After three years, lithium mining giant Ganfeng Lithium has once again won Tesla’s three-year battery-grade lithium hydroxide product order. On the evening of November 1, Ganfeng Lithium issued an announcement stating that recently, the company and its wholly-owned subsidiary Ganfeng International signed a contract with Tesla, Inc. and Tesla (Shanghai) Co., Ltd. (hereinafter collectively referred to as “Tesla”) The “Product Supply Contract” stipulates that the company and Ganfeng International will supply battery-grade lithium hydroxide products to Tesla from January 1, 2022 to December 31, 2024. The actual purchase quantity and sales amount will be specified The purchase order issued by Sla shall prevail.
As early as September 21, 2018, the company signed a “strategic cooperation agreement” with Tesla, and Tesla designated its battery suppliers to purchase battery-grade lithium hydroxide products from the company and Ganfeng International. On the same day, Ganfeng Lithium’s share price rose at a limit.
At that time, the stock price of Ganfeng Lithium was still hovering at a low level, only around 32 yuan. This year, the company’s stock price once exceeded 220 yuan, and hit a record high of 224.4 yuan on September 1. However, the company’s stock price subsequently corrected. Since September, it has fallen by more than 26%. As of the close of yesterday (November 1), the stock reported 162.1 yuan, and the current market value was 220.3 billion yuan. Whether this large order with Tesla can boost the stock price remains to be seen.
Ganfeng Lithium Industry once again won a large Tesla order
On the evening of November 1, Ganfeng Lithium announced that recently, the company and its wholly-owned subsidiary GFL International Co., Limited (hereinafter referred to as “Ganfeng International”) and Tesla, Inc. and Tesla (Shanghai) Co., Ltd. Signed the “Product Supply Contract”, stipulating that from January 1, 2022 to December 31, 2024, the company and Ganfeng International will supply battery-grade lithium hydroxide products to Tesla. The actual purchase quantity and sales amount are The purchase order issued by Tesla shall prevail.
Ganfeng Lithium pointed out that the signing of the contract is conducive to strengthening the long-term and stable cooperative relationship between the company and Tesla, is conducive to improving the company’s sustainable profitability, and is conducive to the company’s long-term development. The contract will be fulfilled and confirmed revenue from 2022 to 2024, which will have a positive impact on the company’s operating performance in the aforementioned years.
In fact, this is not the first time that Ganfeng Lithium has won a large Tesla order. On September 21, 2018, Ganfeng Lithium and its wholly-owned subsidiary Ganfeng International signed a “strategic cooperation agreement” with Tesla, which agreed from January 1, 2018 to December 31, 2020 (can be extended for three years) , Tesla designated its battery supplier to purchase battery-grade lithium hydroxide products from the company and Ganfeng International. The annual purchase quantity is about 20% of the company’s total production capacity of the product that year, and the amount is subject to the final actual settlement.
According to data, Ganfeng Lithium is the world’s leading lithium ecological enterprise, with production capacity of more than 40 kinds of lithium compounds and metal lithium products in five categories, and is one of the manufacturers with the most complete supply of lithium products. The company’s products are widely used in applications such as electric vehicles, aerospace, functional materials and pharmaceuticals, and most of the customers are global leaders in their respective industries.
The core of the Ganfeng ecosystem is the lithium compound business segment. The main products include (1) battery-grade lithium hydroxide, (2) battery-grade lithium carbonate, (3) lithium chloride, (4) lithium fluoride, etc., which are widely used in In the fields of lithium battery materials such as electric vehicles and portable electronic devices, as well as in the chemical and pharmaceutical fields, customers mainly include global battery cathode material manufacturers, battery suppliers and automotive OEMs.
In recent years, due to the rapid development of the new energy vehicle and energy storage system industries, the rising demand for power batteries, and the rapid expansion of downstream ternary material demand, the demand for electric vehicles and power batteries will be released and converted into actual output, further stimulating the demand for lithium. The industry has gradually shifted from a balance of supply and demand to a state of tight supply. Under the dual stimulus of relatively tight supply of lithium compounds and rising industrial demand, the price of lithium compounds has continued to rise since 2021.
The financial report shows that Ganfeng Lithium’s performance in the first half and the first three quarters was excellent. The semi-annual report shows that in the first half of this year, the company achieved operating income of 4.064 billion yuan, a year-on-year increase of 70.27%; net profit attributable to shareholders of listed companies was 1.417 billion yuan, a year-on-year increase of 805.29%.
The third quarter report shows that in the first three quarters of this year, the company achieved operating income of 7.054 billion yuan, a year-on-year increase of 81.19%; net profit attributable to shareholders of listed companies was 2.473 billion yuan, a year-on-year increase of 648.24%; of which, the company achieved operating income in the third quarter 2.989 billion yuan, a year-on-year increase of 98.50%; net profit attributable to shareholders of listed companies was 1.056 billion yuan, a year-on-year increase of 506.99%.
China Merchants Securities pointed out that the substantial increase in the company’s performance in the third quarter was mainly due to the rise in sales volume and price of lithium products. The capacity of the 50,000-ton battery-grade lithium hydroxide production line of the third phase of the Mahong 10,000-ton lithium salt project is gradually released. In the third quarter, the average prices of battery-grade lithium carbonate and battery-grade lithium hydroxide were 110,000 yuan and 117,000 yuan, respectively, up 24% and 35% from the previous quarter. Pilbara conducted the third spodumene concentrate auction on October 26. The final auction price was US$2,350/ton, which continued to hit a record high and is expected to lead the future rise in lithium concentrate and lithium salt prices.
Continue to improve the industrial chain layout
Since the beginning of this year, Ganfeng Lithium has continued to “buy, buy and buy” to increase the integration of the upstream and downstream industrial chains.
