Company introduction: Fluorite industry leader, multi-point layout

Since its establishment in 2001, the company has focused on the investment and development of fluorite ore, a national strategic mineral resource, as well as the production and sale of fluorite products. The company's single fluorite mine has a resource reserve of about 27 million tons of ore, corresponding to a mineral volume of about 13 million tons. The mining license scale for a single fluorite mine is 1.12 million tons/year. There are 8 production mines and 7 beneficiation plants. Coupled with the Baotou “selection and integration” project, fluorite production is in an absolute leading position in the country. Since 2021, the company has gradually expanded into downstream fluorine chemicals, fluorine-containing lithium battery materials, etc., and has entered the comprehensive utilization of difficult mineral resources, such as the development and utilization of symbiotic fluorite resources, and the extraction of lithium containing fine (tail) mud to extract lithium mica concentrate. At the same time, the company invested abroad in the Mongolian fluorite project, beginning the first step in globalization.

Resource endowment: Fluorite supply and demand+cost boosts, prices gradually rise

The gap between the supply and demand of fluorite is gradually widening: on the demand side, demand for steel, electrolytic aluminum, building materials, etc. in the traditional application fields of fluorite is still stable. In the field of fluorine chemicals, the scale of refrigerants has not increased significantly due to quota restrictions, and new energy, new materials, etc. are expected to drive demand for fluorite.

Supply side: China's fluorite resources have the characteristics of poor minerals, few rich minerals, and a scattered pattern. Looking at fluorite in a three-year dimension, although the Jinshi “Baotou” integrated project and the Mongolian project have a relatively definite volume, in the context of stricter domestic environmental protection, limited supply capacity in major overseas producers, and little impact on the short-term impact of phosphate ore by-product hydrofluoric acid, the expected supply growth rate is mainly due to the company's volume, which is weaker than the growth rate of demand.

Costs are rising year by year, and the company's advantages are gradually highlighted: China's fluorite mine has the characteristics of many poor minerals, few rich minerals, and many small enterprises. This means that the actual mining time for existing small mines is limited, and as the mining time limit increases, mining costs will gradually increase. At the same time, the pricing of mining rights, and investment in environmental protection and safety will also increase. In the process of rising costs, large enterprises with the advantage of mining rights and standardized production are expected to stand out further.

The boom continues to improve: The price center of fluorite has continued to rise over the past ten years, mainly due to stricter environmental protection policies, rising costs, and fluctuations in the middle or due to demand issues, but the overall trend is easy to rise and fall. The price center has risen upward from 1000-2,000 yuan/ton to 3000-4000 yuan/ton. We believe that the rise in the price of fluorite is highly certain, regardless of supply and demand perspectives, as well as from a cost perspective.

Company Highlights: Technical Support+Global Layout

The fluorite boom continues to rise. The company's “basic market” single fluorite mine business is solid and steady, while Baotou's “integration” and Mongolian projects have also brought the company more possibilities for volume growth. The company emphasizes the “resource+technology” two-pronged strategy of “resource is king, technology first”. Asset-light technology leverages asset-heavy resources, and key new projects with a multi-faceted layout are efficiently completed and put into operation. The company will produce and transform Mongolia's Mingli Dabian while simultaneously expanding neighboring resources. It is expected to gradually achieve an annual output of 0.2 million-0.3 million tons of fluorite products within 1-2 years, and strive to achieve the goal of producing 0.5 million tons of fluorite products per year within 3-5 years. This is only where the company “set sail overseas”, and it is expected that it will also target South Africa, South America, etc. in the future.

Investment advice: first coverage, giving a “buy” rating

The supply of fluorite as a resource is becoming increasingly tight, and the boom continues to rise. With a single fluorite mine as the basic market, the company drives a multi-site layout around the “resource+technology” wing, including the Baotou “Selection and Integration” project and the Jiangxi Jinling Project. At the same time, the company invested abroad in the Mongolian fluorite project, beginning the first step in globalization. Net profit attributable to 2024-2026 is expected to be 0.46, 0.7, and 0.9 billion yuan, covered for the first time, and given a “buy” rating.

Risk warning

1. Risk of production safety and environmental protection; 2. Risk of downstream demand falling short of expectations; 3. Risk of policy changes; 4. Risk that profit forecasting assumptions are unfounded or fall short of expectations.