Chinese interests look set to expand their share in WA’s lithium industry by seizing the assets of collapsed miner Alita Resources via a $70 million deal.

Administrators of the failed company advised yesterday that China Hydrogen Energy Limited had gazumped a bid by Galaxy Resources to gain control of Alita’s flagship Bald Hill lithium tantalum mine near Kambalda.

As Alita’s biggest shareholder and holder of its $40 million in secured debt, Galaxy looked to be in the box seat to pick up Bald Hill.

KordaMentha said a rival proposal by CHE, if finalised, would deliver a markedly superior outcome to creditors than the alternative deed of company arrangement proposal from Galaxy or liquidation. Under CHE’s proposal, Galaxy will receive about $50 million as senior secured creditor with a $20 million loan available for Alita to draw upon for working capital.

WestBusiness understands CHE represents a private Hong Kong-based investment group with experience in the WA mining sector but not in lithium. It is believed the company intends to take Alita private.

Shareholders of the failed company are likely to receive little if anything from the deal.

KordaMentha said it had asked CHE to provide an unconditional DOCA proposal in two days.

“The administrators will outline the details of the proposals in a report to creditors which is expected to be published within two weeks,” the restructuring firm said.

The deal may require approval from the Foreign Investment Review Board.

The Chinese proposal comes after a $55 million deal in September for China’s biggest battery maker CATL to take an 8.5 per cent stake in lithium miner Pilbara Minerals.

The investments come as the lithium market continues to languish, with prices remaining weak on a glut of supply.

KordaMentha was appointed administrators of Alita in August just two days after Galaxy struck a deal to buy the company’s $40 million in secured debt.

The company was facing a cash crunch on falling lithium prices, lumpy shipments to its sole Chinese customer and hefty debt levels.

Galaxy-appointed receiver KPMG placed Bald Hill on care and maintenance in September resulting in the loss of about 350 jobs.

Former Alita managing director Mark Calderwood said he believed other parties would have bid for Alita had they been given more time.

“Unfortunately it always comes down to people who are prepared to invest for the future and often that’s not Australians,” he said.

“The guys who pick up the asset will do quite well out of it if they are patient.”

Hartleys head of research Trent Barnett said he expected there would be a global lithium deficit in five to 15 years, based on projections for the take-up of electric vehicles.

He said he did not know whether the Chinese had a longer-term view on lithium than anyone else but they seemed to be more willing to act upon it.