Luoyang Molybdenum Industry (603993.SH) is planning to sell the molybdenum mine resources of its subsidiary.
Luoyang Molybdenum Industry announced on June 19th, intending to transfer its 65.1% equity in Xinjiang Luo Moly Mining Co., Ltd. (hereinafter referred to as "Xinjiang Luo Moly"), valued at 2.9 billion yuan, to CITIC Guoan Industrial Group Co., Ltd. (hereinafter referred to as "CITIC Guoan").
A person in charge of Luoyang Molybdenum Industry stated that the Dong Gobi Molybdenum Mine has not been developed. After this equity transfer, the proportion of the company's molybdenum metal business has not decreased. Currently, in addition to the Dong Gobi Molybdenum Mine, the company also owns two molybdenum mines, San Daozhuang and Shangfanggou, and will continue to expand the existing resources at both locations.
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According to the 2023 annual report of Luoyang Molybdenum Industry, the molybdenum resource quantity (calculated by metal quantity) of the Dong Gobi Molybdenum Mine is 508,200 tons, and the resource quantities of the San Daozhuang and Shangfanggou molybdenum mines are 244,600 tons and 609,700 tons, respectively.
In fact, the "molybdenum" content of Luoyang Molybdenum Industry is not high. In 2023, the company's molybdenum metal business recorded a revenue of 7.1 billion yuan, accounting for 3.8%. In the first quarter of this year, the company's molybdenum mine production decreased by 15.66% year-on-year, to 3,474 tons.
Selling molybdenum mines to expand copper production capacity
Luoyang Molybdenum Industry stated that the purpose of transferring molybdenum mine resources is to optimize the business layout and focus resources on the fields of new energy metals and key strategic metals.
The aforementioned person in charge of Luoyang Molybdenum Industry told First Financial that at the beginning of 2024, the company proposed a new round of copper production capacity expansion plans and will initiate the third phase of the TFM mine and the second phase of the KFM mine in the Democratic Republic of Congo (DRC). In addition to the development of existing copper-cobalt resources, the company will also continue to pay attention to merger and acquisition opportunities for other new energy metals.
The announcement shows that Luoyang Molybdenum Industry will transfer its 2.9 billion yuan equity in Xinjiang Luo Moly to CITIC Guoan, and it is expected that after the completion of the transaction, the company will obtain a net financial benefit of about 1.5 billion yuan.
According to the assessment by Zhiyuan Asset Appraisal Co., Ltd., the shareholder's equity value of Xinjiang Luo Moly as of April 30, 2024, is 4.771 billion yuan. CITIC Guoan will pay the first installment of 500 million yuan within 5 working days after the agreement takes effect, then complete the equity transfer procedures, and pay the remaining consideration upon completion.According to the announcement, Xinjiang Luo Moly was established in 2010 with a registered capital of 1.505 billion yuan. As the controlling shareholder of Xinjiang Luo Moly, Luoyang Molybdenum Industry holds 65.1% of the shares. Henan YuKuang Xinyuan Mining Co., Ltd. and Xinjiang Hami City State-owned Assets Investment and Management Co., Ltd. hold the remaining 27.9% and 7% of the shares, respectively.
Xinjiang Luo Moly owns 65.1% of the rights and interests in the Donggobi Molybdenum Mine and has not yet started construction and mining activities. From 2023 to April 2024, Xinjiang Luo Moly's financial reports did not record any operating income, and the net profit was in a loss state, amounting to -8.8754 million yuan and -1.9871 million yuan, respectively. As of the end of April this year, the net assets of Xinjiang Luo Moly were 1.336 billion yuan.
Data shows that Luoyang Molybdenum Industry achieved an operating income of 186.3 billion yuan in 2023, a year-on-year increase of 8%, and a net profit of 8.25 billion yuan, a year-on-year increase of 36%.
Molybdenum prices soar
Molybdenum (Molybdenum) is a transition metal element, commonly used as an additive in the smelting of special steel to improve the performance of steel, hence the industry refers to molybdenum as the "flavor enhancer of industry."
In recent years, the price of molybdenum has continued to rise, reaching a high of 5,590 yuan/tonne in February 2023, a record high in nearly seventeen years. On June 20th, the average price of 45% molybdenum concentrate was 3,875 yuan/tonne.
Data from Shanghai Steel Union shows that the average price of domestic 45% molybdenum concentrate in 2023 was 3,876 yuan/tonne, a year-on-year increase of 38.35%; the average international price of molybdenum oxide was 24.14 US dollars/pound molybdenum, a year-on-year increase of 28.61%.
Luoyang Molybdenum Industry's financial report disclosed that the company mainly sells ferromolybdenum to the domestic market. According to the statistical data of Molybdenum Capital Cloud Business Network, the average annual price of ferromolybdenum in 2023 was approximately 256,900 yuan/tonne, a year-on-year increase of 37%.
Industry insiders analyzed to First Financial that molybdenum and copper ores are often associated, and in recent years, factors such as strikes in overseas copper mines have led to a global trend of reduced production of molybdenum metal, with market expectations for production cuts continuously strengthening. Coupled with the explosion of the new energy vehicle market, the increase in demand for steel has also formed a positive factor, and multiple factors have driven up the price expectations of molybdenum.
Wei Jie, a molybdenum product analyst at Shanghai Steel Union, analyzed that the domestic molybdenum concentrate price has shown a continuous downward trend since 2008 until 2016, then gradually consolidated below 2,000 yuan/tonne until it started to rise in 2021. The long-term low molybdenum price means that the capacity release is limited in the short term.According to Antaike data, in 2023, the global molybdenum supply is approximately 286,000 metric tons, a year-on-year increase of 7.7%; the demand for 2023 is about 278,000 metric tons, with supply and demand being essentially balanced.
The industry insiders analyzed that as the production of copper-molybdenum associated ores overseas gradually recovers, the trend of the domestic steel industry shifting towards special steel is evident, and the product upgrade of steel enterprises is accelerating. The capacity and output of high-quality special steel and molybdenum-containing high-end stainless steel continue to be released, and the demand for molybdenum is expected to be continuously released. Institutions predict that the molybdenum market may continue to experience a supply shortage from 2023 to 2025.
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