Neo Lithium to receive fresh funds from Chinese CATL

China's CATL will acquire more than 10 million shares in Neo Lithium Corp. to become the company's third largest shareholder, the latest in a string of investments by Chinese companies in South American lithium projects. The deal announced on Monday comes about as demand for the battery metal for electric vehicles is expected to triple over the next five years as automakers shift their focus from internal combustion engines to EVs.

Contemporary Amperex Technology Co Ltd (CATL), which supplies lithium iron phosphate batteries to Tesla Inc., will pay C $ 8.5 million ($ 6.5 million) for its stake in Toronto-based Neo Lithium, the company said Company on Monday. CATL will also receive a seat on Neo Lithium's board of directors and sit on the company's technical committee, where it will assist Neo in preparing a feasibility study for its Tres Quebradas lithium project in Argentina's northern Catamarca province. This study will help Neo Lithium attract more investors and set the timeline for opening the project, which the company hopes will initially produce 20,000 tons of lithium.

The deal is expected to close later this year after approval by the Chinese government. BlackRock Inc. will remain Neo Lithium's largest shareholder. Neo Lithium shares rose 30 percent to C $ 0.75 in midday trading. Neo Lithium says it will retain full control of the project's lithium even though China is the world's largest consumer of the white metal and the world's largest market for electric vehicles. In recent years, Chinese companies have invested in lithium projects across Chile and Argentina.

The deal with CATL was provided with a premium of 45 percent on the closing price of Neo Lithium on Friday. To address CATL's concerns about the premium, several Neo Lithium executives agreed to buy approximately 483,000 shares for the same price. "We justified the evaluation with our own pockets," Waldo Perez, chairman of Neo Lithium, told Reuters.