of long-term debt is as follows:
2003 2002
--------------- ---------------
ThUS$ ThUS$
Years to maturity
Current portion 36,749 126,059
1 to 2 years 32,000 28,000
2 to 3 years 46,000 32,000
4 to 5 years 230,000 232,000
--------------- ---------------
Total 344,749 418,059
=============== ===============
31
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 13 - Accrued Liabilities
As of June 30, 2003 and 2002, accrued liabilities are summarized as follows:
2003 2002
--------------- ---------------
ThUS$ ThUS$
Provision for royalties 1,018 820
Quarterly bonus 471 477
Suppliers 1,268 721
Commissions on consignment goods 596 422
Taxes and monthly income tax
installment payments 748 415
Vacation accrual 4,866 4,745
Accrued employee benefits 483 298
Legal expenses 800 -
Other accruals 2,646 2,263
Marketing expenses 800 786
--------------- ---------------
Total current liabilities 13,696 10,947
=============== ===============
Note 14 - Income and Deferred Taxes
a) At June 30, 2003 and 2002 the Company has the following consolidated
balances for retained tax earnings, income not subject to taxes, tax loss
carry-forwards and credit for shareholders:
2003 2002
--------------- ---------------
ThUS$ ThUS$
Accumulated tax basis retained
earnings with tax credit 16,468 19,174
Accumulated tax basis retained
earnings with no tax credit 1,041 11
Tax loss carry-forwards (1) 90,120 129,043
Credit for shareholders 3,061 3,503
(1) Income tax losses in Chile can be carried forward indefinitely
32
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 14 - Income and Deferred Taxes (continued)
The deferred taxes as of June 30, 2003 and 2002 represented a net
liability of ThUS$ 22,175 and ThUS$ 9,959, respectively, and consisted
of:
2003 Deferred tax asset Deferred tax liability
Short-term Long-term Short-term Long-term
--------------- --------------- --------------- ---------------
ThUS$ ThUS$ ThUS$ ThUS$
Temporary differences
Allowance for doubtful accounts 1,025 263 - -
Vacation accrual 759 - - -
Unrealized gain on sale of products 5,285 - - -
Provision for obsolescence - 1,748 - -
Production expenses - - 14,154 -
Accelerated depreciation - - - 59,732
Exploration expenses - - - 4,161
Capitalized interest - - - 6,420
Staff severance indemnities - - - 1,739
Capitalized expenses - - - 719
Tax loss carry-forwards - 17,185 - -
Losses from derivative transactions 5 - - -
Unaccrued interest 77 - - -
Provision for sinister expenses - - - 425
Other 965 736 140 718
=============== =============== =============== ===============
Total complementary accounts - (773) (4,002) (34,756)
=============== =============== =============== ===============
Total deferred taxes 8,116 19,159 10,292 39,158
=============== =============== =============== ===============
33
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 14 - Income and Deferred Taxes (continued)
2003 Deferred tax asset Deferred tax liability
Short-term Long-term Short-term Long-term
--------------- --------------- --------------- ---------------
ThUS$ ThUS$ ThUS$ ThUS$
Temporary differences
Allowance for doubtful accounts 333 870 - -
Vacation accrual 762 - - -
Unrealized gain on sale of products 6,092 - 120 -
Provision for obsolescence - 730 - -
Production expenses - - 11,185 -
Accelerated depreciation - - - 57,878
Exploration expenses - - - 4,141
Capitalized interest - - - 6,552
Staff severance indemnities - - - 2,572
Losses from derivative transactions 277 591 - -
Capitalized expenses - - - 946
Tax loss carry-forwards - 23,691 - -
Other 369 - 54 628
=============== =============== =============== ===============
Total gross deferred taxes 7,833 25,882 11,359 72,717
Total complementary accounts (25) (2,674) (3,654) (39,447)
=============== =============== =============== ===============
Total deferred taxes 7,808 23,208 7,705 33,270
