China’s Ganfeng Lithium buys stake in Argentina lithium project

China’s Ganfeng Lithium buys stake in Argentina lithium project

Acquisition from Chile’s SQM for $87.5m a vote of confidence in lithium market

China’s Ganfeng Lithium, one of the country’s top producers of the battery metal, has bought Chilean producer SQM’s stake in the Cauchari-Olaroz project in Argentina for $87.5m.

Ganfeng will own 37.5 per cent of the brine project, which is expected to start production in 2020, with the rest held by Canada’s Lithium Americas. Ganfeng will also provide a $100m loan to fund its development.

The acquisition comes ahead of Ganfeng’s initial public offering in Hong Kong, which is expected to raise around $1bn, and is the latest Chinese purchase of a lithium project in South America, following an offer by Tianqi Lithium to buy 24 per cent of SQM for $4.1bn last year.

Ganfeng said it had also signed an agreement with Lithium Americas to “explore future opportunities to jointly develop lithium resources across North and South America.”

The Cauchari-Olaroz project in Argentina’s Jujuy province is one of a host of new lithium projects that aim to meet rising demand for the raw material from electric cars. A Tesla Model 3 uses about 38 kilogrammes of lithium, according to estimates from SQM.

Despite the demand outlook, however, shares in the largest lithium producers have fallen this year, on concerns about oversupply of the battery metal. SQM shares have fallen by 23 per cent year-to-date while Lithium Americas are down by 58 per cent.

Still, analysts at VSA Capital Research in London said Ganfeng’s purchase is a vote of confidence in the lithium market.

“The fact that Ganfeng Lithium is acquiring additional top tier lithium projects highlights to us that the demand outlook from China is far stronger than in the West and that lithium stocks are due a re-rating,” they said.

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