China’s lithium battery giant Tianqi Lithium Corp said on Thursday (May 17) that it will buy a 24 percent stake of Chile lithium producer SQM, the world’s second-largest lithium producer, for about 4.1 billion US dollars, Reuters reported. A person who is close to the source said that Tianqi is seeking to acquire the stake from Canada-based fertilizer company Nutrien Ltd.
Favored by the news, the Shenzhen-listed company surged 3.02 percent as of closing that day, with its capitalization exceeding 70 billion yuan.
As two of the world’s top four lithium battery producers, SQM and the acquirer totally account for 66 percent of the world’s total lithium carbonate production.
Tianqi focuses its major businesses on the exploitation of solid lithium resource, production of lithium product and lithium trade. Lithium is a major material for rechargeable battery. As the new energy vehicles have been growing rapidly around the world, the company saw a continuous growth in performance.
Tianqi’s operating revenues came at 1.86 billion yuan, 3.9 billion yuan and 5.47 billion yuan between 2015 and 2017, respectively. During the period, its net profits attributed to shareholders registered 247 million yuan, 1.51 billion yuan and 2.14 billion yuan, respectively. Its operating revenues and net profits grew by more than 50 percent in the first quarter of this year, with net profits expected to reach 1.3 billion yuan-1.45 billion yuan.
Its interests in buying SQM’s stake comes as the Chinese government vigorously promotes electric vehicles to combat air pollution and help China’s domestic automakers leapfrog the combustion engine to build global brands.
The Chinese lithium leader indicated in its 2017 annual report that the new energy vehicle industry is developing now, which will continue to boost demand for lithium battery and its key materials, including lithium compound and lithium resource in the future.
Despite the prosperous development of China’s new energy vehicle market, China Nonferrous Metals Industry Association thought that exploitation of lithium ore resource in China progressed slowly in recent years and China mainly depended on importing raw material. Even the enterprises which own mining resources in China are no exceptions.
In this context, Tianqi started its global expansion earlier than other Chinese enterprises with efforts to ensure supply of raw material and globalization of business.
At the end of 2012, it announced it planned to raise no more than 4 billion yuan by issuing stocks through private placement, which would be used to acquire shares of Australian lithium ore manufacturer Talison Lithium Pty Ltd. At present, raw material lithium concentrate that Tianqi needs are all imported from the Australian manufacturer.
Besides the moves in Australia, Tianqi had been circling SQM since 2016. It acquired 5.5 million B shares of SQM at a price of 38 US dollars per share in September of the year. The deal totally cost it about 210 million yuan, making it have 2.1 percent of shareholdings in SQM.
It intended to further acquire 32 percent of stocks of SQM in April, but Corfo, the institution for economic development in Chile, filed a complaint with the country’s anti-monopolization regulator to block the transaction. Now the company is said to have acquisition again. If the deal is finally approved, it would give China the upper hand in a global race to secure steady resources for electric vehicles.