Hong Kong- and Shenzhen-listed lithium producer Tianqi Lithium [SHE:002466] is in talks to acquire all of private-equity-backed Toronto- and NASDAQ-listed Sigma Lithium Corp’s [NASDAQSGML] mines, according to three sources familiar with the matter and a source with knowledge of the matter.
Jiangxi, China-headquartered Ganfeng Lithium [SHE:002460], which is Hong Kong- and Shenzhen-listed, is separately also preparing to bid for the mines, according to the first two sources familiar.
State-owned Hong Kong-listed, Xiamen-based copper-and-gold miner Zijin Mining Group is also considering a bid, said the first source familiar.
However, it would be unlikely for three Chinese companies to formally all bid concurrently for the same asset, the source with knowledge said, noting that this is unofficially discouraged by Beijing authorities to prevent pushing up the asset price.
Tianqi expects to bid USD 4bn-USD 5bn, said one of the sources familiar. Sigma had a market cap of USD 3.5bn based on yesterday’s (16 March) closing price.
This newswire exclusively reported on 28 February (Debtwire, Mergermarket) that Tianqi Lithium is in talks with banks for an about USD 3bn loan to back a possible acquisition of lithium mines in Brazil, without identifying the target. The loan facility, as currently envisioned, would have a three-year maturity with a two-year extension option.
Backed by local private-equity firm A10 Investimentos, Sao Paulo-based Sigma owns the Grota do Cirilo project, which boasts the largest lithium hardrock deposit in the Americas, according to Sigma’s website.
Sigma has been sought after by Austin, Texas-based electric vehicle maker Tesla Inc earlier this year, according to an 18 February Bloomberg article.
The potential buyers are expected to submit a binding bid “soon”, the third source familiar said.
A10 Investimentos is open to selling the mines given that it is a financial investor with limited operational capabilities that “hit a gold mine”, said the second source familiar. The firm owns about 47% of Sigma, according to financial fillings.
Tianqi, Gangfeng and Zijin declined to comment. Sigma didn’t reply to a request for comment.
Acquisition loan
Chengdu-based, privately-owned Tianqi Lithium is in discussions with a mix of international and Chinese banks for the USD 3bn acquisition loan, though the size may be challenging for international banks, according to the first two sources familiar.
Privately-owned Ganfeng Lithium already has the support of a core group of Chinese banks, so it might not need to tap international lenders, according to the first source familiar.
As reported, Tianqi’s financing for its last large acquisition needed to be restructured more than two years ago because of a downturn in lithium prices, but the company quickly recovered and paid down the amended-and-extended facility.
That acquisition was in December 2018, of a 23.77% stake in Chilean lithium miner Sociedad Química y Minera de Chile (SQM) from Canadian fertilizer giant Nutrien for USD 4.06bn.
To fund that purchase, Tianqi raised USD 3.5bn in senior and mezzanine loan facilities arranged by China CITIC Bank, as reported. The added leverage followed by a prolong downtrend in in lithium prices pushed Tianqi into defaulting initially on an interest payment in March 2020, and then on the repayment of USD 1.884bn principal due in November that year.
Following the restructuring of the loan in December 2020, Tianqi took advantage of the improved lithium market to stabilize its operations and balance sheet, as well as to pay off the 2018 acquisition loan, in part via the USD 1.4bn sale of an Australian asset in July 2021.
Tianqi announced in July 2022 that it had fully paid off the then-remaining USD 1.129bn of the originally USD 3.5bn loan after raising about HKD 13.458bn (USD 1.7bn) from its Hong Kong initial public offering in the same month that year.
Then in October 2022, Tianqi closed a USD 400m three-year senior secured syndicated term loan partly used for the redemption of its USD 300m 3.75% notes due-November 2022, as reported. The loan size was reduced from an original target of USD 800m because Tianqi had raised ample cash through the IPO, as reported.
Sigma asset
Sigma’s Grota do Cirilo project, located in Brazil’s southeastern state of Minas Gerais, consists of nine previously producing lithium mines and 11 first-priority exploration targets, according to the company website.
The company announced on 13 February that the production of continuous sequential batches of crushed lithium material and completion of commissioning of the crushing circuit of its green-tech plant. It plans to kick-start commercial production in April and expects to start generating cash flow in 2Q23.
Sigma plans to produce 270,000 tons annually of battery grade lithium concentrate lithium in Production Phase 1 and expects to increase this volume to 766,000 tons during Production Phases 2 and 3, according to its website.
