In lithium, a racetrack full of smart money, it is hard to run faster or smarter than anyone else -- because good lithium is expensive and expensive to develop, and has always been a field of strong players.
Last year zijin Mining, one of China's leading mining companies, went to sea and won the Tres Quebradas Salar (3Q) lithium salt lake project in Catamarca province in northwestern Argentina for $5 billion.
It soon became clear that the $5 billion thrown away was just mining rights, with billions of dollars of capital spending still waiting to be paid for by Zijin to complete mining and refining. The tens of billions of dollars of mine cash invested to fill only one mine has made many outside capital shy away.
In fact, if we arrange all a-share listed companies with lithium mines according to market value and reserves, we will find an almost cheating formula: the smaller the reserves of lithium carbonate, the higher the relative market value of the company.
The logic of this formula is not hard to calculate: an A-share listed company's superior financing capacity combined with the business model of lithium resource development with ultra-high profit margins (payback period of no more than two years) makes the market more willing to give higher valuations to companies with relatively low resources. The high valuation supports the financing acquisition of lithium mines. The higher return rate brought by the acquisition, the higher valuation of the project with high return rate, the higher valuation supports the acquisition of more lithium mines, forming a positive cycle here. The flywheel effect was born: it also gave birth to such super bull stocks as Jiang Te Motor and Tibet Everest.
Therefore, take the lithium mine, complete mining, can bring the valuation of the day leap, market value growth of tens of billions is not a problem. In order to calculate the reserves announced by listed companies, every ten thousand tons of reserves of lithium carbonate is about 500 million market value, so we have seen over the past year, when a million tons of large lithium mine in hand, can help the company's market value straight skyrocket. But as all the capital to understand this huge leverage, almost everyone will encounter a problem: good lithium price is not cheap, everyone is staring at, where can we find the price of low quality resources? The answer is not hard to figure out:
When your opponent is on the verge of bankruptcy.
The more dangerous, the more beautiful
As British Prime Minister Winston Churchill formed the United Nations at the end of world War II, he said: "Never waste a good crisis." (Never waste a good crisis.)
In today's jittery capital markets, it is all the more philosophical: only when the counterparty is in such a tight spot that it has to buy, will the deal be cheaper than you have ever seen. But we fervently hope that when the opportunity comes, we will be outplayed by a strong-squared opponent, not the other way around.
Therefore, it is not so surprising that guicheng Mining group, the major shareholder of Guicheng Mining, stepped in when the former A-share star Zhonghe holding lithium mine fell on the verge of bankruptcy and liquidation: On February 25, 2022, Zhonghe Co.,Ltd. (hereinafter referred to as "Zhonghe"), which has been suspended from the A-share market for two years to the New Third Board, announced that its Jinxin Mining Co.,Ltd. plans to introduce guicheng Group, the investor, to protect Zhonghe's core lithium assets from auction through the combination of capital increase and borrowing. And help Jinxin mining to restore production and operation capacity.
Data show that Jinxin Mining is one of the largest spodumene deposits in China and one of the rare high-quality large-scale lithium resources in China.
Markang Jinxin Mining Co.,Ltd., an important subsidiary of Zhonghe Co.,Ltd., has fallen into business difficulties and financial crisis and is unable to pay off its own debts. Guicheng Group has avoided the risk of judicial auction of mining rights, exploration rights, machinery and equipment and other core assets held by Jinxin Mining By providing assistance.
According to the capital increase plan, according to the valuation report issued by the third-party asset evaluation agency, the investors will implement the capital increase according to the valuation of all shareholders' equity of Jinxin Mining before the investment of 429 million yuan. After the completion of the capital increase, Guocheng Evergreen, Guocheng Deyuan holding 48%, 2%, aba Zhonghe New Energy Co., Ltd. is still the company's largest shareholder, holding 50%. In addition, Zhonghe, which is on the verge of bankruptcy, also signed a strategic cooperation agreement with Guocheng Group: in the agreement, Guocheng Group will pay 200 million RMB as deposit to Zhonghe to participate in the bankruptcy and reorganization of Zhonghe. The agreement also left a meaningful word: to restore the sustainable development of Zhonghe shares, as soon as possible to independently apply for re-listing or merger by other listed companies for stock exchange listing, safeguard the interests of creditors and minority shareholders.
Seen from the combination of the two agreements, Guicheng Group acquired 50% controlling equity of Jinxin Mining, which has a total reserves of nearly 3 million tons of lithium carbonate, just by investing 428.8 million yuan. Meanwhile, by promoting the public harmony restructuring, It also holds the initiative to complete the listing of Jinxin Mining through stock exchange in the future. In the lithium cheating formula, 3 million tons of Jinxin Mining even according to 200 million per million tons of reserves of market value conversion calculation, is a market value of more than 60 billion behemoth, if all goes well, the city group's valuation at the moment of capital injection, has achieved a stunning reversal.
