How to treat the ambition and anxiety of cobalt mine producers

In the field of power lithium batteries, ternary materials are being adopted by more and more battery manufacturers due to their strong comprehensive advantages in energy density, cost, safety and stability compared to other materials. In the ternary materials such as lithium nickel cobalt manganese oxide and lithium nickel cobalt aluminate, the amount of cobalt is usually one third, so the demand for cobalt materials is suddenly increased.

In 2017, the hottest new energy vehicle industry is lithium batteries, and the most dazzling non-cobalt in the lithium battery industry.

In the field of power lithium batteries, ternary materials are being adopted by more and more battery manufacturers due to their strong comprehensive advantages in energy density, cost, safety and stability compared to other materials. In the ternary materials such as lithium nickel cobalt manganese oxide and lithium nickel cobalt aluminate, the amount of cobalt is usually one third, so the demand for cobalt materials is suddenly increased.

Since the financial crisis, the prices of non-ferrous metals such as copper and nickel have been falling. As a result, many mining giants around the world have closed mines and reduced output. As a result, cobalt production as associated minerals such as copper and nickel has been affected. Although the price of non-ferrous metals such as copper has rebounded since 2016, the output of mines has not increased significantly. This has also made the growth of cobalt supply unable to keep up with the growth of demand, and has been in a state of tight balance and even short supply. The price of cobalt has also risen all the way. Even at the beginning of this year, it broke the high price of 600,000 Yuan per ton, which is more than twice the low point.

Affected by this, the performance of cobalt-related companies has also risen, doubled or even multiplied, and the net profit is also the same; followed by the soaring stock price, double or even several times the stock is not uncommon. Cobalt has thus become a toon, and many companies are competing for layout.

The calmness and calmness of the cobalt mine giant

According to statistics from the US Geological Survey (USGS), the global cobalt reserves are nearly 7 million tons, and their geographical distribution is very uneven, mainly concentrated in the Congo (DRC), Australia, Cuba, the Philippines, Canada, Russia, Zambia, New Caledonia and other places, it accounts for 78% of the world's total cobalt reserves. Among them, Congo (Gold) has a cobalt reserve of 3.4 million tons, accounting for 48% of the world's cobalt reserves, ranking first in the world; and China is a lack of cobalt resources. The country is only 80,000 tons, accounting for 1.1%.

Therefore, who can get more Congo (gold) cobalt resources, whoever took the lead in this battle for cobalt resources, and Luoyang Molybdenum is undoubtedly the leader.

Absolute giant: Luoyang Molybdenum Industry

When talking about cobalt, you have to mention two giants: one is the international giant Glencore, the other is the domestic giant Luoyang Molybdenum. It became one of the world's second largest cobalt companies in the world. The Luoyang Molybdenum industry took less than two years, all of which stemmed from its two acquisitions: in May 2016, Luoyang Molybdenum was 2.65 billion. The US dollar acquired a 100% stake in Freeport-McMoRanDRC Holdings Ltd. (FMDRC) held by PDK, which resulted in a 70% stake in TF Holdings (Limited) (TFHL). This acquisition allowed Luoyang Molybdenum to indirectly hold TenkeFungurume MiningS.A in Congo (Kinshasa). (TFM) 56% of the shares; in April 2017, Luoyang Molybdenum completed a 30% stake in TFHL by Lundin Mining Corporation through BHR, thereby indirectly obtaining a 24% interest in TFM. So far, Luoyang Molybdenum indirectly holds 80% of TFM.

TFM is the largest copper-cobalt mine in the DRC, with resources of more than 28 million tons of copper and 3 million tons of cobalt. With TFM, Luoyang Molybdenum has acquired cobalt resources after Glencore. According to the financial report, Luoyang Molybdenum currently has cobalt resources equivalent to 2.382 million tons of cobalt metal.

