(Yicai Global) Feb. 28 -- Shares of China's Yahua Industrial Group soared after the battery materials processor said that its unit will spend AUD2.8 million (USD2 million) to purchase a stake in Australia's Abyssinian Metals to secure its raw material supply.

Yahua's stock price [SHE: 002497] surged as much as 7 percent to CNY37.69 (USD6) intraday. The shares are almost 40 percent up this year.

Yahua International Investment Development, a subsidiary of Yahua, will subscribe to 3.7 million shares in the Perth-headquartered mining company before the latter's initial public offering, or 3.4 percent of the total, the Chengdu-based parent of the buyer said in a statement yesterday.

The pair penned another agreement the same day. Yahua's unit will become the exclusive buyer of lithium concentrate gained from Abyssinian's Kenticha project in southern Ethiopia till 2025. The first phase of the mine is expected to be ready in the second quarter of 2023 with an annual capacity of about 30,000 tons of lithium carbonate equivalent. The mine's lifespan is predicted to be 18 years.

The two agreements should help Yahua ensure new upstream resources, as well as share excess earnings after Abyssinian's IPO, said the Chinese firm, without providing more details about the expected listing.

This is not Yahua's first overseas lithium concentrate investment plan. Last December, the firm said that it has bought a 9.5 percent stake in Perth-based EV Resources for AUD3.6 million to become the sole buyer of lithium concentrate coming from the latter's mines.

Yahua International will buy at least 120,000 tons of lithium concentrate from Abyssinian per year. But if the mine's annual output exceeds that figure, Yahua International may buy even more. Prices will be negotiated three months prior to delivery.

Abyssinian owns a 51 percent stake in the Kenticha mine which has huge potential as the proven lithium resources surpass one million ton of lithium oxide equivalent, according to Yahua.

Editor: Emmi Laine, Xiao Yi