China produces only around 2000 MT of Lithium per year (10,646 MT MT of LCE), while being world’s biggest Lithium consumer. No wonder China is much reliant on imports, being a net Lithium importer, while Chinese Lithium companies invest in Lithium mines all over the world.
China has abundant lithium resources with reserves among the highest in the world. The resources mainly include spodumene, lepidolite and salt lake lithium, 80% of which are salt lake brine. Salt lake lithium is mainly located in salt lakes of Qinghai and Tibet, among which those conduct brine extraction of lithium include Zhabuye salt lake (Tibet), East Taigener salt lake (Qinghai), and West Taigener salt lake (Qinghai), spodumene is mainly located in Ganzi Tibetan Autonomous Prefecture and Aba Tibetan Autonomous Prefecture; lepidolite, mainly located in Yichun city of Jiangxi province, has been in a stage of resource development and application.
Chinese lithium carbonate suppliers can be principally divided into two categories: salt lake providers represented by Tibet Urban Development and Investment, spodumene providers represented by Sichuan Tianqi Lithium Industries and Galaxy Resources. The exploitation of salt lakes in China is still of smaller capacity in comparison to spodumene providers represented by Sichuan Tianqi Lithium Industries. The range of US$20,000/Mt price in China already ensures great profits for even the highest cost producers and new spodumene capacity comes online more quickly than brine.
Lake Zabuye is a landlocked salt lake located at an elevation of 4,400 metres (14,400 ft.) in the Shigatse Prefecture of Tibet Autonomous Region, 1,050 km (650 mi) from Lhasa. The lake is surrounded by mountains with a height of 4,600–5,200 m above sea level. It is fed by rain, underground water and melting ice. The lake gives its name to the mineral zabuyelite (lithium carbonate, Li2CO3), which was discovered here in 1987 and has been mined since 2004–2005. In 2008, the salt mine at the lake was regarded as the major source of lithium in China. Currently, Zhabuye Lithium owns 20-year exclusive mining rights for the Zhabuye salt lake.
The production of lithium from the salt lake water started in 2004–2005, after exploration work for the metal was initiated in 1982. In 1984, lithium was found in micro-fine sediments of the lake and considered amenable to refining in large quantities. The company involved with the extraction has a plant at the lake which had the total capacity of 5,000 tonnes and produced 1,556.5 tonnes of lithium carbonate in 2008. Its capacity was projected to increase to 20,000 tonnes in the near future. The company claims a reserve of 1.53 million tonnes Li (8.3 million tonnes of carbonate) but this estimate is considered as overly optimistic. Tianqi Lithium holds 20% stake in Tibet Shigatse Zhabuye Lithium High-Tech Co.
“Listed on the Shenzhen Stock Exchange, Tianqi Lithium is a leading global supplier of lithium products, with major businesses including lithium resource development and exploitation, downstream production processing and trade for a diverse range of high quality lithium products including mineral concentrates. The company has established global presences in China, Hong Kong, Australia and Chile, allowing the company to service customers across Europe, Asia, the Americas and Oceania.
High-grade Lithium Mineral Resources:
• Talison Lithium, controlled by Tianqi, mines and possesses the world’s largest and highest grade spodumene reserves in Greenbushes, Western Australia. This asset has been exploited for more than 25 years and Tianqi has a long and successful history with Talison Lithium.
• Tianqi’s wholly-owned Cuola lithium ore reserves in Yajiang County, Ganzi Prefecture, Sichuan Province, are part of asignificant spodumene reserves in Jiajika, Ganzi, which is now considered one of the largest spodumene reserves throughout Asia.
• Tianqi also has a share holding interest in Zhabuye Salt Lake Lithium Project, located in Shigatse, Tibet, which has millions of tonnes of lithium reserves, which are well-known for their high quality within China and abroad.
High-quality Lithium Compound Production Base:
Tianqi owns and operates two of the largest single point lithium production plants in the world as follows:
• Tianqi Lithium Battery Material Industrial Zone, in Shehong County, Sichuan Province.
• The world’s largest battery-grade lithium carbonate production base in Zhangjiagang, Jiangsu Province.
• Kwinana lithium hydroxide production base in Western Australia is under construction.
• The metal lithium production base in Chongqing Tongliang Industrial Park.
