Dazhong Mining: The Comprehensive Lithium Extraction Technology for Harmless Treatment of Lithium Slag Significantly Reduces the Cost of Mining, Beneficiation, and Smelting of Lithium Carbonate, Showing Strong Competitiveness in the Current Market

SMM News on June 19: Recently, Dazhong Mining released a record of investor relations activities, in which the company was asked about the topic, "With lithium carbonate prices recently falling to 60,000, can the company still generate considerable profit margins by continuing to invest in the lithium mine project in Hunan?" In response, Dazhong Mining stated that its Hunan project adopts an "integrated mining, beneficiation, and smelting" business model, achieving 100% self-sufficiency in lithium raw materials. The Jijiaoshan mining area's first mining section, the Tongtianmiao ore block, in Hunan has proven reserves of approximately 3.24 million mt of lithium carbonate equivalent (LCE). The planned annual mining and beneficiation production scale is 20 million mt, giving it significant capacity advantages.

In addition, to enhance resource utilization efficiency and strengthen cost control, the company is currently focusing on two major core technology R&D projects in Hunan: "Efficient Lithium Extraction from Chenzhou Lepidolite and Resource-Saving Technology R&D" and "Research on Improving the Conversion Rate of Lepidolite Roasting and Crystallization." These projects aim to optimize the process flow, achieve cost reduction and efficiency enhancement, and the new process R&D project has already completed pilot-scale testing. Meanwhile, due to the magnetic properties of the lithium ore in the company's Jijiaoshan mine in Hunan, the company can adopt a process of "pre-discarding tailings through strong magnetic separation, followed by flotation for concentration," discarding 85% of the raw ore as tailings, with only 15% entering flotation, thereby increasing the grade of lithium concentrate to 2.3% and significantly reducing the cost of downstream smelting. Through in-house control of core production links such as mining, beneficiation, and smelting, the company has built strong capabilities in comprehensive cost control.

In summary, the entire industry chain business model, large-scale capacity layout, and outstanding cost control advantages will all help the company effectively cope with fluctuations in lithium product prices and enhance its ability to resist cyclical risks.

Regarding the overall construction progress of the Hunan lithium mine project, Dazhong Mining stated that in terms of mining, the company has completed the pre-requisite procedures for applying for the mining rights of the Jijiaoshan lithium mine and is now actively promoting the relevant work for applying for the mining rights. After meeting the application conditions, the company will promptly apply to the Ministry of Natural Resources for a mining license. According to the "Service Guide for New Mining Right Registration (Non-Oil and Gas)" issued by the Ministry of Natural Resources, an approval decision will be made within 40 days from the date of accepting the application. In terms of beneficiation, with the full connection of the mining and beneficiation tunnel in May 2025, the project construction has entered the fast lane. The beneficiation project for the Hunan lithium mine has completed site leveling and is now proceeding with equipment ordering and civil engineering works. The company is overall carrying out the basic work related to the production of the lithium carbonate project in accordance with the construction plan that matches mining, beneficiation, and smelting.

Based on the current construction progress, the company estimates that the first-phase 10 million mt mining and beneficiation project and the first-phase 20,000 mt/year lithium carbonate smelting project will be completed and put into operation in 2026, contributing to the company's revenue. However, during the implementation process, factors such as license approvals and changes to the implementation plan have led to delays in the project's construction progress, falling short of expectations. For specific updates, please refer to the company's official platform information, disclosed periodic reports, and relevant announcements.

In addition to the Jijiaoshan lithium mine in Hunan, Dazhong Mining also holds the exploration rights for the Jiada lithium mine in Sichuan. The company successfully acquired these exploration rights in August 2023 at a price of 4.206 billion yuan. Recently, the company successfully completed the reserve review and filing for the "0-80 Line Exploration Area" in the first mining area of the Jiada lithium mine. The first mining area of the Jiada lithium mine, covering 2.056 square kilometers, has proven ore resources of 43.436 million mt, with an average lithium oxide grade of 1.38% and a lithium oxide mineral content of 600,900 mt (equivalent to 1.4842 million mt of LCE). It is also associated with abundant tantalum and niobium minerals, boasting superior resource endowments and significant development potential. Moreover, the raw ore grade of the Sichuan Jiada lithium mine is relatively high. The company plans to sell by-product raw ore this year to generate new revenue for its own construction.

The exploration area for the Sichuan Jiada lithium mine exploration rights covers 21.2247 square kilometers, while the area of the first mining area that has been filed this time is only 2.056 square kilometers, indicating significant potential for future reserve increases. The company will arrange a geological team to continue exploration work in areas beyond the first mining area, aiming to secure more resources based on the existing foundation as soon as possible.

