Core views

The company's lithium salt production capacity has reached 66,000 tons/year, and the Bikita mine has reached production scale of 4 million tons. The lithium salt business resources are basically self-sufficient, and the company's production capacity is gradually being released to supplement the price with volume. In addition, efforts to reduce costs and increase efficiency of lithium salt are progressing steadily, reducing electricity costs by improving Bikita power guarantee conditions, photovoltaic power generation, etc., and increasing the share of low-cost spodumene concentrate production and reducing lithium salt costs. The company has world-class morganite mines. The rubidium cesium salt industry has outstanding advantages and steady growth in performance. The company acquired Kitumba Copper Mine into the field of copper resource development, and plans to complete an integrated layout of 50,000 tons of copper and metal mining, selection and metallurgy by 2025. The company has more than 20 years of overseas geological exploration experience, empowering resource storage and obtaining high-quality resources, and establishing an advantageous position in resource development. The company's lithium salt, rubidium cesium salt, copper ore development, and overseas geological exploration business are four-wheel drive to build an international mining group with remarkable growth.

occurrences

Net profit to mother decreased by 32.98% and 76.63% in the first quarter of 2023 and 2024, respectively.

In 2023, the company achieved operating income of about 6.013 billion yuan, a year-on-year decrease of 25.22%; net profit attributable to shareholders of listed companies was about 2,08 billion yuan, a year-on-year decrease of 32.98%; and basic earnings per share were about 3.15 yuan, a decrease of 39.13% year on year.

In the first quarter of 2024, the company achieved operating income of 1,127 billion yuan, a year-on-year decrease of 45.63%; net profit attributable to shareholders of listed companies was 256 million yuan, a year-on-year decrease of 76.63%.

Brief review

Due to the impact of falling lithium prices, the company's performance was temporarily under pressure.

According to SMM data, the average price of battery-grade lithium carbonate in 2023 was 258,800 yuan/ton, down 46.36% year on year. In 2023, it achieved production of 15,772 tons of lithium salt from its own mine, 2,622 tons of outsourced/processed lithium salt, with total sales volume of 17,407 tons. The revenue of the lithium battery sector was 4.242 billion yuan, down 33.03% year on year, and the gross profit margin was 57.78%. Lithium prices continued to fall in the first quarter of 2024, with an average price of 101,500 yuan/ton in the first quarter of 2024, down 74.80% year on year and 27.76% month on month. However, due to the release of the company's lithium mine production capacity, production and sales increased month-on-month, and net profit to mother was 256 million yuan, an increase of 85.51% month-on-month. As the price of lithium salt fell to the bottom range, the size of the company gradually increased, and the lithium salt sector compensated by volume, and performance or quarter-on-quarter growth.

The scale of its own lithium mine has exceeded 60,000 tons of LCE, and the target of 100,000 tons is progressing steadily.

The company has two lithium mines, Tanco, Canada and Bikita, Zimbabwe. It completed 4 million tons/year of extraction and production at the end of the year in 2023, which can produce 300,000 spodumene concentrate and 300,000 tons of chemical-grade lithium permeable feldspar concentrate; Jiangxi Chunpeng Lithium's 35,000 tons/year production line was put into operation in November 2023, with a total battery-grade lithium salt production capacity of 66,000 tons/year, which can achieve complete resource self-sufficiency. The Tanco mine currently has a processing capacity of 180,000 tons/year, and is actively promoting the construction of a 1 million tons/year selection plant to handle previously stored tailings. It is expected to be put into operation in 2025, and can reach a 20,000 ton LCE discount after production; in addition, Africa continues to promote scale expansion and strive to complete the integrated layout of 30,000 tons/year of mining, selection and metallurgy in Africa by 2026, and the total volume of the company's lithium mine will exceed 100,000 tons/year.

Cost reduction and efficiency have continued, and the cost of lithium salt has dropped markedly.

With the sharp drop in lithium prices, the company reduced costs from the whole process of production, management, logistics and sales, and stabilized the company's profitability. 1) The company's PPP model invests in the 132KV transmission project in Zimbabwe to improve Bikita's power guarantee conditions, reduce previous diesel power generation, and effectively reduce costs. 2) Bikita invested in the construction of supporting photovoltaic power generation, and completed the main construction in February 2024. The power generation capacity reached more than 20% of the mine's daily electricity consumption, greatly reducing the mine's land use cost. 3) The cost of producing lithium salt from Bikita lithium permeable feldspar is high, and the cost of producing lithium salt from spodumene is low. In 2023, the company mainly used lithium permeable feldspar, and in 2024, it mainly produced spodumene concentrate, reducing the share of lithium permeable feldspar production and effectively reducing the average cost. 4) The company actively negotiates with contractors to reduce pressure costs in various production and transportation processes.

The volume and price of cesium-rubidium business has risen sharply, the application market continues to expand, and the company has an absolute advantage in the industry.

