China’s lithium newcomer Zijin eyes rich returns from battery demand Reuters

© Reuters FILE PHOTO: The logo of Zijin Mining Group, China’s largest gold producer, is seen at a press conference following its annual results in Hong Kong, China March 29, 2016. REUTERS/Bobby Yip/File Photo

By Siyi Liu and Dominic Paton

BEIJING (Reuters) – The head of China’s Zijin Mining Group told a Reuters conference that lithium prices, now at record levels, could halve by the end of 2025, but the miner would still invest heavily in the sector.

The company, China’s top gold exporter and leading producer, spent $16 billion last year buying three lithium mines. The surge in moves comes as lithium prices, driven to record highs by the rapid growth of electric vehicles, come amid warnings of severe supply shortages next year.

“Zijin aims to become one of the top three to five mining companies in the world by 2030. To do this, we need a new growth driver beyond the gold, copper and zinc sectors,” said company president Zhu Laichang.

“New energy and new materials are a key strategic way to achieve this goal.”

Zijin’s latest acquisitions include Canada’s Neo Lithium Corp., which focuses on lithium mining in Argentina and acquired the Tres Queradas (3Q) project for C$920 million ($690 million) in a January deal.

It has acquired majority stakes in the Lakor Tso Lithium Salar Mine in China’s Tibet Region and the Xiangyuan Lithium Mine in Hunan Province.

Additional investments are planned, Zhou said, without giving details on how much the company plans to spend. Zijin has a market capitalization of about $35 billion and a net profit of 15.7 billion yuan ($2.2 billion) last year.

But competition for resources is fierce, with companies like Chinese battery maker Contemporary Amperex Technology Co. ( CATL ) and automakers BYD and Tesla ( NASDAQ: ) seeking access to lithium.

Some companies are working to develop alternative battery materials, which will reduce the need for lithium in the long term.

“Of course there are risks…but we will take full advantage of our technology and cost advantage to be competitive,” Zhu said.

“We have been extracting lithium from salt lake brine and hard-rock deposits to lower costs and improve utilization efficiency,” he said.

In the year Rising supply on stream by 2025 is expected to push prices down to a “normal range” from 300,000 yuan to 400,000 yuan a ton in the second half of that year, Zhu said.

That would cut the price of current Chinese lithium carbonate batteries in half. That is a record 597,500 yuan ($83,430) a ton, three times higher than a year ago, according to Fastmarkets.

China accounts for 60% of the world’s lithium chemical supply and its price is an important global benchmark. Zijin recently told investors that it made the mine purchase based on the lithium carbonate price of 100,000 yuan a ton.

But there are growing headwinds for Chinese miners looking to invest overseas. Last month, Canada ordered three Chinese companies to abandon investments in lithium mines, citing national security.

“We will be more careful, focusing more on assessing policy and political risks,” Zhu said.

Zigin is in the middle of a legal dispute with Australian miner AVZ Minerals Ltd over its purchase of a 15 percent stake in the Democratic Republic of Congo’s Manono project, considered one of the world’s largest lithium mines.

Zijin is aiming to have 150,000 tons of lithium carbonate equivalent (LCE) capacity by 2025, according to an investor briefing on Nov. 15.

This is about half of the capacity planned by major Chinese company Ganfeng Lithium.

Zijin expands downstream and begins lithium iron phosphate (LFP) production. By the end of this year, about 20,000 tonnes of LFP capacity will be commissioned, he said.

To watch the next Reuters conference live on November 30 and December 1, please click here.

($1 = 1.3379 Canadian dollars)

($1 = 7.1462 yuan)

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