(Yicai Global) Sept. 30 -- Ternary lithium materials giant Huayou Holding Group aims to expand into upstream raw materials by joining with Yuntianhua, which owns phosphate ore resources and primary processing capabilities, in a deal that will also give its partner a foothold in the profitable lithium battery market.

Under the deal signed yesterday, Tongxiang-based Huayou will take a 49 percent stake in a project company owned by Yuntianhua that is investing in a 500,000 ton-a-year iron phosphate plant, of which the first 100 ton phase has gone into operation.

Iron phosphate is the main raw material for the production of lithium iron phosphate, which is the main component of the cathode material in batteries.

Kunming-based Yuntianhua, a large fertilizer producer, will also take a 49 percent in a project firm owned by Huayou that is planning to build a lithium iron phosphate plant with an annual capacity of 500,000 tons. It is slated for completion in 2025.

Shares of Yuntianhua [SHA: 600096], which rose more than 3 percent in trading this morning, closed up 1 percent at CNY23.73 (USD3.34) each.

Huayou said the actual costs involved in the deal will be decided through open market bidding.

Huayou’s listed unit Huayou Cobalt mainly focuses on the processing and production of ternary lithium battery cathode materials and upstream raw materials. In recent years, Huayou has also started to expand its business into raw materials for lithium iron phosphate batteries and it owns a lithium iron phosphate cathode material production plant in Inner Mongolia.

Yuntianhua has an annual phosphate ore mining capacity of 18 million tons.

Editor: Tom Litting