Lithium Producer Ganfeng Climbs After Filing $1-billion Hong Kong IPO

Shares of China’s Ganfeng Lithium (SZSE:002460) surged more than 6 percent after the company filed for an initial public offering in Hong Kong.

The Shenzhen-listed company has hired Citi for the process and could raise at least $1 to $1.5 billion, sources told the Financial Times on Wednesday (February 14).

Ganfeng, one of the world’s top lithium producers, will use the money for acquisitions, further exploration and to expand capacity to meet rapidly growing demand from the electric vehicle (EV) sector.

The move comes at a time when carmakers are looking to secure supply of lithium, a key element in electric car batteries, to ensure mass production of EVs in the coming decades.

Earlier this week, BMW (ETR:BMW) was said to be close to signing long-term lithium and cobalt deals, while Volkswagen (ETR:VOW3) has been looking to secure supply of battery metals since last year.

According to CRU Group, Ganfeng is the world’s third-largest lithium compounds producer and the world’s largest lithium metals producer in terms of production capacity.

The company has interests in six lithium resources in Australia, Argentina, China and Ireland, but its primary source of lithium raw materials is Mount Marion in Western Australia.

“As part of our expansion plan, we plan to increase our mineral resources through acquisitions of and/or investments in companies with existing exploration rights and additional mining assets,” Ganfeng said.

Some of the funds from the offering will be used to further develop Ganfeng’s partnership with Lithium Americas (NYSE:LAC), which is developing the Cauchari-Olaroz project in Argentina. The Chinese company has a $125-million credit line with Lithium Americas.

Last year, Ganfeng also signed an offtake agreement with Pilbara Minerals (ASX:PLS), which is developing the Pilgangoora lithium-tantalum project. Pilbara recently announced plans to expand the project in 2018.

On Thursday (February 15), shares of Ganfeng closed up 6.33 percent, at 66.38 yuan, in Shenzhen. The company has been on an uptrend since last year, and is up more than 147 percent year-on-year.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.