Ganfeng Lithium announced on May 29 that it and its subsidiaries have agreed to purchase shares issued by Leo Lithium at AUD 0.81 per share. Ganfeng will acquire enough shares for a 9.9% stake in Leo Lithium. The value of this transaction is set to reach AUD 106.11 million (CNY 491 million).
Established in 2022, Leo Lithium is an Australian mining company that is now listed on the Australian Stock Exchange and the Frankfurt Stock Exchange. Its main business involves prospecting and mining lithium ores in Mali. Its main asset is the Goulamina project where sopodumene is being extracted. Sopdumene is the raw material for lithium salts.
Leo Lithium indirectly controls a 50% stake in the Goulamina project that is located in southern Mali and spans an area of around 100 square kilometers. The company has a mining license for the project. Also, the project site is capable of producing 142 million tons of spodumene per year and 1.97 million tons of lithium oxide per year. The amounts of spodumene and lithium resources contained in the Goulamina project is calculated according to the guidelines under JORC, and the related data is published by Leo Lithium.
In the announcement, Ganfeng laid out the following key terms of the agreement with Leo:
[1] The proceeds from the transaction will be used for the development and operation of the phase 1 of the Goulamina project.
[2] Both parties will cooperate to increase the spodumene (lithium concentrate) production capacity of the phase 2 of the Goulamina project to 500,000 tons per year. As a part of this expansion, Ganfeng will have the exclusive right to purchase 350,000 tons every year, whereas Leo will have the exclusive right to purchase 150,000 tons every year.
[3] Both parties will cooperate to study the feasibility of setting the phase 3 of the Goulamina project. If they decide to go ahead with the phase 3, the additional production capacity and production volume will be evenly divided between them.
[4] Both parties will study the feasibility of establishing a joint venture in Europe or another location for the manufacturing of lithium salts. If the joint venture is established, Ganfeng will have the right to have Leo process 150,000 tons of spodumene annually until the production plant under the ownership of the joint venture has completed construction and entered operation. The specific arrangements for the joint venture, the construction of its production plant, and the spodumene processing service will be made in subsequent agreements.
Ganfeng said the deal will strengthen its existing business relationship with Leo with respect to the Goulamina project. This, in turn, will ensure a stable flow of lithium resources into Ganfeng and its subsidiaries, thereby enabling them to further expand their businesses and improve their core competitiveness. In sum, the deal aligns with Ganfeng’s efforts in vertical integration and growing its presence in the supply chain for NEVs.
Apart from the aforementioned deal with Leo, Ganfeng has also made several notable investments since this April to further increase its supply of lithium resources. Earlier in May, Ganfeng disclosed that its wholly-owned subsidiary Qinghai Liangcheng would acquire another 5.4885% stake in Jintai Potash from Bejing WBD for CNY 274 million. Once the transaction is completed, Qinghai Liangcheng will control a 39.15% stake in Jintai Potash.
Qinghai’s Ministry of Natural Resources has granted prospecting and mining licenses to Jintai Potash. The company is authorized operate in a project site spanning an area of 197.96 square kilometers and outputting up to 60,000 tons of potash per year. It is also authorized to prospect an area that spans 174.14 square kilometers.
On April 27, Ganfeng announced that it will be acquiring another 10% stake in Xinyu Ganfeng Mining for CNY 360 million. Once the transaction is completed, Ganfeng will own 90% of Xinyu Ganfeng. The aim of the deal is to acquire a mine in Yunnan. The mine produces ores related to tantalum, niobium, and rubidium, and lithium. Hence, the addition of this asset will enhance Ganfeng’s portfolio.
Regarding the development of its Li-ion battery business, Ganfeng recently revealed a plan to invest CNY 10 billion into the manufacturing of related products. On April 22, Ganfeng and the government of Hohhot sealed a strategic cooperation agreement. As per the agreement, Ganfeng will set up project for manufacturing Li-ion battery cells, packs, modules, and systems. In addition to facilities for production and assembly, the project site will also accommodate a product testing center, a technology R&D center, and other complementing facilities.
