\u3000\u3000 Sinomine Resource Group Co.Ltd(002738) (002738)
Investment Event: the wholly-owned subsidiary of the company, Hong Kong China Mining rare, signed the share and debt sale agreement with AMMS and Samm. Hong Kong China Mining rare plans to acquire 100% equity of AFMIN and 100% equity of amzim100 jointly held by AMMS and Samm at the benchmark consideration of US $180 million. At present, AFMIN and amzim, the subject of the transaction, jointly hold 74% of the equity of bikita company. The main asset of bikita company is the bikita lithium project in Zimbabwe. Bikita is implementing internal restructuring and share repurchase cancellation. If the final internal restructuring of bikita is approved by the government, the company will hold 99.05% equity and corresponding related creditor’s rights of bikita; If bikita’s internal share repurchase and related company’s debt of 100% are finally approved, bikita will be cancelled.
Bikita lithium mine has mature facilities and great development potential. The main asset of bikita company is the bikita lithium project located in mazungo Province, Zimbabwe, Africa. It is 325km away from the capital Harare. It is connected with the capital, the capital of mazungo Province, Durban port in South Africa and Beira port in Mozambique by Expressway and railway, with convenient transportation and perfect infrastructure. Bikita lithium mine project has the permanent mining right containing shaft and sqi6 ore bodies. The ore type of the mine’s lithium deposit is lithium permeable feldspar and spodumene type ore with cesium garnet. According to the resource estimation report in line with ni43-101 specification submitted by IRES, the accumulated lithium mineral resources in bikita lithium mine area are 229.41 million tons, the average grade of Li2O is 1.17%, and the content of Li2O metal is 344000 tons, Equivalent to 849600 tons of Li2CO3 equivalent, and there are still many unverified lithium cesium tantalum pegmatite bodies in the mining area, which has the potential to further expand the reserves of lithium cesium tantalum mineral resources. Bikita mine is currently in the mining stage, with a beneficiation capacity of 700000 tons / year. The main products in the last three years are technical grade lithium permeable feldspar concentrate and cesium garnet concentrate with high grade and low impurities. According to the technical report of the preliminary feasibility study report of the proposed new mining and beneficiation project with an annual processing capacity of 1.05 million tons prepared by IRES, after the acquisition, the company plans to optimize the preliminary feasibility study report and develop the shaft lithium permeable feldspar project and sqi6 spodumene project.
Significant breakthroughs have been made in the upstream lithium resources, the integration of new materials for lithium batteries has been comprehensively improved, and the future growth space has been opened. New energy vehicles are the general trend. The upstream lithium industry has three times the growth space in five years, and lithium resources have become a pain point in the lithium battery industry chain. It is expected that the global lithium resources will be in a tight supply state before 2025. Taking advantage of the new energy Dongfeng, the company increased the lithium salt track. By the end of 2021, the new capacity of 25000 tons of lithium salt was put into operation and reached the production capacity, realizing the breakthrough of the company’s lithium carbonate and lithium hydroxide business from “0” to “1”. At the beginning of 2022, the company completed the technical transformation project of expanding the capacity of 3000 tons of lithium fluoride to 6000 tons, which will further consolidate the leading position of China’s lithium fluoride Market. In addition, the company has extended to lithium mines upstream of the industrial chain to ensure the supply of lithium resources. The 120000 ton spodumene mining and beneficiation capacity of the company’s own mine, Tanco mine in Canada, was officially put into operation in October 2021 (it has basically reached the production capacity at present), and plans to actively promote the open-pit mining scheme of Tanco mine and build a 500000 ton beneficiation plant. The company’s acquisition of bikita lithium mine has become another major breakthrough in lithium resources, further enhancing the company’s lithium resource reserve and lithium salt raw material guarantee ability, laying a solid foundation for the improvement of the company’s lithium resource self-sufficiency rate and the expansion of lithium salt production capacity in the future, increasing the market share, and opening up the company’s future growth space.
Investment suggestion: as the leader of overseas geological exploration and global cesium rubidium resources, the leader of China’s “special and new” lithium battery new material lithium fluoride and the upstart of lithium salt, the company plans to acquire bikita lithium mine and make a major breakthrough in the lithium resource end upstream of the industrial chain, which will greatly improve the company’s lithium mine reserve and lithium resource self-sufficiency rate, and accelerate the company’s transformation to an integrated enterprise of lithium resource mining, processing and new materials, It also lays a solid foundation for the company’s lithium salt production expansion, opens up the company’s future growth space and development potential, and the company’s valuation is expected to be improved. Under the huge performance increment provided by the prosperity of lithium industry and the release of new capacity of lithium mine and lithium salt, the company will enter a period of high performance growth. It is estimated that the company’s net profit attributable to shareholders of listed companies from 2021 to 2023 will be 547, 1669 and 1971 million yuan, corresponding to EPS of 168, 514 and 6.06 yuan from 2021 to 2023 and PE of 35x, 11x and 10x from 2021 to 2023, maintaining the “recommended” rating.
Risk tips: 1) the downstream demand for lithium salt has shrunk significantly; 2) Lithium salt prices fell sharply; 3) The release of new production capacity of the company is less than expected; 4) Insufficient supply of lithium concentrate resources of the company; 5) The company failed to complete the acquisition of lithium ore; 6) Cesium rubidium salt prices fell sharply.
