Zijin Mining Group, one of China’s largest mining companies, announced on Friday that it is in negotiations to acquire a controlling stake in Zangge Mining, a lithium and potash miner. The discussions are with Zangge Mining’s top two shareholders, Tibet Zangge Venture Capital and Ningbo Meishan Bonded Port Area Xinsha Hongyun Investment Management. Together, these shareholders control approximately 40% of Zangge Mining, which has an estimated market valuation of 46.63 billion yuan ($6.4 billion).

The acquisition, if finalized, would solidify Zijin’s influence over strategic assets in China’s resource-rich regions. Zangge Mining operates in Qinghai, an area known for its abundant mineral deposits. The potential transaction would also enable Zijin to further integrate its operations with the Julong copper project in Tibet, a venture that the company already runs jointly with Zangge.

Expansion in Strategic Minerals

The Julong copper project, a critical component of Zijin’s portfolio, has been a focus of the company’s recent investments. Zijin received government approval last year to significantly expand the mine’s capacity, targeting an output of 350,000 tonnes per day. Once this expansion is complete, Julong will rank as China’s largest single copper operation, processing over 100 million tonnes of ore annually. Zijin initially took control of the project in 2020, achieving operational status within 18 months.

In addition to Julong, Zijin owns other key assets in Tibet, including the Zhunuo copper mine, acquired in August 2023. The company also holds significant stakes in local companies such as Yulong Copper and Tianyuan Mining, as well as a controlling interest in lithium producer Lakkor Resources. These holdings underscore Zijin’s strategic focus on consolidating its presence in regions critical to the supply of essential minerals.

Diversification into Battery Metals

The talks with Zangge Mining are part of Zijin’s broader strategy to diversify into battery metals, particularly lithium, which is improtant for electric vehicle (EV) production. Zijin has been actively acquiring lithium assets to position itself as a key supplier in the EV supply chain. Notable additions to its portfolio include Canada’s Neo Lithium, focused on mining in Argentina, and majority stakes in the Lakkor Tso Lithium Salar mine in Tibet and the Xiangyuan lithium mine in Hunan province.

Beyond mining, Zijin is building facilities to produce lithium iron phosphate, a crucial material for EV battery cathodes. This vertical integration aligns with the company’s goal of capitalizing on the global transition to cleaner energy and the growing demand for EVs.

Global Acquisitions and Setbacks

Zijin’s interest in Zangge is the latest in a series of acquisitions aimed at strengthening its position in both battery and precious metals. The company has expanded internationally, acquiring the Akyem gold mine in Ghana, the Rosebel gold mines in Suriname, the La Arena copper-gold mine in Peru, and a stake in the Koné gold project in Côte d’Ivoire.

However, Zijin has faced challenges in its global operations. Weak lithium prices and regulatory hurdles have delayed the start of some projects in Argentina and Tibet, pushing timelines to 2025. Despite these delays, Zijin remains committed to its global lithium strategy, with plans to begin production at its first lithium exploration project in the Democratic Republic of Congo next year.

Zijin’s potential acquisition of Zangge highlights the increasing consolidation in the global mining industry, particularly in the lithium sector. As demand for EV batteries continues to rise, mining giants like Zijin are racing to secure the resources needed to support the energy transition. The deal would also demonstrate China’s continued focus on dominating the supply chains for critical minerals, leveraging state-backed enterprises like Zijin to achieve strategic goals.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.