Event overview:
The bankruptcy liquidation equity auction of 542857% equity of Yajiang snowway Mining Development Co., Ltd. fell on May 21. According to the auction confirmation issued on May 21, the buyer was Tan Wei, and the transaction price of the subject matter reached 2.002 billion yuan.
Analysis and judgment:
Snowway’s auction fell, and the debt left over by history remains unresolved
According to the auction confirmation issued on May 21, the buyer was Tan Wei, and the transaction price of the subject matter reached 2.002 billion yuan. According to the announcement of the manager of snowway mining on the fourth public recruitment of intended investors, as of December 13, 2021, Yajiang County People’s court has ruled to confirm 18 bonds and the amount of creditor’s rights has been 104015282183 yuan. There are 6 deferred claims, with a total amount of about 57163573659 yuan. The total debt recognized + deferred recognition is 1.612 billion yuan. The auction of 542857% equity of 2 billion yuan was successful, 100% equity of 3.684 billion yuan was evaluated according to this, and the total confirmed + deferred confirmed debt was 1.612 billion yuan. In 2016, the price of “increased exploration minerals” of delanongba lithium and quartzite exploration rights was unpaid, and the evaluation result has become invalid. The supplementary payment price is expected to be higher after reassessment. Based on the supplementary payment price in 2016 alone, the total consideration for the debt cleared by delanongba lithium mine is 6.575 billion yuan, including 293200 tons of lithium oxide, 733000 tons of lithium carbonate, and the cost per ton is converted into 9000 yuan / ton LCE. This can not be counted as the single ton cost of the exploration right. After all, the exploration right is suspected of violating laws and regulations at the stage of obtaining and adding minerals, and has expired on June 30, 2021. It is unknown whether the mining right can be renewed.
The evolution of delanongba lithium mine and quartzite mine, and the exploration right is still being reserved
1) first acquisition in 2003: the first acquisition of delanongba lithium mine and quartzite mine in Yajiang County, Sichuan Province was made on March 27, 2003, which was first applied by Chengdu snowway powder material Co., Ltd. with exploration license No. 51 Shenzhen Guohua Network Security Technology Co.Ltd(000004) 30222, exploration right area of 18.53 square kilometers, and the exploration mineral is silica mine, which is valid from March 27, 2003 to March 27, 2004.
2) from 2004 to 2008, the company applied for the extension of exploration rights for four times and was approved in 2004, 2005, March 2007 and April 2008.
3) transferred to snowway mining in Yajiang County in 2009: in June 2009, Chengdu snowway powder material Park Co., Ltd. transferred the exploration right to snowway Mining Development Co., Ltd. in Yajiang County. With the approval of the county, city and provincial land and resources departments, snowway has the exploration right of delanongba quartzite in Yajiang County, Sichuan Province.
4) the sixth extension of exploration right in 2011: in May 2011, the sixth extension of exploration right was successfully applied for, and the exploration certificate number was t5112008040 Shandong Longertek Technology Co.Ltd(300594) 6, which was valid from June 23, 2011 to June 30, 2013.
5) in 2013, the exploration minerals were changed to lithium and quartzite minerals: in June 2013, snowway applied for continuous change to change the exploration minerals to lithium and quartzite minerals. The exploration certificate number is t5112008040 Shandong Longertek Technology Co.Ltd(300594) 6, and the validity period is from June 30, 2013 to June 30, 2015. After the expiration of the mining right, the mining right holder applied for renewal registration in 2015 and 2017 respectively.
6) the reply on delimiting the mining area was obtained in 2018: on May 7, 2018, the mining right holder obtained the reply on delimiting the mining area issued by the Department of land and resources of Sichuan Province (chuankuangkuang Qu Shen Zi (2018) No. 0004). The mining area is delineated by six inflection points, the mining depth is from 4450m to 4154m, the mining area is 1.14 square kilometers, the resource reserve is 24.924 million tons, the content of lithium oxide is 293200 tons, and the average grade of lithium oxide is 1.1762%, The planned production capacity is 1 million tons / year. The reserve period of the approved mining area shall be maintained until the mining registration application is approved and the mining license is obtained. During the reserve period, the exploration right holder shall apply for retaining the exploration right 30 days before the expiration of the exploration license. On June 30, 2019, the exploration right holder applied for the registration of mineral right reservation, which is valid from June 30, 2019 to June 30, 2021.
7) application for the fourth reservation of exploration right in 2021: the exploration right of snowway company has expired on June 30, 2021. Previously, it has handled the reservation of exploration right for three times, and now it is continuing to handle the fourth reservation of exploration right.
The protection of lithium resources in China is the lifeline, and the value of lithium resources needs to be revalued
As the global battle for key mineral resources intensifies, the United States plans to amend the defense production act to allow funding for mineral projects in Canada, Australia and the United Kingdom, which focus on key minerals for electric vehicles and weapons. This will allow the U.S. government to use the resources of its closest allies to enrich U.S. manufacturing and industrial infrastructure, and increase the country’s advantage in a highly competitive environment. At this time, Chinese enterprises have control over local high-quality upstream resources, which is particularly important in the current and future global industrial chain competition, especially at a time when the acquisition of key global mineral resources is increasingly affected by geopolitics. Delanongba lithium mine can be said to be a project with particularly obvious defects. It is believed that the bidder who spent a lot of money to win the equity is very clear about the risks, but is still willing to take risks and pay a high price. It must be aware of the scarcity of local high-quality spodumene mine resources and the importance of ensuring the safety of electric vehicle supply chain. After all, Australia, the main import source of lithium concentrate, will probably decouple from China in the future, and Australia will soon become the key mineral alliance of the United States. No matter how the world pattern changes, the spodumene ore in the country is more reassuring. The premise is that it can be mined, and the corresponding enterprise value needs to be revalued.
Investment suggestions:
In 2022, the increment of global lithium resources is limited, and the prices of lithium concentrate and lithium salt imported from abroad have risen sharply. Having the control of upstream resources is particularly important in the current and future global industrial chain competition. Especially under the influence of geopolitics, obtaining the control of China’s lithium resources is the safest guarantee, especially the high-quality Chinese spodumene mine resources. We suggest that you pay attention to the [ Youngy Co.Ltd(002192) ], which is being mined in vein 134 of Ganzi Prefecture; [ Sichuan New Energy Power Company Limited(000155) ] about to be put into operation at Lijiagou spodumene mine in Aba Prefecture; [ ; The beneficiaries include [ Tianqi Lithium Corporation(002466) ] that the greenbushes mine has been increasing production in the next five years and can achieve large-scale production through OEM.
Risk tips:
1) the development progress of lithium mine in Sichuan is less than expected;
2) the supply and demand of lithium salt have improved significantly, and the price of lithium salt has dropped rapidly;
3) rapid expansion of lithium concentrate supply capacity in Australia.
