Securities code: Inner Mongolia Dazhong Mining Co.Ltd(001203) securities abbreviation: Inner Mongolia Dazhong Mining Co.Ltd(001203) Announcement No.: 2022019 Inner Mongolia Dazhong Mining Co.Ltd(001203) summary of 2021 annual report I. important tips
The summary of this annual report comes from the full text of the annual report. In order to fully understand the company’s operating results, financial status and future development plan, investors should carefully read the full text of the annual report in the media designated by the CSRC.
In addition to the following directors, other directors attended the meeting of the board of directors to consider the annual report in person
Name of director not present in person position of director not present in person reason for not attending the meeting name of the entrusted person
Tips on non-standard audit opinions
□ applicable √ not applicable
The profit distribution plan of ordinary shares or the plan of converting accumulation fund into share capital in the reporting period considered by the board of directors
□ applicable √ not applicable
The company plans not to distribute cash dividends, bonus shares or increase share capital with provident fund.
Profit distribution plan for preferred shares in the reporting period adopted by the board of directors
□ applicable √ not applicable
2、 Basic information of the company
1. Company profile
Stock abbreviation Inner Mongolia Dazhong Mining Co.Ltd(001203) Stock Code: Inner Mongolia Dazhong Mining Co.Ltd(001203)
Shenzhen Stock Exchange
Contact person and contact information secretary of the board of directors securities affairs representative
Name: Deng Yiting
Office address: No. 55, Huanghe street, Baotou City, Inner Mongolia Autonomous Region No. 55, Huanghe street, Baotou City, Inner Mongolia Autonomous Region
Fax 04725216664
Tel: 04725216664
E-mail [email protected]. [email protected].
2. Introduction to main business or products during the reporting period
(I) main products and uses
The company’s main products are iron concentrate powder and pellets, which are mainly used as raw materials for iron and steel production enterprises. During the reporting period, the sales revenue of iron concentrate powder and pellets accounted for 98.10% of the operating revenue.
1. Iron concentrate powder
At present, the company’s approved mining capacity in Inner Mongolia is 6.2 million tons / year. The designed mining capacity of zhouyoufang iron mine and the re gathering iron mine under construction in Anhui are 4.5 million tons / year respectively, with a total capacity of 9 million tons / year, and supporting the construction of concentrators of corresponding scale. The grade of iron concentrate powder in Inner Mongolia is usually 65.5% – 66.5%, and the content of sulfur, lead, zinc and other impurities is very low. It is a high-quality product, which has a certain premium compared with iron concentrate powder with low grade and high impurities.
2. Pellet
The main raw materials for pelletizing are iron concentrate powder, some of which are supplied by the company’s own mines, and the rest are purchased from outside. The company’s Inner Mongolia pelletizing capacity is 1.2 million tons / year, and Anhui 1.5 million tons / year pelletizing project has been completed and initially put into operation. The advantages of the company’s iron ore industrial chain extension will be further revealed.
(II) main business models
1. Procurement mode
The machinery and equipment, main raw and auxiliary materials and iron concentrate powder / iron ore for pellet production required by the company’s iron ore mining and beneficiation shall be applied by each mining area / branch according to the actual production needs, and the company’s material supply center shall uniformly purchase them through public bidding or inquiry and price comparison, and then supply them to each mining area / branch.
2. Production mode
The mining of the company adopts the combination of self mining and outsourcing mining. The beneficiation of the company is carried out by the company’s own concentrator. The pellet production also adopts the combination of self operation and outsourcing.
3. Sales model
The company has a sales center to coordinate the sales of products in Inner Mongolia and Anhui. The company has established long-term and stable cooperative relations with major customers.
During the reporting period, relying on the quality and location advantages of its products, the company mainly adopted the sales mode of customer direct sales for iron concentrate powder and pellets.
(III) production process flow of main products
1. Iron concentrate powder
The mining method of the company’s iron ore is underground mining. The mined raw ore is transported to the beneficiation workshop. After crushing, screening, grinding and beneficiation, the iron concentrate product is finally obtained, and then sold to the outside world.
2. Process flow of by-product machine-made sand and gravel
The production of by-product machine-made sand and stone mainly takes the waste stone thrown by iron separation and dry throwing as the raw material to produce qualified construction sand through crushing, screening, water washing and other processes.
3. Pelletizing process
Pellet production is mainly made of iron concentrate powder and bentonite as raw materials through drying, grinding, batching, mixing, pelletizing, screening, drying, preheating, roasting, cooling and other processes.
