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Santiago (AFP)

The controlling shareholder in Chile's lithium producer SQM has mounted a legal challenge to halt the sale of nearly a quarter of the company to Chinese group Tianqi.

Pampa Calichera, Potasios de Chile and Global Mining -- collectively known as the Pampa Group which holds 29.12 percent of SQM -- said the decision by Chilean regulators to allow the deal breaks competition rules.

SQM operates one of the world's largest lithium mines on the Atacama salt flats in northern Chile. Lithium is used in batteries, and is in high demand given the boom in the production of electric cars.

Tianqi already has interests in Albermarle, the world's largest lithium producer and a direct competitor of SQM.

If the deal goes through it would potentially give Tianqi control of some 70 percent of the global lithium market, according to some estimates.

The case, filed in Chile's Constitutional Court on Wednesday, calls for antitrust regulators to rescind the decision to approve the sale "because it allows a market player to partially hold and participate in the management of one of its direct competitors."

It would also allow a direct competitor "access to confidential and economically sensitive information on the global lithium market."

In May the go ahead was given for the $4.1 billion sale of Canadian Nutrien group's 24-percent SQM stake to Tianqi.

Regulators then launched an investigation in June into whether the deal broke competition rules.

Chile has the world's largest reserves of lithium, and with Australia produces around 80 percent of total global production.

© 2018 AFP