Ganfeng Lithium Co. Ltd. (GFL) is one of the world’s leading Lithium manufacturers, established in China in 2000 and listed on the Shenzhen Stock Exchange since 2010. Ganfeng has experienced rapid growth in recent years, consequently forming several highly specialized Lithium production subsidiaries and most recently commissioning a new facility in China adding 500mt/y Li metal to its current 1000mt/y Li production capacity. The company exports and produces over 20 unique lithium products for various applications worldwide. This includes Li metal batteries for which GFL has developed a breakthrough technology that shortens the industry standard production process.
Ganfeng has returned a remarkable +555% in the past 5 years giving the Company a present day market cap of $4.58 billion USD (about half the size of SQM):
Ganfeng has a total of 4 subsidiaries that handle all aspects of their business from shipping to sales. Ganfeng is making aggressive investments all over the world and acquiring lithium projects.
Ganfeng is not timid about looking outside their borders for opportunity. In January of 2017, the Company made a $174 million investment in Lithium Americas (TSE:LAC) – (OTCQX:LACDF) in which Ganfeng agreed to financing terms in an aggregate amount of $174 million in exchange for 19.9% of the outstanding common shares of Lithium Americas. Ganfeng also owns 18% of International Lithium (CVE:ILC), a Canadian listed mining company who owns Lithium properties in Argentina, Canada and Ireland. They have a 43% stake in Reed Industrial Minerals which is a lithium project in Australia, and also made a 5% investment in Australian lithium firm Pilbara Minerals (ASX:PLS). In short, Ganfeng has their fingers on every continent securing their supply of lithium to fuel the growth of electric vehicles. All those investments have given Ganfeng a 30,000 metric ton per year production capacity, and they produce over 20 unique lithium products that are then exported around the world.
Ganfeng Lithium is not only ILC’s strategic partner but also has a 17% ownership in the company. The parties are now jointly working on developing the Avalonia Lithium Pegmatite project in Ireland and Mariana Lithium Brine project in Argentina
“I am very pleased that Ganfeng Lithium is reinforcing its strategic stake in International Lithium. Ganfeng is a worldwide leader in lithium materials production based in China. They provide not only the capital to advance our joint venture projects in Argentina and Ireland, but technology to facilitate potential production to their particular needs as a lithium end-user. Ganfeng holds 19 patents and is the only company producing lithium chemicals both from brine and hard rock spodumene sources” states Kirill Klip, President of the Company.
International Lithium develops lithium projects on three continents: in Europe, Argentina and Canada. $17 million Canadian dollars were allocated to all ILC projects for development up to the end of 2017.
Two J/V with Ganfeng Lithium are financed by ILC’s Strategic Partner: Avalonia in Ireland and Mariana in Argentina.
ILC have also entered into the new strategic partnership with Pioneer Resources from Australia for Mavis Lake and Religh Lake in Canada.
This is the implementation of ILC’s new strategy developed for the security of lithium supply for North America as well. International Lithium is advancing a multitude of smaller deposits in the Upper Canada region that possess near perfect accessible infrastructure and that can supply a central lithium carbonate processing facility.
City of Yichun in Jiangxi
A small Chinese city of Yichun in Jiangxi hopes to become the next Asia’s lithium capital by creating and developing lithium related industry worth CNY 100 billion over the next 5 years.
The city’s mayor believes the metal is in high demand for use in batteries as governments and automakers push to get more electric and hybrid vehicles on the road. To achieve its ambitious goal, the city which had a total gross domestic product of CNY 70 billion in 2009 has created a lithium industry park sprawling over 20 square kilometers and is wooing investors with land use and tax incentives.
Mr Gong Jianhua the city’s mayor said making all efforts in promoting investments to develop the lithium industry. It is being planned to develop a complete lithium value chain from mining to auto making. But analysts have warned that over capacity has already started to emerge in China’s lithium industry casting a shadow on Yichun’s grand plan.
They believe Yichun is on a bumpy road to realize its goal. Tibet and Sichuan in China also have large lithium reserves and lithium resources in the south eastern province of Jiangxi are largely in lepidolite that may prove more costly to extract. It’s very hard to grow a complete lithium industry from just a single mine that is not among the best in China.
