Water Resource Management-ZANGGE MINING COMPANY LIMITED

Zangge Mining strictly complies with the Water Law of the People’s Republic of China, the Water Pollution Prevention and Control Law of the People’s Republic of China, and applicable national and local standards for water use and discharge. The company places great emphasis on the environmental impact of water consumption, continuously strives to protect water resources, actively promotes water recycling and reuse, and implements multiple measures to reduce the pressure of production operations on local water resources.

Impact, Risk, and Opportunity Management

Zangge Mining incorporates water-related risks into its environmental and operational risk management. The Company focuses on compliance risks related to water withdrawal, water scarcity risks, and potential compliance pressures arising from increasingly stringent water environment protection requirements. In areas where water resource conditions are relatively sensitive, the Company continues to monitor the potential impacts of external factors such as climate change and changes in regional water resource patterns. Taking into account its actual production conditions, the Company assesses in advance the potential impacts on water supply security and production continuity, providing a basis for subsequent adjustments to management measures. In 2025, Zangge Potash Fertilizer established a Water Balance Testing Management Leading Group to coordinate and advance the optimization of its water-use efficiency.

The Company continues to conduct water security risk assessments for the water withdrawal activities of its domestic subsidiary production enterprises, Zangge Potash Fertilizer and Zangge Lithium. Based on the locations of water withdrawal points, regional water resource conditions, and actual production and operation conditions, the Company systematically identifies the potential impacts of water withdrawal activities on local communities and ecosystems. In 2025, the Company continued to use the water risk assessment tool developed by the World Resources Institute (WRI) to analyze the water risk levels of relevant water withdrawal points. On this basis, it further reviewed the main potential impacts and risk characteristics of the water withdrawal activities of the two production enterprises. According to the assessment, the water withdrawal locations of the Company’s two subsidiary production enterprises are located in low to medium water risk areas, and are not in high or extremely high water risk areas. The specific analysis results are shown in the figure and table below.

Analysis Results of WRI Water Risk Assessment Tool

Water Risk Assessment of Zangge Mining

The company also conducted a dedicated analysis of potential risks that water extraction activities might pose to local communities and ecosystems. This assessment provides a theoretical basis for deepening water resource management practices. Key impact pathways are summarized as follows:

Impact Type	Impact Pathway
Water Resource Use	Excessive water withdrawal may reduce local water storage, affecting river, lake, and groundwater levels and flows, putting pressure on aquatic ecosystems, agricultural irrigation, and residential water supply.
Water Quality	Water extraction may introduce pollutants or alter the physical-chemical properties of water, affecting drinking water sources and agricultural water use.
Ecological Environment	Over-extraction can cause rivers to dry up and wetlands to degrade, damaging habitats for aquatic organisms.
Socioeconomic	Water extraction may compete with local agricultural, industrial, and residential water demands, creating distribution challenges; construction and operation of water facilities may also impact the local economy.
Sustainability	Long-term excessive water use may result in unsustainable water resource utilization, threatening long-term regional development.

Strategy and Management Approach

During the environmental impact assessment phase of project development, Zangge Mining evaluates the hydrological and geological conditions of project locations, including surface water and groundwater availability, to analyze the rationality of water use, water source conditions, and potential impacts on operations. The company establishes reserve water sources and emergency procedures, strengthening water risk management to address contingencies such as water source interruptions and water quality pollution. Zangge Mining also enforces strict protection of water source areas, explicitly prohibiting the destruction of surrounding ecological vegetation.

Water Use Management

Water Conservation Management

To manage water-related risks, the company conducts water risk analyses, performs water balance assessments, optimizes production processes, and sets water management targets. Annual overall water use plans are developed and allocated to subsidiaries and production workshops. Water management indicators are established, water-saving and water-efficiency equipment inventories are maintained, and monthly water-saving statistics are analyzed. Quarterly performance assessments are conducted to ensure compliance. At the same time, employees’ awareness of water conservation is promoted through regular educational campaigns, spreading knowledge about water-saving practices and products, and encouraging personal water-saving behaviors.

Due to the relatively scarce water resources on the Qinghai-Tibet Plateau and the high water demand for chemical production, Zangge Mining leverages the geographical proximity of its two production bases to enhance water recycling between the plants. By establishing a comprehensive tail liquid reuse process, the company improves the overall efficiency of water and mineral resource utilization, achieving effective water conservation.

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