SMM, December 23: On December 20, Guocheng Mining announced that its wholly-owned subsidiary, Sichuan Guocheng Lithium Co., Ltd., plans to sign a "Long-term Cooperation Framework Agreement on Spodumene Concentrate Supply and Sales" with its associate company, Maerkang Jinxin Mining Co., Ltd. Both parties aim to leverage their respective industrial advantages and development visions to cooperate on spodumene concentrate supply and sales, promoting resource complementarity and synergy to achieve mutual benefits.
It is reported that Maerkang Jinxin Mining Co., Ltd.'s business scope includes exploration and mining of spodumene mines in Dangba Township. This related-party transaction will adhere to the principles of openness, fairness, and impartiality, with transaction prices negotiated by both parties based on market prices, in compliance with market economic rules, and without harming the interests of the company or its shareholders, especially minority investors.
Jinxin Mining will supply spodumene concentrate raw materials to Guocheng Lithium. The product quality requirements and technical standards are as follows: Li2O ≥ 4.8%, Fe2O3≤3%, H2O≤15%. Under equivalent market conditions, Jinxin Mining will prioritize supplying spodumene concentrate meeting the above quality requirements and technical standards to Guocheng Lithium, ensuring its raw material needs. The price of spodumene concentrate sold by Jinxin Mining to Guocheng Lithium will be negotiated by both parties based on market prices.
According to the announcement, the contract is valid for five years. The contract content represents an estimate of procurement conditions for Guocheng Lithium's project after its completion. If actual conditions change after the project's completion, both parties will sign a separate agreement to clarify subsequent cooperation matters.
This related-party transaction aims to fully leverage the advantages of both parties and achieve mutual benefits. The signing of this framework agreement will help the company expand its downstream new energy industry chain, create synergies with Jinxin Mining's lithium mining business, and achieve upstream and downstream integration, thereby ensuring the supply of raw materials and optimizing costs for the company's lithium chemical projects. This aligns with the company's strategic development needs and positively contributes to its sustainable development. The agreement is not expected to have a significant impact on the company's operating results for the current year.
Notably, in mid-December, Guocheng Mining also announced that Jinxin Mining had obtained a reply from the Ministry of Natural Resources regarding the "Verification Report on Lithium Ore Resources in Dangba, Maerkang City, Sichuan Province." According to the "Review Opinion on the Verification Report on Lithium Ore Resources in Dangba, Maerkang City, Sichuan Province" issued by the Mineral Resources Reserves Review Center of the Ministry of Natural Resources (Document No. 15, 2024), compared to the previous filing (2023), due to changes (expansion) in the mining rights area (the expanded area is located within the elevation range of 3,982m to 4,154m covered by Jinxin Mining's mining license and within the exploration rights area held by Jinxin Mining), the Dangba mining area has added 33.131 million mt of ore, containing 440,013 mt of Li2O. After this filing, the Dangba mining area has a cumulative verified ore volume of 84.255 million mt, with lithium oxide content reaching 1.1207 million mt and an average grade of 1.33%.
Additionally, the company stated that there are still large unexplored areas within Jinxin Mining's exploration rights. Jinxin Mining will continue exploration work in the deeper and peripheral areas of the Dangba mining area, with the potential for further resource expansion. According to regulations on mineral resource development and mining rights management by the Ministry of Natural Resources, Jinxin Mining will further advance the procedures for expanding the scale of its mining rights. However, whether and when the relevant approvals will be obtained remains uncertain, and investors are advised to be cautious about investment risks. The company will closely monitor the progress of these matters and fulfill its information disclosure obligations in a timely manner.
Furthermore, around September 20, Guocheng Mining mentioned during an investor activity survey that, based on the terrain conditions of the orebody in the mining area, Jinxin Mining adopts underground mining and horizontal adit development, using large-diameter deep-hole subsequent filling mining methods. The raw ore extracted by the mining plant is sent to the beneficiation plant, where it undergoes crushing, screening, ball milling, and flotation to produce lithium concentrate or lithium powder. The mine currently has a mining capacity of 1 million mt/year, and a 5,000 t/d beneficiation plant expansion project is under construction, expected to be completed around the end of 2024. Currently, due to the beneficiation plant's expansion, Jinxin Mining commissions third parties to process spodumene raw ore powder into lithium powder for sale. Once the beneficiation plant is completed, Jinxin Mining will carry out its own beneficiation operations.
