China’s Tianqi Lithium Corp., the country’s top producer of the battery metal, said on Wednesday it would post a net loss in the first quarter of 2020, adding pressure to take aggressive measures, include stake sales, to pay back debt over $6 billion in debt.
The Shenzhen-listed miner warned losses for the first three
months of the year will mount to between 450 and 510 million yuan ($64-$72
million) compared with net profit of 111 million yuan ($16m) a year
earlier.
It attributed the estimate mainly to weak lithium prices,
coronavirus-related disruptions that affected sales, and foreign exchange
factors.
Among the measures to reduce debt, Tianqi is said to be exploring a partial sale of its stake in Greenbushes mine in Western Australia, the world’s largest hard-rock lithium operation, according to the Australian Financial Review.
The move would be a setback for the miner, which went from being a provincial company to joining the world’s largest producers of lithium in less than a decade.
Tianqi invested heavily in the past two years in an ambitious
global expansion plan aimed at securing its leadership in the lithium market, putting
China in a dominant position just as sales of electric vehicles (EVs) took off.
A collapse in prices for the metal used in the
batteries that power EVs and high tech electronics, have thwarted its plans and those of its rivals.
Ganfeng Lithium said in its own earnings alert this week it expected
first-quarter net profit to fall 96-97% year-on-year.
Albemarle (NYSE: ALB), the world’s No. 1 lithium
producer, postponed last year plans to add about 125,000 tonnes of
processing capacity. It also revised a deal to buy into Australia’s Mineral Resources’ (ASX: MIN)
Wodgina lithium mine and said it would delay building 75,000 tonnes of
processing capacity at Kemerton, also in Australia.
Chile’s Chemical and Mining Society (SQM), the world’s
second largest producer of the metal, has shown signs of distress, pushing back a key expansion at its Atacama salt flat
operations from the end of 2020 to late 2021.
Canadian lithium miner Nemaska Lithium (TSX: NMX), which was
backed by Japan’s SoftBank, filed for bankruptcy protection in December.
The main factor behind the price slump has been the avalanche of new supply that hit the sector over the
past year, triggered mainly by mine expansions and a cut in government
subsidies for purchasers of EVs in China, the world’s largest market.
While long-term prospects for the metal are positive, global
demand for the year will be 25% lower than pre-coronavirus forecasts, according
to commodities consultancy Roskill Information Services. This is the market in
which Tianqi will need to find a way to cover a $3.5 billion loan from
state-owned Citic Bank, due to be repaid in November this year.
The Chinese miner used most of the funding to buy almost a quarter of SQM in 2018. It also grabbed 51%
of Australia’s largest lithium mine, Greenbushes, last year
and completed a $400 million lithium hydroxide processing plant outside Perth.
In December, Tianqi raised about 2.93 billion yuan ($424 million) in a
rights issue, less half the 7 billion yuan it was seeking to help pay down the
Citic loan.
The Greenbushes mine, in which Tianqi has a 51% stake, is considered one
of the world’s best lithium assets. Albemarle owns the other 49%. The asset is
operated by their joint venture Talison Lithium.