Zijin Mining Eyes Control of Zangge Mining, Expands Lithium Market Footprint

Zijin Mining Eyes Control of Zangge Mining, Expands Lithium Market Footprint
Published on: Jan 12, 2025

Entering 2025, Zijin Mining Group (OTC Pink:ZIJMF, SHA:601899), a Chinese copper and gold producer known for its aggressive acquisition strategy, continues its buying spree. The company recently disclosed that it is negotiating with the two major shareholders of Zangge Mining (SZSE:000408) for a potential acquisition, aiming to further strengthen its position in the lithium resource market.

According to a statement on the potential acquisition, Zijin Mining is in discussions with Tibet Zangge Venture Capital and Ningbo Meishan Bonded Port Area Xinsha Hongyun Investment Management. These discussions may lead to a change in control of Zangge Mining. The two shareholders collectively hold about 40% of Zangge Mining, with approximately 24.72% of the shares up for transfer. Zangge Mining is valued at approximately 46.6 billion yuan (US$6.4 billion).

Zangge Mining primarily produces potash fertilizer, but about one-third of its revenue comes from lithium extraction, mainly from the mineral-rich salt lakes in Qinghai, western China. In the first nine months of 2024, Zangge Mining reported a production of 9,278 metric tons of lithium carbonate.

Zijin Mining is one of China’s most acquisitive metals companies and the largest listed mining company, focusing on gold, copper, zinc, and other base metals. In recent years, Zijin Mining has accelerated its investment in new energy materials. By mid-2024, the company’s lithium resource rights totaled 14.11 million tons, second only to Ganfeng Lithium (002460.SZ) and Tianqi Lithium (002466.SZ). If this acquisition is successful, Zijin Mining will further expand its lithium resource portfolio.

Beyond China, Zijin Mining is also advancing its lithium projects overseas. The company plans to start lithium production in the Democratic Republic of Congo in 2026. However, due to weak lithium prices and permitting delays, projects in Argentina and Tibet have been postponed to 2025. Zijin’s strategic plan aims to achieve an annual production capacity of 300,000 tons of lithium by 2028. Although current production is limited, acquiring Zangge Mining could accelerate progress toward this goal.

Negotiations are ongoing, and the transaction still requires the approval of Zijin’s board of directors and the formal signing of the acquisition agreement.

Lithium Sector M&A Heating Up

Zijin Mining’s interest in Zangge Mining reflects the growing trend of mergers and acquisitions in the lithium industry. Major mining companies like Rio Tinto (ASX:RIO, NYSE:RIO, LSE:RIO) are also making acquisitions in the lithium sector, as evidenced by Rio Tinto’s US$6.7 billion acquisition of Arcadium Lithium (NYSE:ALTM, ASX:LTM) last year.

Lithium is a critical component in the transition to clean energy, and companies like Zijin Mining are leveraging their expertise in resource development to seize market opportunities. Since late 2022, the lithium market has experienced significant volatility, with prices plummeting nearly 90% from their peak. However, this downturn has created acquisition opportunities, as producers look to consolidate and optimize operations under weaker financial conditions.

Regarding the development of the lithium industry, Zijin Mining has previously stated that the current oversupply situation in the lithium market has not significantly reversed, and lithium prices are expected to continue to decline in the short term. However, the company believes that the rapid price drop will help rebalance supply and demand more quickly, and that the long-term demand for electric vehicles and energy storage remains substantial. It is projected that global lithium carbonate demand will exceed 3 million tons by 2030.

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