① The Luoyang Molybdenum Industry is about to release production capacity in the Democratic Republic of the Congo (Gold), and is ranking among the world's largest cobalt and top ten copper producers. ② Chairman Yuan Honglin told the Finance Association reporter, “Continued access to the highest quality mineral resources is the lifeblood of the company's survival and development. In the future, we will continue to focus on the field of non-ferrous metals, especially new energy metals, and will not rashly expand to the downstream processing industry.”
Financial News Agency, November 12 (Reporter Leung Heung-cai)After reaching a settlement on the equity fund issue, which has received much attention in the market, Luoyang Molybdenum (603993.SH) is about to release production capacity in the Democratic Republic of the Congo (DRC) and is now ranked among the world's largest cobalt and top ten copper producers; however, the problem of insufficient local capacity is still difficult to resolve in a short period of time. Company officials said, “The main thing is to confirm profits, which will need to be delayed for some time.”
In recent years, some domestic new energy metal mining enterprises have “shared a slice of the pie” and have successively expanded downstream of the industrial chain. Currently, the Luoyang molybdenum industry will still focus on the upstream mining end. “Continued access to the highest quality mineral resources is the lifeblood of the company's survival and development. In the future, we will continue to focus on the field of non-ferrous metals, especially new energy metals, and will not rashly expand to the downstream processing industry.” Regarding the future development direction of the molybdenum industry in Luoyang, the company's chairman Yuan Honglin said this to the Finance Association reporter.
Luoyang Molybdenum Industry's beneficiation production workshop in Luanchuan, Luoyang (photo taken by a reporter from the Financial Association)
Production capacity is about to be released
In April of this year, with the Luoyang molybdenum industry reaching a settlement on the equity issue in the Democratic Republic of the Congo (DRC) for nearly two years, export restrictions were lifted, and stocks such as copper and cobalt, which had previously been stranded in the region, left Hong Kong and shipped globally. At the same time, the production capacity of the Democratic Republic of the Congo (gold) mines will also be further released.
A reporter from the Financial Association News Agency learned from Luoyang Molybdenum Industry research that the goal of completing the shipment of copper and cobalt stranded in the Democratic Republic of the Congo (DRC) by the end of September has basically been achieved, but due to the long sales chain, some profits have not been fully realized in the three-quarter report. As the KFM mine has reached production after it was put into production in the second quarter, it is currently striving to overproduce. The company still has some inventory in the Democratic Republic of the Congo (DRC). It is expected that all of the preliminary inventory will be digested around the first quarter of next year, and it will gradually enter a state of normalized production and sales in the future.
According to the disclosure, the first phase of the KFM copper-cobalt mine construction project in the Democratic Republic of the Congo (DRC) has now been put into operation and completed, and all three production lines for the TFM mixed mine have been put into operation. Relevant sources in the Luoyang molybdenum industry said that with the completion of two major world-class projects, the company's copper and cobalt production capacity is expected to increase further in the future.
In terms of cobalt products, according to Luoyang Molybdenum's 2023 production guidelines, TFM and KFM mines will contribute a total of about 50,000 tons of cobalt production. At that time, the company will surpass Glencore to become the world's largest cobalt producer.
At a time when the cobalt market is sluggish, the attitude of the Luoyang molybdenum industry towards industry development has attracted market attention. Yuan Honglin said in this survey that as the company reaches production in the two major mines in the Democratic Republic of the Congo (DRC) next year, as the world's largest cobalt supplier, Luoyang Molybdenum hopes to see the stable development of the entire industry chain. “If cobalt prices are stable in a relatively balanced and reasonable price range, downstream can use cobalt more safely and boldly, and ternary lithium batteries can also improve their competitive advantage, so the company has signed a long-term agreement with some downstream customers to provide them with a stable supply.”
In terms of copper products, the Finance Association reporter learned from the company that TFM and KFM's overall copper and metal production is expected to reach 450,000 tons and 150,000 tons, respectively, in 2024. This means that after Zijin Mining (601899.SH), Luoyang Molybdenum may become the second domestic copper producer to rank among the top ten in the world.
