Following the Snowy equity auction at the end of 2022, another domestic lithium ore auction recently attracted widespread market attention.

On February 21st, according to information released on the Xinjiang Public Resource Trading Network, the Washixia South Lithium Exploration Block (hereinafter referred to as "Washixia South Lithium Mine") in Ruoqiang County, Xinjiang was listed for sale, and Xinjiang Zhite New Materials Co., Ltd. (hereinafter referred to as "Xinjiang Zhite") won for 6.088 billion yuan, with a premium of 385 times.

Independent economist and financial commentator Wang Chikun told China Business Daily that lithium is the latest high-value metal internationally and is currently widely used in the manufacturing of next-generation batteries. People believe that lithium ore will have greater value in the future, so bidders in the market are in a high price situation where their bids exceed expectations, which has led to this high premium transaction.

Wu Xinda, the director of Huizhou Zonghua Battery Industry Research Institute, stated that the development of new lithium mines would be beneficial for the supply of lithium resources in China, but it is also necessary to be wary of hype on related issues.

Premium 385x

The Xinjiang Public Resource Trading Network previously announced that the starting price for the listing of the Washixia South Lithium Mine this time was 15.81 million yuan. Based on this calculation, the final transaction price of up to 6.088 billion yuan is approximately 385 times the starting bid price.

It is reported that the South Washixia Lithium Mine covers an area of 105.39 square kilometers, with a first transfer period of 5 years (calculated from the date of validity of the exploration permit), each lasting for 5 years. Within 3 months of obtaining the exploration permit, the bidder must submit an exploration implementation plan to the Ministry of Natural Resources for filing and organize construction according to the exploration implementation plan; During mining, 1.4% of the previous year's sales revenue will be paid annually for the mining phase transfer income (return rate).

According to the research report of Guojin Securities, the overall distribution of lithium resources in China is relatively concentrated, with lithium resource reserves in Qinghai, Tibet, and Sichuan accounting for the vast majority of domestic lithium resource reserves. Among them, Tibet and Qinghai are salt lake brine type, and hard rock type lithium mines are mainly distributed in Sichuan, Jiangxi, Xinjiang, and other places. China has the vast majority of global lithium processing capacity, but its self-sufficiency in lithium resources is clearly insufficient, leading to a revaluation of the value of high-quality domestic lithium resources.

According to the research report of Essence Securities, the lithium mineral resources in Xinjiang are mainly distributed in the four regions of West Kunlun Karakoram, Altun, Altar Mount Taishan and East Tianshan, with a resource amount of about 25 million tons of lithium carbonate equivalent. The Washixia South Lithium Mine is located in the Altun Lithium Polymetallic Metallogenic Belt, with a preliminary inferred resource of over 8 million tons of lithium carbonate equivalent. The lithium oxide content is 1.56%, which is higher than the domestic average level.

The high premium bidding of enterprises may be due to various considerations. Firstly, the Xinjiang Autonomous Region where Ruoqiang County is located has vigorously developed mining in the 1990s, and its mineral resources can be considered rich. At the same time, the Washixia South Lithium Mine has large reserves and broad prospects for use as an emerging mineral, which can radiate a fixed market position, expand mineral utilization fields, and develop new markets Financial commentator Wang Chikun told reporters.

Wang Chikun believes that lithium is the latest high-value metal internationally and is currently widely used in the manufacturing of next-generation batteries. People believe that lithium ore will have greater value in the future, so bidders in the market are in a high price situation where their bids exceed expectations, which has led to this high premium transaction.

"New lithium mining will be beneficial for the supply of lithium resources in China, but it is also necessary to be vigilant against hype on related issues, "Wu Xinda said.

According to data from the Wind Global Enterprise Database, Xinjiang Zhite, which obtained high premium mining, was established on November 7, 2022 with a registered capital of 500 million yuan and registered in Ruoqiang County, Xinjiang. The shareholders of the company include Ruoqiang Zhicun New Materials Co., Ltd., Xinjiang TBEA Loulan New Energy Co., Ltd., and Ruoqiang County Deheng State owned Assets Investment Group Co., Ltd., with shareholding ratios of 49%, 35%, and 16%, respectively.

