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China's Hainan Mining to invest $164 million in lithium hydroxide plant

Highlights

Construction expected to take 18 months

Company's first involvement in lithium sector

Spodumene to be sourced from Australia

Chinese mining company Hainan Mining Co. has announced that it plans to invest Yuan 1.065 billion ($164 million) in building a 20,000 mt/year battery-grade lithium hydroxide plant at the Hainan Dongfang Industrial Park in the Hainan province.

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It said in an Aug. 23 translated filing to the Shanghai Stock Exchange that it expected construction to take 18 months, after which it would supply battery-grade lithium hydroxide to downstream battery companies.

Hainan said the project was its first involvement in lithium upstream resource processing and production, with the miner's main focus on its iron ore and oil and gas businesses.

The company noted that the 14th Five-Year Strategic Plan stated that "mining, selection and processing of upstream mineral resources in the energy industry is an important direction for industrial transformation and upgrading in the next five years."

Hainan pointed out that the Hainan province was a "relatively good geographical location," as it was closer to Australia, where it would be sourcing the plant's spodumene feedstock, than the Jiangxi and Sichuan provinces, which were the main production areas of lithium hydroxide.

It added that there were also multiple nearby ports, including a large deep-water port, as well as many domestic and foreign air routes, making transportation convenient and reducing logistic costs.

The company said it intended to invest maximum Yuan 500 million of its own funds in the project, with the rest to be borrowed from financing institutions.

Hainan still needs to submit the project plans to a shareholders' meeting for deliberation, and after that will remain subject to the required filings, environmental assessments and safety review approval, as well as construction permits.

The price of spodumene was cited as a project risk, with the company noting that the raw material accounted for a relatively large part of the production cost and prices could be affected by exchange rate fluctuations and possible international political risks.

The S&P Global Platts weekly price of spodumene concentrate with 6% lithium oxide content (SC6) was assessed at $1,300/mt FOB Australia on Aug. 20, up 183% since the start of 2021.

Hainan is not the only Chinese company that plans to take advantage of rising demand for lithium to be used in electric vehicle batteries.

In the past month, EVE Energy has announced plans to build a 30 GWh/year energy storage battery project in Jingmen in Hubei province, while Ningbo Shanshan Co. has also announced plans to invest Yuan 87 billion to construct a 200,000 mt/year lithium-ion battery anode materials plant in the Sichuan province to meet increasing customer demand.

According to S&P Global Platts Analytics, sales of plug-in light duty EVs in China are expected to rise to 4.4 million units in 2025, up from 1.2 million units in 2020, increasing to 9.7 million units in 2030 and 16.8 million units in 2035.