Sichuan boasts abundant and easily extractable spodumene reserves, but the risks of investing in local lithium mines should not be overlooked! What are the mining recommendations? [New Energy Summit]

Article 69, Article 72, Article 75, and Article 77 of the Occupational Disease Prevention and Control Law stipulate 26 types of closure scenarios.

【Environmental Protection】Currently, there are 16 environmental laws and State Council documents that regulate the closure of enterprises, including 9 laws: the Marine Environmental Protection Law, the Noise Pollution Prevention and Control Law, the Solid Waste Pollution Prevention and Control Law, the Soil Pollution Prevention and Control Law, the Air Pollution Prevention and Control Law, the Water Pollution Prevention and Control Law, the Environmental Protection Law, the Yellow River Protection Law, and the Yangtze River Protection Law; 3 administrative regulations and 4 State Council normative documents: the Regulations on Nature Reserves, the Regulations on the Administration of Pollutant Discharge Permits, the Regulations on the Administration of Environmental Protection of Construction Projects, the Notice of the General Office of the State Council on Strengthening Environmental Supervision and Law Enforcement, the Guiding Opinions on the Establishment of a Natural Protected Area System with National Parks as the Main Body issued by the General Office of the CPC Central Committee and the General Office of the State Council, and the Notice of the State Council on the Issuance of the Action Plan for Continuous Improvement of Air Quality.

In addition to the aforementioned administrative penalties leading to closure, mines may be closed by local governments due to public interests such as ecological environmental protection, planning adjustments, industrial policies, or their proximity to sensitive construction projects like railways and military facilities.

(11) Risks of Changes in Mining-Related Laws and Policies

The new Mineral Resources Law will come into effect on July 1, 2025, changing the original "one license, two rights" to "separation of rights and licenses" or "two licenses, one right, and one permit"; major changes in exploration and mining plans will require re-approval; the new Mineral Resources Law establishes a comprehensive and systematic mine ecological restoration system, strengthens the acceptance management of mine ecological restoration, and increases penalties for violations of mineral resources laws.

Mining rights fees - mining rights transfer income, Document No. 35 - Document No. 10

During the policy change process, for existing mining rights, even if the mining rights fees have been paid according to the then-current policy requirements, there is a risk of being required to pay additional transfer income when applying for expansion of the mining area, increase in production scale, change in mining methods, or addition of mineral types during the validity period.

Recommendations for Investing in Sichuan Spodumene Mining Rights

(1) Macro Perspective: A Comprehensive Understanding of National, Sichuan, Aba, and Ganzi's Relevant Plans, Lithium Resource Characteristics, and Local Business Environment is Required

1. Follow the Trend, Anchor the Goal, and Stay Determined

The national positioning of Sichuan. In February 2024, the State Council approved the "Sichuan Provincial Territorial Space Plan (2021-2035)", which has recently been approved by the State Council, clarifying Sichuan's new positioning as "a strategic hinterland for China's development and an important region supporting the implementation of national strategies such as the Western Development and the Yangtze River Economic Belt Development."

Sichuan's self-positioning. By 2027, Sichuan will build a full life cycle industrial cluster and ecosystem of "lithium resource development - lithium battery materials - battery manufacturing - system integration - end-use applications - used battery cascade development and comprehensive recycling."

Sichuan's positioning of Ganzi and Aba. The two prefectures are national lithium resource bases, so in the long run, Ganzi and Aba's lithium resources have great potential.

2. Have an Objective, Comprehensive, and In-depth Understanding of the Lithium Resource Environment, Development Characteristics, and Business Environment in Aba and Ganzi

(2) Meso Perspective: Be Good at Strong Alliances, Build a Cooperative Ecosystem, and Create a Harmonious Community

1. Build a Cooperative Ecosystem and Be Good at Strong Alliances

The investment by Yahua Group in the Lijiagou Lithium Mine is a model of cooperation. On September 11, 2017, Yahua Group issued the "Announcement on the Joint Acquisition of Sichuan State Lithium Materials Co., Ltd. with Sichuan Energy Investment Group Co., Ltd. and the Signing of the 'Equity Transfer Agreement' and 'Cooperation Agreement'", achieving a win-win effect through a three-step approach: first, jointly acquiring 62.75% of the equity of Sichuan State Lithium Materials Co., Ltd. held by other shareholders except Yahua Group; second, after the acquisition, splitting State Lithium Company into two independent legal entities, State Lithium Chemicals Company and State Lithium Mining Company; finally, conducting non-proportional capital increase and share expansion for State Lithium Chemicals Company and State Lithium Mining Company, ultimately realizing Yahua Group's controlling operation of State Lithium Chemicals Company and Sichuan Energy Investment's controlling operation of State Lithium Mining Company.

