This article is part of a 20 article special report on "Metals, miners and money".
"What do flat-screen TVs, organic tomatoes, bathtubs, and hybrid cars have in common? asks international investing expert Frida Ghitis. The contributing editor to Global Investing explains, "All have a promising future and are produced with key materials brought to you courtesy of Sociedad Química y Minera de Chile (NYSE: SQM)."
Indeed, the company is unusual among miners -- and unique among the stock featured in this resource report -- as the firm is a non-metal miner. Says Ghitis, "Everything SQM sells comes from mines in Chile's Atacama Desert, the driest place on earth. SQM, once state-owned, exploits the unique mix of nitrates, iodine, and lithium in the rich caliche deposits.
"These are the largest known reserve of iodine and nitrate, essential elements for human survival. Also in the mix is lithium, increasingly a staple in electronics.
"Sociedad Quimica y Minera de Chile is a large non-metal mining and chemical operation, with a market cap of more than $2 billion and sales that broke the $1 billion mark in 2006. From its South American perch, it is a true global enterprise; its products are sold in over 100 countries by agencies in more than 20.
"With its varied product mix, SQM can be a buffer against recession. Fertilizers are needed even during tough economic times because we go on eating. Potassium nitrate, a leading fertilizer, is in increased use and SQM has half the world market.
"Iodine is needed to produce polarizing film for LCD screens and contrast media. Demand for iodine derivatives grew more than 70% last year, mainly from consumer appetite for LCD television screens.
"The most interesting market is for lithium, where SQM is global leader. Lithium makes rechargeable batteries powering modern electronics and hybrid cars. SQM lithium revenues grew 58% in 2006, limited by capacity constraints.
"An aggressive expansion plan is spending $52 million to increase production. To go operational in Chile summer 2007-8, the plan will raise annual production from the current 32,000 tons to 40,000 tons by end 2008, and then 20% more.
"Profits grew in each of the past six years and 2007 should maintain the trend. The shares have risen 50% this year and valuation gives me pause. The PE at 38 is high but nearly in line with the industry.
"Price-to-sales ratio at 2.5 looks cheaper than its peers. In volatile markets, wait for a price dip to scoop up shares. But don't wait too long; takeover moves could flare up again, giving gains beyond the 1.9% dividend and normal appreciation.
"Canada's Potash Corporation of Saskatchewan (PCS; POT) tried to acquire SQM, and now owns over 30%. Control remains in the hands of CEO Julio Ponce through his holding company, which upped its stake to match POT and crafted a strategic alliance with two shareholder companies to control a majority.
"But shareholder alliances may not survive, and there may be new bids to gain control. With roles in producing LCD TVs, fireworks, tomatoes, and hybrid cars, SQM cam bring big profits to investors in the super-arid Chilean desert."
Each day, Steven Halpern's TheStockAdvisors.com website features the latest investment commentary and favorite stock picks of the nation's leading financial newsletter advisors.
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