[SMM] the signing of a strategic cooperation agreement between Weihua shares and Palmer Technology will be an important supplement to the company's development plan.

SMM6, 17 June: Guangdong Weihua Co., Ltd. signed a strategic cooperation agreement with Tianjin Bamo Technology Co., Ltd.

Guangdong Weihua Co., Ltd. is engaged in the main business is divided into two major sectors, one is the new energy materials business, mainly the production and sales of basic lithium salt and rare earth products; the other is the production and sales of medium (high) density fibreboard, forest planting and sales.

Business aspects of new energy materials

Weihua share lithium salt business is implemented by its subsidiary Zhiyuan lithium industry, with a design capacity of 40,000 tons of battery grade lithium carbonate, lithium hydroxide monohydrate and lithium chloride, advanced and mature technology. the products are mainly used in lithium ion battery cathode materials, energy storage, petrochemical, pharmaceutical and other fields. With the rapid development of the global new energy vehicle industry, the sudden rise of the market in the field of energy storage, the continuous increase in consumption of 3C and other electronic products, the strong demand of lithium battery industry provides a huge market space and development opportunities for lithium salt products. In addition, Weihua subsidiary Shengwei lithium metal lithium project first phase capacity is expected to be completed in the first half of 2019.

The rare earth business of Weihua shares is implemented by Wanhong High and New Technology, a subsidiary. Through comprehensive recycling of waste magnetic materials to produce rare earth oxides, the annual design capacity for the treatment of waste magnetic materials is 6000 tons. The products are mainly praseodymium and neodymium oxide, and cover gadolinium oxide, holmium oxide, dysprosium oxide, terbium oxide and other rare earth oxides, mainly used in permanent magnet materials, catalysts, glass, ceramics, cemented carbide and other fields. The scale of production capacity, the level of technology and the richness of product line are in the forefront of the domestic market.

Composition of operating income of new materials business

In the 2018 reporting period, Zhiyuan lithium industry achieved revenue of 248.8461 million yuan, net profit of 37.0987 million yuan. The company's wholly owned subsidiary Shengwei lithium metal lithium project is currently progressing smoothly, and the first phase of production capacity is expected to be completed and put into production in the first half of 2019. The company will gradually build a relatively perfect basic lithium salt product system. Due to fluctuations in the prices of rare earth products, although Wanhong High and New Technology achieved operating income of 596.5779 million yuan, but the net profit is still a loss of 13.0234 million yuan. With the completion of the technical transformation of Wanhong High and New Technology in the second half of 2018, the control of production costs by strengthening management, batch procurement and appropriate reserves, as well as strengthening the prediction of the prices of rare earth products, and strengthening communication with suppliers and customers, Wanhong's profitability was significantly improved and losses were reversed in the second half of 2018.

Future plans of the company

In the next 2-3 years, Weihua plans to continue to increase investment in new energy materials, enhance the research and development and production capacity of high-end lithium salt products, strengthen cooperation with upstream and downstream well-known enterprises, and continuously expand production capacity according to customer demand.

At the same time, Weihua shares will strengthen foreign exchanges and international cooperation; promote the early injection of Oino mining industry, multi-channel omni-directional protection of raw material supply.

Considering that Tianjin Palmer Technology Co., Ltd. has a complete and forward-looking layout in the field of ternary materials, and has leading R & D, production and sales capabilities, there is a great demand for lithium salt raw materials. Guangdong Weihua Co., Ltd. and Sichuan Zhiyuan Lithium Industry Co., Ltd., a wholly owned subsidiary, has a mature team and rich R & D and production experience in lithium carbonate, lithium hydroxide and other lithium salt production fields. In order to promote cooperation between the two sides in the new energy materials industry and give full play to their respective advantages, the Company and Palmer Technology signed the Strategic Cooperation Agreement on June 15, 2019 on lithium salt business cooperation.

Between 2019 and 2024, Palmer Technology and its subsidiaries plan to purchase lithium carbonate and lithium hydroxide from Weihua shares and subsidiaries according to the capacity building plan of Weihua shares. The annual purchase volume between 2019 and 2024 is expected to be 300t, 10000 t, 10000 t, 18000 t, 21000 t and 25000 t, respectively. During the procurement period, the procurement plan and the structure of the purchased products shall be determined by both parties in consultation on a quarterly basis.

The signing of the agreement is a major complement to Weihua's plan to cooperate with well-known companies upstream and downstream, and will have a positive impact on the performance of both Weihua and Palmer during the period of scientific and technological cooperation.

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