China鈥檚 Tianqi Lithium (SHE: 002466) that nickel-gold miner聽IGO Ltd (ASX: IGO) had acquired a 49% interest in Tianqi Lithium Energy Australia, which controls Greenbushes 鈥� the world鈥檚 biggest hard-rock lithium mine, located about 250 km from Perth.
IGO has committed to invest $1.4 billion, a , which provides Tianqi with聽much-needed cash聽to make loan repayments originally聽due at the end of November, but extended to Dec. 28.
Tianqi is keeping its 51% ownership of its Australian unit. It said it would use the proceeds from the deal with IOGO to repay the $1.2 billion principal on a loan taken out 2018 to partially fund the acquisition of聽a 25% stake in Chilean miner SQM for $4.1 billion.
The deal gives IGO an almost 25% stake in Greenbushes plus 49% in Tianqi鈥檚 suspended Kwinana lithium processing plant. The $770 million facility was mothballed shortly after commissioning earlier this year in light of weak prices and demand for the commodity.
That acquisition of an interest in SQM 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 hefty cost for Tianqi.
The beleaguered Chengdu, Sichuan-based miner closed that deal when lithium carbonate prices were peaking at $17,000 per tonne. They have since plunged more than 70% due to a global oversupply of the commodity used in the making of batteries that power electric vehicles (EVs) and high tech devices.
鈥淗umbling鈥� deal
Tianqi鈥檚 decision of selling a stake in its Australian unit to a local miner comes amid escalating tensions between Beijing and Canberra.
Analysts believe the transaction is rather 鈥渉umbling鈥� for China considering , which accused Australia鈥檚 government of 鈥減oisoning bilateral relations.鈥�
鈥淸The deal] should allow Tianqi Lithium to retain control of Greenbushes while helping China Citic Bank get its money back (鈥�) 聽China might consider thanking Australia for the favour,鈥� Financial Times鈥� columnist, .
Most experts were not surprised with the outcome. 鈥淕reenbushes is a large, low-cost asset and has contributed to China鈥檚 lithium supply security,鈥� Alice Yu, S&P Global Market Intelligence, said in a research note.
The deal, which needs the approval of the Australian Foreign Investment Review Board, will be presented to Tianqi shareholders on Jan. 5.
US-based lithium giant Albemarle (NYSE: ALB)聽holds a 49% stake in Talison Lithium, a partnership with Tianqi that operates Greenbushes mine. Because of this, the聽company is believed to have some form of pre-emptive rights over the project and has聽expressed interest in adding to its stake聽in the past.
Albemarle said on Tuesday the transaction appeared to be structured 鈥渋n a way that would not trigger the company鈥檚 right of first refusal.鈥�
鈥淚f so, we believe the structure of the Talison JV would remain unchanged,鈥� spokeswoman Hailey Quinn told Reuters, adding that Albemarle would evaluate further once full details are known.