Benefiting from the strong demand brought by the development of new energy vehicles, Yahua Group (002497), a lithium salt producer, has seen a surge in performance and actively locked in upstream resources.
Proposed acquisition of shares in Australian companies
On the evening of February 27, Yahua Group announced that its wholly-owned subsidiary Yahua International Investment and Development Co., Ltd. (hereinafter referred to as “Yahua International”) intends to subscribe to Australian ABY Company (Abyssinian Metals Limited, hereinafter referred to as “” ABY Corporation”) 3.7 million shares, representing 3.4% of ABY’s total pre-IPO share capital.
ABY is a battery metal company registered in Australia. It has mineral resources in African countries such as Sudan and Ethiopia. Its core assets are mainly the Kenticha lithium mine in Ethiopia (holding a 51% stake).
The Kenticha Lithium Mine started mining in 1990. The area has highly mineralized Lithium Cesium Tantalum (LCT) pegmatites. It has a proven lithium resource of 67.4 million tons and an average Li2O grade of 1.03%. Further exploration and development has confirmed mineralization. The total resource range is 80-110 million tons of lithium resources, equivalent to more than 1 million tons of Li2O; the resources in the southern and northern reserved areas have great potential for future growth, and the overall resource scale can be compared with Australia’s Talison, Wodgina and other projects. Comparable to rocks.
The overall technical and operation team of Kenticha Lithium Mine comes from the former Australian Galaxy Lithium Industry, and has a long-term good cooperation with Yahua Group. Deliveries will begin in the second quarter of 2023, with an expected mine life of more than 18 years.
The two parties have agreed that ABY will provide no less than 120,000 tons of lithium concentrate every 12-month contract year. If ABY Company has excess lithium concentrate in the future, both parties can provide Yahua International with an additional amount of lithium concentrate on the terms agreed in writing. Valid from the date ABY Company notifies the product that it is ready for shipment until 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 the relevant batch of goods. Consistent.
Re-lock lithium ore resources
This is not the first time Yahua Group has disclosed its move to lock upstream resources.
In December 2021, Yahua Group subscribed 80 million shares of Australian EV Resources Co., Ltd. through Yahua International, accounting for 9.5% of EV Company’s total share capital. The main purpose is to cooperate with EV Company to jointly develop its existing lithium ore resources.
On February 17, 2022, Yahua Group also announced that Yahua International and Lithium Developments (Grants NT) Pty Ltd, a wholly-owned subsidiary of Yahua International and Core Corporation of Australia “Lithium Industry Development”) signed the “Offtake Agreement” on lithium concentrate, the two parties agreed that Yahua International would purchase at least 300,000 dry tons of lithium oxide concentrate with about 6% of lithium industry development, and start production at the lithium deposit. After that, Yahua International will purchase at least 75,000 dry tons of lithium oxide concentrate (with a fluctuation of no more than 10%) per year.
In 2021, the prosperity of the lithium industry will continue to improve, new energy vehicles will develop rapidly, the demand for lithium products will continue to grow, and the price of lithium salt will continue to rise and hit a record high. Yahua Group’s lithium business has also grown significantly.
According to the performance report disclosed by the company, the total operating income in 2021 will increase by 60.99% year-on-year; net profit will increase by 185.5% year-on-year; basic earnings per share will increase by 139.37% year-on-year.
Yahua Group previously disclosed that the company’s total assets in 2021 will increase by 2.127 billion yuan compared with the beginning of the reporting period, a year-on-year increase of 30.57%. Material inventory storage.
In order to lock in resources, in this agreement, Zhongyahua Group also agreed to promise to make an irrevocable advance payment of 40 million US dollars to ABY Company 6 months before the first production of the products of the Kenticha project.
The company believes that with the commissioning of the Kenticha project, the pre-IPO equity subscription and the acquisition of lithium concentrate underwriting rights will open up new guarantee channels for the company in the upstream resource end of the lithium industry, and at the same time share the benefits of Australian ABY after its listing. Excess earnings will have a positive impact on the company’s future operating performance and are in the interests of the company and its shareholders.