Tianqi Lithium and CATL Join Forces to Restart Asia’s Largest Lithium Mining

(AsianFin)—Tianqi Lithium announced on Wednesday that its subsidiary, Shenghe Lithium, had signed a cooperation agreement with Sinuowei Mining and Huirong Mining to form a joint venture company for a 220kV substation project in order to meet the electricity demand of all parties.

The registered capital of the joint venture company is 300 million yuan, with each party intending to contribute 100 million yuan in cash, subscribing to 33.33% of the company's shares.

Tianqi Lithium responded to investor inquiries, saying that it is conducting the feasibility study related to the restart of the Yadujiang Cuola Lithium Ore Selection Project, and is also proceeding with the application for project construction-related permits.

This paves the way for the restart of the largest lithium mine in Asia—Gyabjeka lithium-beryllium deposit, which was idle for years. The operation suspension had been mainly due to pollution issues before resumption in 2019 but progress has been slow in the Gyabjeka lithium-beryllium deposit area.

The joint venture marks the first between the three major lithium giants. CATL is the actual controller behind Sinuowei; Huirong Mining is controlled by Shengxin Lithium Energy; and Shenghe Lithium, which holds 80% of Shenghe Lithium, is controlled by Tianqi Lithium.

With the cumulative increase in lithium prices by 14,300 yuan over the past month, the titans of the lithium industry in western Sichuan province have begun to prepare for mining. It was also dirven by favorable policies.

The joint construction of the power transmission project by the three parties is related to the proximity of the Gyabjeka lithium-beryllium deposit area to the three giants’ lithium mines, poor infrastructure conditions, and slow progress of lithium mining by each company.

Since Rongda Lithium, a subsidiary of Younergy, suspended operation in 2014 due to pollution, and surrounding lithium mines were also affected. It wasn't until 2019 when Rongda Lithium completed its rectification, breathing life into this area.

Tianqi Lithium said in the announcement that the cooperation in electric power infrastructure construction is aimed at promoting the construction of the Cuola lithium ore dressing project in Yadujiang County, Ganzi Tibetan Autonomous Prefecture, Sichuan province by the holding subsidiary Shenghe Lithium, and Shenghe Lithium intends to jointly invest in and operate electric power infrastructure with other lithium industry enterprises in the Gyabjeka lithium-beryllium deposit area.

Sinuowei currently holds exploration rights for the Dechelongba lithium mine and the detailed exploration of the quartzite (retained) mining rights; Huirong Mining holds exploration rights for the Mu Rong lithium mine, both of which have not been developed. Shenghe Lithium holds mining rights for the Cuola lithium mine.

Therefore, some industry insiders estimate that even for the fastest-progressing Cuola lithium mine, it will take at least a year to deliver output. As of December 31, 2021, the Cuola lithium pegmatite mine had lithium resources equivalent to 632,000 tons of lithium carbonate, with a grade of 1.3%.

Moreover, only after the Cuola lithium mine completes its second-phase construction and operation, can the operation of Tianqi Lithium's another reserve lithium mine—the Shaochangou lithium mine—get started. The reserves of the latter are higher than the former.

According to a report by Dongfang Securities, the reserves of the Shaochangou mine are 35.651 million tons, with a Li2O grade of 1.15%, equivalent to a Li2O reserve of about 700,000 tons. According to an environmental impact assessment report for the Shaochangou Mining Project issued by the Sichuan Provincial Department of Ecology and Environment, all mined ores at Shaochangou are sold to the Cuola ore dressing plant phase II project. "Before the completion and operation of the Cuola ore dressing plant phase II, this project cannot start construction," according to the official document.

This is also the only new development for Sinuowei since it was acquired by CATL for 6.4 billion yuan through a bankruptcy reorganization plan at the beginning of 2023. According to an evaluation report issued by the Yadujiang County Development and Reform Bureau of Sichuan Province, Sinuowei Mining holds industrial ore and low-grade ore reserves of the Dechelongba lithium mine, with a total ore reserve of 24.924 million tons, of which the lithium oxide reserve is about 293,000 tons.

The major discovery of the Mu Rong lithium mine by Shengxin Lithium Energy earlier this year may be a contributing factor. Two months ago, Xinhua News Agency reported that the Ministry of Natural Resources discovered nearly a million tons of lithium resources in Yadujiang, Sichuan, making it the largest known pegmatite-type single lithium mine in Asia to date. A confirmed ore resource of 61.095 million tons was found, including 989,630 tons of lithium oxide, with an average grade of 1.62%, comparable to lithium mines in Australia.

Tianqi Lithium said in the announcement that the joint construction of supporting facilities is the best way to ensure the development and utilization of mineral resources. The establishment of a three-party joint venture company between the company's holding subsidiary Shenghe Lithium, Sinuowei, and Huirong Mining will promote the construction of the company's Cuola project, further accelerating the conversion of the company's resources into objective production capacity and supply, and enhancing the stability of the company's production raw material supply chain.

In recent years, the local government in Sichuan province, China, particularly in Ganzi Tibetan Autonomous Prefecture, has been actively promoting the development of lithium resources.

This commitment was reiterated during the fifth plenary session of the twelfth committee of the Ganzi Prefecture Committee held in August 2023. At the meeting, "premium minerals" were positioned as the primary "new industrial growth driver," with a clear directive to develop the green mineral industry and vigorously promote the construction of three national energy resources bases.

Moreover, in late October 2023, the governor of Ganzi Prefecture, Feng Fagui, led a delegation to visit the Cuola mining area of Tianqi Lithium, the Dechelongba mining area of Sinuowei, and the ore dressing plant of Rongda Lithium Industry. He emphasized the need for relevant departments to continue to implement follow-up work and ensure that related tasks are included in the supervision items of the prefecture party committee and government.

In May last year, Yadujiang County also announced the social stability risk assessment of the infrastructure construction project of the Gyabjeka lithium-beryllium deposit area. It plans to start the construction of a road from the county seat to the Gyabjeka lithium-beryllium deposit area in July 2024, with a construction period of 18 months. This implies that the Gyabjeka lithium-beryllium deposit area will have two roads connecting to the outside world—the other road connecting to Tagong Town is funded by Younergy with an investment of 95 million yuan.

The price of battery-grade lithium carbonate per ton rose from over 90,000 yuan prior to mid-February to over 110,000 yuan, with the highest exceeding 120,000 yuan. In the futures market, the main contract LC2407 of lithium carbonate futures closed at 117,350 yuan per ton on March 21st, up about 26.93% from its low point on February 20th.

Many industry insiders believe that the price surge may be a short-term rebound, as lithium production is set to increase over the next two years.

Huatai Futures stated that from the supply side, some factories in Jiangxi province have delayed resumption of work or carried out routine maintenance due to environmental factors, coupled with reduced production in Australian mines, leading to expectations of supply tightening and some improvement in the oversupply situation. With the favorable shipment expectations of brine carbon in March, and the unexpected increase in lithium carbonate exports from Chile to China, the exports of lithium salt to China from Chile reaching 9,819 tons in January and 16,058 tons in February, an increase of 63.5% and 68.3% respectively compared to the previous period.