Dazhong Mining: Lithium Mine Development Plan of Wholly-Owned Subsidiary Approved, Focus on Advancing Lithium Mine Project Construction This Year

SMM March 31: Dazhong Mining recently announced that the "Lithium Mine Resource Development and Utilization Plan for the Jijiaoshan Mine Tongtianmiao Section in Linwu County, Hunan Province" submitted by its wholly-owned subsidiary, Chenzhou City Chengtai Mining Investment Co., Ltd., has passed the expert review organized by the Strategic Research Center for Oil and Gas Resources of the Ministry of Natural Resources, and an expert review opinion has been issued. According to the announcement, the mining right area of the plan is delineated by four coordinate points, covering an area of 4.9343 square kilometers, with a mining elevation (resource reserve estimation elevation) ranging from 1,600 meters to 695 meters, and open-pit stripping and underground engineering elevations ranging from 1,600 meters to 570 meters. The main mineral to be mined is lithium, with a combined open-pit and underground mining method, and a proposed production scale of 20 million mt/year, with an estimated mine service life of 30 years (including a 2-year infrastructure period). The mineral resource mining plan is reasonable. The plan proposes a combined beneficiation method of magnetic separation, flotation, and gravity separation, with the product scheme being lepidolite concentrate and tungsten-tin-tantalum-niobium concentrate. The plan also includes comprehensive mining and rational utilization of associated resources such as tungsten, tin, tantalum, and niobium. Additionally, according to the reply on the mineral resource reserve review and filing of the "Lithium Mine Exploration Report for the Jijiaoshan Mine Tongtianmiao Section in Linwu County, Hunan Province" (Natural Resource Reserve Letter [2024] No. 193), as of August 31, 2024, the lithium ore volume of the Tongtianmiao Section of the Jijiaoshan Mine in Linwu County is 489.872 million mt, with a Li₂O mineral content of 1.3135 million mt, equivalent to 3.2443 million mt of LCE, demonstrating significant resource advantages. Dazhong Mining stated that the reviewed plan adopts a mining method of open-pit mining followed by underground mining, with an open-pit mining scale of 20 million mt/year and an underground mining scale of 8 million mt/year, placing the mining scale among the top domestic lithium mining companies, with significant capacity scale advantages. Dazhong Mining also stated that the approval of this plan by experts is an important step in the company's process of obtaining the mining license for the Jijiaoshan Lithium Mine. The company is accelerating the preparation of the "Mine Geological Environmental Protection and Land Reclamation Plan" for the Tongtianmiao Section of the Jijiaoshan Mine, after which it will apply for the mining license. Additionally, the company will continue to accelerate the construction progress of mining, beneficiation, and lithium carbonate projects, striving to put the lithium mine project into production as soon as possible. However, Dazhong Mining also stated that due to the long construction cycle and significant capital investment required for the mine, the subsequent development of the Jijiaoshan Lithium Mine will take some time, and the final production progress and actual capacity remain uncertain; moreover, the expert review opinion of the plan is still in the public notice period. Investors are advised to make cautious investment decisions and pay attention to investment risks. The market has shown high attention to Dazhong Mining's lithium mine. Previously, investors inquired about the shield machine construction progress of the Jiada Lithium Mine in Sichuan. Dazhong Mining stated that as of now, the company has completed 23% of the total workload of the shield machine tunneling construction for the Jiada Lithium Mine in Sichuan. Regarding the Jiada Lithium Mine, according to previous data, as early as August 14, 2023, Dazhong Mining had already won the exploration right for the Jiada Lithium Mine in Sichuan at a price of over 4.2 billion yuan. According to previous data, the Jiada Lithium Mine is expected to have an average lithium oxide grade of 1.26% in the exploration block, with a potential ore resource of 29.67 million mt to 47.16 million mt, and inferred lithium oxide resources of 370,000 mt to 600,000 mt (equivalent to 920,000 mt to 1.48 million mt of LCE), demonstrating the potential for a large to super-large spodumene mineral resource. Previously, when mentioning the progress of the company's lithium mine projects, Dazhong Mining had stated that in 2025, the company would focus on advancing the construction of lithium mine projects, achieving the rapid production of new resources, and enhancing the company's profitability. However, it is undeniable that unlike the previous years when lithium prices surged, leading to substantial profits for lithium mining companies, in recent years, due to the continuous decline in lithium prices, many lithium mining companies have struggled and even fallen into performance declines or losses, as seen in the recent performance reports of the "Lithium Battery Duo." According to the announcement, Tianqi Lithium's revenue in 2024 decreased by 67.75% YoY, from 40.503 billion yuan to 13.063 billion yuan, and its profit turned from profit to loss, with a net profit attributable to shareholders of the listed company recording a loss of 7.905 billion yuan, a sharp decrease of 208.33% YoY; as for Ganfeng Lithium, the company's revenue in 2024 was 18.91 billion yuan, a decrease of 42.7% YoY; the net profit attributable to shareholders of the listed company recorded a loss of 