Tianqi Lithium Alert:Access China conference highlights

Further expansion is expected in 2017.

    Mr. Bo Li, the deputy general manager of secretary to the board of Tianqi Lithium, attended our 2017 dbAccess China conference in Beijing in this week. Mr. Bo Li delivered his view on industry development and company’s expansion plan of Tianqi. Below are the key summary of the investor meetings.

    Do not expect significant price correction of lithium compounds in 2017.

    The lithium price declined from its peak as demand and supply has not been as tight as it was in 1Q16. Currently price is very stable. Tianqi’s real ASP of shipment is lower than market quotation price, with discounts given and decided case by case. Tianqi does not expect significant ASP hikes in the coming months. However, significant price correction is not expected either, for heavily inflated cost of imported spodumene. The price of first shipment of spodumene concentrates (from Galaxy resource) arrived to China in the end of 2016 was as high as US$900/t.

    Limited potential to increase lithium compounds production volume in 2017.

    Tianqi remains to be the best quality products providers in the market, with the capability of delivering stable massive volume, particularly the battery grade lithium compounds. Tianqi believes that its spodumene-based lithium compounds (battery grade) can outperform brine based lithium compounds due to higher purity of raw material. But unfortunately, further increase in production of lithium compounds in 2017 will be very limited for 1) its Shehong base is almost under full-operation. 2) New incremental production from Zhangjiagang plants is major task. Zhangjiagang’s production in 2016 is c. 11ktpa, implying 60% utilization rate.

    Expansion of Talison in 2017 is highly expected.

    The final capex will be decided and approved by the management and board soon. Tianqi is expecting to spend significant capex in the next three years for 1) building the 23ktpa new lithium hydroxide processing plants in Western Australia and 2) raising the utilization rate of Talison first and then expanding capacity of Talison to feed this new processing plant.

    Open to the opportunity of acquiring high quality assets.

    Tianqi continues looking for the 1-tier lithium resources assets in the market. Tianqi has no interest in domestic poor quality resource, but has strong interests in being a real controller (not just a financial investor) of world-class quality resource globally. As most high-quality spodumene mine resources are off-the market, brine based resource in South America probably will be their prioritized target.