Chinese battery giant buys discount stake in Pilbara Minerals
China’s largest lithium battery maker has bought an 8.5% stake in Australian miner Pilbara Minerals (ASX:PLS), both companies said on Thursday, after falling prices caused mainly by oversupply drove the lithium producer to raise equity to fund working capital.
The move by Contemporary Amperex Technology (CATL) is part of a A$91.5 million ($61.8 million) capital raising that sees the Chinese firm buying the stake in Pilbara through a A$55 million placement. An additional A$36.5 million has been raised through an institutional placement at A$0.30 a share, the companies said.
Pilbara, which exports a lithium-rich spodumene concentrate, will also seek to raise A$36.5 million from institutional investors and $20 million from retail shareholders at 30¢ per share.
CATL, which makes electric vehicle batteries for car manufacturers including Toyota, BMW, Volkswagen and Honda, is currently building a factory in Germany.
Its bet on the Aussie lithium miner can be seen as a show of support for sector struggling with prices that are expected to remain weak for longer than expected.
China’s domestic battery-grade lithium carbonate market has temporarily stabilized at its current level with below 58,000 yuan per tonne ($8,107) rarely reported on the spot market, according to Fastmarkets.
“While there has been commentary talking down the current state of lithium markets, it has belied the significant interest we have continued to see from the strategic players in the lithium-ion supply chain and their focus on lithium raw material supply,” Pilbara Minerals managing director, Ken Brinsden, said in the statement.
“In particular, the focus is on the quality and security of the lithium raw material supply and matching the raw material demand growth to growth downstream in the lithium-ion battery supply chain,” he noted.
Based in the Fujian province in southeast China, CATL currently produces lithium-manganese-cobalt-oxide (NMC) batteries containing 50% nickel, 20% cobalt and 30% manganese.
The transition to battery power will sharply increase demand for raw materials. Deployment of about 140 million electric vehicles by 2030 will require 3 million tonnes more copper a year, 1.3 millions tonnes more nickel and about 263,000 tonnes more cobalt, according to Glencore (LON:GLEN), a top producer of all three metals.
The Pilbara-CATL deal is subject to approval by Chinese regulators and Pilbara shareholders.