Chinese iron ore miner Hainan Mining is planning to build a new facility to produce battery-grade lithium hydroxide, with a $164m (CNY1.065bn) investment.

Planned to be built in Dongfang in southern China’s Hainan island province, the plant will be equipped to produce 20,000tpa of lithium hydroxide, reported Reuters.

Hainan Mining was cited by the news agency as saying in a Shanghai Stock Exchange filing: “Hainan province is closer to Australia, the main source of spodumene raw material for the project.”

The island ‘has obvious maritime logistics advantages compared with Jiangxi and Sichuan, the main producers of lithium hydroxide in the mainland’.

The investment forms part of the Chinese mining firm’s strategy to benefit from the increasing demand for lithium hydroxide, which is used in electric vehicle (EV) batteries.

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The company is seeking to diversify its business to lithium as its prices have roughly doubled this year amid a rebound in demand following a downturn for three years.

Construction on the new facility is planned to be completed in 18 months, according to Reuters.

Ganfeng Lithium and Tianqi Lithium, two of the world’s top lithium producers, have operations in China’s landlocked Jiangxi and Sichuan provinces respectively.

Last month, reports emerged that China-based battery maker EVE Energy plans to acquire a 28.1% stake in lithium producer Jinkulun Lithium Industry.

The two firms are also planning to establish a Qinghai-based joint venture (JV) to build a lithium chemicals project with an estimated investment of up to $277.8m (CNY1.8bn).

Upon completion, the new plant will have a capacity to produce 30,000tpa of lithium carbonate and lithium hydroxide.