Lithium Hydroxide production
Chinese companies now control majority of Lithium Hydroxide, critical chemical product (so-called battery grade lithium) that goes into Tesla lithium batteries as well. Panasonic makes lithium cells for Tesla using this product.
Magazine “Industrial Minerals” has reported this month about Ganfeng Lithium and Tianqi Lithium from China and their incredible growth: “Lithium boom continues to fuel Chinese majors” – Tianqi Lithium and Ganfeng Lithium both saw turnovers more than double in the first nine months of 2016.
Bidding for SQM
The Financial Times reported on Monday that Sinochem, a Beijing-based chemicals and oil conglomerate, was among four Chinese bidders for a $4 billion stake in Chile’s Sociedad Quimica Y Minera (SQM), one of the world’s largest lithium producers. It cited people familiar with the process.
Yet Sinochem Group appeared to deny a media report that it was bidding for a stake in SQM being sold by Canada’s PotashCorp.
“Up until now, neither Sinochem Group nor our subsidiaries have had such intentions or plans,” the company said in response to a request for comment from Reuters.
The other Chinese bidders named by the Financial Times were Ningbo Shanshan, Tianqi Lithium and GSR Capital.
Ningbo Shanshan also said that it was not participating in a bid to acquire equity in SQM, while Tianqi Lithium and GSR Capital did not respond to requests for comment.
Potash Corporation of Saskatchewan Inc was in September reported to have hired Goldman Sachs and BofA Merrill Lynch to explore selling its 32 percent stake in SQM.
Tianqi bought a 2 per cent stake in Chile’s SQM from a US asset manager, with an option on another 7 per cent. Reportedly the Shenzhen-listed group is seeking to acquire a separate 23 per cent stake controlled by a vehicle of Julio Ponce Lerou, the former son-in-law of the late Chilean dictator Augusto Pinochet.
But gaining control of SQM will depend on a deal to buy the 23 per cent stake owned by one of Mr Ponce Lerou’s companies. At present, he controls the board via his 29.97 per cent total stake, held through various entities, and an agreement with Japanese company Kowa, which owns another 2 per cent of the Chilean group. That gives Mr Ponce Lerou an effective stake of 32 per cent, allowing him to nominate seven board members.
Tianqi is very likely to buy more shares in SQM, even eventually become a controlling shareholder according to commentators. This will change the competitive structure of the global lithium industry, and Tianqi will have greater voice within the industry.
Tianqi invested $209.6m in a 2 per cent stake in SQM held by San Francisco-based fund SailingStone Capital Partners. It also said it has an option to buy the rest of SailingStone’s 9 per cent stake.
According to commentators “whoever is bidding on this stake needs to have reassurance from the government that [the Chilean regulator] Corfo is going to settle with SQM.”
Tianqi & Ganfeng growth
Chinese lithium producers Tianqi and Ganfeng reported 2016 results last week, Tianqi’s 2016 revenue more than doubled to US$547M and profit increased three-fold to US$390M. Ganfeng also saw a doubling in revenue, to US$400M, but profit was up only 61% to US$66M; its performance lagging Tianqi as cost of sales increased – Ganfeng is more exposed to market prices for feedstock – and due to losses at its battery subsidiary Shenzhen Mbell.
The revenue of Tianqi and Ganfeng means Chinese lithium producers generated over US$1Bn in sales in 2016. When put alongside the earnings of SQM (US$515M), Albemarle (US$669M), FMC (US$264M), Orocobre (~US$110M) and other smaller producers, the lithium industry in 2016 had a value of >US$2.5Bn, more than double that of 2012.
Reliance on imports
Domestic lithium resources are mainly distributed in Northwest China’s Xinjiang Uyghur Autonomous Region and Southwest China’s Sichuan Province.
But exploitation of lithium has not been highly recorded in recent years because resources in existing mines in Xinjiang have become exhausted and mines in Sichuan have stagnated due to red tape issues.
In addition, lithium resources in Xinjiang and Sichuan are located at altitudes as high as 3,500 to 4,000 meters, which, together with undesirable facilities, make it hard to exploit lithium on a large scale, noting that exploitation of new mines in Xinjiang has only just begun.
