CATL Becomes Pilbara’s Largest Shareholder, Expanding China’s Global Lithium Footprint

On September 4, it was reported that Chinese battery manufacturer, Contemporary Amperex Technology (CATL), will become the largest shareholder in Australia’s Pilbara Minerals by acquiring an 8.5% stake for $37 million.  The stake is relatively underpriced, as falling lithium prices reportedly led Pilbara to seek equity to raise working capital.  The deal represents CATL’s first publicly-reported investment in lithium mining abroad.  It has, however, invested in overseas battery production, with a $2.05 billion factory in Germany under construction.  CATL is a key supplier of batteries to electric vehicle manufacturers.  Among others, it has signed supply agreements with Honda, Toyota, and Volvo (owned by Chinese auto manufacturer Geely).  That agreement was signed during a visit to the country by Premier Li Keqiang.

Pilbara Minerals produces lithium-rich spodumene concentrate, which can be processed for usage in battery production.  Under the terms of the deal, subject to approval from Chinese regulators and Pilbara shareholders, the investment will allow Pilbara to expand the Pilgangoora mine.  CATL has also indicated its willingness to eventually become a majority shareholder in Pilbara, and will have the right to nominate one non-executive board director.

The deal represents part of a broader trend of Chinese companies in the mining and battery production sectors investing in lithium projects overseas to secure influence over battery supply chains.  Examples from just the last few months include the following:

- In August 2019, Xinjiang TBEA Group reached a $1.17 billion joint-venture agreement with Bolivia’s YLB to build lithium carbonate pants.

- In August 2019, it was reported that Talison Lithium was working on a $770 million agreement to fund the expansion of the Greenbushes lithium plant in Australia. Talison is majority-owned by China’s Tianqi Lithium.

- In July 2019, Ningbo Shanshan invested $22.4 million in Pilbara competitor Altura, with the funds put toward developing and expanding lithium mining in the Pilbara region.

- In June 2019, Huayou International signed an agreement with AVZ materials to provide assistance on project financing and EPC services for the Manono lithium project in the Democratic Republic of Congo.