Tianqi Lithium Industry on the tuyere: introducing and expanding Lithium production cycle brings a good opportunity to reverse losses

Because of its strategic significance, it will be more difficult to obtain and control lithium resources. therefore, lithium resources will become a key factor restricting the development of the industry in the medium and long term. In the long run, the bargaining power of lithium resources enterprises and the status of the industry chain will continue to improve. " Jiang Weiping, chairman of Tianqi Lithium Industry (002466.SZ), said at the 2020 performance presentation meeting on May 7.

The Financial Associated Press previously reported that due to underwriting, self-supply and other reasons, the shortage of upstream lithium concentrate resources, resulting in the entire industry chain is in a "anaemic" state. As early as 2018, Tianqi Lithium increased its M & A loan by $3.5 billion to buy a 23.77% stake in Terlison, the world's leading supplier of lithium products.

Obviously, the above mergers and acquisitions are a double-edged sword for Tianqi lithium industry, which is still weak while peer Ganfeng lithium (002460.SZ)'s first-quarter performance has soared due to a huge increase in financial costs caused by huge debt. But what is more noteworthy is that if the introduction of IGO is successful, it remains to be seen whether the pace of the company's production expansion can "step on" the rare excellent market under the lithium cycle.

According to the preliminary announcement of Tianqi lithium industry, the company lost 248 million yuan in the first quarter of this year, an increase of 50.46% over the same period last year, and realized revenue of 904 million yuan, a decrease of 6.63% over the same period last year, of which financial expenses were 402 million yuan. In response to the reason why the price of lithium salts such as lithium carbonate began to rise since the fourth quarter of last year, but the company's sales revenue did not increase in the first quarter, Zou Jun, the company's director and chief financial officer, said that it was mainly due to the decline in lithium mine sales and unit prices in the current period compared with the same period last year.

At the same time, many investors have expressed concern about the internal restructuring of IGO transactions and the degree of delivery conditions. Jiang Weiping explained that except for the examination and approval of the internal restructuring of the transaction by the FIRB and the tax authorities in the UK and Australia, the other delivery conditions have been completed, and so far there have been no substantive obstacles such as rejection or prohibition.

Zou Jun further analyzed the use of the funds after the introduction. He said that after the completion of the deal, the company will first use the funds obtained from the transaction to repay the principal of the syndicated loan of no less than US $1.2 billion; second, it will speed up the construction of the Quinana plant and achieve capacity expansion.

This means that if the above transaction is successfully completed, in addition to reducing the financial costs and asset-liability ratio of Tianqi Lithium Industry, the remaining loans may be extended. On the other hand, IGO, as a traditional mining company, has rich experience in mining development, which may greatly support Tylison to further improve its efficiency and strengthen the company's cost advantage.

"in the current tense relationship between China and Australia, we believe that the risk of taking back Australian mining rights is low, especially if ALB of the United States, Tianqi of China and IGO of Australia all have interests after the completion of the IGO transaction." Zou Jun also expressed his views on the widespread concerns of investors.

With the rapid growth of global sales of new energy vehicles and the active replenishment of the industry chain, the demand cycle of the lithium industry is strong. It is the consensus of the industry that the lithium industry is expected to return to rapid growth in 2021. A number of insiders of listed lithium products told the Financial Associated Press that many companies in the industry are already developing new projects, and a lithium mining giant said more bluntly, "under the current prices of lithium products, it is more attractive for the development of new projects."

At present, Tianqi Lithium Industry has a total capacity of about 44800 tons / year of lithium chemical products, including 34500 tons / year of lithium carbonate and 5000 tons / year of lithium hydroxide. In addition, the company also has 48000 tons / year of lithium hydroxide and 20, 000 tons of battery-grade lithium carbonate under construction, of which Quinana's first phase of 24000 tons of lithium hydroxide project aims to reach production in the fourth quarter of 2022. The third phase of Tellyson chemical grade lithium concentrate expansion project has been launched, with an estimated additional lithium concentrate production capacity of 600000 tons per year.