The long-planned "world-class salt lake industry base" has made new progress.

Yanhu Shares (000792.SZ), which holds the largest salt lake mining rights in the country, will join hands with China Minmetals Corporation, the largest metal mining group in China, to reorganize.

The previously planned China Salt Lake Group is about to be launched.

According to the latest progress disclosed by Yanhu Shares on the evening of September 8, the cooperating parties have determined the details of the plan, including the shareholding ratio and transaction consideration, laying the foundation for the "sailing" of China Salt Lake Group.

China Minmetals will take over as the main shareholder of Yanhu Shares on the evening of September 8.

Yanhu Shares disclosed that the company's actual controller, Qinghai Provincial Government State-owned Assets Supervision and Administration Commission, and the controlling shareholder Qinghai State Investment signed the "General Agreement on the Establishment of China Salt Lake Group Cooperation" with China Minmetals and its subsidiaries.

The Qinghai Provincial Government State-owned Assets Supervision and Administration Commission, Qinghai State Investment, and China Minmetals plan to jointly establish China Salt Lake Industry Group Co., Ltd.; China Salt Lake Group plans to purchase 681 million shares of Yanhu Shares held by Qinghai State Investment and its concerted action person Wuhu Xinze Qing with cash.

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If the transfer is completed, the controlling shareholder of Yanhu Shares will change from Qinghai State Investment to China Salt Lake, and the actual controller of the company will change from Qinghai Provincial Government State-owned Assets Supervision and Administration Commission to China Minmetals.

Regarding the purpose of this equity change, the company stated that it is to accelerate the joint construction of a world-class salt lake industry base and to create a world-class salt lake industry group.

Going back to the evening of April 18, Yanhu Shares disclosed that the company received the "Notice Letter" from its controlling shareholder Qinghai State Investment, which is planning to carry out strategic cooperation in the salt lake industry with China Minmetals, and the two parties will jointly build a world-class salt lake industry base.

Although the specific cooperation plan has not been disclosed, the news of "Minmetals entering the game" has quickly attracted widespread attention.

The stock price of Yanhu Shares has risen by 6% in less than a month.

On the evening of May 6, Yanhu Shares announced that the company received the "Notice Letter" from Qinghai State Investment, which plans to carry out strategic cooperation with China Minmetals in jointly building a world-class salt lake industry base and creating a world-class salt lake industry group.

The latest announcement on September 8 shows that the registered capital of China Salt Lake Group, which the Qinghai Provincial Government State-owned Assets Supervision and Administration Commission, Qinghai State Investment, and China Minmetals plan to jointly establish, is planned to be 10 billion yuan, with China Minmetals holding 53.00%, Qinghai Provincial Government State-owned Assets Supervision and Administration Commission holding 18.73%, and Qinghai State Investment holding 28.27% (all are tentative numbers).

According to the "General Agreement on Cooperation", China Salt Lake Group will purchase 681 million shares (accounting for 12.54% of the total share capital) of Yanhu Shares held by Qinghai State Investment and its concerted action person Wuhu Xinze Qing with cash; the tentative price is 13.558 billion yuan.

Calculated based on 681 million shares, the acquisition price of this time is 19.9 yuan/share, which is a premium of 35% compared to the closing price of the last trading day before the announcement.

At present, the market value of Yanhu Shares is about 80 billion yuan, and according to the acquisition of this part of the equity, the valuation of Yanhu Shares given by China Minmetals is about 108.1 billion yuan.

The industry's voice is expected to be enhanced.

Public information shows that Yanhu Shares is a large state-owned listed enterprise managed by the Qinghai Provincial Government State-owned Assets Supervision and Administration Commission, with Qinghai State Investment holding 11.61% of the shares, which is wholly owned by the Qinghai Provincial Government State-owned Assets Supervision and Administration Commission.

The headquarters of Yanhu Shares is located in Geermu, Qinghai, and it is the largest potash fertilizer industrial base in China at present, with an annual production capacity of 5 million tons of potash fertilizer, accounting for about 35% of the domestic output; at the same time, it has an annual production capacity of 40,000 tons of lithium carbonate, accounting for about 8% of the total domestic supply, and a 40,000-ton basic lithium salt integrated project is expected to be completed by the end of this year.

