Tianqi Lithium is promoting a 25 per cent stake in Australia’s largest lithium mine, in a $1.4bn transaction that may assist the closely indebted Chinese language nationwide champion keep away from a looming default whereas retaining management of its most prized asset.
The lithium producer, based mostly in southwestern Sichuan province, is going through a deadline of December 28 to restructure a $1.9bn mortgage with collectors led by China Citic Financial institution. The mortgage was used to fund Tianqi Lithium’s 2018 purchase of a 23 per cent stake in Sociedad Química y Minera, a Chilean rival, for $4bn.
However lithium costs have since fallen 70 per cent due to a worldwide provide glut, pushing the corporate to the brink of chapter.
Tianqi Lithium and IGO Restricted, the Australian gold and nickel miner, mentioned the latter would take a minority stake in a car holding the Chinese language firm’s 51 per cent stake in Greenbushes, a large open-pit operation in Western Australia, in addition to a lithium processing plant.
Albermarle, the US lithium producer, has a 49 per cent stake in Greenbushes in addition to the best to accumulate Tianqi Lithium’s shares if they’re put available on the market, however not if an oblique stake is bought by way of a holding car.
Greenbushes is the world’s largest and lowest-cost producer of spodumene focus, a lithium-rich mineral, with a capability of 1.2m tonnes every year, in response to analysis by RBC.
China hawks within the Trump administration have raised considerations about Beijing’s de facto control over world provides of lithium and different commodities by way of firms equivalent to Tianqi Lithium, a personal sector group listed on the Shenzhen inventory change.
“The formation of a [joint venture] with Tianqi seems to negate Albemarle’s proper of first refusal,” mentioned Alexander Hislop, analyst at RBC Capital Markets.
The acquisition by IGO marks a change in technique for the group, which lately mentioned it could shift its focus to commodities used within the manufacturing on electrical autos. The Perth-based firm has put its 30 per cent stake within the Tropicana gold mine in Western Australia up on the market in a transaction that may very well be value greater than A$1bn ($741m).
IGO mentioned on Wednesday it meant to fund the Tianqi transaction by way of a A$1.1bn debt facility, an fairness elevating of as much as A$766m and its money reserves.
The deal is topic to approval by Australia’s International Funding Evaluate Board.
Relations between Beijing and Canberra are at an all-time low, with diplomatic rifts over points together with an investigation into the origins of the coronavirus pandemic and the detention of Australian nationals in China on vaguely outlined nationwide safety costs.
China’s embassy in Canberra issued a 14-point memo final month blaming Australia for the deterioration in relations. However the funding board remains to be anticipated to approve the deal because it provides an Australian firm partial possession of the nation’s most vital lithium mine.