Events:

The company announced the signing of a "letter of intent" with Shenzhen AVIC. In order to achieve complementary advantages and promote business coordination, the two sides plan to carry out strategic cooperation in the lithium resource side.

Comments:

1. Qinghai Resources, a wholly owned subsidiary of AVIC Resources, is rich in salt lake resources.

AVIC International Mineral Resources Co., Ltd. is a member of China Aviation Technology International Holdings Co., Ltd., which covers mining, forestry and water conservancy industry. the main business is the reserve, exploitation and processing of potassium, phosphorus and other resources, as well as chemical fertilizer, metal silicon, ecological agriculture and so on. Qinghai AVIC, a wholly owned subsidiary of Shenzhen AVIC, is mainly engaged in the development of salt lake resources, and has the mining right of 284.52 square kilometers of potash mining area in Mahai Potash Mining area, Department of Land and Resources, Qinghai Province, which is rich in mineral resources. It has produced a total of about 1.2 million tons of potash fertilizer from 2008 to 2016. Qinghai AVIC has become the main body of the development, production and sale of salt lake resources in Mahai mining area.

2. complementary advantages, excellent mineral resources + advanced technology packages both join hands to advance the lithium industry.

The lithium resource extraction technology and enrichment material preparation technology mastered by Xianfeng's enterprises belong to the second generation adsorption method in Russia, which has the advantages of low cost and first-class process level. CNAC has rich mineral resources and will give priority to cooperation with Xianfeng when carrying out the business of extracting lithium from brine in the future. It is expected that the two sides will cooperate in the form of a joint venture company. after the completion of due diligence, the two sides shall discuss specific cooperation issues, and the two sides can jointly establish a joint venture company and other forms of cooperation, the specific contents and methods of cooperation shall be determined through separate consultation and the relevant written agreement shall be signed by both parties.

3. In August 2017, the company announced that its subordinate enterprises, Xianfeng New Energy and Zang GE Holdings, signed the "Technology use Agreement" and "General Agreement on sales of Lithium Ion enrichment Materials". The form of cooperation is roughly the same as this transaction. Xianfeng Holdings provides Zang GE Holdings with the basic scheme and process of extracting lithium from salt lake brine and producing industrial-grade lithium carbonate products (i.e. "technology package") and collects technology usage fees; at the same time, Zang GE Holdings will purchase lithium ion enrichment materials from Xianfeng New Energy. This joint effort with AVIC Resources will consolidate the company's strength in the upstream resources side, effectively integrate the superior resources of both sides, and promote strategic cooperation between the two sides, so as to promote the business development of the company and its subsidiaries, and further enhance the company's core competitiveness and sustainable development ability.

4. Tamping the upstream and extending the downstream is expected to continue to benefit from the industry boom in the future. The company expects to continue to actively seek cooperation with enterprises with salt lake resources at home and abroad through equity, projects, technology and other ways to directly produce lithium carbonate products in the field of resource development. In the future, the company will aim to build a comprehensive solution provider for lithium resources development and technical services, focusing on lithium resources development and technology research and development, with the technology owned by the company as the core. Through technical cooperation and joint investment with enterprises in the upper and lower reaches of the industrial chain, we will expand our business and achieve diversified operation and multi-level development.

5. Risk tips:

1. Uncertainty risk of mineral resources 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 salt lake lithium extraction. If there is a breakthrough in ore lithium extraction technology in the future, the environmental protection problem will be improved, making the cost lower than the cost of salt lake lithium extraction, which may impact the salt lake lithium extraction business of the cooperation project.