China’s Potash Giant Zangge Mining Ordered to Halt Lithium Production Over Regulatory Violations 2025.07.17

July 17, 2025 – Zangge Mining (000408.SZ), China’s second-largest potash producer, has been ordered to suspend lithium extraction activities at its subsidiary Golmud Zangge Potash Co., Ltd. after local regulators found the company in violation of mining regulations. The move highlights China’s tightening oversight of lithium resource development amid booming demand for the battery metal.

Regulatory Crackdown: Immediate Suspension and Compliance Requirements

On July 16, 2025, the Haixi Prefecture Natural Resources Bureau and the Haixi Salt Lake Administration issued a “Notice Ordering Immediate Cessation of Lithium Resource Exploitation”, demanding that Zangge Mining halt unauthorized lithium extraction and rectify compliance issues before applying for resumption.

Key directives from the notice include:

• Immediate suspension of lithium-related mining operations.

• Legalization of lithium mining permits before reapplying for production approval.

• Strengthened corporate accountability under China’s mineral resource laws.

Zangge Mining confirmed that its lithium subsidiary, Golmud Zangge Lithium Co., Ltd., has complied with the order and ceased operations while expediting permit applications46.

Why Was Production Halted?

1. Lack of Specialized Lithium Mining License

   • Historically, Zangge treated lithium as a byproduct of potash mining without securing a dedicated lithium extraction permit.

   • Regulators now require separate licensing for lithium, reflecting stricter enforcement of mineral resource laws.

2. Impact on Production Targets

   • 2025 Lithium Output: 11,000 metric tons (MT) of lithium carbonate (planned).

   • H1 2025 Performance: 5,350 MT produced, 4,470 MT sold, generating CNY 49 million (USD 6.7 million) in net profit—just 2.8% of Zangge’s total H1 profit.

3. Limited Financial Impact

   • The suspension affects only lithium operations; potash and copper mining continue unaffected.

   • Zangge’s H1 2025 net profit is still projected at CNY 1.75–1.9 billion (up 34.93%–46.49% YoY), driven by its 12.65 billion investment gains from Tibet Julong Copper.

Broader Implications for China’s Lithium Industry

1. Regulatory Tightening on Salt Lake Lithium

   • China is enforcing stricter controls on salt lake lithium extraction, a key supply source for EVs.

   • Similar compliance demands may extend to other producers like Tibet Mineral Development and Ganfeng Lithium.

2. Market Reaction

   • Lithium carbonate futures rose 5% post-announcement, signaling supply concerns.

   • Zangge’s stock dipped 1.3% but remains stable due to strong copper and potash earnings.

3. Zangge’s Strategic Shift to Tibet

   • The company recently secured a mining license for the Mami Cuo Salt Lake (Tibet), holding 217,740 MT of lithium carbonate reserves.

   • This project, unaffected by the Golmud suspension, is set to begin production in 2026, reducing reliance on Qinghai operations.

Conclusion: Compliance Over Growth

Zangge Mining’s suspension underscores China’s push for sustainable lithium mining practices, even at the cost of short-term output. While the halt has minimal financial impact, it signals:

• Stricter enforcement of mining regulations.

• Long-term industry consolidation, favoring firms with full compliance.

• Continued growth in Tibet as a lithium hub, offsetting Qinghai’s regulatory risks.

The company expects to resolve permit issues within months, but the episode serves as a cautionary tale for China’s lithium sector: legal compliance is now as critical as production scale.