After equity penetration, it was found that Xinjiang Zhite, which has been established for less than 4 months, involves multiple listed companies such as Ningde Times (300750. SZ), TBEA (600089. SH), and Xinjiang Zhonghe (600888. SH).

TBEA recently stated that Xinjiang Zhite is a participating company of the company, and its controlling subsidiary, Xinjiang TBEA Loulan New Energy Co., Ltd., holds 35% of its equity. The news that Xinjiang Zhite has won the exploration rights for the South Washixia lithium mine for 6.088 billion yuan is true, and the transaction results are currently in the public notice period.

According to a recent research report on "Ningde Times Lithium Mine Rebate" by CITIC Construction Futures, since 2018, Ningde Times has frequently invested in companies such as Tianhua Super Clean (300390. SZ), Yongxing Materials (002756. SZ), Zhicun Lithium (an indirect controlling shareholder of Ruoqiang Zhicun New Materials Co., Ltd.), and has established joint ventures, signed strategic cooperation agreements, increased capital in mining enterprises, and constructed material recycling projects, Diversified and in-depth layout of upstream lithium ore resources and positive electrode materials.

Lithium price correction

However, it is worth noting that after more than two years of significant increases, lithium prices have recently experienced a sustained pullback.

According to Shanghai Nonferrous Metals Network (SMM) price information, as of March 2, the average price of domestically produced battery grade lithium carbonate has dropped below 400000 yuan/ton to 374000 yuan/ton, a 34% decrease from the high point of 567500 yuan/ton in mid November 2022.

At the expert media exchange meeting of the China Electric Vehicle Hundred Talents Forum held on February 17th, Ouyang Minggao, Vice Chairman of the Hundred Talents Forum, stated that the reasonable balance point for lithium prices in the future may be around 200000 yuan/ton.

"Despite the recent correction in lithium prices, demand expectations have not decreased, and the market competition for lithium continues to drive up the equity prices of upstream lithium mines. The high premium transactions reflect the current high prospects of the lithium industry and the intense competition for lithium resources. "Zhang Jianhong, Executive Director of the Environmental Technology and Economics Branch of the China Society of Technology and Economics, recently stated in a letter.

Zhang Jianhong believes that the competition for key mineral supply chains has risen from the market level to the international relations level. From a strategic perspective, the global demand for lithium salts will continue to rise rapidly for a long period of time in the future, and it is clearly worth buying lithium ore at a high premium.

At the same time, the enthusiasm of industry enterprises for "mining" has not diminished at all.

On January 9th, Tianqi Lithium (002466. SZ/09696. HK) announced that it plans to purchase all shares of Australian listed company Essential Metals Limited (ESS. AX) for AUD 136 million (approximately RMB 632 million). The relevant resource report shows that the lithium ore resources under ESS are 11.2 million tons, with an average lithium oxide content of 1.16%, totaling 129000 tons of lithium oxide equivalent.

On February 13th, China Mining Resources (002738. SZ) announced its intention to acquire 51% of the URT lithium project in Mongolia for $20 million. The exploration rights area of the URT lithium project is 332 hectares. After verification of the preliminary exploration results by the relevant professional geological team, the estimated lithium ore resource of the project is 1.74 million tons, and the average grade of lithium oxide is about 0.9% (not recognized by a third-party organization).

"The intensification of geopolitical risks is changing the global division of labor led by efficiency first, and various economies are increasingly emphasizing the safety and controllability of the supply chain. "The" Lithium Think "series of research reports from Minmetals Securities have emphasized multiple times in recent years that China is currently the only refining base for mineral lithium salts in the world, but end markets such as Europe and the United States have begun to build a regional closed-loop supply chain for new energy vehicles, Resource countries such as Australia and Canada have begun to focus on extending and building lithium salt production capacity, while Japan has begun to build caustic production capacity. The strategic window period for China's lithium industry to actively strengthen upstream lithium resource protection and improve resource self-sufficiency is not abundant.