In 2017, thanks to the significant increase in cobalt production and its high prices, cobalt products became the main source of revenue for the Luoyang molybdenum industry. In 2017, Luoyang Molybdenum achieved revenue of 24.148 billion Yuan, a year-on-year increase of 247.47%. Among them, the operating income of copper and cobalt related products reached 13.845 billion Yuan, accounting for 57.33%, an increase of 38.69 percentage points year-on-year; 8.905 billion Yuan, of which, the gross profit of copper and cobalt products reached 5.542 billion Yuan, accounting for 62.23%; the net profit attributable to shareholders of listed companies was 2.728 billion Yuan, an increase of 173.32%. It can be seen that cobalt products have become the main source of income and profit for Luoyang Molybdenum Industry, which has a significant impact on the operating income and profits of Luoyang Molybdenum Industry.

In 2018, the TFM copper-cobalt mine's budget cobalt metal production was 16,000 tons to 17,500 tons, which is roughly equivalent to 2017. Obviously, Luoyang Molybdenum has no expansion plan.

Veteran giant: Jinchuan International

Jinchuan International is a Hong Kong-listed mineral resource development and operation company that develops and operates copper and cobalt mineral products. Jinchuan International's core assets are located in Congo (Kinshasa) and Zambia. It has 8 mines with high-quality copper and cobalt mines and has a cobalt metal resource of 362,000 tons.

According to the performance report, in 2017, Jinchuan International's performance increased significantly. In 2017, its operating income was US$549 million, an increase of 50.5% over the US$365 million in 2016. Among them, mineral resources revenue reached US$449 million, up 71% year-on-year; among them, cobalt revenue increased the most, reaching 221%. This is mainly due to the large increase in sales volume and sales price.

At present, Jinchuan International has an annual production capacity of 80,000 tons of copper and 10,000 tons of cobalt. Its cobalt production is mainly in the Ruashi mine, while the Musonoi mine is under construction. It is expected that its cobalt production capacity will increase significantly in the next few years.

Invisible Giant: China Railway

In recent years, China Railway has been pushing for diversification and has achieved remarkable results. In 2017, China Railway's mineral resources sector achieved revenue of 4.085 billion Yuan, a year-on-year increase of 65.44%; gross profit margin was 44.91%, an increase of 21.19 percentage point year-on-year.

Although it is easy to be ignored, China Railway has quietly become a force to be reckoned with in the cobalt industry. According to the financial report, as of December 31, 2017, China Railway's equity cobalt metal resources/reserves reached 280,800 tons.

It is true that compared with China Railway's huge volume (2017 revenues of 693.3 billion Yuan), its resources sector is still insignificant, but its impact on the cobalt industry cannot be ignored. According to the financial report, all of its three cobalt mines have been put into production according to the designed capacity, and there is no expansion plan.

"Alternative" giant: GEM

As the leader in the field of domestic waste battery recycling, GEM has demonstrated a different strength of cobalt resources. According to the financial report, GEM has built a large cycle industrial chain of waste batteries and power batteries , cobalt-nickel-tungsten resource recovery and hard alloy industrial chain, electronic waste recycling industrial chain, scrapped automobile comprehensive utilization industrial chain, waste residue, waste sludge, wastewater recycling Utilize the five major industrial chains, such as the industrial chain, to process more than 3 million tons of waste annually, and recycle 25 kinds of scarce resources such as cobalt, nickel, copper, tungsten, gold, silver, palladium, rhodium, ruthenium and rare earth, and ultrafine powder. , a variety of high-tech products such as power battery materials and materials for new energy vehicles, plastic wood profiles, etc., formed a complete industrial chain of rare metal resource recycling.

In 2017, the production and sales of GEM-related products increased significantly, so its performance is also very bright. Its operating income was 10.752 billion Yuan, an increase of 37.22%; total profit was 795 million Yuan, an increase of 123.47%; net profit attributable to shareholders of listed companies was 610 million Yuan, an increase of 131.42%. Among them, battery materials and battery raw materials business segment (mainly nickel sulfate, cobalt sulfate, cobalt sulphate, ternary precursor, ternary cathode material, lithium cobalt oxide, etc.) realized operating income of 5.532 billion Yuan, an increase of 166.16%, contributing gross profit 13.31 billion Yuan (see Table 9); cobalt nickel tungsten powder and cemented carbide products business segment achieved operating income of 2.084 billion Yuan, an increase of 54.76%, contributing gross profit of 490 million Yuan; it can be seen that the recovery and reuse of cobalt-related products is already GEM The main source of revenue and profits.

