China’s Tianqi Lithium is looking to sell part of its majority stake in the world’s largest lithium mine as it struggles to pay back debt racked up in an aggressive global expansion.
The Shenzhen-listed company is courting bidders for some of its 51 per cent holding in Talison Lithium, which owns the Greenbushes mine in Western Australia, according to two people familiar with the company.
The move marks a setback for Tianqi, which in the space of a decade grew from a small provincial company to one of the world’s largest producers of lithium, putting China in a dominant position in the global market for the raw material used in batteries just as sales of electric cars took off.
Tianqi has struggled under a heavy debt load after it bought a $4.1bn stake in Chile’s largest lithium company SQM in 2018 using a $3.5bn loan from China’s state-owned Citic Bank.
Moody’s downgraded its credit rating on Tianqi last month from B2 to Caa1, citing the company’s “very strained capital structure as a result of its high debt burden, elevated leverage and weak liquidity”.
In November Tianqi extended by one year the maturity on a $2.3bn tranche of the Citic loan. But Moody’s said Tianqi had yet to make progress in repaying the loan since completing a domestic rights issue in December.
“Refinancing risk is further exacerbated by the rapid and widening spread of the coronavirus outbreak,” Moody’s said.
The Greenbushes mine, which Tianqi bought in 2012, is considered one of the world’s best lithium assets. US lithium producer Albemarle owns the other 49 per cent of Talison.
Sichuan-based Tianqi did not reply to repeated requests for comment. Albemarle said it did not comment on industry speculation.
As well as the Talison stake sale, which was first reported by the Australian Financial Review, Tianqi could look to sell a stake in its newly built Kwinana lithium hydroxide processing plant outside Perth, according to one of the people. Tianqi said last month it was delaying commissioning of the plant because of its liquidity situation.
Tianqi reported a net loss last year of Rmb2.82bn ($400m) against a net profit of Rmb2.2bn in 2018, after a fall in lithium prices.
Shares in Tianqi have slid 31 per cent this year, giving it a market capitalisation of Rmb30.77bn. That compares with a 1.7 per cent decline for the CSI New Energy Vehicles index.