According to recent news, after CATL’s overseas purchasing competition for lithium, another acquisition of GF Lithium has encountered a setback.
Tender for lithium
On October 24, GF Lithium announced that its wholly-owned subsidiary, GF International, had made a tender offer for Bacanora, because the Mexican government’s approval process for the matter has not yet been completed, GF International and Bacanora have reported to the United Kingdom.
The M&A Commission applied for a suspension of the tender offer process, and the tender offer process will resume after the matter is approved by the Mexican government.
Affected by industry supply and demand and global inflation, the price of lithium battery materials continues to rise, allowing industry chain companies, including leading lithium mines and power battery manufacturers, to accelerate their deployment of upstream lithium resources.
In the first half of this year, GF Lithium disclosed that the company will use its wholly-owned subsidiary GF International to make a tender offer for all issued shares of Bacanora with its own funds. The transaction amount will not exceed 190 million pounds.
Sonora Lithium Clay
Bacanora is a company established in 2018 and listed on the London Stock Exchange in the United Kingdom. Its main business is group holdings and lithium clay resource project management. Its main asset is the lithium clay Sonora project in Mexico, which is currently the world’s largest lithium clay.
One of the resource items-the Sonora Lithium Clay Project is located in the Sonoran Desert in Mexico, with an average elevation of 900 meters.The project is located in the central highlands of Mexico, which is the main route into the United States along the Pacific coast.
The project is connected to the United States by rail, and the goods can be transported to North America, Europe and other places by rail or Guaymas port. The project is also close to the United States, so transportation and natural gas access are convenient.
The lower clay of the Sonora project has the highest lithium content, with a sample maximum value of 6283 ppm and an average value of 3817 ppm. The high-grade part of the upper clay has the second highest lithium content, with a maximum value of 4535 ppm and an average value of 2937 ppm.
As of December 13, 2017, the project has a confirmed resource of 1.91 million tons of LCE (lithium carbonate equivalent), an indicated resource of 3.13 million tons of LCE, and an inferred resource of 3.779 million tons of LCE.
The project has a total of 8.82 million tons of LCE resources. It is estimated that the annualized lithium hydroxide production capacity after the first phase of the project is put into production will be 20,000 tons.
As early as September this year, GF Lithium signed a non-compulsory legally binding “Letter of Intent for Strategic Cooperation” with Bacanora, intending to make a strategic investment in it.
Before the completion of the transaction, GF International held 17.41% of the equity in Bacanora, and GF International and Bacanora each held 50% of the equity in the Sonora project. After the transaction is completed, GF International will hold 100% of Bacanora.
Once competed by CATL, driven by the huge increase in the sales of downstream new energy vehicles, the demand for upstream raw materials for power batteries has also increased, and prices have continued to rise.
As of October 24, the price of industrial-grade lithium carbonate was reported at 177,200 yuan, an increase of more than 95% from the July quotation, the price of lithium hydroxide was reported at 166,333.33 yuan, an increase of more than 83% from the July quotation.
GF ‘s acquisition
According to the current lithium resources directly or indirectly owned by GF Lithium on a global scale, they are as follows:
- In Australia, it owns a 50% interest in the Mount Marion spodumene mine (current production of 400,000 tons/year), and a 6.33% interest in the Pilbara Pilgangoora spodumene mine
- Owns 51% equity in Cauchari-Olaroz lithium salt lake (with brine water resources of approximately 24.58 million tons of LCE) in Argentina, and 88.75% equity in Mariana lithium salt lake
- Own 50% equity of Sonora Lithium Clay in Mexico (suspended)
- Own 55% of the Avalonia spodumene mine in Ireland
- The domestic Ningdu Heyuan spodumene mine 100% interest and the Qinghai Mangya Administrative Committee Fenghuangtai deep brine lithium mine 100%
- GF International, a wholly-owned subsidiary of GF Lithium Industry, has also made an offer to acquire Millennial, Canada, which holds 100% equity in the PastosGrandes lithium salt lake project and the Cauchari East lithium salt lake project.
- Acquired 50% of the shares of SPV in the Netherlands and indirectly controlled 50% of the Goulamina spodumene project in Mali, Africa
- GF Lithium decided to acquire 100% of Yili Hongda’s property share at a price of RMB 1.470 billion with its own funds, thereby indirectly holding 49% of the equity of Minmetals Salt Lake and obtaining the Qaidam Yiliping lithium salt lake project in Qinghai Province Rights.
- GF International invested USD 15 million in payable bonds at the SRN listed company level with its own funds. The company has the right to convert 100% of its equity in payable bonds into 25% of FE (holding TAS laterite nickel assets). If the rights are exercised, GF International will acquire 50% of FE’s equity for a total consideration of 30 million U.S. dollars (approximately 194 million yuan).
The market is cold and warm, companies are ups and downs, and overseas mining investment needs to be cautious.
At present, the lithium industry is hot. In addition to mining companies, giants such as BYD and Toyota have started a “buying ” move
Risky move
However, this is not a trade that will never lose money: In 2018, Tianqi Lithium bought a 23.77% stake in SQM and added $3.5 billion in new M&A loans.
Since then, the company’s debt-to-asset ratio and financial expenses have risen sharply, making the company experience the darkest moment for two years. It was not until this year that it turned around with the help of the super market.
The global competition for lithium mines reflects the improvement of China’s energy industrialization level and strategic vision, which is gratifying, but in the face of lessons learned, China needs to minimize risks.
