China's Zijin Mining Group ( ZIJMF ) is advancing talks to acquire Zangge Mining Co., a domestic commodity producer specializing in lithium and potash.

Blomberg reported Zijin announced the news in a statement to the Hong Kong Stock Exchange. Zangge is valued at around $6.4 billion (CNY 46.6 billion) on the Shenzhen Stock Exchange.

In a recent New Year's message, Chairman Chen Jinghe announced "significant results within three years ” regarding the lithium portfolio and mentioned the ambition to become "one of the world's leading lithium producers."

Zijin, which started as a regional gold miner, significantly grew under Jinghe's leadership. The company expanded globally, but if successful, a controlling stake in Zangge would be the company’s largest recent acquisition. It would surpass the purchases of Continental Gold ($1.05 billion), Nevsun Resources ($1.4 billion) and the La Arena copper-gold mine in Peru ($1 billion).

Zangge Mining, based in Qinghai province, operates in the region's salt lakes, extracting potash and lithium. Although its lithium production — 9,278 tons of lithium carbonate in the first nine months of 2024 — is modest compared to global giants, Zangge has ambitious plans to expand its production in Tibet, leveraging the region's vast brine fields, including deposits in areas like Xikunsong and Pan-Ganzi.

This low-cost extraction potential makes Zangge a strategic asset for Zijin's ambitions, supplementing lithium projects in Hunan province and abroad in Argentina and the Democratic Republic of Congo.

The lithium market has dramatically transformed, with prices plummeting nearly 90% since their peak in 2022. The decline has spurred industry consolidation and strategic acquisitions, such as Rio Tinto's $6.7 billion purchase of Arcadium Lithium. Despite the downturn, Zijin remains bullish on lithium's long-term potential, aiming to supply China's booming electric vehicle market.

The company targets production of up to 300,000 tons of lithium by 2028 to support growing domestic automakers like BYD and Nio. Thus, Zangge's strategic location and growing production potential align with those goals.

The deal's announcement on Friday suspended trading in Zangge's shares, while Zijin's shares rose 1.45%.

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