Domestic leading lithium resource developers include Shenzhen-listed Tianqi Lithium, Jiangxi Ganfeng Lithium Co, based in East China’s Jiangxi Province, and Yahua Lithium, a subsidiary of Shenzhen-listed Sichuan Yahua Industrial Group Co.
Tianqi’s wholly owned Cuola lithium ore reserves are located in the Jiajika mine of Sichuan’s Ganzi prefecture, which is considered one of Asia’s largest spodumene reserve locations.
In spite of China’s large reserves of lithium ore, the country still imports a large sum from Australia, Chile and Argentina at present due to huge demand.
The rapid growth of the domestic new-energy vehicle (NEV) market is driving the demand for battery-grade lithium compounds, which is directly boosting the need of lithium ore.
China consumes a large quantity of lithium carbonate for lithium-ion batteries, with almost half of the global output used by the country, Zhang Jiangfeng, secretary-general of the Lithium Industry Branch of China Nonferrous Metals Industry Association stated to Global Times.
Imports of lithium carbonate soared by 59.44 percent year-on-year to reach 15,261 tons in the first half of this year, (2017) with this figure including a great increase in imports from Chile and Argentina, according to data published in early August by Changjiang Securities.
Due to the difficulties attached to exploring lithium mines across China, many domestic lithium producers are beginning to explore lithium resources in Australia and Africa.
Huayou Cobalt Co, based in Tongxiang, East China’s Zhejiang Province, announced on Monday that its subsidiary Huayou International Mining (Hong Kong) Ltd will buy an 11.2 percent stake in AVZ Minerals Ltd for A$13.02 million ($10.22 million).
AVZ is an Australian company engaged in mineral exploration in Africa. AVZ has a 60 percent interest in the Manono mine and surrounding areas located in the south of the Democratic Republic of the Congo, a country with rich lithium resources, according to a Huayou statement posted on the Shanghai Stock Exchange website.
In the statement, Huayou said that developing lithium battery materials is a priority for the company during the 13th Five-Year Plan (2016-20) period, noting that this deal will help explore lithium resources that are indispensable for lithium battery materials.
To solve the problem of raw material shortages, Jiangxi Ganfeng Lithium Co is also investing in lithium mines overseas. As of now, its wholly owned subsidiary GFL International owns a 43.1 percent stake in Australian mining company RIM, and is aiming to purchase another 13.8 percent of it.
While making full use of foreign resources, China should improve the recycling of existing lithium resources. China has done well in terms of technologies, but recycling mechanisms require improvements, for example regarding who recycles and how to recycle lithium batteries from discarded smartphones.
At present, the development of lithium battery recycling in China is still in its early stage.
Next year will see a peak of recycled power batteries for NEVs, meaning the domestic discarded lithium-ion batteries recycling market will begin to take shape.
The Qinghai salt lakes in China’s west have long been touted as a potential significant source of lithium as it hosts 77% of its resources. However, commercially it has failed to take off in any way, mainly due to the unfavourable chemistry compared to other sources in South America. The source has seen over $1bn invested in commercialisation attempts over the last decade with no significant results. Most recently, EV producer BYD were eyeing a stake in the source in an attempt at supply sufficient for the country. But realistically, with the known lithium resources in the country, China will always be heavily dependent on lithium imports.
Offtake agreements and moving upstream
To guarantee the supply of lithium carbonate to lithium battery production, China’s largest electric vehicle manufacturer BYD has extended to upstream lithium exploitation.
BYD told the Global Times that it set up a joint venture in March with Qinghai Salt Lake Industry Co, based in Northwest China’s Qinghai Province, and Shenzhen Zhuoyucheng Investment, based in South China’s Guangdong Province. The new joint company will specialize in exploring, processing and selling salt lake resources.
According to BYD, it has made crucial progress in lithium-absorbent technology, which can be used to extract lithium from salt lake brine and is key to the commercialization of lithium extraction from salt lakes.
There were 13 lithium off-take and streaming deals announced in 2016, which represented a sharp increase from the 10 deals recorded in 2015. The first half of 2017 has already seen the announcement of nine deals. Almost all of the deals are for the supply of Australian lithium to China.
Australian lithium miners dominate this supply, with all but six of the 22 deals involving Australian material, and all but one of the deals in 2016. The companies selling lithium forward in streaming or off-take deals have generally seen an improvement in their share price following the announcement.