Zangge Mining’s Ultimate Controller to Change, Partnering with Zijin to Build a World-Class Mining Group

Source: National Business Daily, Author: Pu Zhen

Zangge Mining, January 17, 2025, 10:19, Qinghai

The content of this article does not constitute any investment advice. Disclosure information is subject to company announcements. Investors operate at their own risk.

First Major Mining Asset Integration of the Year: Zangge Mining Joins the National Lithium “Team”

A-share’s first major mining asset consolidation of the year was quickly finalized, with Zangge Mining successfully entering China’s national “team” of lithium producers.

On January 16, Zangge Mining announced that its controlling shareholder Zangge Venture Capital, together with its concerted parties Xinsha Hongyun Investment, signed a Control Transfer Agreement with Zijin International. Zijin International intends to acquire the shares held by Zangge Venture Capital and its concerted parties at CNY 35 per share, representing 24.82% of the company’s total shares, with a total transaction value of CNY 13.729 billion. Zangge Venture Capital will also transfer 5% of its voting rights.

After the transaction, Zijin International and its concerted parties will hold 395 million shares, accounting for 25% of total shares. The controlling shareholder will change from Zangge Venture Capital to Zijin International, and the ultimate controller will shift from Xiao Yongming to the Shanghang County Finance Bureau of Fujian Province.

Zangge Mining stated that in the future, the company can leverage Zijin Mining’s extensive experience in global resource development, multi-product portfolio advantages, and sound governance system to enhance its asset scale, resource reserves, management efficiency, global presence, and regulatory compliance, laying the foundation for high-quality development.

Opening Shot of the Year: Zangge and Zijin Team Up to Chase “World Lithium Leader”

It is noteworthy that this acquisition achieves a multi-party win-win situation.

Zijin International is a wholly owned subsidiary of Zijin Mining. Previously, Zijin Mining and Zangge’s intersection was mainly in Tibet Julong Copper, where they were the largest and second-largest shareholders, respectively. For Zijin, acquiring Zangge Mining not only significantly increases its equity in Julong Copper but also allows it to leverage Zangge’s rich experience in salt lake resource development and leading cost control capabilities.

Zijin Mining’s Chairman Chen Jinghe publicly stated that the more than twenty-year “global mining supercycle” created by China’s industrial demand for minerals has ended, and traditional bulk minerals will enter a period of low or negative growth. At its 2024 senior management strategic seminar, Zijin emphasized full development of the lithium segment to become one of the world’s most important lithium producers.

As early as 2021, Zijin Mining began laying out its lithium resources, acquiring “Two Lakes, Two Mines,” including Argentina’s 3Q Salt Lake, Tibet’s Laguecuo Salt Lake, Hunan’s Dao County Xiangyuan lithium polymetallic mine, and Manono lithium mine. As of H1 2024, its lithium carbonate equivalent resources reached 13.4656 million tons. The company plans to reach a production capacity of 250,000–300,000 tons of lithium (LCE) by 2028.

While Zijin has acquired significant salt lake resources, it relatively lacks mining experience. Zangge Mining, as a leading lithium miner, brings rich salt lake development experience and leading cost-control capabilities. The company developed a proprietary “one-step” method to extract battery-grade lithium carbonate, overcoming the challenges of extracting lithium from ultra-low concentration brine, achieving industry-leading production costs.

According to data, Zangge Mining holds 724.35 km² of mining rights at Chaerhan Salt Lake in Qinghai, with annual lithium carbonate production capacity of 10,000 tons. Even in a context of persistently low lithium prices and large-scale cutbacks by Jiangxi mica lithium producers, Zangge Mining maintains gross margins of around 50%. With strong internal cash flow, its debt ratio stood at just 4.85% by Q3 2024.

In addition to Chaerhan, Zangge Mining owns Mami Cuo in Tibet, potash mines in Laos, and participates in Chaka and Longmu Cuo Salt Lakes through the Tibet-Qinghai Fund. The Mami Cuo project plans 100,000 tons of lithium carbonate capacity, with Phase I’s 50,000-ton mining permit in progress.

This partnership allows for complementary technological and resource advantages, positioning the two companies more favorably in global lithium competition. Zangge Mining mentioned that there is significant cooperation potential across the lithium industry chain, and leveraging Zijin Mining’s market channels will improve risk resilience and accelerate global expansion.

A-Share “Top Student”: Zangge Mining Could Be the Big Winner

Zangge Mining stands to be the primary beneficiary of this acquisition.

For Zangge, the most significant benefit is shedding its private enterprise status and formally joining the “national team.” After completion, the ultimate controller will be the Shanghang County Finance Bureau, which will greatly benefit salt lake resource acquisition and sustainable high-level development.

An investor noted that Zangge Mining has strong dividend potential and growth attributes, but the previous controlling shareholder’s equity pledge ratio was relatively high. Before the acquisition, Zangge Investment had pledged 341 million shares, representing 94.49% of its holdings and 21.62% of total shares. With Zijin’s entry, these pledge risks will be effectively mitigated. Joining the “national team” elevates Zangge Mining into the ranks of A-share top performers.

From a business perspective, Zijin’s empowerment will further enhance Zangge’s industry competitiveness, accelerate resource development and utilization, and create synergies with Zijin Mining.

Zijin Mining is a world-leading integrated mining enterprise. Zangge can leverage its global experience, diversified portfolio, and governance system to strengthen core competitiveness. On one hand, Zangge can use Zijin’s exploration and reserve expansion capabilities to accelerate potash, lithium, and copper development, improve resource utilization, and coordinate regionally with Zijin in Tibet’s mines, salt lakes, and geological exploration units, enhancing operational management systems and achieving domestic leadership.

On the other hand, Zijin Mining’s extensive global resources, market channels, and brand recognition allow Zangge to accelerate globalization and advance its goal of becoming a world-class mining group.

From Qinghai’s perspective, the construction of a world-class salt lake industry base will also accelerate. With China Minmetals acquiring Salt Lake Co. and Zijin acquiring Zangge Mining, Qinghai’s salt lake resource development will form a “national team” led by China Minmetals, CITIC Guoan, Zijin Mining, and Qinghai State-Owned Assets. Collaboration among these giants will facilitate high-level sustainable development of salt lake resources.

It is worth noting that as lithium mergers and acquisitions increase, industry concentration will rise, enhancing the robustness of the global lithium supply chain. In the near term, Zijin notes that lithium carbonate price adjustments help rebalance supply and demand, while medium- and long-term demand from global EVs and energy storage remains significant. By 2030, global lithium carbonate demand is expected to exceed 3 million tons, requiring reasonable lithium prices to stimulate supply growth.

It is foreseeable that as industry chain integration deepens, leading enterprises will leverage economies of scale and technology advantages to strengthen market positions. The Zangge-Zijin alliance consolidates critical resource supply chains and industrial security, giving Chinese companies greater influence in the global lithium sector and ushering Zangge Mining into a true golden era.

Editor: Yuan Chengying