SHANGHAI (Reuters) - China automaker Great Wall Motor Co Ltd (601633.SS)(2333.HK) will take a 3.5 percent stake in Australian lithium miner Pilbara Minerals Ltd (PLS.AX), the firm said late on Thursday, helping shore up supply of a key mineral for electric vehicles.
China on Thursday said carmakers would need to hit a quota for new energy vehicles by 2019, part of a major push by the world’s biggest auto market to phase out petrol cars and shift toward pure electric and plug-in hybrids.
Great Wall said in a statement to the Hong Kong stock exchange it would take the equity interest in Pilbara for around A$28 million ($22 million) via a wholly-owned subsidiary Billion Sunny Development Ltd.
Pilbara owns the Pilgangoora Lithium-Tantalum project south of Port Hedland in Western Australia, which is expected to begin production in the first half of 2018.
The deal would help Great Wall secure supplies of a mineral key for developing electric vehicles. China, keen to combat pollution and close a competitive gap with global rivals, wants to set aggressive goals for electric and plug-in hybrid cars to make up at least a fifth of Chinese auto sales by 2025.
Great Wall has also agreed an off-take deal with Pilbara for 75,000 tonnes a year of spodumene concentrate - a source of lithium - for the second stage of Pilgangoora’s development, set to begin in 2020, the firms said.
Great Wall also has the option to secure a further 75,000 tonnes a year of the mineral if it provides Pilbara with $50 million of debt financing for the project’s expansion.
“(The deal) highlights the strategic importance for the global automotive sector of securing access to large scale, consistent, high quality sources of battery raw materials in low-risk jurisdictions,” Pilbara chief executive Ken Brinsden said in a statement.
Great Wall’s shares were suspended from trading on Friday. Pilbara’s shares jumped 16 percent to their highest level in over a year.
Reporting by Adam Jourdan; Editing by Richard Pullin