(Yicai Global) Dec. 6 -- Chinese battery maker Sunwoda Electronic intends to join hands with Chanhen Chemical to build a CNY7 billion (USD1.1 billion) battery material industrial park to ensure sufficient and reasonably priced raw materials amid the booming new energy vehicle sector.

The two firms will form a joint venture to construct the iron phosphate project in China's Guizhou province, the Shenzhen-listed pair said in a statement recently. The southwestern province is rich in phosphate rock resources. Iron phosphate is a raw material of lithium iron phosphate, a cathode material.

The project will help Chanhen to transform itself into a supplier of new energy materials, said the Guizhou province-based firm.

The production base can help Sunwoda to control its raw material costs and to improve its risk resilience, it said. Chanhen will have a 51-percent stake in the JV and Sunwoda will have the remainder of equity.

Each of the project's two phases will involve an annual capacity of 300,000 tons of battery-grade iron phosphate, with a variety of by-products. Shenzhen-based Sunwoda will be prioritized when it comes to buying the products.

The first phase, which is expected to begin this month, should be ready by early 2024. The second phase lasts till late 2025. After completion, the annual revenue of the facility should exceed CNY15 billion (USD2.4 billion).

Chanhen, which has more than 530 million tons of high-quality phosphate rock resources, has been making moves in the electric vehicle power unit sector. In September, the mining company said it will team up with an affiliate of China’s third-largest battery maker Gotion High-Tech on iron phosphate projects.

Sunwoda is also moving toward the lucrative battery segment after focusing on consumer electronics earlier. In August, the firm said it will invest CNY20 billion to set up an electric vehicle battery facility in eastern China's Nanchang, resulting in a 50-gigawatt capacity addition.

The cooperation plan failed to boost the pair's shares. Chanhen’s stock price [SHE: 002895] was 7.8 percent down at CNY30.28 (SD4.80) in the afternoon.

Sunwoda’s share price [SHE: 300207] dropped 6 percent to CNY48.13.

Editor: Emmi Laine, Xiao Yi