Go straight to the shareholders' meeting | Tianqi Lithium Industry: IGO is expected to solve both lithium ore and lithium brine in about half a month.

Tianqi Lithium Industry (002466.SZ), which affects the global lithium resource development and lithium chemical processing industry, held its 2020 annual shareholders' meeting in Chengdu yesterday, and the number of investors arrived at the scene far exceeded the capacity of the conference hall. Dozens of chairs were temporarily added and the aisles were filled. The two-hour meeting left little time for the scheduled bill, and the question session also focused on debt leverage, capacity and other issues. Company executives replied to investors that the IGO war investment issue is expected to be resolved in about 15 days, and capacity release is proceeding as planned. Reviewing the acquisition of SQM, the company said it needed both lithium ore and lithium brine.

In 2018, Tianqi Lithium Industry bought 23.77% of the Chilean SQM company, which owns the right to exploit the Atacama Salt Lake, and successfully laid out the salt lake brine to extract lithium, thus bringing the company "tiantian" financial costs. According to the annual report, the loan interest fees generated by the merger and acquisition in 2020 totaled about 1.409 billion yuan, but the investment income from SQM was only 175 million yuan.

In order to stop the bleeding in time, TLEA, a wholly owned subsidiary of the company, introduced the strategic investment of IGO in December 2020, and IGO will contribute US $1.4 billion in cash to subscribe to the new registered capital of TLEA to repay the loans owed. Xia Juncheng introduced the latest progress of the matter at the meeting: "at present, except for the internal restructuring work under review by FIRB and the Anglo-Australian Inland Revenue Bureau, all other handover matters have been completed and IGO funding has been put in place." "that's about it in 15 days," he said optimistically. "

But moving reinforcements comes at a cost. After the deal, the company's stake in Terlison, which has the lowest operating costs in the world, fell from 51% to about 26%. And the company has signed a series of restrictions on production and sales with IGO. To give up part of his interest in Tellyson for the sake of SQM, Jiang Weiping, chairman of the board, explained that "the best lithium ore and brine in the world must be obtained."

Due to the long expansion cycle of the resource side, large capital expenditure, and individual resources subject to national policy restrictions, the global lithium resource side has always been a stock market, and the increment is very limited. It is reasonable for the company to preempt the distribution of ore and brine. Jiang Weiping said: "if we hadn't got (SQM), at that time, we would never have been able to get such good resources from abroad."

It is worth mentioning that the Chilean authorities are currently in a period of change, and many investors at the scene are worried about the political environment of SQM. Jiang Weiping said that Chile, as one of the countries with the most robust laws in South America, is not worried about the possible political impact.

The company has paid a huge price for pre-emptive distribution of resources, but the return is about to be reflected in the release of capacity. According to Zou Jun, the company's financial director, SQM made it clear in the quarterly investor conference call that the production capacity will be expanded to 120000 tons of lithium carbonate and 21500 tons of lithium hydroxide in 2021, and the capital operating expenditure will increase to 500 million US dollars, mainly invested in the production expansion plan of lithium carbonate and lithium hydroxide.

Production expansion is to meet the explosive growth of demand. Haitong Securities asked at the meeting that the global demand for lithium carbonate steel plate may exceed 1.2 million tons in 2025. How does the company view the huge gap between supply and demand. Jiang Weiping said that no matter how big the gap is, the company will develop according to the established plan, reaching 20-25% of the market share. As for how to do it, Xia replied that Tianqi Lithium Industry will first "recuperate" and make a profit, then continue to increase production capacity and deleverage, while taking into account international relations and reducing the level of risk. "after five years, everyone will see that Tianqi will make great progress." He said.