What is the impact of insufficient capacity in the Democratic Republic of the Congo (DRC)
The Democratic Republic of the Congo (DRC) has always faced the problem of insufficient capacity due to insufficient infrastructure construction and other effects.
Regarding the transportation capacity issue in the Democratic Republic of the Congo (DRC), a relevant person from the Luoyang Molybdenum Industry told a reporter from the Financial Services Association that the company's African logistics team coordinates the import and export logistics transportation of TFM and KFM copper and cobalt products, plans and deploys in advance, and provides logistics support by signing long-term capacity guarantee contracts with various logistics companies and carrying out railway import and export transportation cooperation with third party companies. According to the performance report for the first three quarters, the company's mine-end copper and cobalt sales were in line with sales expectations.
In addition to the molybdenum industry in Luoyang, there are many local Chinese mining enterprises in the Democratic Republic of the Congo (DRC). According to data from the Ministry of Commerce, as of the end of 2022, there were 28 Chinese mining enterprises in Congo Gold, including Zijin Mining, Huayou Cobalt (603799.SH), Hanrui Cobalt (300618.SZ), Tengyuan Cobalt (301219.SZ), and Peng Xin Resources (600490.SH) and many other domestic listed companies.
A person in the industry chain told the Financial Services Association reporter that at present, Chinese mining enterprises in the Democratic Republic of the Congo (DRC) mainly transport outward through the port of Durban in South Africa and the port of Dar es Salaam on the east coast of Tanzania, but due to the weakness of the overall logistics system in Africa, it takes almost two months from the Democratic Republic of the Congo to the port, and this kind of trouble is difficult to resolve in a short period of time.
In response to the above issues, a relevant person in the Luoyang molybdenum industry told the Financial Services Association reporter that the inventory of upstream mineral products has less risk of impairment compared to the general manufacturing industry. “The main thing is to confirm profits, which will need to be delayed for some time.”
There is a new move to continue to occupy high-quality mineral resources
“As a mining company, we know that its future growth potential lies in its continuous pursuit of the highest quality mineral resources.” Yuan Honglin told the Finance Association reporter that with the increase in storage and production in the Democratic Republic of the Congo (DRC), he is very confident about next year's performance. Looking to the longer term future, the company will still choose opportunities to obtain suitable mineral resources through various means.
As a global non-ferrous metals mining company, it is “long overdue” for the Luoyang Molybdenum Industry to deploy lithium resources. According to public information, in January of this year, Luoyang Molybdenum Industry and Ningde Times (300750.SZ) reached an agreement with Bolivia to build a lithium extraction plant on a giant salt flats in Bolivia to “initially lay out lithium metal.”
In the future, lithium resources will remain one of the key minerals of the Luoyang molybdenum industry. Yuan Honglin told reporters that looking at the global market, the new energy industry has been improving for a long time, and demand for lithium resources has always been there. At the same time, with the “double carbon” target, the future lithium battery industry chain still has a lot of market space. However, the company will not be too anxious to “grab the beach”; it must follow the essence of a mining company and do what is within its capabilities.
It should be noted that although the new energy circuit still maintains a high level of prosperity, the price of lithium resources has gradually faded “passion”. According to Choice data, as of November 10, the price of lithium carbonate was 155,000 yuan/ton, down more than 70% from last year's high of about 600,000 yuan/ton.
Battery-grade lithium carbonate price trend in East China market (data source: Choice)
In terms of resource acquisition, the Luoyang molybdenum industry has made new moves. According to relevant company sources, the company's original strategic development department mainly looked at more mature standards; “Now, a new department has been set up, mainly to look at some non-standard products in the early stages, because the company already has corresponding talent reserves in geological exploration, but it is still in the early stages of testing.”
It is worth mentioning that with regard to Ningde Shidai becoming the second largest shareholder in the Luoyang molybdenum industry, Yuan Honglin said that as an important shareholder of the company, Ningde Shidai has always firmly supported the company in operating according to the essence of a mining company.