Tianqi Lithium and Ganfeng Lithium: The Two Lithium Giants Suffer Setbacks Abroad!

Tianqi Lithium and Ganfeng Lithium: The Two Lithium Giants Suffer Setbacks Abroad Recently, numerous Chinese enterprises’ overseas assets have faced risks of expropriation. In fact, it’s not only lithium mining assets affected. For example, COSCO Shipping’s $10 billion investment to develop the Chancay Port in Peru—transforming a barren plot into a mega-port—has already seen nearly $8 billion invested, with roughly 70% of construction completed, only for its exclusive operating rights to be revoked. However, negotiations are now underway to rescind that decision. Similar incidents have also occurred at other firms, including Wingtech Technology and China General Nuclear Power Group (CGN), among others. Even Tianqi Lithium and Ganfeng Lithium—the so-called 'twin titans' of China’s lithium industry—were simultaneously hit this month. The potential impact is substantial, prompting me to reassess my valuation models for both companies. Let’s start with Tianqi Lithium: on June 3rd, it issued an announcement. Tianqi has actually released two announcements—but for those unfamiliar with the matter, they’re not very accessible, as the language is highly technical and opaque. Many readers may thus interpret the news merely as signing a routine contract. In reality, this contract is extraordinary—and could severely undermine Tianqi Lithium’s financial health. First, some background: In 2018, Tianqi Lithium barely managed to acquire a 23.77% stake in Sociedad Química y Minera de Chile (SQM) for RMB 27.8 billion. At that time, Tianqi’s financials stood as follows: total assets of RMB 44.6 billion; net assets of RMB 12 billion; current assets of RMB 3.9 billion; cash and cash equivalents of RMB 1.9 billion; revenue of RMB 6.2 billion; and net profit attributable to shareholders of RMB 2.2 billion. Using such a balance sheet to acquire a partial stake in a company valued at RMB 117 billion—spending over 12 times its annual net profit—was truly audacious. Credit where credit’s due: Tianqi certainly displayed boldness. Yet this boldness came at an enormous cost—three major ones, to be precise. First, Tianqi clearly lacked sufficient funds, forcing it to divest valuable assets—including its high-quality lithium mine in Australia. Second, it took on massive debt, doubling its debt-to-asset ratio. The yellow bars represent total liabilities; the gray line shows the debt-to-asset ratio. You don’t even need exact figures—you can see the dramatic difference at a glance. Post-acquisition, Tianqi plunged into two consecutive years of losses, compelling it to record RMB 5.2 billion in impairment charges—causing its debt-to-asset ratio to surge from ~40% to 82%. Fortunately, the sacrifices eventually paid off: in 2022, it earned RMB 5.6 billion; in 2023, RMB 2.9 billion. Tianqi’s 2022 net profit attributable to shareholders was RMB 24.1 billion—of which SQM contributed…

Has Tianqi Lithium Finally Turned the Corner?

As for the mine segment’s 74.19% gross margin—this is Tianqi’s true core asset. Globally, only the Greenbushes mine achieves such a lithium concentrate gross margin of 74%. It ranks first worldwide in output and lowest in production cost. According to its report, Talison extracted 1.81 million tonnes of spodumene ore and produced 738,000 tonnes of lithium concentrate in the first half of the year. While other lithium salt producers must source ore from multiple suppliers, Tianqi’s lithium salt plants are backed by an exclusive, captive mine—explaining why, at identical lithium prices, Tianqi remains profitable while competitors barely break even. One figure in the profit statement deserves special attention: net profit totaled RMB 6.957 billion, of which RMB 4.242 billion was attributable to shareholders. The remaining RMB 2.715 billion—39% of total net profit—was allocated to minority shareholders. These minority shareholders are IGO and Albemarle. During Tianqi’s debt crisis—when its debt-to-asset ratio peaked at 82%—it survived by restructuring equity in Talison, the parent company of Greenbushes. Albemarle holds 49% of Wenfield (Talison’s subsidiary), while IGO acquired an indirect stake via its investment in TLEA. As a result, Tianqi’s actual economic interest in the world’s premier lithium mine stands at only ~26%. Thus, Wenfield’s attributable net profit to Tianqi was RMB 959 million in the first half—meaning the mine generated over RMB 3 billion in half-year profits, yet Tianqi captured less than one-third; the rest flowed to IGO and Albemarle. At this pace, annual profit leakage exceeds RMB 5 billion—a steep price paid to survive that crisis. Truly painful. That said, everyone has a past. Without that deal, Tianqi might not have survived to today. In cyclical industries, survival trumps short-term profitability—so this trade-off defies strict accounting. Thankfully, today’s Tianqi is no longer yesterday’s. Its debt-to-asset ratio stands at 28.46%; it holds RMB 10 billion in cash; in February it placed over 65 million H-shares via private placement, issued RMB 2.6 billion in convertible bonds, and registered a RMB 6 billion debt financing facility—ready to issue debt anytime. What the patriarch left his daughter is a financially resilient company—no longer cornered by debt. One can’t help but feel for the princess.

Sociedad Quimica y Minera de Chile SA (SQM) Financial Health: Profitability & Balance Sheet Analysis

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Sociedad Quimica y Minera de Chile SA (SQM) reported robust financial health with a score of 9.81, driven by a 69.79% revenue increase and 165.20% net profit growth year-over-year. High operating efficiency was highlighted, though specific cash flow metrics remain undisclosed.

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