The Scramble for Lithium Mines and the Resource Bubbles Turn Critical

6 min readMay 27, 2022


A recent auction in China for a controlling stake in an enterprise has attracted widespread attention. The 54.2857% stake in Yajiang Snowway Mining Development, formerly held by Chengdu Xingneng New Materials, was auctioned for RMB 2 billion on’s judicial auction platform on May 21. According to the Cailian news agency, if the amount of debts is taken into account, the total consideration of the 54.3% stake of Yajiang Snowway in this auction will reach about RMB 2.9 billion. For Yajiang Snowway, which is in bankruptcy and liquidation, the high auction price was due to its mining rights of the Dechenonba lithium mine in Sichuan’s Yajiang area. The Dechenonba lithium mine has a reserve of 24.92 million tons, equivalent to about 720,000 tons of lithium carbonate equivalent (LCE). Based on the transaction price of about RMB 7,380 per ton of lithium carbonate, some market institutions believe that the consideration of this transaction is far higher than the price of other mergers and acquisitions in the lithium industry since 2021. The fierce “scramble” for lithium mines is an indication of anxiety over the lithium shortage.

According to the upstream industry theory proposed by ANBOUND, under the prospect of the significant growth of demand in the electric vehicle (EV) industry, resources related to the lithium-ion battery have become the bottleneck of the industry’s development. For this reason, the related resources are being sought after by the market. Enterprises hope to gain an advantage in future industrial competition by controlling the upstream of the industry chain. EV enterprises, including BYD, Tesla, and NIO, are now attempting to extend their business in the upstream resource field to secure their industrial chain. At the same time, the resource bottleneck also attracts all kinds of capital, hoping to acquire scarce assets and profit from the development trend of the new energy field. In this case, the “scramble” for lithium mines reflects not only the scarcity of lithium resources in China, but also the value of the related assets.

The concentration and inclination of the capital to resources and the increase of investment in them, are in fact market-oriented behaviors. However, researchers at ANBOUND believe that the current phenomenon of bidding for mine assets at high prices has shown the blindness of capital. This auction, on the one hand, has attracted a large number of bidders. It lasted for several days, and the asset was sold at a high premium, reflecting the “bandwagon effect” as well as the strong demand for capital for investment in the resources. On the other hand, with the uncertainty of whether the mining rights held by Yajiang Snowway can be extended, the acquisition of its stake at a high price of RMB 2 billion is also faced with huge risks. This in turn, raises concerns about whether the bidders are fully rational and alert to the relevant risks. This kind of blind investment in lithium mines, on the one hand, has intensified the asset bubble of exploration rights and mining rights. On the other hand, it will also lead to the intervention of speculative capital. Related problems have already occurred in photovoltaics and copper resources, often with adverse effects on the resource development of related industries.

It should be pointed out that the asset price of the relevant resources corresponding to the Yajiang Snowway stake auction has driven the reaction of the capital market. On May 23, the share prices of some listed companies related to lithium mining resources (e.g., Tibet Mineral Development, Tianqi Lithium, Youngy Co., Ltd., Zangge Mining, Qinghai Salt Lake Potash, Sinomine Resource Group, Shenzhen Chengxin Lithium Group) rose sharply. The realization of asset value in the capital market is one of the motives of listed companies to scramble lithium resources. Currently, some listed companies participating in the bidding have actually pushed up the valuation of resource investment layout with the help of the secondary market and benefited from the asset appreciation. GCL Energy Technology, one of the bidders of the auction, had invested in new energy upstream resources with a subsidiary of New Hope Group in September last year. Prior to the auction, GCL Energy Technology had completed the acquisition of 99% of Yajiang Snowway’s debt and 43% of its equity. These moves have long been reflected in the secondary market in the early days. The share price of GCL Energy Technology has risen from RMB 5 at the beginning of last year to a high of RMB 21 in December last year and is currently traded at around RMB 17. The news that GCL Energy Technology would not participate in the auction also sent its shares tumbling. The appreciation in the market value of GCL Energy Technology has far exceeded the relevant acquisition consideration. Another lithium giant, Tianqi Lithium, has also increased its asset value through rising share prices in the process of acquiring overseas lithium resources.

The pursuit of capital for lithium resources, while bringing asset price bubbles, also means that the future high prices of lithium will be more difficult to control, and this will not be good news for the entire industry chain. The price of lithium carbonate rose from RMB 50,000 per ton in early 2021 to nearly RMB 500,000 per ton in March this year, a tenfold increase within just a year. As an upstream resource of new energy, the surging price of lithium allows upstream miners and lithium salt manufacturers to earn more profits. However, the gross margin of battery manufacturers has been falling, even transmitted to the downstream car manufacturers. Since the beginning of this year, almost all EV enterprises have been forced to raise prices, and downstream manufacturers are actively seeking to expand their business in the upstream. This actually signifies that in the case of the rapid development of the EV industry, metal resources have become the bottleneck of its expansion, and the rise of lithium asset prices will inevitably lead to high lithium prices, crowding out the profits of the downstream industry chain. Therefore, on the whole, the excessive involvement of capital in the field of lithium resources is not conducive to the development of the whole EV industry chain.

The stake auction, while eye-catching in the capital markets, does not exactly benefit Yajiang in Sichuan province, where the lithium reserves are located. The high prices for the assets have nothing to do with the county. Yajiang, which has just achieved poverty alleviation goal, needs substantial capital input to seize the development opportunity of the new energy industry and promote the orderly development of lithium resources, so as to drive its economic development. However, not only Yajiang Snowway has not made substantial investment in mining over the years, many enterprises including Tianqi Lithium fail to see substantial development with their mining rights. Instead, the enterprises themselves benefited from rising asset values.

Under the national development goal of “dual carbon” and the development strategy of promoting the transformation of the automobile industry, lithium resources, as the upstream of the EV industry chain, appear to have more and more strategic value. Under such circumstances, promoting the development of lithium resources and overcoming the current blind investment in lithium and the bubbling of related assets is not only the responsibility and duty of the relevant authorities, this should also be an important condition for realizing the capital market in serving the real economy.

Final analysis conclusion:

The “scramble” for lithium mines caused by Yajiang Snowway Mining Development’s stake auction is the embodiment of the anxiety over lithium shortage in China. This reflects the blindness of the current capital investment in lithium resources. As the strategic value of lithium resources becomes more and more obvious, it would be crucial to prevent the bubbling of resources brought about by the disorderly intervention of capital.

Writer by Wei Hongxu
A researcher at ANBOUND, graduated from the School of Mathematics at Peking University and has a PhD in economics from the University of Birmingham, UK

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ANBOUND is a multinational independent think tank, specializing in public policy research, incl. economy, urban and industry, geopolitical issues. Est. 1993.