Weilasituo lithium-tin mine unlikely to go into operation in 2020

Asian Metal: Firstly, thank you for accepting our interview. Please give us a general introduction of your company.

Mr. Wang: Located in Baiyinchagan Sumu, Hexigten Banner, Chifeng, Inner Mongolia Weilasituo Mining Co., Ltd. was founded in November 2006 with a registered capital of RMB120 million (USD16.98 million) and 51% interests held by the state. The company started construction in 2007 and went into commercial production in 2008. With a daily beneficiation capacity of 1,000 tons, we can handle 330,000 tons of ore per annum at present. The company focuses on production of copper, zinc, silver and tungsten concentrated mineral products. We halted production of existing zinc-copper polymetallic mine in 2020 due to depleted resources and only run the dressing plant now, which can be in production till this October with raw ore stocks. We discovered a large-scaled lithium-tin deposit within our mining area later by exploring and developing and finished project assessment. Now we are still waiting for approvals from relevant authorities.

Asian Metal: Please tell us something about reserves and ore body of Weilasituo lithium-tin mine.

Mr. Wang: The lithium-tin polymetallic mine in Weilasituo mining area, Hexigten Banner, Inner Mongolia Autonomous Region is a large-scaled lithium-tin polymetallic deposit that was discovered and explored during 2013 and 2017. The total ore reserves are 34.75 million tons, including 6.8 million tons of tin ore and 27.8 million tons of lithium ore, and the total metal reserves include 58,000 tons of tin, 357,000 tons of lithium oxide, 50,000 tons of zinc and 9,000 tons of tungsten trioxide. In particular, tin ore and lithium ore are of massive scale. The average grade of the deposit is 1.3% lithium oxide, 0.85% tin, 1% zinc, 0.2% tungsten trioxide. The exploration report passed the review of Mineral Reserves Accreditation Center of Inner Mongolia Autonomous Region and filing procedure was put to an end. We are applying for designation of mining area at present. The mine of large scale, high grade, many valuable elements and simple beneficiation process is a rare high-quality deposit.

Asian Metal: What are your expectations for the output of tin concentrate and other mineral resources after commercial production of this mine?

Mr. Wang: Based on comprehensive analysis on mineral reserves of the mine, we plan to construct a green environment-friendly mine with an annual ore beneficiation capacity of 2.05 million tons, including 400,000 tons of tin ore and 1.65 million tons of lithium ore. The products will be tin concentrate, lithium concentrate, tungsten concentrate, zinc concentrate and others. After reaching the designed annual production capacity, we will produce about 7,000 tons of tin concentrate 60%min, about 550,000 tons of lithium concentrate 3.12%min, about 4,000 tons of zinc concentrate 50%min and about 560t of tungsten concentrate 65%min on average per annum.

Asian Metal: May I know the progress of the large-scaled Weilasituo tin mine?

Mr. Wang: We originally planned to put the mine into commercial production in the second half of 2020, but we have to put off the plan as our "exploration to mining" application has not been approved yet. Presently, the application is at a standstill due to two issues, namely additional minerals and mining right transfer payment. The first issue is the difficulties in adding minerals. We obtained the previous mining right for silver polymetallic ore based on first-to-file principle, but we need to apply for additional minerals as our new deposit mainly consists of lithium-tin ore. However, according to the "notice about issuing resources prospecting registration administration provisions and mineral resources mining registration administration provisions" released by Natural Resources Department of Inner Mongolia Autonomous Region, mining rights that are obtained in terms of first-to-file principle or agreement-based transfer are not allowed to change (including add) minerals. Therefore, the application cannot be carried forward. We are now active in communication. The second issue is about the mining right transfer payment. The "interim administration procedures for mining right transfer payment income" has been a hot topic in the industry since its release. The implementation of the procedures especially makes great impacts on the mining industry which is experiencing a low ebb. If calculated on the basis of current standard price, the payment of our "exploration to mining" application is RMB1.4 billion (USD0.20 billion). We are required to prepay 20%, namely RMB280 million (USD39.63 million), which is beyond our affordability. If calculated on the basis of minerals, we are required to prepay RMB220 million (USD31.14 million) out of RMB1.1 billion (USD0.16 billion) for 100,000 tons of paragenetic mineral rubidium oxide in lepidolite. However, lepidolite-type lithium-rubidium ore is only calculated based on the grade of lithium oxide during production and trading, without considering rubidium oxide.

