CATL's RMB 6.4 billion restructuring proposal was approved unanimously by lithium miner Sinuowei's creditors, according to local media.

(Image from CATL's Weibo)

Chinese power battery giant CATL has acquired a local lithium producer for hundreds of millions of dollars to lock in more supplies of lithium, a key raw material for batteries.

Shareholder information for Sichuan-based Sinuowei Mining saw a change on March 6, with CATL becoming the new sole shareholder and all of the original shareholders dropping out, according to data provider Tianyancha.

This means that the battle for Sinuowei's stake, which has been fought by several bidders over the past 10 months, ended with CATL winning.

Sinuowei, which went bankrupt several years ago, saw its stake put up for auction for the first time in February 2020, with a number of companies, including CATL, GCL Energy Technology and Shenzhen Chengxin, subsequently competing for it.

In January, a court in Yajiang approved Sinuowei's restructuring plan, and CATL then proposed an RMB 6.4 billion ($920 million) restructuring package to acquire 100 percent of the company.

CATL's RMB 6.4 billion proposal was approved unanimously at Sinuowei's creditors' meeting, according to a report by local media Cailian yesterday.

That's not a high price for CATL, which will be able to get future lithium carbonate from the project at a cost of less than RMB 100,000 per ton, the report said, citing analyst Zhang Jinhui of consulting firm ICCSINO.

Lithium carbonate prices have continued to fall over the past few months, with the average price of battery-grade lithium carbonate yesterday at RMB 376,000 per ton and industrial-grade lithium carbonate at RMB 343,000 per ton, according to My Steel.

The downward movement of lithium prices is only a seasonal sentiment factor, and the global supply and demand is still in tight balance, Zhang said.

Lithium prices are still expected to rise after the second quarter, even at current prices, and lithium mining is a quite profitable industry, the analyst said.

CATL is buying local lithium resources while selling off overseas lithium resources.

CATL has sold its entire stake in Australian lithium company Pilbara Minerals for A$850 million, according to a report by the Australian Financial Review earlier this month.

CATL's move is likely to secure a return on its investment and it may also be concerned about policy risks, Cailian said, citing industry sources.

In addition to buying the assets of other lithium miners, CATL has previously been acquiring its own lithium mines.

On April 20, 2022, Yichun Shidai New Energy Resources Co Ltd, a subsidiary of CATL, successfully bid RMB 865 million for the exploration rights of a lithium mine in Yichun, Jiangxi province, eastern China.

The mine, located in Yichun's Yifeng county, has an inferred porphyry resource of 960 million tons and 2.66 million tons of associated lithium metal oxide, according to a statement from CATL at the time.

($1 = RMB 6.9628)

Overseas premiums likely to provide support for lithium prices in China, analysts say