Daoshi Technology: Plans to Invest No More Than $165 Million in the Construction of a 30kt/a Copper Cathode Hydrometallurgy Smelter Project

Dowstone Technology's stock price rose on July 4. As of 10:34 on the 4th, it fell 5.05% to 15.81 yuan per share.

Dowstone Technology announced on the evening of July 3 that, to further advance its industrial layout in the Democratic Republic of Congo (hereinafter referred to as "DRC"), enhance its competitiveness in the copper and cobalt resource sectors, and deepen its strategic planning in the strategic resources segment, the company plans to establish a project operating company, Dowstone Copper Mining (tentative name), in the DRC through its controlling subsidiary, Hong Kong Jianna Co., Ltd. The project involves the construction of a hydrometallurgy smelter with an annual capacity of 30kt copper cathode. The total investment is expected not to exceed $165 million (approximately 1.183 billion yuan, subject to the actual investment amount). This investment is currently in the planning stage and requires filing or approval from relevant authorities at home and abroad. The actual investment amount will be subject to approval by Chinese and local regulatory authorities. The company will implement the project in phases based on market demand and business progress.

Regarding the purpose, risks, and impact of this overseas investment, Dowstone Technology stated:

1. Purpose of the Overseas Investment

This overseas investment is based on the company's long-term strategic layout in the DRC. The new subsidiary is located in the DRC, a region rich in global copper and cobalt resources. Establishing a smelter there leverages its unique resource advantages, ensuring stable and secure raw material supply for the company's expanded production.

The construction of a 30kt annual capacity copper cathode hydrometallurgy smelter will effectively expand the company's production scale and enhance its strategic resource segment's capabilities. Additionally, by leveraging hydrometallurgy technology and local resource advantages, the project will optimize raw material procurement and processing costs, building a more resilient cost control system and improving economies of scale.

With the rapid development of the global new energy industry, demand for copper and cobalt continues to grow. Upon completion, the project will utilize the company's localized operational experience in the DRC to quickly ramp up capacity, precisely meet market demand, and further strengthen its competitiveness and market share in the global cobalt products and copper markets.

Moreover, the new subsidiary, as an independent operating entity, will enhance flexibility in responding to local policy changes and mitigate operational risks, further improving the company's risk resilience.

2. Impact on the Company

This overseas investment aligns deeply with the company's long-term development strategy for its strategic resources business, laying a solid foundation for sustained profitability and comprehensive strength, thereby advancing its long-term development goals and having a positive impact on the company's growth.

The funding for this overseas investment will come from the company's own funds or self-raised funds, and will not affect the normal operation of its existing main businesses. It will not have a significant adverse impact on the company's financial position or operating results, and there will be no circumstances that harm the interests of shareholders, especially minority shareholders.

3. Existing risks and countermeasures

(1) This investment still requires filing or approval from competent authorities at home and abroad. There is uncertainty regarding whether the relevant filings or approvals can be obtained, as well as the time it will take to obtain them. The company will actively promote the approval process, take the initiative to communicate and collaborate with relevant departments, and strive to complete the required approvals, filings, and registrations as soon as possible.

(2) The construction plan, construction period, and scale of this overseas investment may be adjusted accordingly based on changes in the external environment and business development needs. Additionally, due to significant differences in the political, legal, economic, and cultural environments between overseas countries/regions and China, there may be certain operational and management risks during the overseas investment process. Therefore, there is uncertainty regarding whether the progress and effectiveness of the investment will meet expectations.

The company will actively monitor industry development trends to continuously adapt to development requirements and market changes. The company's management will fully coordinate relevant resource elements to ensure the smooth investment and construction of the project, and will strictly comply with the requirements of relevant laws, regulations, and normative documents to fulfill its information disclosure obligations in a timely manner. Investors are advised to pay attention to investment risks.