=============== =============== =============== ===============
34
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 14 - Income and Deferred Taxes (continued)
c) Income tax expense is summarized as follows:
2003 2002
--------------- ---------------
ThUS$ ThUS$
Provision for current income tax (1,091) (1,957)
Effect of deferred tax assets and
liabilities (4,290) (3,987)
Effect of amortization of
complementary accounts (2,643) 1,408
Other tax charges and credits 262 246
--------------- ---------------
Total income tax expense (7,762) (4,290)
=============== ===============
Note 15 - Staff Severance Indemnities
Staff severance indemnities are summarized as follows:
2003 2002
--------------- ---------------
ThUS$ ThUS$
Opening balance 9,143 8,326
Increases in obligation 1,658 950
Payments (1,614) (504)
Exchange difference 189 (412)
--------------- ---------------
Balance as of June 30 9,376 8,360
=============== ===============
35
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 16 - Minority Interest
Minority interest is summarized as follows:
Equity Net Income/(Loss)
2003 2002 2003 2002
--------------- --------------- --------------- ---------------
ThUS$ ThUS$ ThUS$ ThUS$
Soquimich Comercial S.A 19,654 18,872 (507) (571)
Ajay SQM Chile S.A 3,128 3,047 (118) (128)
Cape Fear Bulk LLC 128 116 (73) (112)
SQM Indonesia - 6 - 4
SQM Italia S.R.L 12 27 7 (2)
Fenasa 256 200 (66) (3)
Mineag SQM Africa - - (225) -
--------------- --------------- --------------- ---------------
Total 23,178 22,268 (982) (812)
=============== =============== =============== ===============
36
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 17 - Shareholders' Equity
a) Changes to shareholders' equity consisted of:
Accumulated deficit
of subsidiaries in
Paid-in Other development Retained Net
Number capital reserves stage earnings income Total
of shares ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
------------------------------------------------------------------------------------------------------------------------------------
Balance January 1, 2002 263,196,524 477,386 131,066 (2,223) 195,366 30,102 831,697
Transfer 2000 net income to
retained earnings - - - - 30,102 (30,102) -
Definitive dividends - - - - (14,844) - (14,844)
Accumulated deficit from subsidiaries
in development stage (1) - - - (387) - - (387)
Other comprehensive income (2) - - (3,259) - - - (3,259)
Net income for the year - - - - - 18,790 18,790
------------------------------------------------------------------------------------------------------------------------------------
Balance June 30, 2002 263,196,524 477,386 127,807 (2,610) 210,624 18,790 831,997
------------------------------------------------------------------------------------------------------------------------------------
Balance January 1, 2003 263,196,524 477,386 125,111 (3,661) 210,624 40,202 849,662
Transfer 2002 net income to
retained earnings - - - - 40,202 (40,202) -
Definitive dividends - - - - (19,894) - (19,894)
Accumulated deficit from subsidiaries
in development stage (1) - - - (1,064) - - (1,064)
Other comprehensive income (2) - - 2,649 - - - 2,649
Net income for the year - - - - - 22,836 22,836
------------------------------------------------------------------------------------------------------------------------------------
Balance June 30, 2003 263,196,524 477,386 127,760 (4,725) 230,932 22,836 854,189
------------------------------------------------------------------------------------------------------------------------------------
(1) The subsidiaries in development stage are SQM Lithium Specialties
Limited.
(2) Other comprehensive income includes translation adjustments, and in
2003 other comprehensive income also includes the effect of the
recognition of an additional liability for the Company's under-funded
pension as of June 30, 2003.
