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Western Mining calls off 1.78B yuan acquisition of lithium miner

Western Mining Co. Ltd. said Aug. 5 that it terminated a 1.78 billion Chinese yuan acquisition of Qinghai Lithium Co. Ltd. as it remained unclear if the latter would be able to secure mining licenses for its main operating assets.

President Li Yibang told investors during an Aug. 7 webcast that Western Mining was open to further negotiations with Qinghai Lithium, a unit of Western Mining's state-owned parent Western Mining Group, after the lithium producer secures the required mining licenses.

"The lithium unit is required to submit supplementary materials for mining license applications, which is expected to take a relatively long time ... We currently do not have an estimate on when it can be completed but we would be open to further discussion if the lithium producer obtained the mining licenses," Li said.

Qinghai Lithium's exploration license for four deposits in an area of around 270 square kilometers in Qinghai province, China, expired on Aug. 5, according to a previous statement.

The lithium producer has been applying for mining licenses to replace the exploration license since the deal was announced in June 2016.

"The company plans to continue to increase reserves and steadily push forward with our strategic plans in the nonferrous metals sector," Li said, responding to a question on whether or not the company seek acquisitions of other lithium resources.

The Qinghai Lithium acquisition is part of a larger 2.5 billion yuan asset restructuring plan between Western Mining and its state-owned parent. The second deal under the plan involved Western Mining issuing shares worth 727.74 million yuan to acquire lead and zinc producer Daliang Mining Co. Ltd.

In a separate Aug. 5 statement, the company said it would complete the transaction by paying cash instead. The total amount to be paid will be subject to discussions with the three stakeholders, Western Mining Group, Sichuan Development Asset Management Co. Ltd. and AVIC Trust Co. Ltd.

The price will also reference a recently released third-party asset appraisal report, according to the statement.

Li said during the webcast that the expected cash payments would not add pressure to its liquidity, as the company has ample cash from strong earnings performance.

The company's net profit for the first half surged 747% year over year to 260.0 million yuan on price hikes in its main products of lead, zinc and copper.

As of Aug. 4, US$1 was equivalent to 6.72 Chinese yuan.