(IV) basic information of the industry during the reporting period
The industry of the company is ferrous metal mining and beneficiation industry. Its main business is iron ore mining and beneficiation, production and sales of iron concentrate powder and pellets, and processing and sales of by-product mechanism sand and stone. Its main products are iron concentrate powder and pellets. The main use of iron ore is the raw material of steel production, and steel is the basic material of the national economy, which is widely used in various social and economic industries. The development of iron ore mining and dressing industry is mainly affected by the iron and steel industry and other downstream industries. The output of pig iron, crude steel and steel directly determines the demand for iron ore.
1. During the reporting period, macroeconomic data improved, but downward pressure increased.
In 2021, with the spread of the global epidemic and the rise of commodity prices, China’s macroeconomic policies strengthened the efforts of “ensuring supply and stabilizing prices” and “helping enterprises to bail out”. The national economy has shown great resilience. GDP grew by 8.1% in the whole year. Epidemic prevention and control and economic development maintained a leading position in the world, and achieved a good start in the 14th five year plan. Although the steady growth policy has alleviated the pressure on economic operation to a certain extent, the current economic operation situation in China is still severe and complex. On the one hand, there is still uncertainty in the development of the global epidemic and there is still pressure to slow down the global economic repair. On the other hand, structural adjustments such as repeated epidemics, the “double carbon” goal and reducing the dependence of economic growth on real estate all pose challenges to China’s economic recovery.
2. The demand for iron ore is at a high level.
In 2021, the global output of pig iron and crude steel was 1.4 billion tons and 1.951 billion tons; The output of pig iron, crude steel and steel in China was 869 million tons, 1033 million tons and 1337 million tons, with a year-on-year increase of – 2.14%, – 3.00% and 0.89% respectively. (data sources: National Bureau of statistics, wind, World Steel Statistics 2021, USGS mineral products summary (2022)) according to China’s pig iron production in recent years, China’s demand for iron concentrate in 2021 is about 1.390 billion tons.
3. The price of iron ore broke through the highest level in history.
China is the world’s largest producer and consumer of iron and steel, and also the world’s largest importer of iron ore. In 2021, China’s pig iron production accounted for 62% of global production, and crude steel production accounted for 52.9% of global production. Benefiting from the strong demand in the Chinese market, China’s iron ore prices showed strong performance in the first half of 2021, and the spot price hit an all-time high of $233 in mid May; In the second half of the year, iron ore prices fell as iron and steel enterprises continued to upgrade measures such as reducing crude steel, double control of energy consumption and limiting production by environmental protection; At the end of the year, with the improvement of expectations for the downstream industry of iron ore, the price of iron ore rebounded significantly.
4. Iron ore is highly dependent on foreign countries.
China is the world’s largest importer of iron ore. Although China has large iron ore reserves, it is difficult to mine because of its low grade and uneven distribution. On the other hand, there is downstream demand for rapid economic development, resulting in an imbalance between supply and demand of iron ore in China, which is highly dependent on high-grade iron ore from Australia and Brazil. According to wind data and the National Bureau of statistics, since 2015, China’s external dependence on iron ore has always remained above 80%. In 2021, China’s pig iron output was 869 million tons, and imported iron ore accounted for about 80.86% of China’s total consumption.
(V) major industrial policies and impacts during the reporting period
1. Iron ore is included in the national strategic reserve resources
For a long time, China’s dependence on imported iron ore has exceeded 80%. The international iron ore exporting countries are mainly Brazil and Australia. The iron ore resources of Brazil and Australia are mainly controlled by vale, Rio Tinto, BHP Billiton and FMG, and their supply accounts for more than 70% of the global iron ore offshore trade. The four iron ore giants have a strong ability to adjust the market supply and price. The shortage of iron ore has become a pain point threatening the security of China’s strategic resources. It is urgent to increase the guarantee of China’s iron ore resources, improve the self-sufficiency rate of iron ore and reduce external dependence. In August 2021, the Ministry of natural resources made it clear that it was organizing the preparation of the first “multi compliance” national land and space planning outline (20212035) “, which” listed iron ore as a strategic mineral and the main target of China’s prospecting action “. The fourteenth five year plan for national economic and social development of the people’s Republic of China and the outline of long-term objectives for 2035 further clarify: implement the energy and resource security strategy, strengthen the planning and control of strategic mineral resources, improve the security guarantee capacity of reserves, and implement a new round of strategic action for prospecting breakthroughs. At the same time, support a number of competitive Chinese existing iron ore enterprises to strengthen the basic guarantee role of China’s mineral resources through large-scale and intensive development.