37
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 17 - Shareholders' Equity (continued)
b) The composition of other comprehensive income as of June 30, 2003 is as
follows:
For the period As of
ended June 30, June 30,
2003 2003
---- ----
Detail ThUS$ ThUS$
Technical appraisal - 151,345
Changes to other comprehensive income from equity method investments:
Soquimich Comercial S.A. (1) 1,180 (7,736)
Isapre Norte Grande Ltda. (1) 3 (94)
Inversiones Augusta S.A. (1) - (761)
SQM Ecuador S.A. (1) - (270)
Almacenes y Depositos Ltda. (1) 12 (79)
Asociacion Garantizadora de Pensiones (1) (1) (18)
Empresas Melon S.A. (1) 1,596 (14,040)
Sales de Magnesio Ltda. (1) - (17)
SQM North America Corp. (2) (141) (1,288)
Other Companies (1) - 718
------------ ------------
Total other comprehensive income 2,649 127,760
============ ============
(1) Corresponds to translation adjustment and monetary correction
(2) Corresponds to the effect of the recognition of an additional liability
for the Company's under-funded pension as of June 30, 2003.
c) Capital consists of 263,196,524 fully authorized, subscribed and paid
shares with no par value, divided into 142,819,552 Series A shares and
120,376,972 Series B shares.
The preferential voting rights of each series are as follows:
Series A : If the election of the president of the Company results
in a tied 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 a director
elected by Series B shareholders.
38
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 18 - Derivatives Instruments
Derivative instruments are recorded at their fair value at year-end. Changes in
fair value are recognized in income with the liability recorded in other current
liabilities. Losses from options relate to fees paid by the Company to enter
into such contracts. As of June 30, 2003 the Company's derivative instruments
are as follows:
Notional or Accounts affected
Type of Covered Expiration Description of the contract Position Liability Income
derivative Amount type purchase/sale amount (loss) recorded
Forwards 3,000 4th quarter of 2003 Exchange rate P 28 28
Put option 8,928 3rd quarter of 2003 Exchange rate P - -
Put option 4,000 3rd quarter of 2003 Exchange rate P - -
Put option 2,300 3rd quarter of 2003 Exchange rate P - -
Put option 720 3rd quarter of 2003 Exchange rate P - -
Forwards 500 3rd quarter of 2003 Exchange rate P 27 (27)
Forwards 1,814 3rd quarter of 2003 Exchange rate P 60 (60)
------------ ------------ ------------
21,262 115 (59)
============ ============ ============
39
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 19 - Non-Operating Income and Expenses
Amounts included in non-operating income and expenses are summarized as follows:
a) Non-operating income
2003 2002
---- ----
ThUS$ ThUS$
Interest income 1,398 2,379
Reversal of allowance for doubtful accounts 500 243
Insurance recoveries 116 1,038
Net foreign exchange 3,220 77
Sales of materials and services 527 267
Equity participation in net income of unconsolidated subsidiaries 3,742 2,568
Other income 1,193 774
------------ ------------
Total 10,696 7,346
============ ============
b) Non-operating expenses
2003 2002
---- ----
ThUS$ ThUS$
Write-off of property, plant, and equipment 4,119 1,155
Interest expense 11,216 15,348
Amortization of goodwill 529 567
Legal expenses 1,020 -
Project relating to commercial effectiveness - 1,008
Work disruption expenses 1,282 -
Other expenses 1,858 1,553
------------ ------------
Total 20,024 19,631
============ ============
40
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 20 - Price-level Restatement
Amounts charged or credit to income relating to price-level restatement are
summarized as follows:
(Charge) credit to
income from operations
2003 2002
---- ----
ThUS$ ThUS$
Property, plant and equipment 36 30
Other assets and liabilities 91 10
Shareholders' equity (575) (307)
------------ ------------
Subtotal price-level restatement (448) (267)
------------ ------------
Net readjustment of assets and liabilities denominated in UF 227 98
------------ ------------
Net price-level restatement (221) (169)
============ ============
Note 21 - Assets and Liabilities Denominated in Foreign Currency
2003 2002
---- ----
ThUS$ ThUS$
Assets
Total assets
Chilean pesos 776 (210)
Euros 1,606 (187)
Japanese Yen 12 12
Brazilian Real 585 (453)
Mexican pesos 139 (412)
Other currencies 778 (481)
Current liabilities
Chilean pesos (1,063) 1,514
Euros 77 (293)
Brazilian Real (284) 335
Other currencies 759 48
Long-term liabilities
Chilean pesos (194) 373
Euros 250 -
41
Note 22 - Commitments and Contingencies
I. Contingencies:
(a) The Company did not record the potential insurance reimbursement
for damages incurred in the potassium sulfate wells in the
Atacama salt deposit.
