Tianqi Lithium picks up minority SQM stake for $4.07bn

VANCOUVER (miningweekly.com) – Lithium producer Tianqi Lithium has secured a 24% stake in Sociedad Quimica y Minera de Chile (SQM) from crop nutrient producer and distributor Nutrien, for $4.07-billion.

Nutrien's sale of its SQM holdings was required by the Competition Commission of India and Ministry of Commerce in China before providing their clearance for the merger of Agrium and PotashCorp, which formed Nutrien in January.

The deal will give the Chinese firm increased exposure to SQM’s current lithium carbonate production capacity of 48 000 t in Chile, which it will expand to 70 000 t by mid-2018 and to 100 000 t in 2019, as prices continue to rise on the back of strong demand from the growing electric vehicle market.

"This is an attractive investment for Tianqi Lithium which fits well within our existing business strategy. Tianqi Lithium's shareholders will greatly benefit from this transaction given SQM's long-term stable financial returns and steady dividends," Tianqi president Vivian Wu said in a statement.

Under the terms of the deal, Tianqi will buy 62.5-million SQM A shares for $65 each from Nutrien.

Nutrien will retain an 8% stake in SQM for now, but will divest the position in due course, as required under the antitrust approvals.

Chile development agency Corfo filed a complaint in March to block the sale of a 32% stake in SQM to Tianqi, or any related entities or State-backed firms, saying it would "gravely distort market competition”. Market speculation was rife on Thursday as to whether the reduced stake could point to a compromise agreement between Corfo and Nutrien to ensure that Tianqi could not gain control of SQM in the future.

Corfo's complaint centered on concerns that, together, Tianqi and SQM, the world's second-biggest lithium producer after US-based Albemarle Corp, would control 70% of the global lithium market.

Chile has for decades been vigorously protective of its lithium resources, but under a deal struck with Chilean development agency Corfo in January, SQM will be able to produce up to 216 000 t/y of lithium carbonate through 2025, if it makes certain investments and obtains the relevant permits.

Outside Chile, SQM has a joint venture (JV) with Lithium Americas at the Cauchari-Olaroz project in Argentina, which has a targeted production capacity of 25 000 t/y of lithium carbonate and is expected to come on line around 2020.

The agreement is subject to customary closing conditions, including regulatory approvals and Tianqi shareholder approval, and is expected to be completed by the fourth quarter of this year.

The announcement Thursday dovetailed with an announcement from Kidman Resources that it has inked an offtake agreement with clean energy solutions provider Tesla to supply lithium hydroxide for an initial three-year term on a fixed price take-or-pay basis, with two three-year term options.

Kidman said on Thursday that the agreement equated to less than 25% of the company’s portion of initial nameplate production for the first three years of its planned lithium refinery with SQM, in Western Australia. The JV is planning to commission the refinery in 2021, with an initial nameplate capacity of 44 000 t/y of lithium hydroxide, or 37 000 t/y of lithium carbonate. A definitive feasibility study for the refinery is expected for release in late 2018.