Asian Metal: Regarding the abovementioned two issues, are there any effective solutions now?

Mr. Wang: Restrained by existing policies and related documents, our "exploration to mining" application cannot be carried forward, which has direct impacts on anticipated commercial production of the mine. At the beginning of commercial production of Weilasituo zinc-copper polymetallic mine, we handled 364,000 tons of ore in 2010, with the average zinc grade of 4.28%, copper grade of 0.97% and silver grade of 72g/t, and recorded sales revenue of 321 million (USD46.12 million), taxes of 116 million (USD16.67 million) and net profit of 148 million (USD21.26). In view of current situation, we would suffer a loss of about RMB20 million (USD2.87 million) in 2020. We are in positive communication with relevant authorities at present, hoping to get approvals as soon as possible to give a full play to high-quality resource and put the mine into commercial production at the earliest to increase supply in Chinese tin industry chain. We hope relevant authorities and experts can give guidance and assistance after learning actual situation of mining companies to pull us through as early as possible. Then we can make contributions to the society. Commercial production of the mine will replenish raw material supply of Chinese tin smelters and relieve tin raw material supply shortage to some extent.

Asian Metal: If Weilasituo mine goes into operation as scheduled, will it exert influences on Chinese tin smelting market pattern?

Mr. Wang: After Weilasituo mine goes into operation, we will build a tin dressing plant with a daily handling capacity of 1,200 tons and an annual handling capacity of 400,000 tons of tin ore. The monthly output of tin concentrate 60%min would be around 400 metal tons, which is enough for a tin smelter with an annual production capacity of 5,000 tons. Building a dressing plant next to raw material production place is one of investment and planning ways. Enterprises with clear goals have contacted us, hoping to construct tin smelters consuming tin concentrate from our mine. This will break the monopoly of one smelter in North China and attract more tin smelting companies to set up plants in North China, enabling Inner Mongolia to be one tin smelting concentration areas in addition to Yunnan and Jiangxi and marking a significant change in Chinese tin smelting market pattern.

Asian Metal: Tin prices have been going up since May due to tight raw material supply. Please let us know you opinions about tin ore market in 2020 and market trend in the second half of the year.

Mr. Wang: Dragged by COVID-19, Chinese mines didn't record a stable output in Q1 and the low operating rate of overseas mines resulted in continuously low import volume of tin concentrate, which intensified the supply shortage in Chinese market. Currently, tin concentrate supply is extremely low and decreases by about 30% compared to the same period of last year. Market dynamic leads to tin concentrate price rise and decreasing treatment charges. Even so, smelters have to purchase raw material to keep production stability, resulting in a buyers' market. It is expected that tin concentrate market would continue to see tight supply in the second half of this year. In terms of domestic market, no tin mine will increase production and most mines will keep output at the current level in the second half of the year. In terms of imported tin concentrate, the supply won't rise notably in short term as the output of Myanmar, the major importer, declines sharply due to COVID-19, resource depletion and the upcoming rainy season. It is expected that treatment charges of tin concentrate would continue standing low in China and tin concentrate prices would hover at high levels and might hit a new high in the second half of the year.

Asian Metal: Finally, what are your anticipations of the development of tin concentrate and tin industry chain?

Mr. Wang: As there is poor communication between domestic tin concentrate producers and overseas tin concentrate producers for the time being, we hope to learn from each other, have discussions, seek cooperation and reach win-win results in the future. The upstream and downstream collaboration of tin industry chain can promote regional flow of resources and take advantage of resources to the greatest extent to serve the society. The integration of research, education and production and strong cooperation of all sectors of the society will bring a brighter future to Chinese tin industry.

Asian Metal: Thanks again for accepting our interview. We hope that relevant authorities and individuals can pay attention and attach importance to Weilasituo's issues and grant approvals at an early date. Wish you the earliest commercial production!

Mr. Wang: Thank you.