Benefiting from the strong demand brought by the development of new energy vehicles, the performance of lithium salt manufacturer Sichuan Yahua Industrial Group Co.Ltd(002497) ( Sichuan Yahua Industrial Group Co.Ltd(002497) ) has increased greatly and actively locked in upstream resources.
proposed acquisition of shares of Australian company
On February 27, Sichuan Yahua Industrial Group Co.Ltd(002497) announced that the wholly-owned subsidiary Yahua International Investment Development Co., Ltd. (hereinafter referred to as “Yahua international”) planned to subscribe for 3.7 million shares of Abyssinian Metals Limited (hereinafter referred to as “aby company”) in Australia at the price of a $0.75 per share, accounting for 3.4% of the total share capital of aby company before IPO.
Aby company is a battery metal company registered in Australia. It owns mineral resources in African countries such as Sudan and Ethiopia. Its core assets are mainly kenticha lithium mine in Ethiopia (holding 51% equity).
The mining of kenticha lithium mine began in 1990. The area has highly mineralized lithium cesium tantalum (LCT) pegmatite. It has proven 67.4 million tons of lithium resources and the average grade of Li2O is 1.03%. It is further exploring and developing the mineralized lithium resources. The total resources range from 80-11 million tons of lithium resources, equivalent to more than 1 million tons of Li2O; The resources in the southern and Northern reserves have great potential for future growth, and the overall resource scale can be comparable to the pegmatites of talison, wodgina and other projects in Australia.
The overall technical and operation team of kenticha lithium mine comes from the former Galaxy lithium industry in Australia and has long-term good cooperation with Sichuan Yahua Industrial Group Co.Ltd(002497) the lithium concentrate of phase I 200000 t / a (equivalent to 30000 T / a of Li2CO3 equivalent) production line will be delivered in the second quarter of 2023, and the mine life is expected to exceed 18 years.
Both parties agree that aby company will provide no less than 120000 tons of lithium concentrate every 12 monthly contract years. If aby company has excess lithium concentrate in the future, both parties can provide additional lithium concentrate for Yahua international under the conditions agreed in writing. The validity period is from the date when aby company notifies the product to be ready for shipment to December 31, 2025. Aby and Yahua international will negotiate with reference to the price of lithium concentrate based on 6.0% Li2O published on relevant market websites no later than 3 months before the expected delivery date of lithium concentrate, and reach an agreement on the price of relevant batches of goods.
re lock lithium resources
This is not the first time that Sichuan Yahua Industrial Group Co.Ltd(002497) disclosed the measure of locking upstream resources.
In December 2021, Sichuan Yahua Industrial Group Co.Ltd(002497) through Yahua international subscribed 80 million shares of Australia EV Resources Co., Ltd., accounting for 9.5% of the total share capital of EV company. The main purpose is to cooperate with EV company to jointly develop its existing lithium resources.
On February 17, 2022, Sichuan Yahua Industrial Group Co.Ltd(002497) also announced that Yahua international and lithium developments (grants NT) Pty Ltd (hereinafter referred to as “lithium development”), a wholly-owned subsidiary of Australian core company, had signed the off purchase agreement on lithium concentrate, The two sides agreed that Yahua international will purchase at least 300000 dry tons of lithium oxide concentrate from lithium industry development. After the lithium deposit is put into operation, Yahua international will purchase at least 75000 dry tons of lithium oxide concentrate (floating up and down no more than 10%) every year.
In 2021, the prosperity of the lithium industry continued to improve, new energy vehicles developed rapidly, the demand for lithium products continued to grow, and the price of lithium salt continued to rise and hit a record high Sichuan Yahua Industrial Group Co.Ltd(002497) lithium business is also growing significantly.
According to the performance express disclosed by the company, the total operating revenue in 2021 increased by 60.99% year-on-year; Net profit increased by 185.5% year-on-year; Basic earnings per share increased by 139.37% year-on-year.
Sichuan Yahua Industrial Group Co.Ltd(002497) previously disclosed that the company’s total assets in 2021 increased by 2.127 billion yuan compared with the beginning of the reporting period, with a year-on-year increase of 30.57%, mainly due to the significant increase in operating performance caused by the increase of the company’s revenue scale, and the increase in lithium material inventory storage in order to ensure the supply and demand of products in the lithium industry.
In order to lock resources, Sichuan Yahua Industrial Group Co.Ltd(002497) also promises to irrevocably pay an advance payment of USD 40 million to aby six months before the first production of the products of kenticha project.
The company believes that with the commissioning of the kenticha project, the pre IPO equity subscription and the acquisition of the underwriting right of lithium concentrate will open up new guarantee channels for the company in the upstream resource end of the lithium industry. At the same time, it can also share the excess earnings after the listing of Australian aby company, which will have a positive impact on the company’s future operating performance, which is in line with the interests of the company and shareholders.