Under the background of “substitution of domestic iron ore”, the company will make full use of the development opportunities of the industry, deeply cultivate the main business and become bigger and stronger.
2. Driven by policies, the iron and steel industry has entered a new cycle of “carbon control + ultra-low emission + merger and reorganization + discouraging exports”
In April 2021, the Ministry of industry and information technology issued the measures for the implementation of capacity replacement in the iron and steel industry, which put forward strict replacement requirements: the replacement ratio in key areas of air pollution prevention and control shall not be less than 1.5:1, and that in other areas shall not be less than 1.25:1. On July 29, the Tariff Commission of the State Council announced that the export tax rebate of some iron and steel products would be cancelled from August 1. This measure will help curb the growth momentum of steel export and cooperate with the reduction of steel production. In December 2021, the Ministry of industry and information technology issued the “14th five year plan” for the development of raw material industry, which requires the continuous improvement of structural rationalization level by 2025. The production capacity of crude steel, cement and other key raw materials and bulk products is only reduced but not increased. Form 5-10 leading enterprises in the industrial chain with ecological leading power and core competitiveness. More than five world-class advanced manufacturing clusters have been formed in the field of raw materials. The guiding opinions on promoting the high-quality development of the iron and steel industry was issued in January 2022, “strive to basically form a high-quality development pattern with reasonable layout structure, stable resource supply, advanced technology and equipment, prominent quality brand, high intelligence level, strong global competitiveness, green, low-carbon and sustainable by 2025”. In February 2022, the implementation plan of carbon peak in the iron and steel industry was issued to reduce pollution and carbon and promote synergy, so as to promote the comprehensive green transformation of economy and society.
The company deeply studied and judged the development trend of the downstream steel industry, complied with the requirements of “low-carbon” green development, and accelerated the increase of pellet product layout. As a good blast furnace charge, pellet is an effective measure to increase production, save coke, improve economic benefits and improve emissions. At the same time, we will continue to reduce costs and increase efficiency and enhance our core competitiveness.
(VI) development stage of the company’s industry
As a mineral resources mining and dressing industry, iron ore industry is located at the forefront of the industrial chain, and the downstream industry is mainly the iron and steel industry. It is highly related to macro-economy and is obviously affected by macro-economic policies. The whole industry presents obvious cyclical characteristics around the changes of supply-demand relationship, supply-demand expectation and macro-control policies.
From the supply side: according to the summary of mineral products (2019) of the United States Geological Survey (USGS), by the end of 2018, the global raw iron ore reserves were 170 billion tons and the amount of iron metal was 84 billion tons. The top five Australia, Brazil, Russia, China and India accounted for 77.88% of the global raw iron ore reserves and 77.50% of the amount of iron metal. There is sufficient supply of iron ore worldwide. Although China is a large iron ore reserve country, the ore grade is low, the distribution is uneven and the mining is difficult. The iron ores in Australia and Brazil have the characteristics of high grade, shallow burial and less impurities, and most of their four main mines are open-pit rich mines, which have the comparative advantages of low mining cost and high degree of mechanization. Therefore, Australia and Brazil are the world’s largest producers of iron ore and major exporters of iron ore. In 2021, the global iron ore output was 2.6 billion tons, and the total output of Australia and Brazil was 1.28 billion tons, accounting for 49.2% of the total global output. (data source: USGS, COFCO Futures Research Institute)
From the demand side, the global crude steel output in 2021 was 1.951 billion tons, an increase of 3.7% year-on-year. The global crude steel output has increased for ten consecutive years. China’s factors have promoted the continuous strong global demand for iron ore. At present, the proportion of China State Construction Engineering Corporation Limited(601668) steel is stable at 63% – 64%, that of machinery industry is stable at 19% – 20%, and that of automobile and other manufacturing industries is relatively small. For a long time to come, China will still be in the stage of large-scale urbanization, and the development of infrastructure construction, real estate and other industries will form a sustained demand for steel. China’s continued demand for steel will directly affect China’s demand for iron ore. Due to the low grade of iron ore and high mining cost in China, the dependence on imported iron ore will not change in the short term.
(VII) industry competition and industry position of the company
China iron concentrate supply