GEM is obviously not satisfied with the existing achievements. It is actively constructing a “1+N” waste battery recycling network. It has signed agreements with more than 60 car companies and battery companies to recycle their power batteries and expand their own cobalt source of resources.

Producer's ambition and anxiety

Unlike the upstream cobalt mines, which are calmly deploying cobalt resources and not rushing to expand production capacity, cobalt producers are actively expanding their production capacity while expressing their ambition and determination to seize market share and expand their advantages.

Production leader: Huayou Cobalt Industry

Huayou Cobalt is one of the leading producers of cobalt products in China. Its sales of cobalt products in 2017 exceeded 40,000 tons (metal content: 20,663 tons), accounting for 35% of domestic consumption, accounting for 18% of global consumption. According to the financial report, in 2017, Huayou Cobalt achieved operating income of 9.653 billion Yuan, an increase of 97.43%, of which cobalt products realized revenue of 7.384 billion Yuan, an increase of 121.71%; net profit of 1.86 billion Yuan, an increase of 3145.19%; The net profit attributable to owners of the parent company was 1.896 billion Yuan, an increase of 2637.70%, and the performance was very alarming.

Although Huayou Cobalt has begun to lay out the ternary lithium battery cathode material and achieved good results, it is clear that cobalt products are the main source of income and profit. Therefore, Huayou Cobalt has spared no effort to expand its cobalt production capacity. According to the financial report, the MIKAS project, which was launched in August 2017, has an annual production capacity of 4,000 tons of crude cobalt hydroxide and 10,000 tons of copper. The project has been completed and put into trial production at the end of the year; thus, its cobalt production capacity in 2018 is expected to reach 3 Ten thousand tons.

However, for Huayou Cobalt, the biggest uncertainty comes from the supply of its cobalt ore raw materials. Although its self-supplemented cobalt ore raw materials accounted for about 45% of total raw material purchases in the current period in 2017, and plans to reach 50% in 2018; this is not enough for a company with a capacity of 30,000 tons. Once the supply of raw materials is not available, it will face the danger of a sharp decline in both performance and profit.

Up-and-coming star: Han Rui Cobalt

Hanrui Cobalt is a star in the capital market in 2017, and its share price has increased 20-fold in less than a year, thanks to its brilliant performance.

In 2017, the company achieved operating income of 1.465 billion Yuan, an increase of 97.16% year-on-year; net profit attributable to the parent company was 449 million Yuan, an increase of 575.04%, compared with the same period last year, the sales revenue of cobalt powder increased by 110.42%, the sales revenue of electrolytic copper increased by 54.56%, the sales revenue of cobalt concentrate products increased by 123.64%, and the sales revenue of cobalt hydroxide products increased by 152.32%.

However, sales of its cobalt products declined in 2017; apparently, the substantial increase in its cobalt product revenue was the result of a significant increase in cobalt prices.

Cobalt products account for a growing proportion of the income structure of Hanrui Cobalt. Combined with the gross profit margin of its products, cobalt products are the core source of income and profit. Therefore, Hanrui Cobalt is also adding capacity to cobalt products. In 2017, its annual production capacity of 3,000 tons of metal cobalt powder production line and technology center was smoothly progressed as planned. Congo Mate Mining Co., Ltd. built an annual production capacity of 5,000 tons of electrolytic cobalt production line project, and completed the front-end 5,000 tons of metal cobalt hydroxide production line. And has already put into production to bring benefits; Hanrui Cobalt invested in the construction of 20,000 tons of electro winning copper and 5,000 tons of cobalt hydroxide in Kolwezi is also progressing as planned. After these projects are completed, their cobalt production capacity will increase significantly.

However, for Hanrui Cobalt, the biggest risk is the acquisition of raw materials. According to the financial report, although it has a mine in the Democratic Republic of the Congo, it has not started construction; its raw materials are mainly purchased from local Congolese individuals. The reason for its claim is that Congo's current production process can only accept more than 4% of cobalt ore and more than 6% of copper ore. It does not have the ability to handle low-grade ore below 3%, so it is not possible to directly use the mine supply. Raw ore and the processed concentrate products supplied on the market are costly.