Dowstone Technology stated on the investor interaction platform on July 3 that the company started in the ceramic materials industry and transitioned to the new energy materials industry, establishing a business layout of "carbon materials + lithium battery materials + ceramic materials + strategic resources," achieving synergistic development across multiple fields. In the new market environment, the company will focus on solid-state battery materials and the AI field, leading industrial transformation and upgrading, and exploring future development space. Currently, the company has completed a series of strategic layouts and is confident in its future positive development. It also responded on July 3 that in 2024, the company achieved operating revenue of 7.7518238 billion yuan,with overseas business revenue accounting for over 65%. The company's export business mainly focuses on ternary cathode precursors and copper cathode products. Among them, ternary cathode precursors are mainly exported to South Korea, while copper cathodes are directly sold locally in the Democratic Republic of the Congo (DRC). Changes in the external economic and trade environment have a limited impact on the company's overall performance.If there are any plans for shareholding increases in the future, the company will fulfill its information disclosure obligations in a timely manner in accordance with relevant regulations.

Dowstone Technology stated on the interaction platform on June 30 when answering investor questions that the company has comprehensively deployed core materials for solid-state batteries. Among them, single-walled carbon nanotubes and silicon carbon anodes have been supplied in bulk to downstream solid-state battery producers. Solid-state and semi-solid electrolytes are actively being developed and tested in cooperation with top-tier enterprises, with positive feedback. Currently, multiple tests are being carried out according to the supply schedule, striving to meet customer demand for supply.

Dowstone Technology's Q1 2025 report, as disclosed, shows that in the first quarter of this year, the company achieved a total operating revenue of 1.758 billion yuan, down 12.17% YoY; and a net profit attributable to shareholders of 43.7336 million yuan, up 206.86% YoY.

Dowstone Technology's 2024 annual report, previously released, indicates that for the full year of 2024, the company achieved an operating revenue of 7.7518238 billion yuan, an increase of 6.25% compared to the previous year, with overseas business revenue accounting for over 65% of the total; a net profit attributable to shareholders of 156.8573 million yuan, up 662.33% compared to the previous year; and a net profit attributable to shareholders after deducting non-recurring gains and losses of 120.7546 million yuan, up 333.47% compared to the previous year.

Dowstone Technology explained that the main reasons for the company's turnaround from losses to profits in its 2024 annual operating performance were as follows:(1) During the reporting period, the company's shipments of ternary cathode precursors and copper cathode increased compared to the previous year. (2) The company continued to focus on the implementation of its internationalization strategy, actively expanding overseas markets. During the reporting period, the proportion of the company's overseas market shipments increased, and export business revenue continued to grow. (3) During the reporting period, the company's capacity for major copper and cobalt products was released, and production increased, demonstrating comprehensive economies of scale: copper cathode production reached 40,883 mt, up approximately 32% YoY; cobalt intermediate product production reached 1,743 mt in metal content, up approximately 227% YoY. During the reporting period, market prices for copper remained at a relatively high level, and the company's subsidiaries MJM and MMT in the DRC were operating at full capacity and sales, making significant contributions to the company's performance. (4) During the reporting period, the company's provision for inventory depreciation decreased compared to the same period last year.

Regarding its business plan, Dowstone Technology stated in its 2024 annual report that in 2024, the company continued to focus on the implementation of its internationalization strategy, significantly increasing the proportion of overseas market shipments and export business revenue. Combined with the release of copper cathode capacity and the high-level operation of market prices, the company achieved continuous growth in operating revenue and a turnaround from losses to profits in net profit. Looking ahead to 2025, the company will prioritize R&D innovation and digital management, deepen the general manager responsibility system and target management system, leverage equity incentive mechanisms to stimulate momentum, accelerate the transformation and implementation of new quality productive forces, and drive leapfrog growth in operating performance. To achieve this goal, the company has formulated the following business plan:

