China’s CATL Takes Significant Stake in Canada’s Neo Lithium Corp.

On September 14, Mining Weekly reported that China’s Contemporary Amperex Technology Co., Ltd. (CATL) had reached a deal to acquire over 10 million shares from the Canadian Neo Lithium Corp.  The deal — which would place CATL as Neo Lithium’s third-largest shareholder and give it a seat on the company’s board — also opens up another avenue where China might seek to advance its already dominant position over the supply chain for strategic metals.  Although Neo Lithium has indicated it would maintain full control over its offtake, CATL’s status as a leading stakeholder would seem to position the company competitively as a purchaser of the company’s product. 

Notably, CATL purchased its shares in Neo Lithium at a 45% premium to the company’s Friday closing stock price, a number that raised attention.  As reported by Mining Weekly, this appears to have prompted “several Neo Lithium executives…to buy roughly 483 000 shares at the same price.  The company’s CEO observed to Reuters that, “We justified the valuation with our own pockets.”  The premium may have been intended to help assuage concerns about the strategic nature of the stake and scrutiny of excessive Chinese influence over such assets.

As part of Neo Lithium’s technical committee, CATL is expected to help prepare a feasibility study for the Tres Quebradas lithium project in the northern Argentinian province of Catamarca.  The Tres Quebradas project, which is still in the planning stages, is the sixth-largest brine project worldwide on a total resource basis, and, among those, is the only project with low critical impurities that is not in production.

The Tres Quebradas project is the latest in a string of projects backed by China in Latin America that implicates the mining of the strategic mineral.  In December 2018, Tianqi Lithium finalized the $4.1 billion acquisition of a 24% stake in Sociedad Quimica y Minera (SQM), a listed company headquartered in Santiago, Chile, and that is responsible for the development of the Atacama Desert lithium project in northern Chile, which is among the largest lithium production sites in the world.  In August 2019, Xinjiang TBEA Group joined Yacimientos de Litio Bolivianos (YLB), a state-run Bolivian firm, as a minority partner in a joint venture to build plants to process lithium recovered from Bolivia.

Nonetheless, these projects have been met with setbacks in recent months, primarily due to COVID-related delays in project implementation, and a precipitous 70% drop in the price of lithium since late 2018.  This has put considerable financial pressure on Tianqi, in particular, which took on a $3.5 billion loan in order to finance the acquisition.