China’s Tianqi Lithium buys minority stake in SQM for $4.1bn

Brine pools and processing areas at SQM’s lithium mine on the Atacama salt flat. (Image courtesy of SQM)

China’s Tianqi Lithium is buying a 24% stake in Chilean producer SQM from Canada’s Nutrien (TSX:NTR) for $4.1bn, further expanding the Asian nation’s increasing hold over the market for the key component needed in the making of batteries that power electric vehicles.

“This is an attractive investment for Tianqi Lithium which fits well within our existing business strategy,” Vivian Wu, president of Tianqi Lithium, said in the statement. “Tianqi Lithium’s shareholders will greatly benefit from this transaction given SQM’s long-term stable financial returns and steady dividends.”

Stake sale will make Tianqi a key player in the global lithium market and grow China’s presence in the electric car battery supply chain.

Chengdu-based Tianqi has agreed to buy about 62.6 million class A shares in SQM, for about $65 a share in cash. While Nutrien will sell all of its A shares of SQM it said it’s keeping almost 20.2 million B shares, which the company said it “expects to divest…in due course.”

The sale process, which ended earlier than anticipated, was plagued with controversy. In March, Chile’s development agency Corfo filed a complaint to block Tianqi from acquiring the stake in SQM, arguing that would give China an unfair advantage in the global race to secure resources to develop electric vehicles.

According to Corfo, Tianqi and SQM combined will control 70% of the global lithium market, as the Chinese firm  is seeking to almost triple production capacity through 2020.

Beijing criticized the move, saying any efforts to block the deal could harm bilateral relations. The Chinese Ambassador Xu Bu’s remarks were followed by comments from China’s trade and economic representative to Chile Liu Rutao. Last week, he said he suspected other countries, racing to secure lithium supplies, had lobbied Chile to block Chinese firms from purchasing Nutrien’s coveted share in the Chilean firm.

Tianqi already has a 50% stake in the Greenbushes lithium mine in Australia, one of the world’s largest lithium mines. It also owns lithium assets in Sichuan and Tibet.

Nutrien’s sale of its SQM stake was required by the Competition Commission of India and Ministry of Commerce in China as a condition to clear the merger between Potash Corp and Agriumwhich created the company.

The agreement is subject to customary closing conditions, including regulatory approvals and Tianqi Lithium shareholder support, and is expected to be completed by the fourth quarter of this year.