China electric cars/lithium: gold miner finds a new vein

China electric cars/lithium: gold miner finds a new vein

Electric car sales are zooming ahead in China. Neither its slowing economy nor chip shortages have left a dent. A battery shortage, however, would be a different story. A local gold miner agrees, keen to produce the precious lithium needed for the batteries.

Zijin Mining’s all-cash $768m (C$960m) acquisition of Canada’s Neo Lithium might look steep for a company forecasting ebitda losses through 2022. It paid a reasonable 18 per cent premium, though its share price has more than doubled this year, an increase that has lagged behind the lithium price.

In the context of China’s world-leading electric car market, the purchase makes sense. New energy vehicle sales, both battery-powered and plug-in hybrids, rose 150 per cent last month from a year earlier. Overall auto sales fell by a fifth. Neo Lithium owns and mines some of the biggest lithium deposits in the world.

Soaring demand in China means companies must scramble for batteries and their key ingredients. The country accounts for 80 per cent of the world’s battery cell manufacturing capacity, making it the world’s largest consumer of lithium — nearly 40 per cent of the total. Surging sales of EVs mean lithium carbonate prices are up fivefold in the past year to