Further to my post re LAC's JV Partner
SQM
After reading the article below, it's not hard to envision both the auto manufacturing industry and the U.S. Government scrambling to work with LAC, as the largest Li holder in the U.S. If ensuring a secure and robust supply of domestic Li hasn't already become a strategic national security issue, it is rapidly becoming one. There is no way that the West will simply concede this game to the Chinese. With geo-political forces at play, in addition to the usual macro and micro economic dynamics, LAC is about to get really interesting (read: profitable for shareholders). Of course, that's just my opinion, I could be wrong. Anyway, I hope you enjoy the article.
BREAKINGVIEWS-China's Chile deal highlights a battery dilemma
6:50 AM ET, 05/16/2018 - Reuters
(The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Adds graphic.)
By Clara Ferreira-Marques
SINGAPORE, May 16 (Reuters Breakingviews) - China's latest resources gambit highlights a battery ingredient dilemma. Tianqi Lithium is set to buy a stake in $14.9 billion Chilean giant Sociedad Quimica y Minera. That suggests local worries about Beijing's excessive control over the metal's supply have eased. Still, if approved, the deal would hamper resource-rich nations’ scope to push back.
Tianqi, an ambitious Shenzhen-listed producer, has been circling SQM since 2016, but its bid for Canadian firm Nutrien's roughly 30 percent stake hit a roadblock in March. Two days before President Sebastián Piñera took office, the government asked regulators to block a sale, arguing it would "gravely distort market competition". If Tianqi’s deal goes through, it would imply a softening of stance.
SQM is getting a decent deal: at the reported 22 percent premium to the market price, Tianqi is paying almost 44 times expected earnings for a 24 percent stake, compared to SQM's already-rich 30 times. Yet the concerns expressed in March are not unfounded.
China Inc has moved swiftly to secure supply of ingredients to feed a strategic battery industry. The boss of top cobalt producer Glencore - who sold a chunk of output to China's GEM in March - has warned the Western car industry it is waking up "too late". As well as mines at home, Tianqi controls the giant Greenbushes mine in Australia, run with U.S. partner Albemarle. It also has processing facilities, and a partnership to invest in lithium-ion batteries.
One answer to China's growing clout would be for the countries that control the resources to club together to balance that out, with a coordinated approach rather than individual sabre-rattling. There are reasons for that to work: cobalt and lithium, two key ingredients, are highly concentrated. In lithium specifically, Australia and Chile together accounted for three-quarters of 2017 global production. An OPEC-style model has been floated sporadically around the 'lithium triangle': Bolivia, Chile and Argentina.
Yet an “OLEC” also faces big challenges. Instead of an Aramco <IPO-ARMO.SE> of lithium there are private companies, which might attract antitrust attention and complicate disciplined output cuts. The bigger issue is China, increasingly a behemoth on both the producer and the consumer side of the fence. Insufficient domestic production is increasing, but bold bets like SQM spread out supply risk further. China may already be too big to stop.
