Tianqi’s top shareholder to get up to $2.5bn injection

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

China’s Tianqi Lithium (SHE: 002466) said an unnamed investor is injecting up 16 billion yuan ($2.5 billion) in its controlling shareholder as the beleaguered miner continues to look for ways to pay down debt.

The Chengdu, Sichuan-based lithium producer secured in December a $1.4 billion investment in its Australian operations from IGO Ltd (ASX: IGO). It also decided to extend the maturity of $3 billion of loans as lithium prices have begun to climb again.

The company said it had on December 22 signed a “non-binding and non-exclusive memorandum” on a potential equity transfer with a party that plans to invest 10-16 billion yuan in controlling investor Chengdu Tianqi Industrial Group, which holds a 30% interest in Tianqi.

The investor has investment experience or strength in the lithium industry and plans to set up a private equity fund to make the investment, Tianqi said. 

Prices in China had their strongest month in more than five years in January and are set to rise further as EVs sales begin to outstrip supply

The company has been struggling to pay a loan taken out in 2018 to partially fund the purchase of a 25% stake in Chilean miner SQM for $4.1 billion.

The acquisition was part of an aggressive global expansion aimed at securing leadership in the lithium market. It succeeded in putting China in a dominant position just as sales of electric vehicles (EVs) took off, but it came at a hefty cost for Tianqi.

The miner closed that deal when lithium carbonate prices were peaking at $17,000 per tonne. They since plunged around 59% due to a global oversupply of the commodity.

Welcome change

2021 is looking a lot better for producers of the metal used in the batteries that power EVs and high tech devices.

Prices in China had their strongest month in more than five years in January and are set to rise further as EVs sales begin to outstrip supply.

Fastmarkets’ weekly price for lithium carbonate, 99.5% Li2CO3 min, battery grade in China was 63,000-68,000 yuan ($9,750-10,524) per tonne on Thursday, up 4.8% from 60,000-65,000 yuan per tonne the previous week.

Analysts believe the recent rally may be a sign of a long-awaited recovery in the market, which has remained depressed for three years.

“Demand for lithium chemicals has begun to outpace growth on the supply-side,” said Benchmark Mineral Intelligence (BMI) analyst George Miller, adding consumers were eager to secure supply ahead of looming deficits.

BMI said it expects a 6,000-tonne deficit this year compared to a mostly balanced market in 2020.

Even Tianqi’s shares have benefitted. They are trading at 59.95 yuan, more than 50% higher than its 39.30 yuan price in December, hitting a record high earlier this week of 68.88 yuan.

(With files from Reuters)