The performance of Yanhu Shares has fluctuated greatly in the past five years.

First, due to poor management of magnesium industry and chemical projects, it entered the judicial reorganization procedure in 2019, and returned to the capital market after stripping off the loss-making assets in August 2021; then, coinciding with the recovery of the lithium industry market, it turned from loss to profit in 2020.

From 2021 to 2023, the high gas cycle of lithium prices, the revenue of Yanhu Shares was 14.778 billion yuan, 30.739 billion yuan, and 21.579 billion yuan respectively; the net profit attributable to the parent company was 4.478 billion yuan, 15.57 billion yuan, and 7.914 billion yuan respectively.

In the first half of this year, affected by the decline in the market prices of potassium chloride and lithium carbonate products, the revenue of Yanhu Shares was 7.2 billion yuan, a year-on-year decline of 27.31%; the net profit was 2.2 billion yuan, a year-on-year decline of 56.6%.

In the secondary market, the stock price of Yanhu Shares has been stable since this year, with a closing price of 14.81 yuan/share as of the closing on September 10, and a market value of 80.4 billion yuan.

China Minmetals is a state-owned backbone enterprise directly managed by the central government with metal mining as its core business.

It has 8 listed companies, including China Metallurgical Group (601618.SH, 1618.HK) A+H listed companies, Minmetals Capital (600390.SH), Minmetals Development (600058.SH), China Tungsten High-tech (000657.SZ), Zhuzhou Smelter Group (600961.SH), and Changsha Lithium Science (688779.SH) five A-share listed companies, as well as Minmetals Resources (1208.HK) and Minmetals Real Estate (0230.HK) two Hong Kong listed companies.

Yanhu Shares will become the 9th listed company under China Minmetals.

By the end of 2023, the total assets of China Minmetals exceeded 1.1 trillion yuan, and the metal varieties operated by the company covered more than 70% of the strategic mineral species catalog in China.

It is worth mentioning that Minmetals Salt Lake Co., Ltd., affiliated to China Minmetals, was established in September 2009, and its production plant is located in the Yili Ping Salt Lake in the middle of the Qaidam Basin.

At present, a 10,000-ton/year lithium carbonate project and a 300,000-ton/year potassium chloride project have been built and put into operation, with main products including battery-grade lithium carbonate, potassium chloride, lithium phosphate, etc.

Among them, the production scale of lithium carbonate ranks second in domestic salt lakes, and the production scale of potassium chloride reaches the second echelon in China.

As an important mineral resource, salt lakes are rich in sodium, magnesium, potassium, lithium reserves, among which lithium is one of the indispensable raw materials for power batteries, and most of China's salt lake resources are concentrated in Qinghai Province.

At the end of 2022, the People's Government of Qinghai Province publicly issued the "Several Measures of Qinghai Province to Accelerate the Construction of a World-Class Salt Lake Industry Base and Promote the High-Quality Development of the Salt Lake Industry".

The document clearly proposes to "accelerate the establishment of China Salt Lake Group".

Refine the establishment plan of China Salt Lake Group, and under the premise of market demand, resource implementation, technical maturity, and economic feasibility, introduce large-scale state-owned enterprises, integrate related enterprises to establish China Salt Lake Group, and establish a priority supply cooperation mechanism between upstream and downstream enterprises of the group.

Chaerhan Salt Lake is located in Geermu, Qinghai, and is the largest salt lake in China.

Its mining rights are held by Yanhu Shares and Zangge Mining (000408.SZ), and the lithium concentration within the rights scope of Yanhu Shares is slightly higher.

Looking at the industry data, the average cost of lithium mining from lithium ore is about 100,000 yuan/ton, while lithium extraction from salt lakes is not more than 40,000 yuan/ton, and there is still room for cost reduction.

Considering that the price difference between battery-grade and industrial-grade lithium carbonate is not large, the cost advantage of lithium extraction from salt lake brine will undoubtedly bring better profit margins and risk resistance.