Ganfeng Lithium announced on October 27 that at the 35th meeting of the fifth board of directors held on October 26, 2021, the company reviewed and approved the “Proposal”, agreeing to Ganfeng Lithium Netherlands Co., BV (hereinafter referred to as “Ganfeng Netherlands”) to increase the capital of its wholly-owned subsidiary Litio Minera Argentina SA (hereinafter referred to as “Litio”) with a total amount of More than 140 million US dollars in financial support.
The company pointed out that this increase in capital and financial assistance to Litio is to promote the development and construction of Litio’s Mariana lithium-potassium brine mine project in Argentina, optimize Litio’s creditor’s rights and debts, and provide lithium resources and guarantees for the company’s development. The company’s long-term stable development is conducive to improving the company’s core competitiveness and is in line with the company’s upstream and downstream integration and the development strategy of the new energy automobile industry.
On August 6, Ganfeng Lithium announced that in order to build a competitive new-type lithium battery production base and achieve the company’s development goals of becoming bigger and stronger, the company’s holding subsidiary Ganfeng Lithium intends to develop in Xinyu, Jiangxi’s high-tech industries. The district invested 3 billion yuan to build a new type of lithium battery project with an annual output of 5GWh, and a new independent legal entity project company in Chongqing Liangjiang New District invested 5.4 billion yuan to build a new type of lithium battery technology industrial park with an annual output of 10GWh and an advanced battery research institute project.
But the company’s road to acquisition has not been “smooth sailing.” On May 6th of this year, the company passed the “Proposal Concerning the Tender Acquisition of Bacanora Company by Shanghai Ganfeng, a wholly-owned subsidiary, involving mining rights investment and related transactions”, and agreed to the company’s wholly-owned subsidiary Ganfeng International Trading (Shanghai) Co., Ltd. (Hereinafter referred to as “Shanghai Ganfeng”) with its own funds for the tender offer of all issued shares of Bacanora (except the shares held by Shanghai Ganfeng), the transaction amount does not exceed 190 million pounds.
According to data, Bacanora was established in 2018 and listed on the AIM section of the London Stock Exchange in the United Kingdom. Its main business is group holding and lithium clay resource project management. Its main asset is the lithium clay Sonora project in Mexico.
On October 25, the company announced that the aforesaid tender offer is undergoing the acceptance procedures of Bacanora’s shareholders and the approval of the Mexican government. Up to now, because the Mexican government’s approval process for the matter has not been completed, Shanghai Ganfeng and Bacanora have applied to the UK M&A Commission to suspend the tender offer procedure according to the UK tender offer process and relevant laws and regulations. Resumed after approval by the Mexican government.
In addition, on July 16 this year, the company passed the “Proposal on Ganfeng International’s or its wholly-owned subsidiary’s tender offer for the Canadian Millennial Company involving mining rights investment”, and agreed to its wholly-owned subsidiary Ganfeng International Co., Ltd. (hereinafter referred to as “Ganfeng International”) or its wholly-owned subsidiary made a tender offer for Millennial Lithium Corp of Canada (hereinafter referred to as “Millennial”) with its own funds, and the transaction amount did not exceed CAD 353 million.
Recently, the company received a notice from Ganfeng International that because Millennial received a “better offer” from its competitors, and Ganfeng International did not choose to increase the offer price within the agreed period, Millennial has unilaterally terminated its tender offer with Ganfeng International Cooperation agreement, and paid 10 million US dollars of cooperation termination fee to Ganfeng International.
Ganfeng Lithium pointed out in the 2021 semi-annual report that obtaining high-quality and stable lithium resources is essential to the long-term stable development of the company’s business. The company adheres to the purpose of resource globalization and will continue to expand the existing lithium resource portfolio through further exploration, and gradually focus on the extraction and development of resources such as brine and lithium clay. The company will actively promote the development and construction of the Cauchari-Olaroz lithium salt lake project in Argentina. The project plans to complete most of the project construction in 2021 and commissioning in 2022. As of July 2021, the Mariana Lithium Salt Lake Project in Argentina has successfully obtained the environmental impact report issued by the Salta Provincial Government of Argentina and plans to start construction in 2021. At the same time, the company will further accelerate the construction of the Sonora lithium clay project in Mexico, and strive to make the project a leading project for lithium extraction from clay in the world. In terms of spodumene resources, the company will continue to focus on high-quality spodumene projects around the world, and actively cooperate with partners to ensure the production, operation and production capacity of spodumene projects such as Mt Marion in Australia, Pilgangoora in Australia, and Goulamina in Mali, Africa. The construction went smoothly.
The company will choose to expand its production capacity based on changes in market demand and evaluation of future lithium products. The company plans to form a lithium product supply capacity with a total annual output of not less than 200,000 tons of LCE by 2025, which will include lithium extraction from ore, lithium extraction from brine, and lithium extraction from clay. The company is optimistic about the longer-term global lithium market development. In the future, it will form a lithium product supply capacity of no less than 600,000 tons of LCE, and a more competitive lithium resource project reserve that matches it.
At the same time, in order to support future growth, the company plans to further develop and upgrade existing lithium battery production, and carry out research and development and industrialization of a new generation of solid-state lithium battery technology. In the future, the company’s consumer batteries, power and energy storage batteries, and TWS wireless Bluetooth headset batteries will further expand production capacity.
In addition, with the use of automobiles and consumer electronic products, the demand for disposal of decommissioned batteries continues to increase. The company has great potential for growth in the lithium battery recycling business and further enriches the source of lithium raw materials. In the future plan, the company will build a large-scale comprehensive facility that can recover 100,000 tons of decommissioned lithium batteries per year. The company continues to expand its business downstream by expanding the production capacity of the lithium battery recycling business and its expertise in recycling and reusing decommissioned batteries.