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Tianqi Lithium, China's largest lithium producer, said its net profit fell 83 percent in the first quarter due to weak lithium prices and high interest payments on a loan contracted to acquire a $ 4.1 billion stake in SQM, its Chilean rival.
The company is the latest victim of falling commodity prices for batteries, following an increase in supply in recent years in anticipation of rising sales of electric cars.
The price of lithium carbonate has fallen by 43% over the last year, according to Benchmark Mineral Intelligence, based in London.
Last year, Tianqi made a bold bid to acquire $ 4.1 billion from SQM, Chile's largest lithium producer. The company, controlled by the son-in-law of the former Chilean dictator, General Augusto Pinochet, is one of the cheapest lithium producers in the world.
But the deal left Tianqi struggling with debt. The company announced its intention to raise 7 billion rand by issuing 343 million shares to repay its loans.
Net income fell 83% to 111.3 million rand in the first quarter, the paper said. Revenues decreased by 20% to 1.34 billion rand.
Tianqi said that despite falling lithium prices, it had maintained "healthy" cash flows and "industry leader" profit margins.
Tianqi announced an extension of its giant Talison lithium mine in Australia and the construction of a lithium hydroxide processing plant in the country "in order to meet the growing demand of customers".
"The company thinks that in the long run, demand for lithium products will be driven by the downstream market and will remain strong," Tianqi said. "The company will continue to advance its plans to increase production capacity."
Tianqi lost 4% of its shares on the Shenzhen Stock Exchange Tuesday to trade at RMB 29.63.
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