Tianqi Lithium 6% stake up for sale

Tianqi placed the expansion of Kwinna plant on hold in September 2019. (Image courtesy of Tianqi Lithium.)

China’s Tianqi Lithium Corp., the country’s top producer of the battery metal, said on Monday that its controlling investor had put a sixth of its holding up for sale.

The move, the Shenzhen-listed lithium miner said, seeks to raise much needed cash to pay back debt the company racked up in an ambitious expansion overseas over the past two years.

Chengdu Tianqi Industry Group, which holds a 36.04% stake in Tianqi Lithium, could raise more than $200 million in much-needed cash with the move, according to a filing in the Shenzhen Stock Exchange.

Tianqi Lithium is due to repay in November a total of $2.2 billion to Citic Bank

The sale will see the parent company offloading up to 88.6-million shares, or 6% of the company’s stock, from July 3 and within a six-month timeframe.

Chengdu plans to sell up to 2% via competitive bidding. As much as 4% will be sold via a block trade, the filing says, at prices yet to be determined.

The company will remain Tianqi’s controlling shareholder after the sale, which will not impact the lithium miner’s structure or operations, the filing said.

Prices for lithium carbonate have dropped by more than 70% since 2018, when Tianqi acquired about a quarter of Chilean miner SQM for $4.1 billion. The move was part of an aggressive global expansion aimed at securing leadership in the lithium market. The plan succeeded in putting China in a dominant position just as sales of electric vehicles (EVs) took off.

Tianqi Lithium said in April it was mulling options to pay back some of its debt, pegged at over $6 billion. Among the measures, the miner said it was exploring a partial sale of its stake in the Greenbushes mine in Western Australia, the world’s largest hard-rock lithium operation.

Albemarle (NYSE: ALB), the world’s top producer of the white metal, revealed last week its interest in all or part of Tianqi’s stake in Greenbushes.

Market challenges

Tianqi is not the only lithium major struggling as a result of the collapse in lithium prices.

SQM, the world’s second-largest producer of the metal, has pushed back a key expansion at its Atacama salt flat operations from the end of 2020 to late 2021.

Canadian lithium miner Nemaska Lithium (TSX: NMX), which was backed by Japan’s SoftBank, filed for bankruptcy protection in December.

Tianqi has a $6-billion debt due to an ambitious expansion overseas in the past two years

Albemarle has also had to adjust plans. It postponed last year a project to add about 125,000 tonnes of processing capacity. It also revised a deal to buy into Australia’s Mineral Resources’ (ASX: MIN) Wodgina lithium mine and said it would delay building 75,000 tonnes of processing capacity at Kemerton, also in Australia.

The lithium giant showed further signs of distress in early May. It cut its 2020 budget and pulled its annual forecast amid the global spread of the coronavirus.

That was one of the first signs that the lithium industry is beginning to feel the pain of falling EVs sales, which are projected to slide further for the rest of the year due in part to shutdowns affecting carmakers.

Before the pandemic, the main factor behind the price slump was an avalanche of new supply. The glut was triggered mainly by mine expansions and a cut in government subsidies for purchasers of EVs in China, the world’s largest market.