Investigation of Lithium Electric Transformation of Chuanhua Shares: Two Mining Assets Injection Suspense

Since the resumption of listing through bankruptcy reorganization on December 18, 2017, Chuanhua Stock (000155) has proposed a transformation goal to the strategic layout of the lithium battery full-industry chain. At the same time, when small and medium-sized investors inquired about the progress of the injection of lithium battery assets, Chuanhua AG had publicly responded that it would complete the injection of large lithium mine assets in the first half of 2018.

However, as the deadline for the injection of assets is approaching, Chuanhua AG's response to small and medium-sized investors has begun to shrug off its words, repeatedly and publicly emphasizing the need to conduct a comprehensive analysis based on the actual situation of the company and whether the underlying assets have the conditions for acquisition. Timely launch of mergers and acquisitions.

So, in the end, Chuanhua shares have the target assets can be acquired? What target assets are eligible for injection?

The investigation found that the Lijiagou lithium mine in Sichuan Aba Prefecture, which is currently controlled by Sichuan Energy Investment Group Co., Ltd. (hereinafter referred to as “Sichuan Energy Investment”), has started its preliminary work and is expected to be put into production in 2019. Sichuan can also vote outside the Sichuan Ganzi Prefecture Mikad to pull the mining rights of the Pakistani lithium mine just recently obtained the relevant approval, has completed the mining rights approval procedures on May 14.

In addition, as early as the beginning of this year, Chuanhua shares and shares in Xinyuan Partnership Co., Ltd. completed a controlling equity acquisition of Sichuan Nengtou Dingsheng lithium industry Co., Ltd. (hereinafter referred to as "Dingsheng lithium industry"). It is understood that the lithium-salt and industrial assets are expected to be put into production by the end of this year, do not rule out the production in 2019 and release the results into the listed companies, further improve the lithium-ion battery industrial chain.

Two major lithium mines + lithium salt plants

The investigation found that the assets surrounding Chuanhua shares and their controlling shareholder Sichuan Nengtou lithium battery industry chain layout include at least two major lithium mines and a lithium salt processing plant, namely Lijiagou lithium mine, Makad Teddy Pakistani Lithium Mine and Dingsheng lithium industry.

According to people familiar with the situation, due to the relatively steep mountains in the Lijiagou mine and the destruction of some mountain roads caused by landslides, the amount of infrastructure projects in the mining area is relatively large. At the same time, considering the topography and landforms of the mining area, underground mining is built on the spot. The feasibility of the tailings library is not great. However, after Sichuan was able to put into operation last year, it has already carried out a lot of preparatory work and is actively promoting the Lijiagou lithium mine project.

According to the Jinchuan County People's Government portal website, Sichuan Dexin Mining Resources Co., Ltd. (hereinafter referred to as “Dexin Mining”) plans to implement the Lijiagou spodumene mine in Jinchuan County, Sichuan Province, in Lijiagou, Jimu Township, Jinchuan County, Aba Prefecture. The 10,000-ton/year mining project will be publicized twice in the EIA within 10 working days from May 22.

According to the above public announcement, Dexin Mining plans to invest 1 billion yuan to build a 1.05 million tons/year mining project in the Lijiagou spodumene mine in Lijiagou, Jimu Township, Jinchuan County, Aba Prefecture, Sichuan Province, mainly including spodumene mining. As well as the beneficiation project, supporting the construction of the tailings pond project and related supporting facilities, the mining area is about 3.878km2, and underground mining is adopted.

In fact, as early as last September, Sichuan Energy Investment Group and Yahua Group solved the shareholder disputes of Lijiagou Lithium Mine through “combination boxing” such as joint acquisition, equity transfer and cooperation agreement, and realized the separation by means of separation. Lijiagou Lithium Mine has a 62.75% equity holding operation.

According to public information, Sichuan Guoli Lithium Materials Co., Ltd. (hereinafter referred to as "Sichuan Guoli") once acquired 100 % equity in Sichuan Hengding Lithium Industry Technology Co., Ltd. (`` Hengding Technology ") with cash. Two wholly-owned subsidiaries, including Dexin Mining and Aba Hengding Lithium Salt Co., Ltd., Among them, Dexin has the mining rights of Lijiagou Lithiite Mine with proven lithium resource reserves of about 512,100 tons (equivalent to lithium oxide).