Dazhong Mining stated that this exploration achievement marks a milestone in the progress of the Jiada lithium mine project, providing solid support for the company's strategic layout of lithium resources. According to the process of converting exploration rights to mining rights, the company will subsequently need to compile the "Mineral Resource Development and Utilization Plan" based on the resource reserve filing documents. After completing the compilation and filing of the "Mine Geological Environmental Protection and Land Reclamation Plan" (referred to as the "Two-in-One Plan"), the company can apply for a new mining license. Currently, the company is simultaneously working on the compilation of both plans. Referring to the license application cycle for the Jijiaoshan lithium mine in Hunan, the company expects to obtain the mining license for the Jiada lithium mine by December 2025. However, during the implementation process, delays may occur due to factors such as license approvals and inefficient personnel organization. The company will disclose project updates in a timely manner based on relevant progress.

In addition, it is worth mentioning that Dazhong Mining has also conducted in-depth research on a new process for lithium extraction using the sulphuric acid method. In January of this year, the company finalized the process plan, completed small-scale experimental verification, and initiated pilot-scale testing, which was recently completed. The experimental results indicate that the company's research and development of a comprehensive, harmless lithium extraction technology from lithium slag has overcome the cost and environmental protection challenges associated with mica lithium extraction compared to traditional processes. Its main advantages are as follows:

(1) Reduction, harmlessness, and resource utilization of lithium slag: The amount of lithium slag is reduced by 50%; harmful elements such as beryllium and thallium in the lithium slag meet the Class 1 solid waste standards; the lithium slag can be widely used in fields such as building materials and highway construction, successfully addressing the environmental protection issues associated with mica lithium extraction;

(2) Significantly improved lithium recovery rate: The lithium recovery rate reaches 90%;

(3) Comprehensive utilization of valuable metals: Simultaneous recovery of metals such as potassium, achieving a circular economy model of "one mine, multiple products";

(4) Low cost: The comprehensive cost of mining, beneficiation, and smelting per mt of lithium carbonate is significantly reduced, maintaining strong competitiveness under current market conditions.

According to SMM spot quotations, the spot price of lithium carbonate has recently remained around 60,000 yuan/mt. As of June 19, battery-grade lithium carbonate spot quotations stood at 59,900-61,000 yuan/mt, with the average price at 60,450 yuan/mt.

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SMM survey indicates that the lithium carbonate market still exhibits a supply surplus. The supply side maintains relatively ample circulating volumes, while demand remains weak, with downstream material enterprises showing low purchase willingness and primarily restocking for essential needs, with no visible stocking demand. Additionally, upstream and downstream enterprises hold significantly divergent expectations on price trends. Upstream lithium chemical producers strongly refuse to budge on prices due to cost considerations, while downstream buyers maintain a cautious wait-and-see approach. Considering end-use demand and the current relatively high inventory level in the industry chain, SMM expects lithium carbonate prices to continue fluctuating at lows in the short term.

Despite the currently subdued lithium price trend, Dazhong Mining continues expanding its lithium-related business. On June 18, Dazhong Mining announced plans to construct a "3,000 mt/year lithium metal battery new material project" in Linwu County, with a total investment of 1 billion yuan. Specifically, the project will be implemented in three phases: Phase I focuses on R&D, aiming to complete research, small-scale, and pilot-scale tests of lithium metal battery new materials by 2025; Phase II plans to build a 1,000 mt/year lithium metal battery new material production line, with construction expected to commence in April 2026 and operation to begin by the end of 2027; Phase III plans to construct a 2,000 mt/year production line, with construction scheduled for June 2027 and operation by the end of 2028.

Dazhong Mining stated that lithium metal battery materials offer significant advantages in high specific capacity, serving as a key raw material for high-performance batteries, especially solid-state batteries, aligning with the development trend of new energy industry upgrades. Additionally, the company noted it already holds 3.24 million mt LCE resources in Linwu County, complemented by lithium ore mining and lithium carbonate processing projects, forming an integrated industry chain from mining to smelting and establishing a foundation for lithium battery new material production. This investment in lithium metal battery new materials represents a forward-looking layout based on in-depth market analysis and future strategic considerations, enhancing the company's overall competitiveness and profitability.

On June 17, Yahua Group also announced the consolidation of its lithium business, planning to rename its wholly-owned subsidiary Sichuan Yahua Lithium Technology Co., Ltd. as "Yahua Lithium Group" and transfer equity interests of five lithium-related subsidiaries to Yahua Lithium Group without compensation. The announcement indicates that the establishment of "Yahua Lithium Industry Group" aims to coordinate and integrate various resources of Yahua Group's lithium industry, fully leverage the business advantages of each company, focus more on the development of the lithium industry, improve resource synergy efficiency, reduce business chain costs, and promote the rapid and high-quality development of the company's lithium industry.