On 23 April, Tianqi Lithium released Q1 2024 earnings guidance, estimating a quarterly net loss of 3.6 billion to 4.3 billion yuan. The company reported a net loss of 800 million yuan in the last quarter, and earned a net profit of 4.9 billion yuan in the same quarter last year.
Tianqi attributes the increase in net loss to the volatile lithium prices, and its 20%-stake-holding Chilean miner SQM’s tax disputes which could bring a US$1.1 billion hit to SQM’s quarterly results.
On the same day, the Shenzhen Stock Exchange (SZSE) issued a letter of concern to Tianqi, seeking explanations on three matters while Tianqi should then make a public disclosure by 26 April.
The exchange firstly requires a numerical justification of the quarter-on-quarter surge in losses, which should be explained by referencing production, sales, pricing, costs, and depreciation evaluation. Tianqi should also clarify whether this loss aligns with industry benchmarks and is expected to persist.
Secondly, Tianqi is to state the extent to which SQM’s US$1.1 billion quarterly loss will be translated into Tianqi’s financials. The company must update on the status of SQM's tax disputes and any related developments.
Lastly, the SZSE requires Tianqi to disclose the ongoing SQM-Codelco negotiations and assess potential impacts. Tianqi is also asked to outline its strategy in response and provide a suitable risk warning to investors.
In the previous month, amid heightened tensions, Tianqi Lithium was reported by Reuters to raise transparency concerns regarding SQM's partnership negotiations with Codelco, urging a shareholder vote to potentially reshape the agreement, which was later rejected by SQM Board Chairman. At the same time, the Chile's mining minister also urged SQM and Tianqi to resolve the conflict.
The unfolding situation, especially with the upcoming Tianqi disclosure and SQM Shareholder Meetings expected to be revelatory, may further illuminate Tianqi’s financial and strategic position as one of the world’s largest lithium producers.
Author: Hongqiu Su | Battery Metals Analyst Associate | London Office, Shanghai Metals Market
Email: lilysu@smm.cn
