(Yicai) Jan. 16 -- Pilbara Minerals said Chinese battery materials supplier Ganfeng Lithium Group plans to nearly double its purchase of spodumene concentrate from the Australian lithium mining company over the next three years amid an oversupply of lithium salts and tumbling prices.

Pilbara Minerals and Ganfeng Lithium inked an amendment to their existing offtake deal yesterday, the West Perth-based firm said on the same day. Purchases will rise to 310 kilotons of spodumene concentrate per annum from 160 kt, with pricing still based on market prices, it added.

Ganfeng Lithium needs to produce normally regardless of the market price, so ensuring the supply of raw materials remains its top priority, The Paper reported, citing the Xinyu-based company.

"The long-term outlook for the industry remains incredibly exciting," said Dale Henderson, managing director and chief executive of Pilbara Minerals. "Both Ganfeng and Pilbara Minerals remain focused on extending our respective positions as major, low-cost producers in the burgeoning lithium market.”

The lithium-ion battery sector continues to develop well despite temporary fluctuations, an insider at Ganfeng Lithium told The Paper. An increase of 150 kt a year of raw materials is not too much, corresponding to about 20 kt of lithium salt products, the source added.

The person declined to disclose Ganfeng Lithium's production costs for lithium carbonate and lithium hydroxide, stating only that they fluctuate with raw material prices.

The cost of extracting lithium from Australian lithium concentrate may fall below CNY40,000 (USD5,600) per ton this year, according to CCB Futures' latest forecast.

The price of battery-grade lithium carbonate closed flat at CNY96,200 a ton yesterday, while that of lithium hydroxide was unchanged at CNY84,600 a ton, according to Shanghai Metals Market data.

“The expanding of our current offtake agreement with Pilbara Minerals marks another important step to further strengthen our valued partnership with Pilbara Minerals,” noted Wang Xiaoshen, president and vice chairman of Ganfeng Lithium.

“The increased supply from Pilbara Minerals also demonstrates our strong commitment to support the growth of our global customers through the creation of cost-competitive and high-quality lithium raw materials,” said Wang.

Ganfeng Lithium and Pilbara Minerals inked their first purchase and sale agreement in 2017. The Chinese firm then subscribed for shares and holds a stake of about 5.8 percent in Pilbara Minerals as of the end of last year, making it the miner’s fourth-largest shareholder.

Shares of Ganfeng Lithium [SHE: 002460] rose 0.3 percent to end at CNY42.54 (USD5.95) apiece in Shenzhen today.

Editor: Martin Kadiev