2.07 billion yuan, a decrease of 141.9% YoY. It is reported that 2024 was the first year of loss since Ganfeng Lithium's listing. When mentioning the reasons for the performance loss, Ganfeng Lithium stated that in 2024, the global lithium chemical industry experienced a deep adjustment, affected by the changes in the supply-demand pattern and the fluctuations in the lithium product market, the sales prices of lithium chemicals and lithium battery products declined, leading to a YoY decrease in the company's operating performance; Tianqi Lithium, when mentioning the reasons for the company's performance decline, stated that the reasons for the company's performance loss can be summarized into two points: first, the MoM decline in lithium prices led to a significant decrease in the consolidated gross profit margin, with the comprehensive gross profit margin in 2024 being 46.07%, a decrease of 38 percentage points YoY. Second, due to the time cycle mismatch between the pricing mechanism of the chemical-grade lithium concentrate of the company's subsidiary, Talison, and the sales pricing mechanism of the company's lithium chemical products, the domestic product gross profit margin was inverted, exacerbating the profit loss at the parent company level. Additionally, Zou Jun also mentioned the company's outlook for 2025, stating that although the lithium carbonate market in 2025 is still in the bottoming stage, and prices have not yet recovered, the main factors affecting the 2024 performance, such as the second phase of asset impairment provisions and inventory impairment provisions, and the lithium concentrate price mismatch, have been eliminated this year. Therefore, he believes that Tianqi Lithium's performance in Q1 2025 will improve. Moreover, at the performance meeting, Tianqi Lithium also mentioned its outlook for the future lithium fundamentals, stating that from the demand side, the company is confident in the long-term development of the new energy industry. In 2024, the global energy transition has entered a critical stage. Governments, enterprises, and various sectors of society are accelerating the promotion of clean energy applications to address the challenges of climate change. Although changes in the macroeconomic environment and fiscal pressures in some countries have led to certain policy changes, globally, the development of the new energy vehicle and energy storage industries still receives broad support; from the perspectives of speed, scale, and intensity, the global lithium industry is still in a rising phase of development. Therefore, from a medium and long-term perspective, the company believes that the lithium industry fundamentals will continue to improve in the coming years. As for Ganfeng Lithium, although this year's performance has encountered its first loss, the company still believes that obtaining high-quality and stable lithium resources is crucial for the long-term stable development of its business. Ganfeng Lithium stated that the company will continue to acquire global upstream lithium resources, planning to form a total annual lithium product supply capacity of no less than 600,000 mt of LCE by 2030 or earlier, which will include capacities from ore lithium extraction, brine lithium extraction, clay lithium extraction, and recycling lithium extraction. Returning to the recent spodumene prices, according to SMM spot quotations, as of March 31, the spot quotation for spodumene concentrate (CIF China) fell to $819/mt, down $26/mt from the previous high of $845/mt, a decrease of 3.17%. According to SMM surveys, with the downward trend in lithium carbonate prices, downstream price pressure continues to increase, and some early stockpilers have sold some goods to raise funds, with transaction price ranges in CIF prices between $810-850/mt, with the low end slightly lower WoW. Additionally, some domestic traders have adopted the method of pricing based on the lithium carbonate futures market, further contributing to the downward trend in the spodumene concentrate market prices. In terms of domestic spot ore, under the pessimistic expectations of subsequent lithium chemical prices, suppliers' firm pricing attitudes have loosened, and transaction prices have declined. As of March 31, the quotation for spodumene (China spot) fell to 5,280-5,950 yuan/mt, with an average price of 5,615 yuan/mt. Click to view SMM new energy product spot quotations. In terms of lepidolite, although upstream suppliers still maintain a firm pricing attitude, facing the continuously declining lithium carbonate prices, downstream smelters are not willing to purchase at current high prices, forcing market prices to decline. As of March 31, the spot quotation for lepidolite concentrate (China spot) (Li₂O: 1.5%-2.0%) fell to 740-1,500 yuan/mt, with an average price of 1,120 yuan/mt. In terms of lithium carbonate, as of March 31, the quotation for battery-grade lithium carbonate fell to 73,200-74,800 yuan/mt, with an average price of 74,000 yuan/mt. According to SMM surveys, although the current spot market for lithium carbonate is relatively loose, there is still tight supply for higher-quality lithium carbonate, providing some pricing power for first and second-tier lithium chemical plants. At the same time, as some traders are handling old inventory, promoting transactions with downstream material plants at lower price points, the transaction price center for lithium carbonate continues to decline. In the short term, considering the difficult reversal of the surplus pattern of lithium carbonate and the signs of loosening ore prices, it is expected that lithium carbonate still has some downside room, accompanied by range-bound fluctuations.