Chinese top lithium companies are snatching up resources on a global scale - Pin...

Chinese top lithium companies are snatching up resources on a global scale

Chinese top lithium companies are snatching up resources on a global scale

Rebbeca Ren

posted on November 11, 2021 2:22 pm

As of October 18, China's mining and battery industries had acquired 6.4 million tonnes of lithium in reserves and resources.

As the most critical part of electric vehicle (EV) batteries, lithium is undoubtedly the "new oil" of today.

Now, Contemporary Amperex Technology Co., Limited (CATL), the world's top EV battery maker, and Ganfeng Lithium, the world's largest lithium metal producer by market capitalization, are locked in a fierce battle for seizing more "new oil".

Driven by the tug of war between the two Chinese companies, the shares of Millennial Lithium, a Canadian lithium developer with two lithium salt lake projects in Argentina and rich in lithium resources, have soared by nearly 50% in the last two months. 

In July, Ganfeng offered to acquire Millennial Lithium for a total of $280 million (C$353 million). Then, in early September, CATL had made an offer of C$3.85 per share in cash to acquire the company, outbidding the C$3.60 per share offer made by Ganfeng, and promised to reimburse the company for the termination fee of $10 million paid to Ganfeng.

Since Ganfeng elected not to exercise its right to match CATL's offer, Millennial terminated the Ganfeng Arrangement Agreement in accordance with its terms and entered into the CATL Arrangement Agreement.

However, when the market believed that CATL's deal with millennials was basically sealed, Lithium Americas broke in with a higher offer. On November 1, the company proposed that it would acquire Millennial at a price of approximately $400 million, or C$4.70 per share, and guaranteed to reimburse Millennial’s $20 million termination fee payable to CATL.

It is worth mentioning that Ganfeng holds a 12.51% stake in the Vancouver-headquartered resource company and has appointed a director to engage in the company's operations. Therefore, although Ganfeng claimed that it had nothing to do with the offer, the public believed that Lithium Americas' actions were for the benefit of Ganfeng.

The competition may not be ended since CATL still has time to match the offer. But insiders from Ganfeng said that they are unwilling to see two Chinese companies keep raising prices in order to compete for minerals, and they will be more cautious in future mergers and acquisitions.

Meanwhile, as Ganfeng expands its footprints into EV battery production, its relationship with the CATL has become increasingly tense. In a filing submitted to the Shenzhen Stock Exchange on August 5, the lithium manufacturer said it plans to invest 8.4 billion yuan ($1.3 billion) in two lithium battery projects with a combined annual output of 15 GWh.

As demand for EVs has recovered from the impact of the pandemic, the price of battery-grade lithium carbonate in China has more than tripled so far this year. Affected by the increase in raw material prices, CATL's gross profit margin declined in the first half of the year, so the company needs to have more control over the supply of lithium.

This year, the Tesla battery provider has spent a lot of money on mines: It invested $240 million in the lithium mining project Manono of Australian mineral exploration company AVZ Minerals, and injected C$8.58 million in September to become a shareholder of Canadian mining behemoth Neo Lithium.

Ganfeng also accelerates its global acquisitions: invested $130 million to acquire up to a 50% stake in a lithium mine in Mali; acquired a 35% stake in a lithium project from Arena Minerals for $7.8 million; invested around $600 million towards the construction of a solar-powered lithium plant at its Mariana operations in northern Argentina.

This is a snippet of Chinese mining companies and battery companies sweeping up the world's lithium resources. Although the country has become the world's largest producer of lithium, with 80% of global lithium-ion battery production capacity, it still needs to source the bulk of raw lithium products beyond its borders.

According to the China Nonferrous Metals Industry Association, nearly 60% of the country's spodumene crystal has to be imported from abroad to produce lithium salts used in the manufacture of EV batteries.

As of October 18, China's mining and battery industries had acquired 6.4 million tonnes of lithium in reserves and resources, nearly matching the 6.8 million tonnes acquired by all companies in 2020, according to S&P Global.

"It is not only China but also other countries that are scrambling to build bigger reserves of core raw minerals, which are key to lowering the high cost of NEVs. To persuade consumers to replace traditional gasoline-fueled cars with NEVs, the latter must be cost-effective," said Cui Dongshu, secretary-general of the China Passenger Car Association.

(The story is based on PingWest Chinese report)