(Approved by the 29th Meeting of the Eighth Board of Directors on March 10, 2022)
Important note: This plan is a strategic reflection on the future development of the company based on its realistic development and the external environment. The main development objectives and measures involved here are forward-looking statements, which do not constitute a substantive commitment of the company to investors. According to the internal and external macro- and micro-situation changes, the company may make moderate adjustments to this plan for high-quality development. Investors are requested to pay attention to the investment risk.
I. Background of the Plan
1. External Environment
The world today is undergoing profound changes unseen in a century, and the global political and economic pattern is undergoing profound adjustments. The global economy has resumed its expected growth after the gradual recovery of the pandemic of Covid-19. The global ultra-loose quantitative policy supports high commodity prices.
With its far-sighted vision, China will continue to play a leading role in global economic recovery by building a new development pattern that focuses on domestic circulation and promotes domestic and international circulation. As the world’s largest manufacturing country, China is the world’s largest commodity market with huge capacity.
2. Market Opportunities
As the starting point of China’s manufacturing industry upgrading, with the policy support, the electric vehicle industry is making great efforts. The penetration rate of electric vehicles reached about 20% in December 2021.
With each electric vehicle requiring 40-50 kg of lithium carbonate, the annual new demand is tens of thousands of tons. The lithium industry is seriously in short supply. The price of lithium carbonate rose from about 50,000 yuan/ton at the beginning of 2021 to about 300,000 yuan/ton at the end of the year. The company’s lithium carbonate business has ushered in significant development opportunities.
2. Current Development
As a company with its major business in the production of potassic fertilizer and lithium carbonate based on the potash resources in Qarhan Salt Lake of Qinghai province, the company’s core business is the production and sales of potassium chloride and lithium carbonate. It is certified with the right of potash mining with an area of 724.35 km2 east of Qarhan Salt Lake railway. Besides, with 30.78% of the equity, it is the second largest shareholder of Julong Copper Mining Co., Ltd. in Tibet, cooperating with Zijin Mining, its strong shareholder, to develop Qulong Copper Mine in Tibet.
In 2018, with its entry into the field of new energy, the company built the project of lithium carbonate in Qarhan Salt Lake. The first phase of the project, with an annual output of 10,000 tons of lithium carbonate, was completed and put into operation in 2019. The company has broken through the worldwide problem of extracting lithium from ultra-low concentration brine and large-scale industrial production (the concentration of lithium in brine is only 60 mg/l). It is one of the three companies in the world that master the process of lithium extraction technology with the combination of adsorption and filming techniques at the level of 10,000-ton level, which is planned to be applied next in the lithium projects in Tibet and other salt lake areas.
As of December 31, 2021, the company has had 50 million tons of KCl of potassium resources in Qarhan Salt Lake. In October, 2021, Jiangsu Zangqing New Energy Fund (limited partnership), the company’s main limited partner, acquired 51% of the equity of Tibet Ali Mamico Mining Co. Ltd., greatly expanding the company’s lithium resource reserves. The lithium resource of Mamico Salt Lake is equivalent to about 2,180,000 tons of lithium carbonate, with an average grade of lithium chloride of 5,645mg/l.
With advantages in its system, mechanism, and market-oriented operation and management, the company has formed professional operation and investment ability, independent technology and engineering ability with innovation as the core. In terms of comprehensive strength, it is already a first-class mining company in China. However, the company has some challenges, such as insufficient transformation of technical advantages into economic and social benefits, shortage of international talents, insufficient international experience, little global management system, and the weakness in the construction of ESG system and cross-cultural integration.
II. Five-year Plan
1. Guiding Principle
We will persist in following the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, to serve the new development pattern of mainly improving domestic large cycle and promoting domestic and international double cycle, and to serve the needs of China’s manufacturing industry upgrading, especially the electrification and intelligent development of the automotive industry. We will grasp the huge market opportunities of lithium demand rise in the next five years. We will comprehensively plan the domestic and international markets, accelerate the transformation of technological advantages into economic and social benefits to ensure the rapid growth of the company’s performance. In terms of operation, resources, talents, capital, and culture, we will significantly improve the company’s core competitiveness and sustainable development for a first-class company in the global mining industry, contributing to the development of mining industry both at home and abroad.
2. Major Development Targets
(1) The first stage – go nationwide (2022-2024)
The output and economic indicators shall increase by leaps and bounds, economic strength and enterprise scale shall improve significantly. The operation shall be carried out at the grouping management level.
1) The output of potassium chloride and lithium carbonate in Qarhan Salt Lake shall remain stable.
