(Yicai) June 24 -- Shares of Zangge Mining soared to a record high after a lithium extraction project in western China, in which the firm holds a stake, received regulatory approval.

Zangge [SHE: 000408], a major Chinese producer of potash, lithium, and copper, rose to a historic high of CNY42.88 (USD6) today, closing up 3 percent in Shenzhen.

Local authorities have approved the project company’s application to develop resources at Mamicuo Salt Lake in the Xizang Autonomous Region, Qinghai province-based Zangge said earlier today. Construction must begin within two years.

The total planned investment is CNY4.5 billion (USD637 million). Using adsorption techniques to extract lithium from brine, the project aims to produce 50,000 tons of battery-grade lithium carbonate annually, along with 17,000 tons of borax as a by-product. Construction is expected to take two years, with a projected 33-year mine life.

The project company is majority-owned (57.2 percent) by the Jiangsu Qinghai-Tibetan New Energy Industry Development Fund Partnership, a private equity fund. Through the fund, Zangge indirectly holds nearly 27 percent of the project company, ranking behind only the Fifth Geological Explore Team, which owns 31.5 percent. The Fifth Geological is controlled by the local government of Xizang Autonomous Region.

The endeavor has a strong financial outlook. Zangge’s Board Secretary Li Ruixue told investors in 2023 that the Mamicuo Salt Lake contains around 2.5 million tons of lithium chloride, equivalent to about 2.2 million tons of lithium carbonate, with production costs controlled within CNY25,000 (USD3,483) per ton.

However, the project’s remote location -- at an altitude of around 4,700 meters in Tibet’s Ali prefecture -- and poor road infrastructure pose logistical challenges for development.

Zangge, China’s second-largest potash producer, is already extracting lithium at Qarhan Salt Lake in Qinghai. Last year, it produced 11,600 tons of lithium carbonate, generating CNY1 billion in revenue, which accounted for over 31 percent of the company’s total income. That operation contributed CNY491 million (USD68.4 million) in net profit, according to its latest annual report.

Editor: Emmi Laine