(Yicai Global) Feb. 4 -- CNNC Huayuan Titanium Dioxide will spend CNY12.1 billion (USD1.9 billion) to build a lithium iron phosphate factory in northwestern Gansu province to tap into the rapidly emerging sector of raw materials used to make lithium batteries for new energy vehicles.

The new plant, located in the city Baiyin, will have an annual production capacity of 500,000 metric tons, more than triple the country’s total output, the Jiayuguan, Gansu province-based firm said yesterday. It is expected to generate CNY5.3 billion (USD817.4 million) in profit once up and running.

Unit Gansu Dongfang Titanium Industry will be in charge of the construction of the new plant, which will take place in three stages, it said. No completion dates were given. The subsidiary will be able to supply many of the minerals, such as concentrated sulfuric acid, aqueous ammonia, ferrous sulfate heptahydrate and lithium carbonate, which are needed to make lithium iron phosphate. Other materials can be easily sourced locally, it added.

As a precaution, the Shenzhen bourse stepped in today to question some possible ‘misleading’ statements in the company’s announcement. It is querying the firm’s move into lithium iron phosphate, a product that Huayuan Titanium has never produced before, the proposed scale of the venture and whether the declaration is linked to speculation.

There have been some unusual movements in the firm’s stock price recently. Today, shares in Huayuan Titanium [SHE:002145] crashed 8.9 percent today to close at CNY7.06 (USD1.09). Yet earlier in the day they had gained almost 10 percent to reach CNY8.49. The company has seen a 20 percent gain in its share price over the last two weeks and just last week hit a five-year high.

Editor: Kim Taylor