(Yicai) March 26 -- Ganfeng Lithium Group said the Chinese battery materials supplier plans to ensure the supply of raw materials and hike the production capacity of lithium salts by building a 50-50 joint venture plant with Australia’s Pilbara Minerals.

Ganfeng Lithium and Pilbara have inked an investment agreement to build a factory that processes lithium compounds, whose location has yet to be determined, the Xinyu-based company said late yesterday. Pilbara will pen a 15-year offtake deal to supply 300,000 tons of spodumene concentrate a year to the factory after it is built.

The partners will fund a feasibility study, which will be used to make a final decision on whether to proceed with the project, the Chinese firm noted, without disclosing any further details.

Shares of Ganfeng Lithium [SHE: 002460] closed 1.5 percent higher at CNY37.13 (USD5.14) each today. In Sydney, Pilbara [ASX: PLS] fell 3.6 percent to AUD3.74 (USD2.45).

If the plant does not go ahead, Ganfeng Lithium has agreed to buy 100 kilotons of spodumene concentrate from Pilbara each year between 2027 and 2030 based on an existing offtake contract, it pointed out.

But they will exempt each other from the lithium concentrate procurement obligation previously agreed to after the second-phase expansion project of Pilbara's Pilgangoora mine is completed.

Pilbara has been Ganfeng Lithium's spodumene concentrate supplier since 2017. The pair amended their offtake deal on Jan. 15 so purchases will rise to 310 kt of spodumene concentrate per annum from 160 kt, based on market prices, Pilbara said the same day.

So far this year, West Perth-based Pilbara has also penned new offtake deals with Yahua Industrial Group and Chengxin Lithium Group, two other Chinese processors of lithium salts, with their purchases set to gradually increase to 160 kt and 150 kt by 2026, respectively.

The market price of spodumene concentrate has swung over the past year. Pilbara accepted a quotation of USD1,106 per ton in an auction in the middle of this month, down 85 percent compared with a transaction price of USD7,505 per ton agreed at auction in December 2022. 

Editor: Martin Kadiev