1. Dual-wheel drive of long-term incentives and precise control: At the beginning of 2025, the company released the "2025 Restricted Stock Incentive Plan," covering key employees in R&D, production, marketing, and other critical areas. Using net profit from 2025 to 2027 as the performance assessment indicator, the plan sets up staggered unlocking conditions and a deferred payment mechanism to achieve a dynamic balance between short-term operations and long-term value creation, effectively aligning the interests of shareholders, the company, and core team members, and fostering a shared focus on the company's long-term development. Under the framework of equity incentive targets, the company will break down revenue and net profit requirements to various business divisions to formulate a responsibility system assessment plan. Meanwhile, it will focus on inventory, accounts receivable, and expense ratio management, and combine non-quantifiable indicators such as quality, safety, environmental protection, and honors for assessment. By implementing precise control and thoroughly implementing the responsibility system, the company aims to drive continuous improvement in organizational efficiency, cultivate an advanced management culture that matches rights, responsibilities, and benefits, and enhance the company's overall competitiveness.

2. Enhance Digitalization and Lean Manufacturing Management Level In 2025, the company will anchor itself in digital transformation, focusing on deepening the application of CRM, SRM, EHR, and financial sharing, optimizing existing business systems, and promoting comprehensive business online, automated, and intelligent operations to improve operational efficiency and reduce costs. At the same time, it will actively explore the application of AI in business scenarios, mine data value to assist strategic decision-making, and drive digital transformation and upgrading through the deep integration of information technology and business, enhancing the company's core competitiveness and laying a solid digital foundation for long-term development.

3. Actively Enhance Global Market Competitiveness The company adheres to a customer-demand-oriented approach, continuously enhancing its global market competitiveness, strengthening supply chain resilience, and promoting high-quality and sustainable development of the company's business. In terms of lithium battery materials, the company has reached a long-term and stable cooperation with POSCO, and the current contract will be strictly executed as planned until December 31, 2025. Based on the deep mutual trust between the two parties in technological R&D, product quality, and delivery capabilities, the company will initiate renewal negotiations in 2025. Meanwhile, it will expand other high-quality overseas customers to further consolidate its key position in the global lithium battery material supply chain. In terms of carbon materials, the company will actively promote the export of carbon nanotube conductive agent products; in terms of ceramic materials, it will leverage its own product and brand advantages, increase R&D innovation, optimize incentive mechanisms, and promote market capture in domestic and overseas regions to improve market share.

4. Drive Innovation through R&D and Lead Industry Development The company continues to invest heavily in R&D and innovation, achieving breakthroughs in product performance, production, cost, and customer adoption for single-walled carbon nanotubes and nano silicon carbon anodes that have been researched and developed for many years. These breakthroughs are expected to disrupt the market landscape, reshape the market map, and become the next sector supporting the company's rapid development. Based on the advantages of high-performance materials such as single-walled carbon nanotubes, silicon carbon anodes, and high-nickel ternary materials, the company has established a solid-state battery research institute, laying out solid electrolytes, lithium metal anodes, and AI for Science, and striving to build a comprehensive material solution for solid-state batteries to prepare for the company's long-term development in terms of technology and products.

5. Accelerate the Expansion of Core Production Capacity In 2025, in the carbon materials business segment, the company will promote the capacity expansion of single-walled carbon nanotube powder and silicon carbon anodes; in the strategic resources segment, it will continue to promote the capacity expansion of copper cathode at the DRC base and make relevant preparations for expansion in Africa and Indonesia.

6. Strengthen risk prevention and control awareness. In the face of a complex and ever-changing domestic and overseas economic environment, the company will establish a full-cycle risk management mechanism to address systemic challenges: at the raw material procurement end, a dynamic inventory model will be established to achieve a balance between cost control and supply chain flexibility; at the production end, lean manufacturing will be promoted, with production based on sales to reduce inventory turnover risks; at the sales end, a customer full-life-cycle risk control model will be built to strengthen the closed-loop management integrating credit assessment, account tracking, and customer complaint response; at the investment end, a strategic-oriented project evaluation system will be implemented, relying on industry trend analysis to establish a dynamic adjustment mechanism, and simultaneously advancing technological adaptability upgrades and market match optimization to maximize the full-cycle benefits of projects.