In 2023, the company's rubidium cesium salt division achieved revenue of 1,124 million yuan, gross profit margin of 64.41%; in 2023, cesium-rubidium fine chemical product production/sales volume was 962.18 tons/999.23 tons, an increase of 21.09%/25.92% year-on-year, and cesium formate production/sales/inventory volume 506.96bbl/2946.35bbl/21289.56bbl, -9.86%/13.43%/-10.28% YoY. Cesium and rubidium are included in the list of key minerals in many countries, and are indispensable in the development of strategic emerging industries such as aerospace, defense and military, and information technology. They are also basic raw materials supporting modern high-tech research and development, and downstream consumption scenarios and space are accelerated. The company is a leading enterprise in the field of cesium-rubidium salt fine chemicals and the manufacturer with the most complete cesium industry chain in the world. Morganite resources that can be mined on a large scale in the world are mainly concentrated in the three major mining areas, Canada's Tanco, Zimbabwe's Bikita, and Australia's Sinclair mining area. The company has an absolute voice within the industry and has significant advantages. The company's rubidium cesium salt business has steady, high growth, and high valuation characteristics.

The copper business sector is beginning to take shape. Kitumba copper development is a milestone in the copper sector resource development business. The company successively acquired the Tsumeb smelter in Namibia and the Kitumba copper mine in Zambia to complete the complete layout of the copper business from exploration to development to smelting. Among them, the Tsumeb smelter has a concentrate processing capacity of 260,000 tons/year, and is one of the few special smelters in the world that can handle complex concentrates such as high-arsenic copper concentrates. The Kitumba copper mine has discovered a total of 27.9 million tons of copper resources, 614,000 tons of copper metal, an average grade of 2.2% of copper, and great potential for exploration. The company plans to complete an integrated layout of 50,000 tons/year copper metal mining, selection and metallurgy in 2025, and will strive to obtain new high-quality copper resources within 2 years.

Overseas geological exploration for more than 20 years, geological exploration has enabled the growth of resource reserves and the acquisition of high-quality resources. The company has been engaged in overseas geological exploration for more than 20 years, providing geological survey technical services for many large Chinese mining enterprises to “go global” projects. The business covers more than 20 countries and regions including Africa, Southeast Asia, Central Asia, and Southern Europe. The company's geological exploration business is deep, giving it a unique perspective on resource mergers and acquisitions, and contributing greatly to the company's own mine reserves. Since the company acquired the Bikita mine, it has completed three consecutive storage increases with the company's geological exploration technology. The amount of resources held by lithium minerals has increased from 29.41 million tons to 113.35 million tons of ore, and the LCE has increased from 850,000 tons to 2.88 million tons; the potential for mineral development and prospecting prospects have been discovered in the M&A Kitumba copper mine area, laying the foundation for subsequent storage growth.

The plan is clear, and the path is clear, four-wheel drive. The company has the strategy of “becoming a world-class resource-based mining company” to become an international mining group company with the core business of lithium battery new energy materials production and supply, development and utilization of rare light metal resources, development and utilization of copper mineral resources, solid mineral exploration and mineral rights development. 1) The lithium battery business aims to complete the construction and commissioning of Canada's Tanco 1 million tons/year selection plant in 2025, complete the integrated layout of 30,000 tons/year mining, selection and metallurgy in Africa in 2026, and obtain new high-quality lithium ore resources within 2 years. 2) The rare light metal business maintains the world's largest share of cesium ore resources and the world's leading market share of cesium-rubidium products. 3) The copper business aims to complete the integrated layout of 50,000 tons/year copper metal mining, selection and metallurgy by 2025, and obtain new high-quality copper resources within 2 years. 4) In terms of solid mineral exploration and mineral rights development, we actively obtain rare minerals such as germanium, gallium, tantalum, niobium, beryllium, rare earths, and high-quality mineral resources such as zinc, gold, and iron on a global scale and develop them in a timely manner, providing new mining development growth points for the company's long-term development.

Investment advice: The company's lithium salt production capacity is expanding steadily. In the cycle of falling lithium prices, volume compensation is used to overcome the company's performance cycle; production cost reduction and growth are progressing steadily, costs are constantly decreasing, and good profitability is obtained at the bottom of the cycle. At the same time, the company's copper sector layout path is clear and steady, the geological exploration business is fully empowered, and the future has high growth characteristics. We expect the company's net profit from 2024-2026 to be 13.1/24.2/3.42 billion yuan, corresponding to the PE at the current stock price being 19/10/7 times, giving it a “buy” rating.

Risk warning: 1. The company's lithium salt sector contributes the most revenue and profit. If lithium salt exceeds expectations and falls below expectations, the annual performance may fall short of expectations; 2. The company's lithium salt production capacity is 66,000 tons/year, and can be completely self-sufficient in resources and can rely on capacity release during the year. If capacity release is low, the annual performance falls short of expectations; 3. The company's pressure reduces lithium mine costs, but there is a possibility that the cost reduction falls short of expectations; 4. The risk of the Zimbabwean currency depreciation is high, or there is a risk that the Zimbabwean dollar will depreciate more than expected; 5. There is a growth rate in the salt sector Risks that fall short of expectations; 6. Newly acquired copper resources are currently still in the research stage, and progress may fall short of expectations.