This paper is abstracted from the commentary report on new energy research of China-Thailand Securities  

Event: Company announcement: 1) To acquire 100% of Byron Biotechnology Co., Ltd. through full-owned Sun Company Huayou International through 184.44 million yuan; 2) To increase the capital of MIKAS Co., Ltd. by 65.16 million dollars, for the construction of MIKAS Co., Ltd. annual output of 4000 tons of crude cobalt hydroxide, 10,000 tons of copper electrowinning project.

Comment:

Acquisition of Byron Biotechnology to enter the field of metal resource recovery.

Byron biotechnology was originally mainly engaged in the production and sale of natural vitamin E products. In 2017, Byron decided to transform to the development of basic chemical industry. In the future, it will enter into the field of recycling and utilization of lithium-based electrical materials. According to the expectation of the management of the enterprise, the renovation will be completed and put into trial production in August 2017. At present, the designed capacity is about 70-100 tons per month.

Recyclable metals in lithium materials include cobalt, nickel, copper and aluminium, which are highly compatible with the company's main products. If the acquisition is completed, the company's metal raw materials will be effectively supplemented after the project reaches production, and the annual supplementary metal volume will reach 840-1200 tons.

Increase investment in MIKAS and increase the supply of free mine resources for construction projects.

MIKAS is mainly used to build 4000 tons of crude cobalt hydroxide and 10000 tons of copper electrowinning projects, which are expected to be completed and put into operation in the first half of 2018. The financial internal rate of return on full investment after project tax is 17.07%, and the payback period (including construction period) is 6.11 years.

The main purpose of the project is to reform the KAMBOVE tailings concentrator of MIKAS Company. In the early stage, the plant stopped production because of the low recovery rate of resources and the low price of cobalt and copper. This project is to upgrade and transform it in order to improve the utilization rate of resources and seize the high boom cycle of cobalt.

Crude cobalt hydroxide is the raw material for cobalt production. After the completion of the 4000 tons/year crude cobalt hydroxide project, the raw materials needed for the company's cobalt products will be supplemented, and the self-sufficiency rate of cobalt resources will be increased. Under the high cobalt price, the company's profitability will be greatly enhanced. The 10,000 tons/year copper electrowinning project can achieve a certain profit through takeout.

Chart: MIKAS Ownership Structure

Source: Company Bulletin, China-Thailand Securities Research Institute

"Recovery + Mine" double channel guarantee company's follow-up development.

The company has occupied a large market share and position in cobalt products such as cobalt trioxide and cobalt sulfate, and actively carried out ternary precursor projects, invested in the acquisition of Bamo Technology, a cathode material manufacturer. The production system of cobalt products has been improved.

The acquisition of Byron Biotechnology, together with the previous acquisition of 70% of Korean TMC equity into the "lithium battery dismantling recycling - cathode material recycling" process, is the company's layout for the establishment of recycling channels. High consumption in the future will certainly lead to high scrap. Recovery must be the top priority under the condition of limited global resources and relatively poor domestic cobalt resources. And with the continuous development of new energy vehicles, the peak period of power battery scrapping is coming. Advanced layout will help power companies seize the wind of power battery recycling.

The company has opened a "recycling + mining" dual-channel resource guarantee. Under the tight cobalt resources and high prices, further improving the self-sufficiency rate of resources will enhance profitability while ensuring the company's follow-up development in the field of battery materials.

The company is a leading cobalt product enterprise. In recent years, it has actively extended to battery materials. The layout of ternary precursors and cathode materials has opened up the development space for the company. The further strategic layout of the upper available resources guarantees the follow-up business development and improves the comprehensive competitiveness.