Zijin Mining Group Co., a prominent player in the global copper and gold industry, is reportedly in discussions to acquire Zangge Mining Co. Ltd., a Chinese lithium producer. This potential acquisition signals Zijin’s strategic move to strengthen its presence in the rapidly growing lithium market.
Zijin has a history of aggressive expansion through acquisitions and aims to capitalize on the increasing demand for lithium, a crucial component in electric vehicle batteries. Zangge Mining, listed on the Shenzhen Stock Exchange with a market capitalization of approximately $6.4 billion, primarily produces potash but derives a significant portion of its revenue from lithium extracted from salt lakes in Qinghai province.
The lithium market has experienced a significant downturn since late 2022, with prices plummeting nearly 90%. This price drop has impacted lithium producers and spurred a wave of mergers and acquisitions within the industry. Notably, Rio Tinto Group acquired Arcadium Lithium Plc for $6.7 billion in 2024.
While Zangge’s current lithium carbonate production is relatively modest at around 9,278 tons in the first nine months of 2024, the company has ambitious plans to expand its operations in Tibet. Zangge is already a minor partner in Zijin’s Julong copper mine located in Tibet. This existing relationship could potentially facilitate a smoother integration process if the acquisition proceeds.
Under the leadership of Chairman Chen Jinghe, a former geologist, Zijin has rapidly ascended to become a leading global copper producer. Originating as a gold mining operation in southeastern China in the 1980s, the company now boasts a market capitalization of roughly $57 billion in Hong Kong. Following the announcement of the potential Zangge acquisition, Zijin’s shares saw a 3.4% increase.
Zijin’s foray into lithium is a more recent endeavor, driven by the anticipated surge in demand for the metal due to its critical role in electric vehicle battery production. The company’s strategic objective is to achieve lithium production of up to 300,000 tons by 2028. However, current production levels remain comparatively low.
Challenges such as depressed lithium prices and permitting delays have forced Zijin to postpone the commencement of projects in Argentina and Tibet until 2025. The company anticipates initiating production in the Democratic Republic of Congo by 2026 and also operates a hard-rock lithium mine in China’s Hunan province.
Zijin’s statement indicates that the acquisition of Zangge shares could potentially lead to a change in control of the company. However, the successful completion of the deal hinges on reaching a formal agreement and obtaining the necessary board approvals. This potential acquisition underlines Zijin’s commitment to diversifying its portfolio and establishing a strong foothold in the burgeoning lithium sector. The outcome of these negotiations will undoubtedly be closely watched by industry analysts and investors alike.
