(Yicai Global) Sept. 15 -- Shares in Mianyang Fulin Precision Machining surged to a record high today after the Chinese auto parts maker said it will purchase 31.7 equity in lithium carbonate producer Qinghai HXR Lithium Tech to ensure the supply of raw materials to its lithium iron phosphate unit which is preparing to more than quadruple output.

Fulin Precision’s share price [SHE:300432] closed up 13.68 percent at CNY53.59 (USD8.33). Earlier in the day it had reached CNY55. The stock has risen five-and-a-half fold since April on surging demand for lithium iron phosphate, a key raw material used to make electric car batteries.

Fulin Precision will pay CNY330 million (USD51 million) for a 9 percent stake in HXR Lithium, the Mianyang, southwestern Sichuan province-based company said yesterday. Over the course of the rest of the year, the firm intends to raise this stake to 31.7 percent but it did not say how much this will cost.

The deal will guarantee raw material supplies to Jiangxi Shenghua New Materials, in which Fulin Precision holds 72.78 percent equity, it added. It will help cut production costs and increase core competitiveness.

Jiangxi Shenghua, which has a current yearly output of 65,000 tons of lithium iron phosphate, has another 50,000 tons of capacity that should come into operation soon and has started building a new CNY4 billion (USD621.8 million) plant with an output of 250,000 tons a year.

Fulin Precision will also become exclusive distributor of all the lithium carbonate produced by HXR Lithium over the next five years, it added. HXR Lithium extracts around 20,000 tons of the substance a year from salt lakes in Qinghai province. It also owns the prospecting rights to the West Taijinar Salt Lake in the northwestern province covering 394.26 square kilometers.

Editor: Kim Taylor