The two-stage Kwinana lithium hydroxide plant was once hailed as a landmark project for WA’s emerging lithium industry. Credit: Tianqi Lithium
Chinese lithium producer Tianqi has revealed its delayed $700 million-plus Kwinana processing plant is not expected to enter production until next year, with the suspended second stage unlikely to be completed until mid-2023 at best.
The timelines are disclosed in new regulatory filings which warn the survival of Tianqi Lithium’s Australian operating arm is reliant on continuing funding from its cash-strapped parent. They also confirm rumours of a cost blow-out at Kwinana, citing the “increased capital costs” of building the plant.
The 2019 annual accounts for the WA-registered Tianqi Lithium Holdings, signed off on June 30, have been prepared on a going concern basis, recognising that Tianqi’s capacity to support its subsidiary is dependent on the financial viability of the parent.
When announced, the two-stage Kwinana lithium hydroxide plant was hailed as a landmark project for WA’s emerging lithium industry.
However, the commissioning of the completed $400m-plus first stage has been derailed by a combination of COVID-19 and a prolonged downturn in lithium prices that has put Tianqi under severe financial pressure and forced it to consider asset sales to reduce debt.
Tianqi Lithium’s $700m lithium hydroxide plant in Kwinana. Credit: Tianqi Lithium The TLH filings reveal Tianqi took action to stem the bleeding much earlier than announced, with the commissioning actually suspended in January and construction of the plant’s $300m second stage delayed in April 2019.
TLH now expects “stage one to complete in early 2021, after which production may commence”. “Stage two is not expected to complete for 36 months,” it said. Tianqi has provided the subsidiary with $34m in funding this year alone and guaranteed to support the company for at least the next 12 months to ensure it can meet its bills.
However, uncertainty about Tianqi’s ability to repay a $US3.5 billion loan in November taken out to pay for a major stake in Chilean lithium miner SQM two years ago is clouding its future in Australia.
The loan is secured by assets including the Kwinana plant, which is valued in TLH’s books at $1.04b.
TLH, headed by general manager and director Phil Thick said the parent company’s liquidity had been adversely affected by the decline in lithium prices, the fall in value of its 23.7 per cent stake in SQM and weaker equity markets triggered by COVID-19.
Phil Thick Credit: Daniel Wilkins/The West Australian
“Tianqi is taking a number of potential measures to improve its liquidity ... including seeking rescheduling of the acquisition loan, seeking additional financial support from its controlling shareholders, a sell down of assets and or equity funding.”
The Kwinana plant and Tianqi’s 51 per cent stake in the Greenbushes lithium mine, south-east of Perth, are among the assets said to be on the sale block.
The accounts show TLH finished 2019 with an annual loss of $16.2m and a working capital deficiency of $141.7m.
More than $69m was still owed to suppliers, including sub-contactors.
Loans from Tianqi Lithium and its associates exceeded $341.5 m.
The Kwinana development has been further complicated by a Supreme Court writ by the construction contractor, MSP Engineering, over a disputed $36m claim.
TLH has rejected the claim and “asserted its entitlement in any case to recover an amount which is in excess of the amounts claimed by MSP”.
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