(b) Material lawsuits or other legal actions of which the Company is
party to:
1. Plaintiff : SQM Salar S.A.
Defendants : ACE Seguros S.A. (formerly - Cigna
Compania de Seguros (Chile) S.A.) and
Chubb de Chile Compania de Seguros
Generales S.A.
Date of lawsuit : April 2002
Matter : Arbitration
Status : Collection of compensation for insured
claim
Instance : Evidence verification
Nominative value : ThUS$ 36,316
2. Plaintiffs : Du Guano de Poisson Angibaud S.A. and
Generale de Nutrition Vegetale SAS
Defendants : Soquimich European Holdings B.V.,
NU3 N.V. and SQM France S.A.
Date of lawsuit : March 2003
Court : Court of Arbitration in France
Matter : Termination of the company relationship
and liquidation of the company Generale
de Nutrition Vegetale SAS
Status : The lawsuit is being contested
Nominative value : ThEuro$ 30,295
42
Note 22 - Commitments and Contingencies (continued)
I. Contingencies (continued):
(c) Models for the Production of the Maria Elena site
The Company is currently reviewing the "Models for the
Production of the Maria Elena site" which may be implemented as
a result of the Decontamination Plan (see note 25). The
different alternatives for production and technology development
for the Maria Elena site, which are a part of the
above-mentioned "Production Models" do not proactively generate
significant changes in the present ore reserves or forecasted
sales volumes. These options include possibilities to use new
production methods and are related to the "leaching piles" and
implementing a mixed system, which would be comprised with the
use of the aforementioned technology and the current production
methods. Advantages and disadvantages of the different options
relate to the extension of the transition periods of new
technology, the investments that will be required, production
costs, changes in technologies and in productive processes and
the effects on certain of the Company's assets and their value.
The possible effects on the valuation of assets are not yet
determinable.
(d) Other
The Company and its subsidiaries are involved in litigation in
the ordinary course of business. Based on the advice of counsel,
management believes the litigation will not have a material
effect on the consolidated financial statements.
II. Commitments:
(a) The subsidiary SQM Salar S.A. maintains an agreement with a
government agency, whereby the Company must make annual payments
until 2030 based on the Company's annual sales. This amount,
which has been paid since the beginning of the agreement in
1996, amounted to ThUS$1,920 in 2003 (ThUS$ 1,571 in 2002).
(b) The Company has certain indirect guarantees, which relate to
agreements with no remaining payments pending. These guarantees
are still in effect and approved by the Company's Board of
Directors; however, they have not been used by the subsidiaries.
43
Note 23 - Third Party Guarantees
As of June 30, 2003 and 2002 the Company has the following indirect guarantees
outstanding:
Debtor Balances outstanding
--------------------------------------------------------- -------------------------------------
Beneficiary Name Relationship 06/30/2003 06/30/2002
ThUS$ ThUS$
Phelps Dodge Corporation SQM Potasio S.A. Subsidiary 2,739 3,541
Bank of America N.A. RS Agro-Chemical Trading A.V.V. Subsidiary 80,195 80,230
Note 24 - Sanctions
During 2003 and 2002, the SVS did not apply sanctions to the Company, its
directors or managers.
