Tianqi Lithium sells 25% stake in Australia’s largest lithium mine, in $ 1.4 billion deal that will help the heavily indebted Chinese national champion avoid impending default while retaining the control of its most valuable asset.
The lithium producer, based in southwest Sichuan province, faces a deadline December 28 to restructure a $ 1.9 billion loan with creditors led by China Citic Bank. The loan was used to finance Tianqi Lithium 2018 purchase a 23% stake in Sociedad Química y Minera, a Chilean rival, for $ 4 billion.
But lithium prices have since fallen 70% due to a global supply glut, pushing the company to the brink of bankruptcy.
Tianqi Lithium and IGO Limited, the Australian gold and nickel miner, said the latter would take a minority stake in a vehicle holding the Chinese company’s 51% stake in Greenbushes, a massive open-pit operation in Western Australia , as well as a lithium company. processing plant.
Albermarle, the US lithium producer, has a 49% stake in Greenbushes as well as the right to acquire the shares of Tianqi Lithium if they are put on the market, but not if an indirect stake is sold through a holding company.
Greenbushes is the world’s largest and cheapest producer of spodumene concentrate, a lithium-rich mineral, with a capacity of 1.2 million tonnes per year, according to a study by RBC.
Chinese hawks in the Trump administration have raised concerns Beijing’s de facto control on global supplies of lithium and other commodities through companies such as Tianqi Lithium, a private sector group listed on the Shenzhen Stock Exchange.
“The formation of a [joint venture] with Tianqi seems to deny Albemarle’s right of first refusal, ”said Alexander Hislop, analyst at RBC Capital Markets.
The acquisition by IGO marks a change in strategy for the group, which recently announced that it would focus on raw materials used in the production of electric vehicles. The Perth-based company has put up for sale its 30% stake in the Tropicana gold mine in Western Australia in a deal that could be worth more than A $ 1 billion ($ 741 million).
IGO on Wednesday announced its intention to finance the Tianqi transaction through an A $ 1.1 billion credit facility, raising capital of up to A $ 766 million and its cash reserves.
The transaction is subject to the approval of the Australian Foreign Investment Review Board.
Relations between Beijing and Canberra are at an all-time low, with diplomatic rifts on issues such as an investigation into the origins of the coronavirus pandemic and the detention of Australian nationals in China on loosely defined national security charges.
The Chinese embassy in Canberra released a 14-point memo last month accusing Australia of deteriorating relations. But the investment board is still expected to approve the deal because it gives an Australian company partial ownership of the country’s largest lithium mine.