April 30, 2019 9:20 am by Henry Sanderson in London
Tianqi Lithium, China’s biggest producer of lithium, said its net profit fell by 83 per cent in the first quarter because of weak lithium prices and high interest payments on a loan taken out to buy a stake in Chilean rival SQM for $4.1bn.
The company is the latest casualty of plummeting prices for battery raw materials, following an increase in supply over the past few years in anticipation of rising sales of electric cars.
The price of lithium carbonate has fallen by 43 per cent over the past year, according to London-based Benchmark Mineral Intelligence.
Last year Tianqi made a bold bid to acquire a 24 per cent stake in Chile’s largest lithium producer SQM for $4.1bn. The company, which is controlled by the son-in-law of Chile’s former dictator General Augusto Pinochet, is one of the lowest cost lithium producers in the world.
But the deal has left Tianqi saddled with debt. The company said it aims to raise Rmb7bn through an equity issuance of 343m shares to help pay off its loans.
Net income fell by 83 per cent to Rmb111.3m in the first quarter, it said. Revenues fell by 20 per cent to Rmb1.34bn.
Tianqi said that despite the fall in lithium prices it had maintained “healthy” cash flow and “industry leading” profit margins.
Tianqi said it would progress with an expansion of its giant Talison lithium mine in Australia and the building of a lithium hydroxide processing plant in the country “to satisfy the increased demand from customers”.
“The company believes that in the long-term demand for lithium products will be driven by the downstream market and will continue to be strong,” Tianqi said. “The company will continue to steadily push forward its plans to expand production capacity.”
Shares in Tianqi fell by 4 per cent on the Shenzhen stock exchange on Tuesday to trade at Rmb29.63.
GXY Price at posting:
$1.48 Sentiment: Sell Disclosure: Not Held
