April 28, 2020 / 4:12 AM / a month ago

China's Tianqi Lithium expects to stay in red after big 2019 loss

BEIJING (Reuters) - China’s Tianqi Lithium Corp said on Wednesday it expects to post a net loss of up to 932.4 million yuan ($131.7 million) in the first half of 2020 on lower lithium prices, after revising to a much worse-than-expected 6 billion yuan loss for last year.

Tianqi’s share price fell as much as 10% on Tuesday to its lowest since November 2015 after it said its 2019 net loss was going to be double previous guidance due to a higher impairment provision on its stake in Chilean miner SQM.

Tianqi, one of the world’s top producers of lithium, used in batteries for electric vehicles, has flagged liquidity problems as it struggles to repay loans taken out to buy the 23.8% stake in SQM for $4.1 billion in 2018.

The company confirmed a 5.98 billion yuan loss for 2019 on Wednesday, and reported a 500.3 million yuan loss for the first quarter of 2020, near the top of previous guidance for a quarterly loss and compared to a profit of 111.3 million yuan a year earlier.

Tianqi estimated its first-half 2020 loss at between 621.6 million and 932.4 million yuan.

Combined losses of as much as $1 billion over the 12-month period to June 30 will pile further financial pressure on Tianqi, which is already considering asset sales to reduce debt.

Prices for lithium have fallen around 70% since Tianqi agreed to buy the SQM stake and are languishing at five-year lows.

Tianqi has been linked with selling part of its stake in the Greenbushes mine in Western Australia, the largest and lowest cost hard-rock lithium mine in the world. Such a sale would likely draw interest from suitors like Fortescue Metals Group.

Chengdu-based Tianqi said in February it had set aside an impairment provision of 2.2 billion yuan for its stake in SQM, formally known as Sociedad Quimica y Minera de Chile. On Tuesday it said it had increased the provision by another 3.07 billion yuan for 2019.

An impairment is a loss in the recoverable amount of an asset on a company’s balance sheet.

Tianqi said the revision on the impairment was made because of the impact of the coronavirus outbreak on SQM’s key lithium export markets, such as the United States and Europe, which had been underestimated in February.

It also noted that SQM last month forecast lithium prices would fall further due to oversupply, while a report from consultancy Roskill pointed to a worsening outlook for electric vehicle sales due to the pandemic.

Reporting by Tom Daly and Zhang Min; Additional reporting by Melanie Burton in Melbourne; Editing by Richard Pullin and Tom Hogue

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