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China Lithium Giant Expects to Access Funds, Warns of Asset Sale

Annie Lee

(Bloomberg) -- Tianqi Lithium Corp., which is facing a liquidity crunch after buying a stake in a rival, said it expects to obtain sufficient funds to support its operating needs for the next 12 months.

The company said it plans measures to improve liquidity, but also warned there’s still a possibility it will need to sell some assets under unfavorable circumstances to repay debt, according to a filing to the Shenzhen stock exchange on Sunday.

Tianqi has been wrestling with liquidity issues stemming from a loan it took out to fund a more than $4 billion stake in Chile’s Soc. Quimica y Minera de Chile SA in 2018. About $1.88 billion of the syndicated financing, led by China CITIC Bank, is due in November. The Chinese lithium producer is still in talks with banks to amend the terms of the loan, including modifying the maturity and interest rate.

The company is also looking to adopt measures such as tapping the financing capabilities of high-quality subsidiaries and accelerating equity financing to relieve its financial strain, it said in the statement. The company warned of potential defaults in April and has previously said it was studying financial options, including the introduction of strategic investors or the sale of assets and equity.

​Lithium prices have tumbled since Tianqi bought its stake in SQM less than two years ago, weighing on profits and its capacity to repay the debt load. The company reported a net loss of 696.6 million yuan ($101 million) in the first half of the year, citing lower lithium product prices and a decline in investment income from the weaker performance in SQM.

While the coronavirus pandemic has hurt lithium demand and prices, the sector is set to benefit from green policies that should accelerate the purchase of electric cars. Tianqi expects demand for lithium resources to improve on a slew of stimulus measures, adding that there have been signs of slight rebound in lithium carbonate prices as of July.

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