Wednesday, 5 July 2017

Lithium Race: China Private Equity Player GSR Eyes Stake In $9 Billion Chilean Lithium Miner SQM.

CNBC reports that China continues to accumulate lithium assets. Ganfeng Lithium and Tianqi were both dancing around SQM stake before, now Ganfeng Lithium has closed its deal with Lithium Americas where they have a JV with SQM in Argentina. Security of lithium supply is the most important now for all lithium chemicals producers. We have only a few solid new lithium projects coming online and this kind of M&A will bring the attention to the lithium sector and provide the reassessment of the valuations for the projects with the strong backers. International Lithium is plugged into the very dynamic EVs and Energy Storage markets in China with its holdings in JV projects with Ganfeng Lithium, a giant from China. Finally, some buying volume is coming back into the market of lithium junior miners, investors are getting the message. 

Tesla Officials Visit Argentina’s Governor Of Salta For Solar And Storage Projects And Sourcing Lithium.

ElectTrek reports that "salt on the salad'": this is how Elon Musk has described lithium before - must be very important for Tesla's digestive system after all. I am writing here extensively about the coming control of the Lithium supply by Chinese companies who are very aggressively buying all the best lithium projects worldwide. It is very difficult to pretend anymore that any lithium will be coming from any signed by Tesla agreements with some junior miners in the nearest future. Lithium cathode is still produced by Panasonic for Tesla Gigafactory. Read more.

Another part of this story is the rising price of lithium in China again. Last year we have seen only 14% rise in lithium supply and prices have increased by 74%. In December, Benchmark Minerals has reported that LCE (Lithium Carbonate Equivalent) was priced below $15k/T and Lithium Hydroxide (the particular lithium based chemical which is used in Tesla batteries) was around $18k/T. Last week I have received reports that in Shanghai LCE was priced at $18k/T and Lithium Hydroxide was at $22k/T. Today there are reports that LCE is already pushing $19k/T. It is all happening just before 4 major Lithium batteries Megafactories will be coming online in China this year and Tesla will move into the mass market stage with the production launch of Tesla Model 3 in July.

As you know, I have been preaching for years that security of lithium supply will be the most important factor determining the competitive advantage among different producers of critical raw materials for the Energy rEVolution. This Lithium Race will have the very far-reaching geopolitical implications. Now it looks like that Tesla is realizing that there is no secure supply of lithium for its massive expansion of operations from the underneath of Gigafactory floor in Nevada. Even if Panasonic is producing cathode for lithium cells which are made at Tesla Gigafactory in Nevada the supply chain is going all over the globe and back to China.

The real test to the market and supply chains for Energy rEVolution will come with the coming tide of Electric Cars and the following tsunami of Energy Storage. Bloomberg has recently reported that there will be more than 120 models of electric cars by 2020 and you should not be surprised as we have discussed here before that there are more than 70 models of electric cars on sale in China already. The next few years will determine who will have the keys to the new Energy rEVolution and control the supply chains. Hungry Dragons are flying high already and mostly in China, the question remains who and how will feed them without fear of being burnt in the process. 


China private equity player GSR eyes stake in $9 billion Chilean lithium miner SQM

  • China private-equity player GSR Capital is aiming to buy as much as 20 percent in SQM, one of the world's biggest lithium producers, sources said.
  • GSR, an investor in clean technology and electric cars, met the Chilean government in April to discuss the potential purchase and was now moving towards a deal, the sources said.
"Chinese private equity firm GSR Capital is looking to buy a substantial holding in Chile'Sociedad Quimica Y Minera (SQM), one of the world's biggest lithium producers, according to two sources with knowledge of the matter.
GSR could buy a stake of around 20 percent - worth just under $1.9 billion at current market values, one of the sources said, but added there was no firm agreement.
SQM is one of just a handful of established lithium miners globally and a Chinese investment would go hand in glove with an electric car boom in the world's biggest auto market.
Beijing is aggressively promoting the vehicles to combat air pollution and as a means for the domestic car industry to compete with foreign rivals that have decades more experience in internal combustion engines.
The sources said GSR, which has invested in clean technology and electric cars, met the Chilean government in April to discuss the potential purchase and was now moving towards a deal.
A Chilean government transparency web site reported two GSR representatives met Eduardo Bitran, the head of the government development agency Corfo that manages the nation's lithium leases, on April 24.
An SQM representative declined to comment. GSR did not respond to a Reuters request for comment.
The sources did not specify who would sell the shares to GSR, but Julio Ponce, former chairman and one-time son-in-law of Chilean ex-dictator Augusto Pinochet, has previously tried to sell part of his interest in SQM. That process ended in late 2016 after offers fell short.
Suitors then included Ningbo Shanshan, a Chinese manufacturer of lithium battery materials. Canada's Potash Corp was also seen as a potential buyer.
According to a presentation on SQM's website, Ponce's holding firm Pampa Calichera and Japanese trading and chemicals firm Kowa, who have a joint voting pact, together owned a 32 percent stake in SQM as of the end of March 2017. Potash also owns 32 percent.
Potash declined to comment. Reuters was not able to reach Ponce for comment, but a source with knowledge of Pampa Calichera said he was not aware of the potential stake purchase. Kowa did not have immediate comment.
SQM, which has access to vast mineral reserves in the so-called 'lithium triangle' in Chile and Argentina, said in May it was planning to expand production as lithium demand continues to rocket on the back of its increased use in electric vehicles and mobile phones.
GSR, currently managing a $5 billion M&A fund, mainly targets foreign industrial and emerging technology companies, including electric car batteries and pharmaceuticals firms. It is in talks to buy control of a Nissan Motor rechargeable battery unit for about $1 billion, media have reported
GSR was also involved in a Chinese consortium to take over Italian football club AC Milan last year, but dropped out before the deal was signed, sources said at the time.
It grabbed headlines in 2015 when it teamed up with other investors to buy Philips's lighting component unit for $2.8 billion, a deal later blocked by a U.S. foreign investment panel on security grounds."

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