44
Note 25 - Environmental Projects
Disbursements incurred by the Company as of June 30, 2003 relating to its
investments in production processes and compliance with regulations related to
industrial processes and facilities are as follows:
Future
2003 Disbursements
---- -------------
ThUS$ ThUS$
Project
Environmental protection department 188 188
Dressing-room, Tocopilla 276 1
Renewal of water network against fire 3 36
Technology change in Maria Elena 346 3,031
Tocopilla dust collection 331 265
Environmental impact evaluations 76 -
Plant for the treatment of wastewater, Ministry of Public Works 300 -
Extension of carbonate plant 298 252
Borate plant emission control 5 95
Dry plants aspiration system 8 92
Environmental evaluation, Guggenheim camp 2 -
Transfer of Steamblock boilers (environmental authorization) 73 24
Modification of fire network - 85
------------ ------------
Total 1,906 4,069
============ ============
45
Note 25 - Environmental Projects (continued)
Protecting the environment is a constant concern for SQM, regarding both the
Company's productive processes and the manufactured goods.
SQM is currently implementing an Environmental Management System, which is based
on the ISO 14000 standard, with which, the Company's environmental performance
will be improved through the effective application of the Environmental Policy
of SQM. The implementation program stipulates that late in 2004, all the
operations maintained by the Company in Regions I and II of Chile, will have a
fully implemented Environmental Management System.
As part of the conversion project to natural gas, the supplier will in turn make
an investment of US$ 5,500 million to be paid by the Company on a monthly basis
for the duration of the contract (10 years).
Technological processes are intended to be environmentally friendly in order to
reduce residual materials and improve technical conditions to ensure an
effective protection to the environment. A good example of this is ongoing
conversion of oil to natural gas used in the Company's plants.
Processes where sodium nitrate is used as a raw material are carried out in
geographical areas such as the desert with favorable weather conditions for the
drying of solid materials and the evaporation of liquids used in solar energy.
The extraction of minerals in open pit mines, given their low waste-to-mineral
ratio, gives rise to sites that have little impact on the environment. The
extraction process and ore crushing produce particles that are consistent with
the industry of operation.
On August 10, 1993, the Ministry of Health published a resolution under the
Sanitary Code that established that the levels of breathable particles present
at Maria Elena Plant exceeded the level allowed for the quality of air and,
which affected the nearby city of Maria Elena. Particles mainly come from dust
that results from processing the sodium nitrate, particularly at the crushing
process prior to leaching. The decontamination plan presented by the Company to
reduce the level of particles was approved with certain modifications by means
of Decree No. 164. As a result of the investments and processes implemented
according to the approved plan, the Company has substantially reduced the levels
of particles in the air. Resolution No. 384, made public on May 16, 2003,
authorized the review and a new draw up of the decontamination plan for the city
of Maria Elena. The Supreme Decree containing the final Decontamination Plan
should be made public within
46
Note 25 - Environmental Projects (continued)
early 2003. It is not possible to assure that within such period the Company
will be free from warnings, fines or even eventual temporary closing of the
crushing plant in Maria Elena. The Company is continuously researching
techniques, processes and systems relating to the processing of sodium nitrate
that could even further reduce the level of particles in the city of Maria
Elena.
Ore treatment operations, as they are controlled processes, produce solid
residual materials that are the non-soluble by product and a certain degree of
moisture.
Productive operations based on brine, are carried out at the Atacama Salt Mine
and almost 95% of the energy used is solar energy and the remaining 5% comes
from natural gas, electricity and fossil fuels. Residual brine left after the
production processes are again injected to the Atacama Salt Mine in order to
minimize the possible environmental impact.
SQM entered into a contract with the National Forestry Corporation (CONAF) aimed
at researching the activities of flamingo groups that live in the Atacama Salt
Mine lagoons. Such research includes a population count of the birds and
wildlife, breeding research, additional behavior research and the climate
phenomena of the area.
Consistent with the Company's ongoing commitment with the environmental
authorities, the Company actively participates in the Joint Monitoring Research
project for the Atacama Salt Mine watershed along with other mining companies
that make use of the water resources that supply the Atacama Salt Mine
watershed.
Note 26 - Subsequent Events
Company management are not aware of any significant subsequent events occurred
between June 30, 2003 and the date of issuance of these consolidated financial
statement (August 14, 2003), which may affect the presentation of these
financial statements.
47
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
-----------------
Ricardo Ramos
Chief Financial Officer
Date: September 26, 2003.