(Yicai Global) Feb. 28 -- Insiders at Jiangxi Special Electric Motor and Yongxing Special Materials Technology confirmed that the two suppliers of lithium battery materials have halted their lithium mining businesses in Yichun, China because of an investigation into illegal mining in the city known as ‘Asia’s lithium capital.’

Jiangxi Special Electric’s mining operations are expected to resume around the middle of next month, the source at the Yichun-based company said, adding that the production halt will impact its operating performance this month.

China’s government sent a team from the ministries of natural resources, industry and information technology, and public security to Yichun -- a Jiangxi province city that is rich in lithium resources -- to determine if companies mined lithium without permits or with expired licenses, local officials and sources at lithium firms told Yicai Global on Feb. 26.

“The working group came mainly to probe into illegal acts such as theft and excessive mining,” the insider at Jiangxi Special Electric noted. “There are indeed some mining businesses that do not abide by the regulations.”

In previous years, mining was suspended during the rainy season around June and July, and during China’s so-called Two Sessions -- the annual meetings of the country’s two main political bodies -- in March, the person noted.

Shares of Jiangxi Special Electric [SHE: 002176] fell 0.7 percent to close at CNY17.90 (USD2.58) today.

Yongxing Special Materials halted extraction from its mines in Yichun, and it is unclear for how long they will be closed, the insider at the Huzhou-based company told ChinaFund. The firm has sufficient lithium ore inventory, so processing was unaffected, the person added.

Yongxing Special Materials [SHE: 002756] ended 0.3 percent higher today at CNY91.84 a share.

Nineteen Chinese mainland-listed companies have lithium mining operations in Yichun, 15 of which expect their net profit to have climbed last year.

Ganfeng Lithium Group, another battery materials supplier, said its lithium salts production base in Yichun was not affected by the investigation because it mainly targets lepidolite ores, and the firm’s plant does not use lepidolite as raw material because it has a relatively low content of lithium and can cause pollution, according to Bkeconomy.com, a media outlet of The Beijing News.

Shares of Ganfeng Lithium [SHE: 002460] fell 0.7 percent to end at CNY72.40 in Shenzhen, while its Hong Kong-listed stock [HKG: 1772] sank 4.5 percent to HKD54.70 (USD6.97).

Editor: Futura Costaglione