In the record of the 2022 Cadre meeting of Guicheng Group, the jubilation generated by the capital increase in Jinxin Mining is expressed in words: "This major operation measure has a milestone significance on the road to achieve high-quality development of the group."
02 The more gorgeous, the more sad
Of course, cheap assets are cheap for a reason: if you open the public notice of Zhonghe, the new Third Board bulletin board of Zhonghe is full of words such as seizure, lawsuit and judgment, it does not look like a lithium mining company that can hide its market value of 100 billion yuan. Compared with that new energy star Zhonghe a few years ago, zhonghe successfully transformed from textile industry to lithium mining and took control of Jinxin Mining. However, with the decline of the textile industry, the capital flow of Zhonghe suddenly stopped, and Jinxin Mining needed to spend a lot of capital in the early stage of mining.
At the moment zhonghe is caught in a dilemma: liquidated assets can protect themselves, but the valuation of untapped lithium mines is limited; Fujian native Xu Jiancheng chose to increase the bottom of the gas, which directly let the already tottering Zhonghe collapsed.
The financial statement of Zhonghe has been unable to be issued two years ago, and in the last financial statement, the debt of Zhonghe is close to 2.8 billion yuan, which has long been insolvent. Zhonghe, which has long been in debt, is now completely paralyzed:
Xu Jiancheng, the head of the company, was prosecuted and imprisoned by dangba prosecutors because of the contract dispute over the transfer of jinxin mining rights.
In Jinxin Mining Co., LTD., which is located in an area inhabited by Tibetans, many local people borrowed money to buy trucks for transportation in order to participate in mining development, and now they are also heavily in debt.
Even in several creditors dial: in 2018, in order to retain the and listed shell not retreat city, melts the trust transfer of creditor's rights to societe generale in mining, industrial mining large shareholders invested 600 million to promote jinxin mining development, but the arms of Asia's largest lithium the iron rice bowl, and in the case of a leaderless, always can't realize finishing, jinxin mining development still on hold.
Ironically, with the rapid rise of the new energy market, the price of lithium carbonate has soared. Some people have calculated that: at the current price, Jinxin Mining can pay off all its debts in two years, but at the moment, zhonghe can not get a penny. In fact, if it were not for guocheng group's low-price investment and white Knight assistance, Zhonghe would be in the stage of a house auction.
The more crisis, the more excited
To be fair, for Guicheng Group, investing in Jinxin Mining is just the beginning, the wedding is always the most happy: Undertake the liabilities of account arbitrage, inject capital expenditure to realize mine development, clean up the disputes and litigation, explicit and invisible reconciliation with suppliers and customers, to get the environmental impact assessment of updates, eventually to promote various aspects have flawless lithium business, complete listing of these is the real test of the city group white knight ability really big test.
In fact, the failure of Xingye Mining and Zhongrong Trust to protect its shell has shown that there is more to the story than meets the eye.
But investors seem to be more interested in Guicheng's ability to restructure, given its history of involvement in restructurings. In the past four years, Guicheng has offered to take over jianxin Mining, which went bankrupt, and won a listing. In the new restructuring of the construction, Guocheng Group has successfully completed the restructuring of its high-grade molybdenum mine, Chinese and Western Mining, which is about to be injected into the listed company; With the development of the epidemic in 2020, Guicheng Group extended a helping hand to Yupang Mining, the largest silver mine in Asia, at its lowest point, and acquired the controlling stake of the largest silver mine at a very low price. With the past track, Guocheng Mining is good at participating in bankruptcy restructuring, but also has strong financial strength.
Despite the long road ahead, minority shareholders may be confident that Guicheng can repeat its magic at the debt-ridden Jinxin lithium mine, one of the few glimms of growth for Zhonghe.
Don't waste a crisis, the important thing is that you are not the crisis
History obviously plays a big trick on Zhonghe shares. From textile mills turned lithium, all the shares and clearly to guess the beginning, not guess the ending: towards a new energy transformation is undoubtedly correct, but the transformation of the huge gap of capital turnover, the early stage of the mining giant barriers and time cost of funds, many legal risks in the process of trading, all is the most important factor in the and finally into a liquidity crisis.
Ironically, the lithium mine, which was supposed to be a huge source of cash flow and employment opportunities, eventually brought Zhonghe down, leaving zhonghe Mired in multiple crises, including debts and lawsuits. Suppliers, dealers, local governments and citizens were all dragged into the final vortex.
And stand in the perspective of the city group, from just four years ago a new mining incoming and its assets total already can take a look into the future billions dollars valuation, all this is based on every trade point is counterparty liquidity dried up in the moment: the deal, jinxin perfect interpretation of what is "don't waste a crisis" this quote. Perhaps, in the capital market jittery today, as investors we should understand the meaning of this sentence.
But we need to understand that the premise of not "wasting" the crisis is not to let ourselves become the crisis itself
-- As lithium assets continue to soar, every K line seems to imply the sharp edge of a sickle.
Post time: Mar-31-2022