(Yicai) Dec. 29 -- Nanshi Lithium, which used to be one of China's biggest producers of lithium carbonate, could finally be dissolved due to prolonged shareholder disagreements.

On Nov. 17, a court in Yichun reopened a case that Nanshi Industrial Investment Group, the controlling stockholder of Nanshi, started against other shareholders in 2021 to ask for the court to legally terminate the maker of battery materials, according to public information. Wu Jianfei and Wu Qian, the other shareholders, had appealed the earlier verdict of forced dissolution.

The owners have been at loggerheads for years. Wu Jianfei and his sister Wu Qian offered CNY200 million (USD28.2 million) to buy a combined 40 percent stake in Nanshi in March 2020, with the remaining 60 percent stake belonging to Nanshi Industrial. But already next year, the group started fighting in court, based on multiple documents seen by Yicai.

In March 2021, Wu Jianfei sued Nanshi and the controlling shareholder, demanding repayment of CNY20 million (USD2.8 million), including interest. Four months later, Nanshi Industrial sued Nanshi and the court ruled that the unit needs to repay around CNY483 million plus interest to the parent. The original loan had allegedly exceeded CNY530 million but more than CNY40 million was already repaid.

The latter decision caused a shake-up as Nanshi's assets were auctioned. Tianzhuo New Materials, another battery materials firm also based in the "lithium capital of Asia," Yichun, paid the starting price of CNY508 million for the assets even though the appraised value was CNY726 million.

Wu Jianfei claimed that Nanshi Industrial had forced the minority shareholder to sell the equity at a low price following the litigation about the over CNY530 million loan that the Wus were not informed about. Nanshi Industrial had not brought the loan matter to the board of directors or a shareholders’ meeting, he added.

Founded in 2017, Nanshi was troubled almost from the get-go due to mismanagement. Wu Jianfei said that Nanshi Industrial was trying to transfer the unit's assets and profit via the CNY530 million request in 2021 and removed staff hired by him after lithium carbonate prices surged and Nanshi achieved technological breakthroughs to increase its production capacity.

The tensions came at the wrong time as prices of lithium carbonate jumped to exceed CNY200,000 (USD28,200) per ton by December 2021 from around CNY50,000 (7,100) in December 2020. Last year, the prices surged even higher to surpass CNY500,000 per ton.

A source from Nanshi Industrial told Yicai that it was not convenient to respond to the disputes. But Wu Jianfei took a series of actions that would ruin Nanshi's production and operation, which caused conflicts and a loss of mutual trust among shareholders, the person said, adding that it is impossible to keep working together.

The new buyer, Yichun Tianzhuo, is a subsidiary of Zhicun Lithium. The insider at Nanshi Industrial said that Nanshi is not linked to Zhicun. But their executives should be familiar with each other as media reports show that Nan Jinxi, who owns half of Nanshi Industrial, used to be the chairperson of Zhicun Lithium. The other half of Nanshi Industrial is owned by Nan Jinxi's brother Nan Jinle. Nan Dongdong, the legal representative of Zhicun, is linked to another firm controlled by the brothers.

Jiangxi province-based Zhicun Lithium was one of China's 10 biggest makers of lithium carbonate last year, contributing almost 17 percent to the total output of the top 10.

Nanshi has garnered a total investment of CNY1.6 billion (USD225.8 million) since the start. It is mainly engaged in the production and sales of battery-grade and industry-grade lithium carbonate, lithium hydroxide, and others.

Editor: Emmi Laine