According to the disclosure of Yahua Group, Sichuan Guoli was divided into Guoli Liyan Company and Guoli Mining Company. Sichuan Neng Investment's corresponding shareholding ratio was 43.74 % and 62.75 %, respectively.

The industry familiar with the Lijiagou lithium mine told the interface reporter that according to the current environmental assessment publicity and other circumstances, the Lijiagou lithium mine is expected to be officially put into operation in 2019 and produce benefits. However, given the huge capital needs in the early stages of the mine, it is not ruled out that Sichuan can invest its stake in a listed company.

It is worth noting that compared to the well-known Lijiagou lithium mine, the interface journalist survey also found that another large lithium mine is more likely to be acquired by Sichuan Nengtou.

An unknown detail is that as early as this year, Chuanhua shares can participate in the Xinyuan partnership to complete the 51% equity acquisition of Dingsheng Lithium in the form of cash contribution, the counterparty is Chengdu Xingnengxin Materials Co., Ltd. ("Xingneng New Material"), Chengdu Chuan Shang Xingeng Equity Investment Fund Center (Limited Partnership) (referred to as "Chuan Shang Xing Neng"), Yajiang County Snowway Mining Development Co., Ltd. (referred to as "S Novi"). In Yajiang County, Snowway Mining Development Co., Ltd., there is also a mine in the core area of the Mika lithium mine in Ganzi Prefecture, Sichuan Province. The Sichuan Provincial Department of Land and Resources shows that the mine has been in 2018. On May 14th, the approval procedures for mining rights will be completed.

Further investigation by the reporter found that Sinuowei's Delanba Lithium Mine is a large lithium vein numbered 309 in the Jiajiqia Lithium Mine. It is 730 meters long and has a thickness of 30 to 40 meters. The average grade of lithium oxide is 1.3 %. The reserves of 2624,200 tons, equivalent to 340,000 tons of lithium oxide. The third largest lithium mine currently discovered in the Meica region (the second largest lithium mine in Meica is the 134 vein of Rongjie).

What needs to be added is that the X03 super-large lithium vein in the same area is the largest vein of the entire methyl-carna lithium mine, with a length of 2,200 meters, a thickness of 1 to 92.73 meters, and an average grade of lithium oxide of 1.46%. The amount of 63.210 million tons, lithium oxide resources of 885,558 tons.

People familiar with Sinuowei told the interface journalist that the mining rights of No. 309 vein have just been approved. Last year, the second environmental assessment of the mining project was completed, but the entire methyl card lithium mine project needs to wait for Ganzi Prefecture. The government unified and coordinated arrangements. Once the production is completed, the mining area will directly dock the supply of raw materials that can be invested, and even the possibility of injecting the shares into Chuanhua will not be ruled out.

In this regard, an investment banker pointed out that, by contrast, the lithium-rich industry into listed companies is much more operable. Since Xinyuan Partnership, which can currently invest in Xinyuan Partnership, has directly held a 51 % stake in Dingsheng lithium industry through cash capital increase, as long as Dingsheng lithium industry reaches a certain level of performance, it can give higher value cash acquisitions or exchange shares by means of income method. It is also possible to acquire the remaining 49 % of the equity at the same time.

The reporter learned that the lithium-salt and industrial assets are expected to be put into production by the end of this year, do not rule out production in 2019 and release performance will be injected into the listed company, further improve the lithium-ion battery industrial chain of chuanhua shares.

Public information shows that at present, Dingsheng Lithium Industry has built an annual output of 50,000 tons of lithium salt in three phases in Ganmei Industrial Park. The total investment of the project is 3 billion yuan, covering an area of 500 acres. After the first phase of the project is put into operation, the battery grade lithium salt production capacity will reach 10,000 tons/year, and all three phases of the project will be completed after the birth, which will become the main lithium salt production company in China.

When to inject suspense

The net assets at the end of the two consecutive fiscal years of 2014 and 2015 were negative because the net profits audited were negative for the three consecutive fiscal years of 2013, 2014 and 2015. Chuanghua SHARES suspended from listing on May 10, 2016 will resume listing through bankruptcy reorganization and injection through the acquisition of 55 % of the shares of Sichuan Energy Wind Power Development Co., Ltd. In December 2017, it proposed a transformation goal to the strategic layout of the entire industrial chain of lithium batteries.

