Australian nickel-gold miner IGO Ltd (IGO.AX) is in negotiations to buy a minority stake worth close to $1.5 billion in a vehicle holding Tianqi Lithium Corp's (002466.SZ) stake in the Greenbushes lithium mine, sources told Reuters.
China's Tianqi, one of the world's top producers of lithium chemicals used in electric-vehicle batteries, urgently needs the proceeds from the sale to make loan repayments that were due at the end of November.
Representatives for Tianqi and IGO did not immediately return requests for comment. On Monday afternoon, Perth-based IGO requested a trading halt for its shares until Dec. 9, pending a material acquisition. Tianqi's shares closed up 5% on Monday.
Chengdu-based Tianqi, which alongside Albemarle Corp (ALB.N) operates Greenbushes - the world's largest hard-rock lithium mine - in Western Australia, last week secured a one-month reprieve on repayment instalments that had fallen due on $1.88 billion of loans used to acquire a 23.8% stake in Chile's SQM (SQMA.SN) in 2018.
The IGO acquisition includes a stake in Greenbushes, both sources said, with the second source adding it also included other assets, mostly in Australia.
A price has not been agreed but was expected to be slightly below A$2 billion ($1.48 billion), both sources said, asking not to be identified because the details of the deal are private and have not been signed.
The second source said the deal was expected to be structured as a joint venture in Tianqi unit Tianqi UK and include both Greenbushes and Tianqi's suspended Kwinana lithium processing plant in Australia.
Doing it that way would bypass Albemarle's pre-emption rights, the source added, adding that Tianqi would retain control of the vehicle.
Some analysts think it is unlikely China would allow a strategic resource base like Greenbushes to fall into foreign hands.
"Greenbushes is a large, low-cost asset and has contributed to China's lithium supply security," said Alice Yu, research analyst at S&P Global Market Intelligence.
Tianqi UK, which holds Tianqi's 51% in Greenbushes, has changed its name to Tianqi Lithium Energy Australia Pty Ltd, according to a filing to Companies House on Sunday.
IGO will fund its purchase with existing cash and debt, while Macquarie Capital and Citigroup are advising on a potential capital raising that would partly fund the deal, the second source said.
Tianqi's debt jitters have occurred at a time when defaults among China's usually gilt-edged state-owned enterprises have left the country's bond market on edge.
Earlier this year, Tianqi appointed Australia-based advisory firm Grant Samuel to find a buyer of the stake, while Standard Chartered is advising IGO, both sources said.
($1 = 1.3461 Australian dollars)
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