Retain Priority Procurement Rights for Lithium Ore Products! Wanrun Xinneng Plans to Transfer 100% Equity of Mining Company

Published: Dec 17, 2024 08:55

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[Retain Priority Procurement Rights for Lithium Ore Products! Wanrun New Energy Plans to Transfer 100% Equity of Mining Company] Shenzhen Zhongzhu and Wanrun Mining have committed to Wanrun New Energy that, upon completion of the transaction, lithium ore products (including but not limited to spodumene, lepidolite, and salt lake brine lithium ore) produced from lithium mines for which Wanrun Mining holds mining rights and exploration rights as of the transaction completion date shall be supplied to Wanrun New Energy on a priority basis, with preferential pricing under equivalent commercial conditions. (Battery Network)

On the evening of December 15, Wanrun New Energy (688275) announced that the company and its wholly-owned subsidiary, Shenzhen Wanrun Mining Co., Ltd. ("Wanrun Mining"), signed an Equity Transfer Agreement with Shenzhen Zhongzhu Mining Investment Partnership (Limited Partnership) ("Shenzhen Zhongzhu") on December 14, 2024. The company intends to transfer 100% of its equity in Wanrun Mining to Shenzhen Zhongzhu for a transaction price of 315 million yuan.

The announcement stated that after the completion of this transaction, Wanrun New Energy will no longer hold any equity in Wanrun Mining. Shenzhen Zhongzhu and Wanrun Mining have committed to Wanrun New Energy that, after the completion of the transaction, Wanrun Mining will prioritize supplying lithium mine products (including but not limited to spodumene, lepidolite, and salt lake brine lithium) derived from its mining and exploration rights as of the transaction completion date to Wanrun New Energy, and will offer price discounts under equivalent commercial conditions.

Data shows that Wanrun Mining achieved revenue of 106,100 yuan in 2023, with a net loss of 21.0015 million yuan; from January to June 2024, it achieved revenue of 409,400 yuan, with a net loss of 18.7119 million yuan. As of the end of June 2024, Wanrun Mining's net assets amounted to 269 million yuan.

Wanrun New Energy stated that this equity transfer aims to further optimize the company's asset structure, focus on its core business, improve asset operation efficiency, and enhance the company's overall profitability and competitiveness.

According to available information, Wanrun New Energy is one of the earlier enterprises in China engaged in the production and R&D of cathode active materials for new energy batteries. It primarily produces cathode materials and their precursors for lithium-ion power batteries and energy storage batteries, including LFP and iron phosphate. The company has repeatedly stated that due to significant fluctuations in the market prices of key raw materials such as lithium carbonate, the decline in the selling price of its main product, LFP, has exceeded the reduction in unit costs, thereby lowering product gross margins. Meanwhile, the company has made inventory write-down provisions due to falling product prices, further impacting profit levels.

Battery Network noted that on December 10, Wanrun New Energy issued an announcement regarding the launch of commodity futures and options hedging business. Under the premise of ensuring normal production and operations, the company and its subsidiaries within the consolidated financial statements plan to carry out commodity futures and options hedging business based on their actual circumstances.

The announcement stated that price fluctuations in lithium chemical products have significantly impacted Wanrun New Energy's cost control. To address and mitigate the risks and impacts of lithium chemical product spot market price fluctuations on the company's production and operations, the company and its subsidiaries plan to engage in commodity futures and options hedging business. Through the risk-hedging mechanism of hedging, they aim to effectively control the risk exposure of raw material price fluctuations, enhance the company's ability to withstand such risks, and improve financial stability.

The aforementioned trading products are limited to lithium chemicals directly related to the company's production and operations. The maximum margin usage will not exceed 100 million yuan, and the maximum contract value held on any trading day will not exceed 1 billion yuan.

At the same time, Wanrun New Energy has applied to the Guangzhou Futures Exchange for the qualification of a designated delivery in-plant inventory for lithium carbonate.

According to Wanrun New Energy, this will help integrate the spot market, futures market, and delivery in-plant inventory, further enhancing the company's risk resistance and market competitiveness.

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