Regarding the future production costs of lithium concentrate, Guocheng Mining stated that Jinxin Mining's lithium concentrate costs mainly consist of mining costs, beneficiation costs, transportation fees, and management expenses. In H1 2024, due to the beneficiation plant's expansion, transportation fees will account for a higher proportion. In the future, after the completion and commissioning of Jinxin Mining's beneficiation plant, the transportation of raw ore downhill will be replaced by concentrate downhill, significantly reducing transportation costs. Meanwhile, Jinxin Mining plans to enhance its actual capacity and fully leverage economies of scale to effectively reduce mining and beneficiation costs. Preliminary estimates suggest that the future production cost of lithium concentrate, converted to lithium carbonate, will be within 50,000 yuan/mt.
According to SMM data, as of December 20, the cash production cost of lithium carbonate prepared from externally purchased spodumene concentrate was approximately 78,072 yuan/mt. Compared to the estimated lithium carbonate production cost of within 50,000 yuan/mt, Jinxin Mining's lithium concentrate still holds a cost advantage.
According to an SMM survey last week, recent prices from different sources have shown varying trends. For Australian ore, transaction price centers moved slightly higher WoW. The main reason is that the Australian ore supply side currently faces little pressure to ship, and despite the current decline in lithium chemical prices, the sentiment to stand firm on quotes remains strong, with some quotes even showing upward adjustments. On the demand side, just-in-time procurement forced buyers to accept these quotes, providing some support for the current high prices. For domestic lithium ore and African ore, due to limited supply scale and stability, varying supply quality, and differing negotiation leverage among trading parties, quotes and transaction prices are more influenced by current lithium carbonate prices, showing a slow decline in transaction prices.
On the lepidolite side, due to the current limited circulation of lepidolite, the supply side continues to stand firm on quotes. Non-integrated lithium chemical plants, to maintain production pace, have made some just-in-time procurements. Overall, prices showed little change WoW.
In summary, SMM expects no significant improvement in lithium ore supply in the short term, and thus lithium ore price changes are expected to lag behind those of lithium carbonate.
As of December 23, spodumene concentrate (CIF China) spot prices rose to $810/mt.
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Regarding lithium carbonate prices, according to SMM spot prices, as of December 23, domestic battery-grade lithium carbonate spot prices remained stable after a slight increase of 50 yuan/mt on the previous trading day, with quotes steady at 74,250–76,850 yuan/mt and an average price of 75,550 yuan/mt.
According to an SMM survey, the transaction price center for lithium carbonate spot remained stable. For current just-in-time procurement or short-term restocking, downstream material plants showed slightly improved purchasing sentiment. Some traders, aiming to destock and recover funds by year-end, sold older-dated lithium carbonate at lower price points to facilitate transactions with downstream material plants, dragging the transaction price center of the lithium carbonate spot market downward. Considering the current actual supply and demand situation for lithium carbonate, combined with the current market inventory levels of circulating lithium carbonate, spot prices are expected to face downward pressure, accompanied by sideways movement.
Regarding its future development plans, Jinxin Mining stated that it will leverage its lithium ore resource advantages to accelerate the application for a 5 million mt/year mining license, with supporting infrastructure projects progressing simultaneously. Among them, the 5,000 t/d beneficiation plant expansion project is expected to be completed around the end of 2024. The tailings storage facility and the new 5 million mt beneficiation plant project have been included in the construction plan, with related preparatory work underway. In the future, Jinxin Mining will align its plans with the progress of mining license expansion and infrastructure projects, following the principles of synchronized planning, phased construction, and gradual ramp-up to full production, progressively increasing its actual production scale. The company aims to convert resources into production, steadily improving operational efficiency. Moving forward, the company will continue to assist Jinxin Mining in advancing the expansion and renewal of mining licenses, intensifying resource exploration efforts, and ensuring resource reserve growth and production, thereby supporting the implementation and realization of the company's new energy strategy.
