OZ firm IGO Ltd comes to the rescue of an under weather Chinese firm advised by Clayton Utz and Herbert Smith Freehills on $1.4 Billion Joint Venture

OZ firm IGO Ltd comes to the rescue of an under weather Chinese firm advised by Clayton Utz and Herbert Smith Freehills on $1.4 Billion Joint Venture

The debt-ridden Tianqi Lithium, based in Western Australia, is the world's largest producer of lithium chemical used in electric vehicle batteries

A Perth-based nickel and gold miner IGO Ltd has come to the rescue of the debt-laden Chinese company Tianqi Lithium by announcing investment worth $1.4 billion. Tianqi Lithium controls Green bushes, which is the world's biggest hard-rock lithium mine.

Interestingly, an Australian company coming to the rescue of a Chinese firm has come at a point when inter-government relations between Australia and China is witnessing its lowest ebb in the wake of the Corona virus pandemic outbreak. Increased naval activities of China in South China sea in which Australia has a big stake and attempts of some Chinese investors to take over some Australian companies currently reeling under the economic slump following the Covid-19 outbreak have strained bilateral and multilateral ties between the two countries.

Tianqi is one of the world's largest producers of lithium chemical used in electric vehicle batteries. The growing demand for the zero-emission electric vehicles has opened the doors for an opportunity for all firms associated with lithium battery production starting from the mining stage.

Tianqi has been under the weather with its inability to repay loans. It was supposed to repay a $1.88 billion loan towards the end of November and had secured one-month moratorium.

According to the details coming out from Down Under, IGO Lithium Holdings would take up 49 per cent stake in Tianqi Lithium Energy Australia (TLEA) valued at $1.4 billion, while Tianqi would hold 51 per cent stakes in the firm. IGO Lithium Holdings' 49 per cent stake in TLEA would add on to its 24.99 per cent stakes in the Green bushes, making it a major player in the lucrative Lithium mining and processing business.

TLEA intends to use the money it will get to repay the existing $1.2 billion worth principal on loan and interests. The deal, however, is subject to approval from Australia's Foreign Investment Review Board, which is expected to focus on the issue from January 5 2021, onwards.

If approved, TLEA plans to extend loan repayment term by two years to 25 November 2022, which should give it enough leeway to restructure its finances and existing business. TLEA may also take up a shareholder loan offered by its chairman Jiang Weiping worth $117 million which will attract an interest rate of not higher than five per cent and has to be repaid within five years. This shareholder loan can be availed from 1 February. TLEA is confident that the US-based Albemarle Corps right to the first refusal would not come in the way of its deal with the IGO. Albemarle Corp holds 49 per cent stake in the Talison Lithium joint venture that operates Green bushes. Albemarle Corp had earlier expressed its interest in taking full control of the Green bushes.

A clear picture is expected to emerge in this case only after Australia's Foreign Investment Review Board takes a final call on this issue.

The joint venture advised by Clayton Utz and Herbert Smith Freehills