Did Tianqi Lithium, which nearly collapsed at the风口 (lit. 'wind mouth'), narrowly escape death?

The gradual replacement of traditional fuel-powered vehicles by new-energy vehicles is an irreversible global trend. This backdrop has created long-term, inelastic demand for lithium batteries—whether lithium iron phosphate, ternary lithium, or future solid-state batteries, all these technological pathways rely fundamentally on lithium resources. For Tianqi Lithium, its 2018 overseas acquisition secured control over the world’s highest-grade lithium resource—a strategic advantage initially gained. Yet this 'whale-swallowing' acquisition also saddled the company with a heavy interest burden. Compounded by falling lithium prices, Tianqi has struggled to catch its breath in recent years: it posted a loss of nearly RMB 6 billion in 2019 and, this year, even edged perilously close to delisting. However, at the very last moment, by bringing in the Australian-listed mining company IGO as a strategic investor, Tianqi not only retained control over its lithium assets but also resolved its debt crisis. Most importantly: can Tianqi seize this opportunity to rise from the ashes and embrace the new-energy era? I. Was this deal a loss—or a gain? In 2018, Tianqi acquired a 23.77% stake in Sociedad Química y Minera de Chile (SQM)—holder of the world’s premier brine-lithium resource, the Atacama Salt Flat—for USD 4.066 billion, paying USD 65 per share at a historical high (the current share price remains only USD 48). Tianqi contributed only a small portion of the purchase price; the remaining USD 3.5 billion came entirely from syndicated loans. As of September 30, 2020, outstanding loan principal totaled USD 3.084 billion (approx. RMB 21 billion), with unpaid interest amounting to RMB 464 million. Facing severe default risk under this massive debt load, Tianqi brought in IGO, which invested USD 1.4 billion to acquire a 49% stake in Tianqi’s wholly owned subsidiary TLEA (formerly Tianqi UK). Of this, USD 1.2 billion was earmarked to repay syndicated loans and accrued interest; the remainder will be held in reserve within TLEA to fund operations and commissioning of TLK’s Kwinana lithium hydroxide plant. It is worth examining whether this transaction represented a loss or a gain for Tianqi. First, using USD 1.2 billion (approx. RMB 7.8 billion) to repay debt undoubtedly alleviates the company’s debt pressure. As of September 30, the company held cash of RMB 1.3 billion, short-term borrowings of RMB 3.1 billion, non-current liabilities due within one year totaling RMB 13.3 billion, and long-term borrowings of RMB 13 billion. Rough calculations show total borrowings would decrease by roughly 25%, to approx. RMB 21.5 billion, while the asset-liability ratio would fall from ~81% to ~63%. Assuming a 6% interest rate, annual interest savings would exceed RMB 400 million. Although full-year interest expenses reached RMB 2.05 billion in 2019—and the remaining burden remains substantial—the most critical outcome is that default risk has been averted. Moreover, this transaction involved selling not just mineral assets but also associated infrastructure: it included Greenbushes (home to Talison Lithium, the world’s largest and highest-grade spodumene mine) *and* TLK’s Kwinana lithium hydroxide plant. Prior to the deal, Tianqi held 51% of Talison and 100% of TLK. Post-transaction, Tianqi retains ~26% of Talison and 51% of TLK.

Major move by Chilean authorities! Is Tianqi Lithium now in jeopardy?

Summary: Implications for Tianqi Lithium (Follow Leveraged Games for updates) Recall the earnings shock in late April, when Tianqi Lithium’s stock opened at its daily lower limit. Events continue unfolding: on one hand, its share price keeps declining; on the other, behind the earnings shock lies a deeper concern—the potential nationalization of Sociedad Química y Minera de Chile (hereinafter 'SQM'), the world’s second-largest lithium producer, in which Tianqi made a bold investment years earlier. Rumors about SQM’s nationalization have circulated for some time. This time, on May 31, 2024, local time, SQM signed an agreement with Chile’s state-owned copper company Codelco to establish a joint venture. Starting in 2025, 70% of the venture’s operating profit will accrue to the Chilean government. Tianqi Lithium recently disclosed this development. If the agreement is implemented, the enforceability of Tianqi’s rights—including its investment returns and dividends from SQM—will become uncertain. It may even trigger an impairment charge against this investment. Tianqi has filed an appeal seeking to block SQM’s nationalization. Is there still room for a turnaround? 1. Background of SQM’s Nationalization The story traces back to 2018. That year, Tianqi invested USD 4.066 billion to acquire a 23.77% stake in SQM, becoming its second-largest shareholder. As of now, Tianqi holds approximately 22.16% of SQM. At the time, this acquisition stunned domestic and international markets—dubbed a 'snake swallowing an elephant.' To finance the deal, Tianqi borrowed USD 3.5 billion from a syndicated loan led by China CITIC Bank. The resulting heavy debt burden later placed immense pressure on Tianqi. Consequently, Tianqi had to cede equity in Australia’s Greenbushes operation to IGO—significantly diminishing its pricing power in Australian operations—and ultimately reported a staggering loss exceeding RMB 4 billion in Q1 2024, drawing widespread attention. In past years, vehicle electrification and soaring lithium prices delivered windfall profits to Tianqi. But as lithium prices declined, Tianqi began feeling the squeeze. Now, compounding misfortunes, even this 'iron rice bowl' appears at risk of slipping away. On December 27, 2023, Tianqi’s investee SQM and Codelco signed a non-binding Memorandum of Understanding ('MOU') concerning the operation and development of the Atacama Salt Flat from 2025 through 2060. The MOU serves as a framework agreement, expressing both parties’ intent to build a cooperative partnership—operating sustainably and harmoniously with local communities to produce high-quality lithium products from the Atacama Salt Flat. To achieve this goal, SQM and Codelco plan to jointly establish a venture company. Under the original plan, this joint venture would assume SQM’s current lithium extraction quota—leased from Chile’s Ministry of Economy–affiliated Production Development Corporation (Corporación de Fomento de la Producción de Chile, 'Corfo')—for the Atacama Salt Flat region, and would manage project execution and global lithium sales.