On July 17, 2024, Tianqi Lithium's subsidiary Shenhe Lithium, CATL's subsidiary Sinowei Mining, and Chengxin Lithium's subsidiary Huirong Mining jointly established Sichuan Tiansheng Times New Energy Co., Ltd. to jointly invest in and operate power infrastructure; with a registered capital of 300 million yuan, the business scope includes power supply, power generation, power transmission, and power distribution.

2. Build Good Government-Enterprise Relations and Promote Sustainable Community Development

Aba and Ganzi are both ethnic autonomous regions, relatively underdeveloped, but relevant authorities should collect taxes and fees according to law and not illegally collect "dry shares"; on the other hand, lithium mining companies and their actual controllers should take the initiative to give back to the ethnic autonomous regions in appropriate ways and support the long-term development of local communities, building a harmonious community and good government-enterprise relations.

(3) Micro Perspective: Lithium Mine Investors Need to Choose the Right Investment Model, Entrust Professional Institutions to Conduct Due Diligence, Operate Compliantly, and Legally and Rationally Protect Rights

1. Compare and Optimize the Investment and Acquisition Models of Spodumene Mines

First, rationally participate in the primary market for the transfer of lithium mine exploration rights, cautiously bid at high prices, and prevent the gap between expected and actual resource reserves due to impulsive bidding. For example: the exploration premium of the North Lijiagou Lithium Mine was 1,771 times, and the exploration premium of the Rongxuka South Lithium Mine in Daofu County was 174 times.

Second, when the opportunity is right, obtain lithium mine exploration or mining rights through the transfer of mining rights, for example, on February 11, 2025, the Sichuan Provincial Department of Natural Resources approved the transfer of the exploration rights of the Redamen Spodumene Mine in Jinchuan County from Sichuan Qingda Energy Co., Ltd. to Sichuan Fusheng Mining Co., Ltd.

Third, invest by acquiring equity or increasing capital in mining rights holders.

Fourth, when the mining rights holder of a lithium mine is declared bankrupt, actively participate in the reorganization process to become a reorganization investor.

2. Select Investment Targets, Conduct Pre-investment Due Diligence on the Proposed Transaction Targets, and Grasp the Right Timing for the Transaction

Different investment models require different due diligence items and focuses.

Especially in ethnic autonomous regions. For example, whether Sichuan Province or Ganzi and Aba Prefectures have formulated specific local regulations or administrative normative documents to implement the Qinghai-Tibet Plateau Ecological Protection Law and the Yangtze River Protection Law, and whether local governments have formulated policies requiring local state-owned platform companies to hold dry shares in lithium mining rights holders, for example, the "Aba Tibetan and Qiang Autonomous Prefecture Resource Management Measures" issued by the Aba Prefecture People's Government on May 20, 2013, will have a significant impact on investors, as mentioned in the "Announcement on the Investment in 'Sichuan State Lithium Materials Co., Ltd.'" issued by Yahua Group on December 20, 2013.

3. Pay Attention to Key Clauses in Transaction Agreements

(1) Pay attention to the clauses related to rights restrictions in the exploration rights transfer contract, such as whether the transfer department has made special requirements for exploration work, whether there are restrictions on the transfer, investment, and mortgage of mining rights, and whether there are special provisions on the subject of mine ecological restoration obligations.

(2) Pay attention to setting up commitment, guarantee, and breach clauses

"Commitment and guarantee clauses" can be customized based on the issues and risks identified during the due diligence process.

4. Operate in Compliance with Laws and Be Good at Protecting Rights Through Multiple Channels According to Law

Operating in compliance with laws is the basic premise for the steady and long-term development of enterprises, avoiding administrative penalties due to land use, environmental protection, safety, and illegal mining; do not cross the red line of criminal responsibility, avoiding high-frequency mining crimes such as illegal land occupation and illegal mining.

In the face of civil disputes between partners, under the premise of fully clarifying the facts and preserving evidence, hire professional lawyers to provide consultation and formulate relevant solutions.

If dissatisfied with administrative actions, be good at using rights protection methods such as reconsideration, litigation, mediation, settlement, petition, incidental review of normative documents, or separate proposals for the legality review of normative documents, and organize expert arguments on key legal application issues.

---

》Click to view the special report on the 2025 (10th) New Energy Industry Expo