Performance report for the first and third quarters In the third quarter of 2015, the company achieved operating income of 1,159 billion yuan, a year-on-year decrease of 15.86%, and realized net profit attributable to shareholders of listed companies of 906.307 million yuan, an increase of 66.55% over the previous year. The company is a large-scale coal chemical circular economy enterprise integrating coal mining, raw coal washing, coke oven gas to methanol, coal tar hydrogenation, coal to aromatic hydrocarbons, light hydrocarbons, dry coke quenching power plants, and heating. The company maximizes the use of coal resources through a complete circular economy industrial chain to achieve good economic and social benefits. Currently, the company is actively transforming its layout in the field of supporting projects for new materials graphene and lithium iron phosphate batteries. 2. Traditional coal coking business 1. Coal coking business The Qitaihe region currently has a coking production capacity of about 10 million tons, and the company's production capacity is 1.6 million tons. The coal mines in the Qitaihe region are low in sulfur and phosphorus, and the coke produced has high reducibility and high heat density, making it most suitable for use in the metallurgical industry. However, at present, the steel industry has shrunk drastically, prices are extremely low, and sales are still slow. Therefore, demand for coke has also declined sharply. The price has dropped from 3,200 yuan/ton to 700 yuan/ton, and the profit situation is relatively poor. Currently, there are about 6 or 7 coking companies left to produce normally. With the exception of the company, other coking companies have basically stopped production or maintained a minimum output. Currently, the Qitaihe region produces less than 4 million tons of coking, with a capacity utilization rate of 40%, and Baotailong's production capacity of 1.6 million tons. The annual output is about 1.1 million tons, and the capacity utilization rate is about 70%, which is superior to other enterprises in Qitaihe. The company has always been in a leading position in the local coking industry, with railways accounting for more than 50% of the city's production volume. This is due to the company's circular economy industrial chain, which makes the company's comprehensive cost lower, so the utilization rate of production capacity is higher. The company's coking products are mainly sold to the three eastern provinces, Mengdong, North China and other regions, mainly in Liaoning. One quarter of the raw coal used by the company comes from its own production, and the rest is purchased from outside sources. The main types of coal include 1/3 coking coal, and some mainly coking coal and fertilizer coal. The current selling price of coal is about 320 yuan/ton, and the full cost of a tonne of coal excluding tax is more than 200 yuan. The cost is low, but there is limited room for decline. Next year, a new zone will be developed and built. The planned reserve for the new area is 200 million tons. The production capacity is 900,000 tons per mine, 600,000 tons for both 2 and 3, reaching 2 million tons, and can serve for more than 60 years. The coal mines in the new district are mainly lean coal, some mainly coking coal, and the construction period is about 3 years. 2. The core competitiveness of circular economy system companies in the traditional coal coke business is cost, specifically the circular economy industry chain. The company has established a relatively complete circular economy industrial chain, with coking coal to coke as the main line. Each by-product has its own destination. For example, all of the by-products of the coal mill are used for power plant power generation, waste heat from power generation is used to heat surrounding communities and local governments, slime cinder makes cement, coke oven gas produces methanol, and coal tar is later further processed, etc. On the one hand, the circular economy industrial chain makes full use of the by-products of coking, creates additional economic benefits, reduces the overall cost of the entire industrial chain, and fully complies with environmental protection standards. This is the company's core competitiveness. The company was able to save 120 yuan per ton when the price of coal was at its highest, and now it can save about 20-50 yuan; all companies buy raw coal for their own washing and processing, and wash the refined coal to remove coking, so they can save 50 yuan by refining one ton of coke; in terms of water use, the company has set up a sewage recycling treatment plant. 80% of the water is recycled, so the cost of water use is more than half lower than that of other companies; in terms of electricity consumption, the company's power plant produces 400 million kilowatts a year, of which 300 million is for personal use, and the remaining 100 million is connected to the Internet. The cost of electricity consumption is 0.7 million yuan/kilowatt-hour for others. The company is about 0.37 yuan/kwh, saving about 50% in cost. Currently, a new power plant is still being built. After completion, the power plant's power generation capacity will reach 1 billion kilowatts per year, and the company's electricity costs will continue to be reduced. Furthermore, the company makes full use of industrial automation technology in industrial control, saving a lot of labor costs. For example, the 100,000-ton methanol plant normally has no less than 500 people, and the company controls around 160 people; residential heating facilities have been reduced from 200 to 81 people, reducing labor costs by more than 50%. 