Tianqi lithium industry's net profit in the first half of the year is 1.31 billion yuan to actively expand production and increase lithium product production capacity.

SMM8, 30 August: August 29, Tianqi lithium industry released semi-annual report, the report shows that the company achieved business income of 3.29 billion yuan in the first half of the year, an increase of 36.24% over the same period last year; The comprehensive gross profit margin of the product was 72.54%, an increase of 3.9 percentage points over the same period last year, and the net profit was 1.31 billion yuan, an increase of 41.71% over the same period last year.

Tianqi lithium industry believes that with the change of the national new energy vehicle subsidy policy, high-energy, long-lasting products will become the mainstream of the market, and the previous backward technologies and products will be eliminated by the market, and the corresponding manufacturers will also be adjusted. This year, the fall in the price of lithium carbonate in the upper reaches was affected by the adjustment of subsidy policies for downstream new energy vehicles and the adjustment of production lines by battery enterprises. The demand side was lower than the market expectations, and the low-end production capacity gradually began to enter the phase-out stage. The development of the industry is bound to go through the reshuffle process of survival of the fittest, and the high-end, consistent, stable and low-cost lithium carbonate products still have strong market demand support, but the low-end products are flooded with the market in the short term. It will still have a certain impact on the market order.

Tianqi lithium industry is the world's leading supplier of lithium products, across Asia and Oceania, with production, resource bases or branches in Sichuan, Jiangsu, Chongqing and Australia.

Telison, which is controlled by the company, owns the largest and best quality spodumene mine currently being exploited in the world, Green Bush (Greenbushes), Western Australia. Tellison is currently the world's largest owner and supplier of solid lithium concentrate. According to the reserve evaluation report issued by BDA, as of March 31, 2018, the total resource volume of Greenbush lithium mine is 178.5 million tons, equivalent to 8.78 million tons of lithium carbonate equivalent. The total reserves of lithium ore are 133.1 million tons, equivalent to 6.9 million tons of lithium carbonate, and the grade of lithium oxide is 2.1%.

According to the Roskill report, Greenbush's high-grade lithium ore and large-scale operations have made it the lowest cost to produce chemical grade lithium concentrate in the world. The company achieved complete self-sufficiency in lithium concentrate through an off-take agreement with Telison. In addition, according to the Roskill report, Telison was the largest producer of technical grade lithium concentrate in terms of its capacity and the number of goods sold to end users in the six years from 2012 to 2017. The large-scale and stable supply of high-quality, low-cost lithium raw materials at the Greenbush mine can continuously support the processing of the company's existing and future lithium products, as well as the future business development of downstream customers in the lithium industry.

In addition to the Greenbush lithium mine resources, Shenghe Lithium Industry, a wholly owned subsidiary of the company, owns the mining right of the Zola spodumene mine in Yajiang County, Sichuan Province. As of March 31, 2018, the mining area identified 19.714 million tons of ore, equivalent to about 632000 tons of lithium carbonate equivalent.

According to the Roskill report, in the future, with the completion of the SQM transaction, the company will realize the strategic investment in Atacama Salt Lake (Salar de Atacama), the largest salt lake lithium resource in the world. Based on production of lithium chemicals in 2017, SQM is the world's largest producer of lithium chemicals in 2017. The company's investment in SQM and control of the Greenbush mine will help the company to generate comprehensive benefits from lithium resources with superior endowment and operating costs.

Main products and their uses:

The lithium concentrate obtained by the company is mainly used to produce four kinds of lithium chemical products, namely lithium carbonate, lithium hydroxide, lithium chloride and metal lithium. The company's lithium chemical products are widely used in the terminal industry, including electric vehicles, energy storage systems, aircraft, ceramics and glass.

(photo: Tianqi Lithium 2018 Annual report)

The major expansion measures of Tianqi lithium industry in the past two years:

1. Expand the company's mining business to support future business expansion

As a basic component of the company's fully vertically integrated business model, upstream business is the basis for supporting overall business growth and meeting expected market demand. The company plans to increase production capacity of lithium concentrate by expanding production at the Greenbush mine. Tellison is currently building a second chemical grade lithium concentrate production plant adjacent to the existing chemical grade lithium concentrate production plant (hereinafter referred to as "CGP2"). Production of CGP2 will begin in mid-2019, It will also be able to increase the annual production of chemical grade lithium concentrate at the Greenbush mine by 600000 tons.

On July 24, 2018, the board of directors of the company approved the construction of a third chemical grade lithium concentrate production plant (hereinafter referred to as "CGP3") and related infrastructure; The project includes the construction of an independent and dedicated large-scale chemical grade lithium concentrate production facility, a new ore crushing facility and infrastructure to complement the subsequent expansion, which is expected to be completed and pilot production begins in the fourth quarter of 2020. The two new plants will be able to increase annual production at the Greenbush mine to about 1.95 million tons and will continue to have the lowest cost of producing chemical-grade lithium concentrate. Tellison has a well-trained and experienced local management team to ensure the smooth implementation of the expansion plan. After the completion of the production expansion project, it will provide a sustained and adequate raw material guarantee for the lithium salt project at home and abroad, better achieve capacity matching and industrial chain synergy, and enhance the company's market supply capacity and share. In order to improve the profitability of the company, and further consolidate the company's leading position in the global lithium mining industry.