However, it has been about two years since the suspension of listing in May 2016 and the resumption of listing in December 2017. The small and medium-sized investors waiting for Chuanhua shares to solve historical problems through bankruptcy reorganization and achieve transformation and upgrading through asset injection have never seen the substantial actions that the listed companies and their controlling shareholders Sichuan can invest in the strategic goal of building a full-industry chain of lithium batteries. Even many investors are beginning to question whether this will be a "bad check".

The company stated that in 2017, through the acquisition of 55 % equity in Sichuan Energy Power Development Co., Ltd., Chuanhua SHARES entered the new energy industry, deployed wind power and photovoltaic industries, and obtained new profit growth points. The business scale and profitability have significantly increased. But since late last year, after the interactive platform revealed that the company planned to complete a big lithium mine merger in the first half of 2018, it has repeatedly said since the start of the year that it "does not constitute a substantial commitment".

Regarding the small and medium-sized investors asking about the progress of the merger and acquisition of lithium ore assets, the company also emphasized that the merger and acquisition of lithium electric assets needs to be combined with the actual situation of the company, the assets of the target and the scientific planning of the company's strategic long-term planning system, and must also take into account the external environment and other objective factors. At present, the relevant work is fully advancing, and the company will fulfill its disclosure obligations in a timely manner according to the progress of the work.

It is worth noting that during the bankruptcy reorganization period, Sichuan Neng Investment made performance commitments to Chuanhua, and the net profits of the audited parent company in 2017 and 2018 reached 315 million yuan and 350 million yuan, respectively.

According to public information, as of the end of 2017, Chuanhua's annual operating income in 2017 was about 6.609 billion yuan, and the net profit attributed to shareholders of listed companies was about 325 million yuan, slightly higher than the promised level.

A person familiar with the situation told reporters that considering the 2018 performance commitment, Sichuan Energy Investment is unlikely to inject assets that have not yet released their performance or even in the early stage of investment into the listed company, otherwise it will inevitably affect the fulfillment of performance commitments.

However, the above-mentioned people further pointed out that if the Lijiagou lithium mine is progressing smoothly in the early stage, it is expected to be put into production in 2019, so this asset injection may be relatively easy. However, if the methyl card is not able to push the lithium mine, it will not be as fast. At present, the most promising injection is the company that will start production and release its results by the end of this year. It does not rule out that Sichuan Energy Investment will inject 51% of its shares into listed companies, and it may also acquire the remaining 49%.

It is understood that the Dingsheng lithium salt production project covers an area of 500 acres, with a total investment of 3 billion yuan and is divided into three phases(of which, the first phase of the project has invested 670 million yuan and covers an area of 192 acres). After the first phase of the project was put into operation, the battery grade lithium salt production capacity reached 10,000 tons/year, the annual output value reached 1.4 billion yuan, and the tax revenue was 150 million yuan.

At present, the main project of the first phase of the project has been basically completed. It is expected that the brick project and the exterior decoration project will be completed by the end of June. By the end of August, the machinery will be completed. By then, all the equipment, including the monotonous installation, will be completed. The entire production line will enter the trial feed trial production stage. It is finally expected that the project will be officially put into operation in November this year.

A person who has long followed the transformation process of Chuanhua shares told the interface journalist that the progress of the asset injection of Chuanhua may be affected by the changes in Sichuan's energy investment. As early as last October, Sichuan Energy Investment Co., Ltd. publicly selected the general manager of the group for the whole country. This position is fully responsible for the operation and management of the group company. It is necessary to wait for the new general manager to be elected to the post to make it possible to substantially promote the asset injection of Chuanhua.

The interface journalist found that in the public announcement of the cadre issued by the Sichuan Provincial Party Committee Organization Department on May 25, Wang Cheng, the chairman of Chuanhua and the deputy general manager of Sichuan Energy Investment, was nominated as the general manager of Sichuan Energy Investment Group. It is 5 working days.

Wangcheng's assumption of the new, can crack the Sichuan shares of assets into suspense?

The page contains the contents of the machine translation.