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- Mar 22 2018 at 4:43 PM
- Updated Mar 22 2018 at 5:03 PM
Tianqi's lithium growth will be 'aggressive' amid transfer pricing tax probe
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Tianqi and Albemarle announced a doubling of mine production at Greenbushes last year.
by
Peter Ker
Chinese giant Tianqi has vowed to aggressively grow its production of lithium and believes transfer pricing negotiations with the Australian Tax Office will become simpler when its $700 million lithium hydroxide plant begins production south of Perth this year.
The ATO is probing the price at which Australian registered company Windfield Holdings, which is 51 per cent owned by Tianqi and 49 per cent owned by US company Albemarle, sold lithium products from its Greenbushes mine in Western Australia to its owners.
Greenbushes produces a lithium-rich spodumene concentrate, which Tianqi ships to China for further processing. The ATO probe could see it and Albemarle forced to pay more for concentrate purchased in 2015 and 2016.
Tianqi, which is valued at $US67 billion ($86.5 billion), is spending $700 million on a facility that will convert spodumene concentrate into the sort of lithium hydroxide that can be used in batteries.
"Transfer pricing is a complex thing for companies that are selling overseas to related parties and I am not going to be drawn into a comment on that," the man in charge of the hydroxide project, Tianqi Australia general manager Phil Thick, said.
"Obviously when they are supplying us here in Australia it becomes a whole lot easier because either they [Windfield] pay the tax or we [Tianqi Australia] pay the tax and it all stays in Australia, that is under discussion at the moment."
Speaking at the same event, Galaxy Resources corporate development analyst Daniel Harangozo said the company was unlikely to sell equity in its mines to customers in a bid to avoid conflicts.
"We, inevitably, probably will look to keep offtakers as offtakers because of the obvious commercial conflicts you have between producing and buying," he said.
Lithium prices have risen sharply in recent years amid growing demand from battery manufacturers. The bullish mood prompted Tianqi and Albemarle to announce a doubling of mine production at Greenbushes last year.
In recent weeks, the two companies have started a feasibility study into a further expansion of Greenbushes, which supplies 34 per cent of the world's lithium.
Potential for third stage
Mr Thick said there was potential for Tianqi to add a third stage to its Kwinana plant and was studying two further processing plants in China.
He pointed to predictions that the lithium market would rise from 200,000 tonnes in 2017 to between 600,000 and 1 million tonnes a year by 2025, and said Tianqi would need to aggressively expand mining and refining if it wanted to retain its market share.
"I think you will find our targets beyond that are much more aggressive as well ... we need to grow that pretty aggressively," he said.
Construction on the first stage of Tianqi's lithium hydroxide plant at Kwinana, south of Perth, is 50 per cent complete with first production due before the end of 2018.
By producing lithium hydroxide, Tianqi will be able to sell directly to electric vehicle manufacturers, rather than selling to intermediaries as the company does with its spodumene concentrate.
"Lithium hydroxide has become the go-to product, lithium carbonate used to be ... players like Tesla are only buying lithium hydroxide so that is what they want, the advantages are it gives much better energy density and that leads to much better range [in electric vehicles]."
'Exciting time'
It is believed Tianqi could be ready to sign lithium hydroxide offtake contracts from Kwinana within months.
"It is an exciting time for us to be coming into production at the end of this year, when we finish the plant and ramping up during 2019 because we will be well ahead of the rest of the market," he said.
"We have generated significant interest from multiple customers across the globe".
Mr Thick said the capital cost of the Kwinana project was double or triple the cost of building a similar facility in China, but the plant could be run with a "significantly lower number of people than you would run it in China".
Once the second stage of the Kwinana plant is complete, the facility is expected to employ 150 people long term.
Mr Thick said Tianqi would continue exporting spodumene concentrate from the Greenbushes mine longer term, with the Kwinana plant set to be fed by an expansion of production at the Greenbushes mine.
