Events:

Xianfeng Holdings disclosed that it intends to set up a lithium carbonate extraction joint venture with three companies, including China Agricultural Materials Group, in which Xianfeng holds a 41% stake. Engaged in industrial-grade lithium carbonate extraction and preparation business (initially planned to produce 10,000 tons of industrial-grade lithium carbonate, which can be increased to 30,000 tons in the long term).

Comments:

1. Expand the upper reaches continuously and deeply, and the partners control the rich brine water resources in Qinghai Province.

Xingyuan potash, a subsidiary of the partner China Agricultural material Group and China Nong Holdings, is rich in brine resources in the Dalangtan mining area in the northwest of Haixi Prefecture, Qinghai Province. according to statistics, the subordinate enterprise Dalangtan Liangzhong Mine Xingyuan Company has accumulated identified reserves of resources, of which the reserves of potassium chloride in solid ore is 6.7468 million tons. The reserves of potassium chloride in the liquid mine are 33.9604 million tons and the amount of brine is 279641.81 million m3. If estimated according to the annual production capacity of 1 million tons of potash fertilizer, the future theoretically exploitable life will reach more than 30 years, which provides sufficient resources for the joint venture company.

2. The joint venture company sets up a management and core employee shareholding platform to bind the core competitiveness.

The proposed project under the proposed joint venture company has the characteristics of "high technical difficulty and high risk", and the stability of the management team and core technical personnel is very important. The cooperation managers and technicians will deeply bind the relevant personnel through the newly established shareholding platform one and two holding 10% and 14% of the joint venture company, respectively.

3. Industrial-grade lithium carbonate production capacity planning of 10,000 tons, if successfully put into production, will jump to the upper reaches of the second echelon in the industry.

The announcement reveals that the joint venture company intends to invest in the construction of a production project with an annual production capacity of 10,000 tons of industrial grade lithium carbonate. if the production project with an annual production capacity of 10,000 tons of industrial grade lithium carbonate is completed and reaches production, the profits generated can be used for additional investment. until the project achieves an annual output of 30,000 tons of lithium carbonate. According to the ranking of public information, if the proposed project lands smoothly, the company's production capacity will rank second in the upper echelon of the industry.

4. After joining hands with Zang GE and AVIC Resources, we will continue to expand our "moments of friends."

The company from "selling the right to use technology" (Tibetan) to "joint resources" (in cooperation with AVIC resources) to "joint venture" shows that the company has taken a firm step upstream. At the same time, Zang GE Holdings announced the day before yesterday that the successful trial production of battery-grade lithium carbonate to a certain extent indicates that the company's core technology is optimistic in the future.

5. Risk tips:

1. Uncertainty risk of mineral resources project development. The reserves, taste and recoverable quantity of lithium resources in Mahai Salt Lake in Qinghai Province of AVIC Resources are directly related to the development of the company. If the actual reserves, taste and recoverable quantity of lithium resources in the salt lake of the company are lower than expected in the future, or the mining is not economically feasible due to bad weather and other conditions during mining, it may have an impact on the revenue of the project.

2. Technical risk. The company has obtained the second generation adsorption lithium extraction technology of Ju Neng Yongtuo by paying consideration and establishing a joint venture company, and will potentially cooperate with AVIC Resources to develop salt lake lithium resources in the future. The project has high technical requirements, and if the "right to use lithium enrichment materials to produce lithium carbonate technology" provided to the company can not achieve the desired results, it will have a long-term adverse impact on the company.

3. The project is not as expected. The construction of the production line of the cooperative project involves complex processes and strict technical parameters, which may affect the production schedule and final output of the project if it is subject to adverse changes in industrial policy, trade policy, technical bottleneck and so on.

4. the risk of price fluctuation of lithium carbonate. The company cooperates with other companies to cut into the lithium industry and uses the proprietary technology used in the production of lithium ion enrichment materials to produce industrial grade lithium carbonate products from salt lake brine with high mg / Li ratio. if there are adverse situations such as the fluctuation of lithium carbonate price and the decline of product profits caused by intensified market competition, the project revenue may not be able to meet expectations.

5. Cost risk. The kinds and contents of impurities in the ore lithium resources are less and easy to purify, and the high purity lithium salt products can be obtained directly, but its cost is higher and the pollution is higher than that of extracting lithium from salt lakes. If there is a breakthrough in the technology of extracting lithium from ores in the future, the environmental protection problems will be improved and the cost will be reduced. The scheme itself has uncertainty in the process of final implementation in terms of share proportion, registration process, operation coordination and so on.

The cost of lithium extraction from salt lake is lower than that of salt lake, which may impact the salt lake lithium extraction business of the cooperation project.

6. Operation and management risk of joint venture company. The announcement reveals that the company intends to establish a partnership with other partners in a certain proportion of equity distribution.