2) The lithium project at Mamico Salt Lake shall be completed and put into operation.
3) Progress shall be made in the merger and acquisition of new projects, adding 1-2 lithium projects at the Salt Lake with million tons of lithium carbonate reserves.
4) The personnel training system shall be preliminarily established.
5) Overseas capital market shall be reached.
6) ESG system shall be initially set up.
7) The construction of process organization and information platform shall be achieved with initial good effects.
(2) The second stage – go worldwide (2025-2027)
We shall continue to develop existing mineral resources in an all-round way, and the main economic indicators and benefits shall reach the level of RMB 10 billion yuan, basically reaching the level of a world-class mining group.
1) The output of potassium chloride and lithium carbonate in Qarhan Salt Lake shall remain stable.
2) The lithium project in Mamico Salt Lake shall have stable production and the production shall be expanded sometime appropriate.
3) A new salt lake lithium mine shall be built.
4) A systematic process operation mode shall be formed for new project mergers and acquisitions.
5) The talent training system shall be systematic, and the shortage of international talents shall be basically solved.
6) Rich experience shall be accumulated in capital operation both at home and abroad, able to use a variety of financing methods to meet the funds needed for development.
7) ESG system shall be equivalent to the world class.
8) The global process organization and information platform shall be in operation.
III. Major Measures
The following five years will be a critical period for the company to become a world-class mining group from a domestic first-class mining company. The strategic highlight of the company is: company group set-up, globalization, a leading role of resources, productivity improvement, driving force of innovation, ecological harmony, and cultural integration. For this purpose, the company will focus on the implementation of the work from the following aspects.
1. Build comprehensively a concise, standardized, and efficient global operation and management system
We shall comprehensively implement the master plan for deepening reform. With “simplicity, standardization, and efficiency” as the basic requirements, we shall build an advanced global operation management system, with a process organization for better vitality of both the organization and employees. We shall strengthen the relative independence, effectiveness, and responsibility of supervision. We shall adhere to law and regulations, and pay attention to preventing and controlling all kinds of risks. We shall build a global information system and realize the digitalization and platformization of all production, operation, and management.
2. Prioritize resources, and strengthen comprehensively the merger and acquisition of lithium resources
We shall highlight lithium and other minerals with high growth potential, and improve the ownership of mineral resources with high cost performance. We shall track over ten projects, negotiate about several projects, acquire a new project each year, study and master a project each year, and start a project each year. We shall strengthen mergers and acquisitions and cooperative development in multiple modes by taking advantage of markets and resources both at home and abroad.
3. Promote comprehensively the transformation of technological advantages into economic and social benefits
We shall make good use of the company’s leading technology and engineering capacity in salt lake lithium extraction, and quickly copy the technology to other salt lake lithium projects in Tibet and other areas. We shall promote project construction efficiently and quickly, improve management, speed up the full release of major incremental project capacity, and strive for the rapid increase of capacity contribution benefits after the merger and acquisition of new projects.
4. Strengthen capital operation and form an advanced value creation system
We shall continue to create new value for shareholders. We shall improve the quality of listed companies, connect deeply with the domestic capital market, choose the opportunity to reach the overseas capital market. We shall introduce long-term investors such as public funds, strengthen the construction of supporting investment and financing platforms, and further enhance our ability to use a variety of financing methods to meet the funds required for development.
5. Strengthen international talent team and cross-cultural construction
We shall inherit and carry forward the excellent culture of Zangge – diligence, preciseness, realism and innovation. We shall vigorously introduce and cultivate a team of high-quality talents with international vision, and promote cross-cultural exchanges. We shall export the pragmatic and efficient work style of Zangge, unite local communities and residents, build new production bases in Tibet and other places, and enhance the soft power of global competition.
6. Build the environmental, social, and governance (ESG) system
We shall adhere to the concept of globalization, high quality, green and sustainable development, and promote the ESG performance of the company to be at the advanced level of the industry. We shall implement the construction of international reputation of safety, environmental protection and green ecology. We shall improve safety management, reduce carbon emissions, improve the utilization rate of water resources, and strengthen the protection of biodiversity. We shall build an industrial ecological chain of mutual dependence, coexistence and development, so that the communities, employees and investors where the project is located can benefit from the existence of the company.
The company aspires to become a world-class mining group, for which we will deepen reform around the company’s strategic priorities to ensure high-quality and sustainable development. The Board of Directors of the company believes that the next five years will be a major opportunity for Zangger Mining. In face of the risks and challenges, the company will seize the opportunities, meet the challenges, and create greater value for shareholders and the society as a whole.