(Yicai Global) April 18 -- Chinese civil explosives supplier Yahua Industrial Group plans to invest CAD5 million (USD4 million) to acquire a 13.2 percent stake in Canadian lithium and gold explorer Ultra Lithium.

Yahua also intends to buy 60 percent of the Ultra Lithium subsidiary that has two lithium mining projects in Forgan Lake and Georgia Lake, the Sichuan province-based company said in a statement yesterday. The price will be decided after asset valuation and will be paid in cash.

The deal could be major for Vancouver-based Ultra Lithium because the startup is in the initial stages with no revenue, according to the Chinese investor. 

This is not the first time that the Canadian firm has attracted investment from China. In February, Zangge Mining said it would pour CAD4.1 million into Ultra Lithium to gain a nearly 19.5 percent stake. Moreover, Zangge said that it will inject funds into the latter's Laguna Verde brine lithium project in Argentina.

The two projects that Yahua is eyeing are located in Ontario, where the local geology makes it possible that both projects have the potential to find super-large spodumene deposits, according to the statement.

The average grade of lithium oxide in the Forgan Lake project is 2.2 percent, with an estimated lithium oxide equivalent of about 140,000 tons. That of the Georgia Lake project is 1.2 percent, with an estimated lithium oxide equivalent of about 65,000 tons.

The joint venture intends to build a local lithium concentrate mining and processing plant with an annual processing capacity of 200,000 tons. The number could even be doubled over a minimum lifespan of 10 years.

Yahua has lately been expanding its overseas assets. Last December, the firm spent AUD3.6 million (USD2.7 million) to acquire 9.5 percent of EV Resources. It also gained the right to buy all the lithium concentrate coming from mines controlled by the Australian green technology metals firm. 

In late February, Yahua announced another investment of AUD2.8 million to acquire a 3.4 percent stake in Australia-registered Abyssinian Metals and obtain the underwriting right of lithium concentrates from its Kenticha mine in Ethiopia.

The latest acquisition failed to boost Yahua’s shares today. The stock [SHE: 002497] dropped 2.6 percent to close at CNY30.60 (USD4.80).

Editor: Emmi Laine, Xiao Yi