Tianqi buys 23.77% stake at SQM for $4bln

Chinese lithium producer Tianqi Lithium has purchased 23.77% of A shares in Sociedad Quimica y Minera (SQM), which were previously owned by Canada’s Nutrien.

A total of 62,556,568 A shares in SQM were sold for $4.066 billion at a minimum price of $65 per share, the Chilean Stock Exchange said in the Chilean morning of Monday December 3.

All formalities for the completion of this deal will be finalized by Wednesday December 5, according to Tianqi. The deal also allows Tianqi to nominate three directors to SQM’s board during the next shareholder meeting in April next year.

The Tianqi-SQM deal follows a trend seen over the past two years in the lithium industry where major companies are diversifying their portfolios to include both hard rock and brine operations. The aim of the diversification is to increase output to fulfill demand from the battery industry and spread asset risk.

Most recently Ganfeng Lithium acquired a 37.5% stake in Lithium Americas’ Cauchari-Olaroz brine project in Argentina.

Meanwhile, SQM reached a joint venture with Kidman Resources in September 2017, acquiring a 50% stake in the Mount Holland project in Western Australia.

“As the lithium supply base grows it is interesting to see an increase in cross-ownership with hard rock producers diversifying by buying into brine operations and brine producers buying into hard rock miners – this is a sure sign that both lithium sources have their merits,” William Adams, head of battery raw materials research at Fastmarkets, said.

“Despite a 50% pullback in lithium prices it is good to see that producers are still looking to increase exposure, the current supply surplus is going to be temporary, investment in new projects will be essential to feed the EV boom that will last for decades,” he added.

Battery-grade lithium carbonate spot price in China fell by 55.14% to 74,000-83,000 yuan ($10,638-11,932) per tonne on Thursday November 29 from 180,000-170,000 yuan per tonne on Thursday November 30 last year.

This deal went through after SQM’s opposition to the agreement between Chilean national anti-trust regulator Fiscalía Nacional Económica (FNE) and Tianqi enabling the Asian company to move forward with the purchase in October, due to risk to free competition.

SQM requested the interpretation of FNE-Tianqi agreement by the South American country’s anti-trust court, the Tribunal de la Libre Competencia (TDLC), under the allegation that having a direct competitor as a shareholder and board member presents risks and challenges free competition.

Tianqi is also a majority 51% shareholder in its partnership with the world’s largest lithium producer, Albemarle Corp, in the world’s largest lithium hard rock mining operation, at Greenbushes in Western Australia.

Tianqi is one of China’s largest lithium producers, expected to increase its total production capacity to 58,800 tonnes per year of lithium carbonate equivalent (LCE) by 2019 from 34,800 tpy at present.

Meanwhile, SQM is the largest Chilean lithium producer and is planning to expand output to 180,000 tpy of lithium compounds by 2021 from 48,000 tpy in 2017.

Nutrien’s sale of 24% of SQM A shares was a condition imposed by Chinese and Indian regulators for the creation of Nutrien through the merger of PotashCorp and Agrium on Monday January 1, 2018.