The ore mined by the individual is selectively oriented according to the direction of the vein. After the mining, the site is manually sorted, so the ore grade is higher, the grade of cobalt ore is generally between 3-12%, and the grade of copper ore is generally 6- 20%, more economical and reasonable, and in line with the production needs of Congo Maite, is the main source of many Congolese and local small and medium-sized mining companies.

However, the stability of the source of raw materials for personal mining is questionable, and the company seems to have encountered the dilemma of raw material supply: in 2014, 2015 and 2016, the company's purchase of cobalt and copper ore decreased year by year. At the time of capacity expansion, the purchase of raw materials has declined, and there seems to be no explanation except for the source of raw materials.

The enthusiasm and passion of new recruits

Compared with the former two, the newcomers are more aware of the huge benefits of the cobalt industry, and they are quick and passionate.

Ready to come: Pengxin resources

Pengxin Resources was originally engaged in the mining, metallurgy and sales of metallic copper. In recent years, it has gradually expanded its business to trade, finance, new materials and new energy.

At present, Pengxin Resources has more layouts in the field of cobalt ore: its Hitulu copper mine in Congo (Golden) is one of the largest copper-cobalt mines in the region, with a cobalt resource of more than 180,000 tons (see Table 10). In the first half of 2017, through the capital increase and shareholding, it subscribed for 16.17% of the shares of the Australian listed company Clean TeQ, thereby obtaining the equity of the Sunrise nickel-cobalt-based project; in addition, Pengxin Resources is still constructing cobalt ore trading. The Center intends to reserve resources through mine leasing and acquisition.

In addition to resources, Pengxin Resources is also actively engaged in the construction of cobalt product line. The first phase of the production line of cobalt hydroxide production line (3000 tons of cobalt metal/year) is proceeding in an orderly manner. It is expected to be completed and put into production by the end of 2018; Sunrise Sunrise scandium project of Clean TeQ is carrying out preliminary research work.

Cross-border: Hezong Technology

In July 2017, Hezong Technology completed the acquisition of Hunan Yacheng, thus cutting into the cobalt industry. At present, its cobalt business is mainly completed by Hunan Yacheng, which mainly produces lead oxide galvanooxide, which is a precursor of lithium battery cathode materials.

As a result of the acquisition of mature companies, Hezong Technology shares the relevant benefits after the merger. However, its low gross profit margin makes people wonder about the motive and rationality of its mergers and acquisitions.

Starting from zero: Yinxi Technology

Compared with the rapid benefits of Pengxin Resources and the rapid benefits of Hezong Technology, Yinxi Technology is a complete newcomer, starting from scratch. At the end of 2017 and early 2018, Dongguan Yinxi Cobalt Co., Ltd., Congo Silver Mine Mining Co., Ltd. and Yinxi Technology (Congo) Cobalt Industry Co., Ltd. were established, and the cobalt business began. At the beginning of 2018, Yinxi Technology began to carry out cobalt product trade activities, acquire Congo Gold and Cobalt Mine, and prepare to establish an annual production of 3,000 metal tons of crude cobalt sulphide smelting project in Congo, everything seems to be rapid and orderly.

However, it is feared that Yinxi Technology will get real income after 2019.

Conclusion

With the rapid development of the new energy automobile industry, the demand for cobalt will continue to grow rapidly. Due to the copper-nickel accompanying properties of cobalt ore, its production cannot be increased rapidly in a short period of time. Therefore, the supply and demand of cobalt will be in tight balance and even in short supply. The situation, its price will also be at a high level, the existing enterprises to obtain high returns and the rapid influx of the splitter will continue, the battle for cobalt resources will be more intense.

In this situation, the existing cobalt mining giants will gain the maximum benefit and have obvious investment value; Cobalt producers will also get high profits with the rapid expansion of production capacity. However, due to the lack of resource advantages and weak discourse power, they need to bear greater risks despite the investment value. New entrants may simply be catching fire with the concept.

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