Canmax: Subsidiary Obtains Mining License for Porcelain Clay (Containing Lithium) Ore with Over 2.16 Million mt of Associated Lithium Oxide

SMM March 21 News: Recently, Canmax announced that its subsidiary Yichun Shengyuan Lithium Co., Ltd. has obtained the Mining License for the Jinzifeng-Yizhujia ceramic clay (containing lithium) mine in Fengxin County and Yifeng County, Jiangxi Province, issued by the Yichun Natural Resources Bureau. The announcement shows that the mine's ore type is ceramic clay, with an open-pit mining method, a production scale of 9 million mt/year, a mining area of 0.8429 square kilometers, and a validity period of 23 years (from March 7, 2025, to March 6, 2048). Canmax stated that obtaining the mining rights for the Jinzifeng-Yizhujia ceramic clay (containing lithium) mine will help the company increase its reserves of lithium ore resources, effectively ensuring the supply of lithium ore resources and enhancing the company's core competitiveness. The bidding for the mine can be traced back to November 27, 2024, when the Yichun Natural Resources Bureau organized an online auction for the mining rights of the Jinzifeng-Yizhujia ceramic clay (containing lithium) mine. Yichun Shengyuan intended to participate in the auction. On November 28, 2024, Yichun Shengyuan successfully won the mining rights for 251.028 million yuan and signed the Mining Rights Transaction Confirmation on November 29, 2024. In terms of the mine's resource reserves, within the open-pit boundary (above the minimum mining elevation of +320 meters), the amount of ceramic clay (containing lithium) ore is 2.06257 billion tons, with 638,769 tons of associated Li2O, at an average grade of 0.31%, and 302,888 tons of associated Rb2O, at an average grade of 0.15%. Across the entire area (above the elevation of +220 meters), the total amount of ceramic clay (containing lithium) ore is 7.2231 billion tons, with 2.1633 million tons of associated Li2O, at an average grade of 0.30%, and 1.0528 million tons of associated Rb2O, at an average grade of 0.15%. It is worth noting that, as lithium chemical prices remain low, many lithium chemical and lithium ore companies have successively announced plans to engage in futures hedging. Canmax is one of them. On March 20, it announced that due to the significant impact of macro factors and the obvious phase adjustment of industry supply and demand in recent years, the price volatility of domestic commodity materials and products has been enormous. The company's main products are affected by price fluctuations, leading to operational profit volatility and overall performance fluctuations. To promote stable business operations, fully utilize futures derivatives, and leverage the hedging function to mitigate market price fluctuation risks, enhance the company's sustained profitability and comprehensive competitiveness, reduce the adverse effects of commodity raw material and finished product price fluctuations on business operations, and improve the company's risk resistance and operational stability, the company plans to conduct futures hedging business according to relevant laws and regulations and company rules. The company's hedging varieties include lithium chemicals and raw materials required for lithium chemical production, which are directly related to the company and its subsidiaries' business operations. Canmax stated that conducting hedging business will strictly follow the company's operational needs, which can, to some extent, avoid commodity price fluctuation risks and ensure the stability and sustainability of the company's operations. Therefore, conducting hedging business is beneficial and feasible for the company. Another lithium chemical company, Yahua Group, had already announced its plan to engage in commodity futures and derivative hedging business on August 30, 2024. Yahua Group mainly engages in lithium battery new energy materials, with primary products being lithium hydroxide and lithium carbonate. In March this year, Yahua Group stated that in 2024, the company used lithium carbonate futures hedging to hedge against some of the risks caused by lithium chemical product price fluctuations. In the future, the company will continue to selectively conduct hedging business based on production and operation plans to reduce the impact of severe market price fluctuations of finished products and raw materials on the company's operations. Tinci also announced its plan to engage in hedging business in September 2024, including lithium carbonate, palm oil, and copper raw materials-related futures varieties required for the company and its subsidiaries' business operations. Regarding lithium carbonate prices, SMM historical prices show that since 2022, lithium carbonate prices have fluctuated dramatically, reaching a high of 567,500 yuan/mt and a low of 72,250 yuan/mt, with a price difference of 495,250 yuan/mt between the highest and lowest points! The significant price fluctuations have led to varying impacts on lithium battery industry chain companies at different times. During the peak of lithium carbonate, upstream lithium ore enterprises such as Ganfeng Lithium and Tianqi Lithium reaped substantial profits, with YOUNGY's net profit attributable to shareholders in 2022 soaring by 3,472.94%. However, as the lithium carbonate market gradually shifted towards a supply surplus, lithium carbonate prices continued to pull back, and many lithium ore and lithium chemical companies began to face narrowing or even negative net profits. In this situation, choosing hedging can, to some extent, mitigate the risks of commodity price fluctuations and stabilize corporate operating costs. Returning to the present, according to the SMM survey, the transaction price center of lithium carbonate spot significantly declined this week. As the sentiment of potentially lower-than-expected downstream demand gradually intensified, coupled with the still robust supply of lithium carbonate, there was a continuous inventory buildup. With the continuation of the surplus pattern, lithium carbonate spot prices continued to fall. Therefore, from the perspective of this week's market transactions, downstream material plants saw a noticeable increase in purchases over the past two days, with their inventory cycles slightly raised to around 13 days. The continuous price decline has led to varying degrees of production cuts among some lithium chemical plants with high-cost positions, but the reduction is relatively limited, and domestic lithium carbonate production remains at highs. The surplus pattern of lithium carbonate is difficult to change, and with downstream production schedules possibly falling short of previous expectations, it is expected that lithium carbonate spot prices will continue to trend downward, accompanied by sideways movement. As of March 21, the spot price of battery-grade lithium carbonate fell to 73,400-75,200 yuan/mt, with an average price of 74,300 yuan/mt. Click here to view SMM new energy product spot prices