3. The e-commerce platform company officially launched the e-commerce platform launch ceremony on 2015.10.16. The Internet e-commerce platform was introduced this time mainly to optimize company management, integrate the company's supply chain and sales channel resources, build a database, and expand the market while reducing the company's costs. Currently, e-commerce platforms have mainly saved office costs and office costs for customers and suppliers for companies, and there is no profit model yet. The main function of the platform is to make procurement and bidding and other work fair, impartial and open. The company has also increased its control over procurement work, making the entire process more transparent, and has also reduced this part of the management costs accordingly. The goal of the platform is to enable the company's three business segments to be carried out simultaneously. One is supply, including daily procurement and major equipment procurement, the second is sales, and the third is bidding. The platform plans to have an annual transaction volume of around 5 billion dollars, of which sales are 2 billion, procurement is 1 billion, and bidding for major contracts is 2 billion. The future development direction of the platform takes into account its independent development as a supply platform for all coal chemical enterprises and coking enterprises in the Qitaihe region, but this part of the work also requires strong support from local governments. 4. Coal-to-Aromatics and Light Hydrocarbons Project The Longmei Tiantai Coal-to-Aromatics Project was originally scheduled to be put into operation in October this year, but has now been postponed until the end of this year. It mainly uses coke, which can partially solve the problem of coke sales channels. The 100,000 tons/young hydrocarbon project will be put into operation by the end of next year. Aromatic hydrocarbon and light hydrocarbon projects are one of the important steps for the company to upgrade from traditional coal chemicals to petrochemicals. 3. Graphene project Due to the difficulties in the coking industry, in addition to upgrading its main business and transforming into the petrochemical industry, the company is also speeding up the transformation into the field of new materials, namely graphene. Currently, the Group has invested 500 million dollars in construction of new materials projects, of which 200 million is used in 100-ton graphene projects, and another 300 million in lithium iron phosphate projects (within the group). The technical patents purchased by the company in the graphene project are exclusively owned by the three eastern provinces and Mengdong. The technology for the industrial production of graphene purchased by the company from the inventor is relatively mature. Difficulties in industrial production are not a big problem. The project is currently under construction and is expected to be put into operation by the end of next year. Sales of the graphene project after production are mainly divided into two segments. First, the lithium iron phosphate project being built by the group will use graphene, and the technology is relatively mature. The 2,000 tons/year lithium iron phosphate project, which was put into operation in 2017, is expected to consume 16 tons of graphene, and the remaining 84 tons of graphene are planned to be exported. The company's current focus is on project construction. The company is currently cooperating with Tsinghua University to invest 3 million dollars to establish an R&D center, mainly for research related to the downstream application of graphene, and the results will be shared in the future. The company plans to establish cooperative relationships with several universities at the same time, mainly to develop downstream applications of graphene. The initial consideration for graphite raw materials is to be purchased, but since graphene does not use more than 200 tons of raw materials a year, the impact is not significant. Crystalline graphite sells for 5,000 to 8000 yuan per ton. The company has acquired 43% of the shares in Dongrun Mining. Dongrun Mining Company has two prospecting rights. One is the Qitaihe City Jungle Graphite Mine, with a survey area of 16.35 square kilometers. The survey shows that the mineralization conditions are very good. It is expected that the exploration report will be submitted in 2017 to complete mining rights procedures; the other is the Qitaihe City Jungle Calcite Project, which has a survey area of 20.52 square kilometers. Currently, the possibility of graphite is not ruled out. The purpose of the company's acquisition of prospecting rights is, on the one hand, to provide raw materials for the graphene project and guarantee its own needs. On the other hand, considering that the value of graphene will continue to rise in the future, saving resources in advance is beneficial to later development.