2. Further improve the production capacity of lithium chemical products and enrich the supply of products

In order to take full advantage of the company's growth momentum and the growing market demand for lithium products, the company intends to effectively implement the company's expansion plan to increase the company's lithium compound production capacity. For example, in order to expand the company's capacity as a supplier of the world's top battery materials manufacturers, a fully automated plant is being built in Queenana, Australia, to produce battery-grade lithium hydroxide, with an annual capacity of 48000 tons upon completion and operation. Upon completion of the construction of the quinana plant, the company will take full advantage of the strong growth potential of battery-grade lithium hydroxide to improve the company's performance. In order to expand the production capacity of battery-grade lithium carbonate, the company will build a production plant with an annual production capacity of 20000 tons in Anju District of Suining City. Because of its geographical proximity to the company's flood injection plant, the company will be able to minimize execution risk and improve efficiency by taking advantage of the operational synergies between the two plants. The company also has plans to expand the lithium metal capacity of the Tongliang plant in Chongqing to take full advantage of the future development opportunities of solid lithium batteries and other downstream applications of lithium metal. In addition, the company will continue to upgrade and improve the production technology of the flood shooting plant and Zhangjiagang plant, in order to improve production capacity and efficiency.

The company has a first-mover advantage in building new production bases in China and Australia. With this advantage, the company plans to take advantage of long-term strong customer relationships and excellent product quality to effectively reduce operating costs and execution risks.

3. Consolidate long-term and strong customer relations and continue to expand the company's global business scope

The company strives to become an indispensable part of the customer supply chain and an indispensable part of the end market. The company plans to further strengthen the company's sales efforts and customer-oriented research and development capabilities, continue to expand the company's customer base, and deepen customer relations around the world. The company intends to strengthen its ties with downstream end users around the world through strategic cooperation in product development and technological innovation. The company plans to sign medium-and long-term supply contracts with industry-leading international customers who have strict requirements on product quality and compliance with strict certification procedures.

The company is continuing to develop its international business, thereby further strengthening the company's global customer base. The company will continue to improve its international sales capacity through the recruitment and training of sales personnel and further expand its geographical coverage, especially its customers in Northeast Asia and Europe. To strengthen ties with top end customers in the lithium-based new energy sector, particularly in electric vehicles and energy storage systems.

4. Strengthen R & D capacity and selectively pursue strategic investment

During the reporting period, the company continued to improve the R & D team's scientific research ability, respectively in the battery recovery, metal lithium negative electrode materials as the representative of the scientific research projects to obtain invention patents, and strive to create and enhance the driving force of technology to the future growth of the company; In the future, we will continue to pay attention to the development opportunities in line with the company's development strategy, actively create favorable conditions to further improve the industrial layout, and constantly enhance the intrinsic value and industry status of the company. Strive to become an international leader in the new energy materials industry with lithium industry as the core.

During the reporting period, the company continued to make strategic investments to support key players in the downstream new energy industry. The company invests in Beijing Weilan New Energy Technology Co., Ltd., strategically giving the company access to new battery technologies and preparing the company for better use of lithium in the future trend of new battery applications. Helping the company adapt to changing industry trends and customer needs may also create more growth opportunities for the company's business development.

The company is committed to devote a large amount of resources to R & D work to improve production technology and product supply, optimize product quality, improve operating efficiency and reduce production costs. The company's future research and development focus includes: (1) according to customer feedback and market development, continue to optimize the company's lithium compounds and metal products; (2) strengthen the research and development of lithium recovery and utilization, keep up with the latest industry trend, and realize closed-loop production; (3) deepen the understanding of advanced lithium-based battery materials expected to be used in the next generation battery technology; (4) participate in the research and development of potential battery technology in the future in order to develop innovative products that meet the needs of the company's customers.

Tianqi Lithium forecasts operating results for the first three quarters of 2018:

In the report, the company forecasts operating results for the period from January to September 2018 (the first three quarters). The company expects to realize the change range of net profit attributable to shareholders of listed companies from January to September in the range of 1.66 billion yuan to 1.88 billion yuan, an increase of 9.32% to 23.81% over the same period last year. As for the reasons for the performance changes, the company said that it was mainly due to the increase in lithium mine sales and prices and the increase in lithium chemical product sales, gross profit and net profit. Secondly, due to the purchase of SQM 23.77% equity delivery time has not yet been finalized, the above performance forecast does not take into account the impact of the completion of the transaction on the performance of the company.

The company entered into a share purchase agreement with Nutrien Group on 17 May 2018 to purchase a combined approximately 23.77 per cent stake in Chilean-based lithium producer SQM. After the deal is completed, the company will own about 25.86 per cent of SQM and become its second-largest shareholder. According to the Roskill report, SQM is the world's largest manufacturer of lithium chemicals by production in 2017. The deal will further consolidate the company's position in the industry and generate sustainable, stable and attractive long-term financial returns.

According to the Roskill report, in the future, with the completion of the SQM transaction, the company will realize the strategic investment in Atacama Salt Lake (Salar de Atacama), the largest salt lake lithium resource in the world. Based on production of lithium chemicals in 2017, SQM is the world's largest producer of lithium chemicals in 2017. The company says its investment in SQM and its control of the Greenbush mine will help the company generate comprehensive benefits from lithium resources with superior endowment and operating costs.