The acquisition of Prospect Lithium Zimbabwe by Huayou International Mining was only approved by the Competition and Tariff Commission (CTC) on condition the new owners would undertake to produce battery grade lithium in Zimbabwe within five years of receiving approval, Business Weekly can reveal.
Early this year, Prospect Lithium Zimbabwe (Prospect) sold its Arcadia Project to Huayou International Mining (Huayou) for US$365 million.
The Arcadia Project is the largest JORC Code reported lithium deposit in Africa, comprising ~808 000t contained lithium oxide (over ~2 000 000t contained lithium carbonate equivalent or LCE).
This makes it a globally significant hard rock of lithium resource being rapidly developed, focusing on near term production of high purity petalite and spodumene lithium concentrate.
It was sold to Huayou which is an investment holding company of Zhejiang Huayou Cobalt Co Ltd that specialises in research, development and manufacturing of new energy lithium batteries and new cobalt materials.
In its analysis the Competition and Tariff Commission (CTC) considered theories of harm associated with vertical mergers which include input and market foreclosure theories of harm.
According to CTC, foreclosure occurs when Huayou and Prospect’s rivals or competitors fail to access supplies or markets as a result of the merger, thereby reducing these company rivals’ ability to compete.
By Huayou acquiring control over the supply of lithium concentrate – a critical input in the production of battery grade lithium, there will be a likelihood of all lithium concentrate produced by Prospect being used by Huayou alone, said the CTC in its analysis.
The CTC also concluded that customer foreclosure is unlikely to harm competition in Zimbabwe.
Given the analysis above, the transaction was approved subject to the condition that “the merged entity, its subsidiaries, affiliates and successors in title should undertake to produce battery grade lithium in Zimbabwe within five years of receiving this determination”.
Battery grade lithium carbonate is a key component in electric cars’ batteries.
The merged entity is also expected to submit to the Commission “its plan to implement the condition above”, reads the CTC’s first quarter Newsletter in part.
Before disposing of its stake in Arcadia, Prospect had modified an existing laboratory complex at the Chaka Mine in the Kwekwe to produce battery grade lithium carbonate.
Interestingly, despite the conditions by the CTC, Huayou reportedly said it did not make sense to establish a converter for producing battery-grade lithium carbonate locally.
It said the country lack supporting and auxiliary materials for battery-grade lithium carbonate production.
“There is a chronic shortage of these supporting and auxiliary materials in Africa, and the costs incurred by importation would be huge and unaffordable”, reads part of Huayou response to questions by NewZWire, a local online publication.
While the CTC gave Huayou 5 years to produce battery grade lithium in Zimbabwe the company said there “is a certain possibility in practice to establish a converter to produce lithium sulphate from the lithium concentrate within ten years from the date of commencement of commercial production of lithium concentrate under Arcadia Project”.