China Lithium Giant Faces Debt Mountain After Deal at Cycle Top (Financial Post/Bloomberg – January 31, 2020)

(Bloomberg) — After borrowing billions to fund an overseas expansion to ride a lithium boom, a collapse in prices has left one of the world’s top producers straining under a mountain of debt.

Valued at more than $6 billion, Tianqi Lithium Corp.’s predicament highlights the risks of boom-and-bust cycles in commodity markets that can punish mistimed or over-extended ventures, even in sectors fated to become dominant.

While long-term prospects for lithium are bullish as demand for electric-vehicle batteries booms, the sector is reeling from a prolonged price slump triggered by an explosion in supply and reduction of EV subsidies in China, the biggest auto market.

Tianqi is staring down a $3.5 billion loan from China CITIC Bank that it used to buy a 24% stake in a Chilean rival in May 2018. About $2.3 billion of that is scheduled to come due in November, Moody’s Investors Service said in a report last month.

The company’s $300 million offshore bonds sank the most on record last week amid reports that the giant miner was facing uncertainty over the repayment of just 300 million yuan ($43 million) of debt. They’ve since been drifting about 66 cents on the dollar, near an all-time low, amid continued concern about its financial health.

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