Tianqi Lithium Warns of 2024 Loss, Halts Australia Expansion

(Bloomberg) -- Miner Tianqi Lithium Corp. warned investors it would post a net loss for 2024 and halt an expansion project in Australia to cope with languishing metal prices.

The Chinese producer expects a preliminary net loss of between 7.1 billion and 8.2 billion yuan ($1.1 billion) for the period, Tianqi said in a statement late on Thursday. Explaining the drop, it said in a separate statement that poor prices and changes to constructions plans had resulted in an impairment currently estimated at 2.2 billion yuan. That figure could increase as it considers the impact of altered Australian plans.

Lower income from its investment in Chilean lithium producer Sociedad Química y Minera de Chile also contributed to the steeper loss.

Tianqi plans to pause construction of the second production line at a lithium refinery in Western Australia — which it owns with miner IGO Ltd. — “to avoid further unnecessary use of resources and minimize potential financial losses”, it said. The high-profile Kwinana plant was among the projects visited by Chinese Prime Minister Li Qiang during a trip last year.

The warnings are testament to the travails of the battery-metals industry, which is struggling to adapt to prices that have plunged almost 90% from a peak in 2022. The crash has forced companies worldwide to rein in spending and cut output — and the market is still seen likely to be in oversupply this year, due to lukewarm demand for electric vehicles.

Tianqi’s shares in Shenzhen slid as much as 4.3% to 29.85 yuan in morning trade on Friday.

The construction of the second production line at Kwinana — which had a planned lithium hydroxide capacity of 24,000 tons a year — “is not economically viable”, Tianqi said in a statement, adding that the decision came after considering market conditions, the operational performance of the first production line and the estimated future costs. 

The second line, which has already had preliminary investment of 1.4 billion yuan, has been delayed since 2020, when the company was facing a liquidity crisis. Tianqi is still ramping up the first line of the project.

“This is not a surprise and removes an overhang,” for partner IGO, analysts at Citigroup Inc. wrote in a note — adding that the question will be how much time the Australian company will give the first line to perform and whether the economics will eventually stack up. “Investor sentiment towards Kwinana is weak.” 

IGO said last month that a major shutdown at the plant had allowed for maintenance and performance improvements. It added that the joint venture had seen an increase in lithium hydroxide inventory over recent months, which is expected to continue in the short to medium term.

IGO shares in Sydney surged as much as 4.6% before paring gains.

(Updates with details, share price in sixth paragraph.)

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