China's Zijin Mining Group is negotiating to acquire shares in Zangge Mining, a Chinese lithium producer, part of its strategy to expand in the lithium market.

The potential acquisition signals Zijin's intent to strengthen its position in the global lithium sector, a move driven by increasing demand for battery materials, according to a report by Bloomberg.

Zangge Mining, based in Qinghai, China, has a market value of 46.6bn yuan ($6.4bn) on the Shenzhen Stock Exchange.

The company primarily produces potash but derives around one-third of its revenue from lithium extracted from salt lakes in Qinghai.

Zangge produced approximately 9,278t of lithium carbonate in the first nine months of 2024 and plans to expand its operations in Tibet, where it is already a minor partner in Zijin's Julong copper mine.

Zijin Mining, led by chairman Chen Jinghe, has rapidly expanded its global presence, particularly in copper mining.

The company, which began gold mining in the 1980s, now has a market capitalisation of around $57bn in Hong Kong.

Zijin's recent focus on lithium is driven by the anticipated long-term demand for electric vehicle (EV) batteries. The company aims to produce up to 300,000t of lithium by 2028.

However, it has delayed projects in Argentina and Tibet until 2025 due to weak prices and permitting issues, with plans to start production in the Democratic Republic of Congo by 2026.

The lithium market has experienced significant volatility, with prices dropping nearly 90% since late 2022.

Despite the recent decline in lithium prices, the market remains attractive for strategic acquisitions.

This has led to increased merger and acquisition activity, exemplified by Rio Tinto's $6.7bn move to acquire Arcadium Lithium last year.

The acquisition of Zangge Mining shares “may result in a change in control” of the company and the deal is subject to a signed agreement and board approval, the company said in a statement.