Morningstar | Nutrien Completes Sale of SQM Shares to Tianqi Lithium
On Dec. 3, SQM reported that the sale of Nutrien's 24% equity stake in SQM to Tianqi Lithium was completed. We had already assumed a 100% probability that the deal would close after the transaction cleared all regulatory hurdles. As such, we maintain our narrow-moat Nutrien fair value estimates of $68 per share and CAD 89 per share, respectively. Our $65 per share fair value estimate for narrow-moat SQM is also unchanged.Until the transaction was completed, the risk existed that Nutrien may have had to divest its 24% stake in SQM on the open market, which we think has weighed on SQM's stock price in recent months. With the transaction closed, this risk should no longer be an issue for SQM shareholders.
We continue to view SQM as the highest-quality lithium name we cover. SQM's narrow moat rating stems from the company operating the world's lowest cost lithium carbonate operation due to unique geology. SQM will expand its lithium capacity through the conversion of existing assets, which will be the most cost-efficient lithium capacity expansion globally. As the lowest-cost lithium producer, SQM should benefit from elevated lithium prices as higher cost supply will be needed to meet unprecedented demand growth due to our above-consensus outlook for electric vehicle sales. With SQM shares trading at nearly a 30% discount to our $65 per share fair value estimate, SQM has attractive risk-adjusted upside.
For more information on our lithium outlook, please see our Nov. 30 report, "Put the Pedal to the Metal for Lithium Stocks: SQM and Albemarle offer attractive upside given our above-consensus electric vehicle adoption forecast." For more information on our electric vehicle forecast, please see our Sept. 24 Observer, "Electric Vehicle Sales in China and Europe Will Leave U.S. in the Dust, Driving Above-Consensus Global Adoption Rates."
Nutrien Ltd is Canada-based crop nutrient producer and distributer of potash, nitrogen and phosphate products for agricultural, industrial and feed customers worldwide. The Company is focused on retail, potash, nitrogen and phosphate mining and processing operations. The Company's retail operations serve growers in a number of countries across the United States, Canada, South Africa, Australia and South America. The Company operates six potash mines in Saskatchewan and has a mine in New Brunswick in care-and-maintenance mode. The Company operates integrated phosphate mining and processing facilities, as well as a number of smaller upgrading plants in the United States.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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