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Contemporary Amperex Technology Co Ltd (CATL) and Zhejiang Huayou Cobalt are each in talks to buy stakes of around 10% in Chinese miner Jinchuan Group International Resources Co worth HK$2 billion ($257 million), sources told Reuters on Thursday.
Top Chinese battery maker CATL is looking to shore up supply of raw materials such as cobalt, prices for which have risen sharply this year.
It has submitted an offer to buy 9.9% of Jinchuan International which would value the stake at about HK$2 billion, and would secure at least 3,000 tonnes of cobalt per year through the deal, two sources with direct knowledge of the matter said.
CATL denied it would buy such a stake.
Jinchuan Group produced 4,158 tonnes of cobalt from the Ruashi mine in the DRC last year
Jinchuan International said in a filing it had been in “preliminary discussions with independent third parties” about possibly issuing new shares, without naming the parties. It described the talks as “premature” and said that had been no contact on the matter since around Aug. 2.
The CATL offer represents a premium of about 40% to Jinchuan International’s average share price of HK$1.14 over the past month and would value the company at around HK$20.2 billion.
The sources said CATL had wanted to buy almost 20% and take twice as much cobalt but this was rejected by Jinchuan International, the Hong Kong-listed arm of state-run metal producer Jinchuan Group which mines cobalt in the Democratic Republic of Congo (DRC).
Standard Chartered is the main bank advising on the deal, the sources said. The bank did not immediately respond to a request for comment.
One of the sources told Reuters that Huayou, already one of the world’s biggest cobalt producers, was in separate discussions for a 9.9% stake in Jinchuan International.
A Huayou spokesperson said this was not the case.
Jinchuan International shares soared as much as 90.5% to HK$2.00 ($0.2569) on Thursday, the highest since March 2018, after Bloomberg News reported CATL was in initial discussions to buy a stake of around 10%.
The company produced 4,158 tonnes of cobalt from the Ruashi mine in the DRC last year. It aims to expand production to 13,000 tonnes per year by 2023, the two sources said, with one adding that supply from another DRC mine CATL has invested in will not be available until 2026.
In April, a CATL unit agreed to pay $137.5 million for a stake in China Molybdenum Co’s (CMOC) Kisanfu copper-cobalt mine.
CMOC has yet to reveal a timeframe for production at Kisanfu.
“We see CATL’s potential further expansion into cobalt mining as a proof of solid demand for cobalt,” even as low-cobalt and cobalt-free batteries become more popular, Daiwa Capital Markets said in a note.
($1 = 7.7861 Hong Kong dollars)
(By Julie Zhu, Bhargav Acharya, Tom Daly and Shivani Singh; Editing by Tomasz Janowski and Jason Neely)
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