In the first half of 2024, as the global economic recovery continues and commodities enter an upward cycle, the once disgraced "mine bosses" will raise their eyebrows again. But in stark contrast to many flamboyant New Money, the "mine boss" is usually inconspicuous and featureless in appearance, but behind the scenes, he is silently counting money, like a "charter man"!
There is such a mining giant, the largest actual shareholder does not have any position in the company, but "makes a fortune quietly" and enjoys the dividends of the company's performance growth. The company's previous "precise stepping point" is as accurate as an unpredictable prophet, and you have to admire the "viciousness" of its vision and the decisiveness of "making a move". This is the "debris flow" in the mining industry - China Molybdenum.
Behind the sixfold increase in net profit, the mysterious actual controller
According to the performance forecast for the first half of 2024 disclosed by CMOC on July 13, the company's net profit attributable to the parent company in the first half of the year is expected to be 5.189 billion yuan to 5.735 billion yuan, an increase of 638% to 716% year-on-year; The net profit excluding non-attributable to the parent company is expected to increase even higher, which is expected to be 5.375 billion yuan to 5.941 billion yuan, an increase of 2,343% to 2,600% year-on-year.
CMOC's net profit attributable to the parent company in the first quarter was 2.072 billion yuan, which shows that the net profit in the second quarter was as high as 3.117 billion yuan to 3.663 billion yuan. This figure is the second highest single-quarter profit since listing. The announcement said that the reason for the sharp year-on-year increase in performance is that "the production and sales of copper and cobalt, the main products of CMOC, have increased significantly year-on-year, and at the same time, the copper market price will be strong in 2024, which will bring about an increase in performance", which is in line with the sharp rise in copper prices in the first half of the year!
On July 22, Forbes China released the 2024 China Best CEOs list, and Sun Ruiwen, CEO of CMOC, became the only corporate leader in Henan Province to make the list.
Although the CEO is often more in the foreground, the actual controller of the company is Yu Yong, who holds about 25% of the shares through Hongshang Industrial Holdings, and what is even more "strange" is that at the age of 63, he is low-key, has not held any position in CMOC, never attended any public events, and it is even difficult to find a credible photo on the Internet!
What's even more unexpected is that the second largest shareholder of the company is the famous CATL!
According to Kaiyuan Securities, in September 2022, Luoyang Guohong, the controlling shareholder of Luoyang Mining, the company's second largest shareholder, reached a cooperation agreement with Sichuan Times, a subsidiary of CATL, and Luoyang Guohong increased its capital in Sichuan Times with its equity in Luoyang Mining. After the completion of the capital increase, CATL indirectly holds 19.55% of the company's total share capital and becomes the company's second largest shareholder.
Image source: Kaiyuan Securities
Not only CATL has taken a stake in CMOC, but Yu Yong, the actual controller of CMOC, also has a deep relationship with CATL. According to relevant information, in 2015, Hongshang Group and CMB International Capital jointly participated in the private placement of CATL, and when it was listed in June 2018, Hongshang Group held a total of 3.21% of the shares through its wholly-owned subsidiary Tibet Hongshang, and was the seventh largest shareholder of CATL. To this day, Tibet Hongshang still holds about 1.11% of the outstanding shares of CATL, ranking eighth among the top ten outstanding shares!
Hongshang Capital is the eighth largest shareholder of CATL
Image source: Oriental Fortune Network
The relationship between Hongshang Group and CATL is not limited to cross-shareholding: the two sides have reached cooperation on the projects of ZEEKR Automobile and Xiaokang Life Insurance for many times. In particular, in 2021, he participated in the Pre-A round of financing of ZEEKR, which firmly bound the relationship between the two parties.
You must know that CATL is also a partner of ZEEKR, and ZEEKR CEO An Conghui also once said that money is not the most important thing, Geely has tens of billions of profits a year, and there is no shortage of money, and the reason why it promotes financing is to "form a closer relationship with some strategic investors". In other words, you must also be qualified to give money, if you have a talent in the circle of friends!
Image source: Kaiyuan Securities
With such a "four-sided attack", how much wealth has Yu Yong accumulated? This should be quite complicated, but according to Forbes, as of July 26 this year, Yu Yong's net worth was 10.8 billion US dollars, or about 78 billion yuan. And according to CMOC's current rate of making money, this data may continue to rise in the future!
Image source: Forbes
The name is "molybdenum industry", and the main business is not molybdenum
Although the name has the word "molybdenum" in it, and it did start with molybdenum at the beginning, after decades of ups and downs, CMOC still retains a considerable part of the molybdenum business while focusing more on "big metals" and "technology metals" to grasp the main theme of the new era.
As the saying goes, "plan before you act", CMOC has become a multinational and cross-industry metal giant, and is even known as "Mining Moutai", and the close cooperation with CATL shows the forward-looking nature of its industrial layout - from this point of view, its profit in the first half of the year increased sixfold, which is the fruit of a series of previous "strategies"!
Specifically, from the perspective of revenue, mineral trading has become the largest revenue producer. In 2023, the company's mineral trade business will contribute revenue of 168.078 billion yuan, a year-on-year increase of 14.10%, but mineral trade has a great feature: "profits are as thin as paper", although the revenue is high, but the contribution to profits is relatively limited, the company's "big profits" are mainly in the traditional mining industry!
According to the announcement, in 2023, the company's mineral trading business/copper and cobalt plate/niobium phosphorus plate/molybdenum and tungsten plate will contribute 20.55/124.02/15.42/3.751 billion yuan in gross profit respectively, and the corresponding gross profit margin will be 2.72%/44.29%/24.39%/43.56% respectively. Among them, the copper and cobalt business benefited from a sharp increase in sales volume after the resolution of the royalty problem, and the gross profit increased by 171.72% year-on-year, but the overall gross profit margin decreased by 2.53 percentage points year-on-year due to the sharp decline in cobalt prices and the fluctuation of high copper prices. It can be seen that sometimes the department with high revenue is not necessarily the department with high profit!
Image source: Kaiyuan Securities
The family is big and the business is big, and it all depends on "buying, buying, buying"
In the asset-heavy mining industry, "buying, buying, buying" is the only magic weapon to quickly do large-scale. In fact, buying a mine has something in common with "opening a blind box" - whether it is a low-level leak or a high-level pick-up, all of which test the vision of the acquirer. And the mergers and acquisitions of CMOC have been "stepping on a low point" almost every time!
In 2013, the company invested in the acquisition of the Northparkes copper-gold mine in Australia, starting the journey of overseas expansion. In 2014, the company carried out mixed ownership reform again, and the private capital Hongshang Group obtained control of the company.
From 2015 to 2023, the company continued to acquire overseas high-quality mine resources, including CIL phosphate mine and NML niobium mine in Brazil, TFM and KFM copper-cobalt mine in the Democratic Republic of Congo (DRC), etc. These mergers and acquisitions have put CMOC on the world stage!
It is worth mentioning that in November 2016 and April 2017, CMOC acquired 56% and 24% of the shares of TFM copper and cobalt in the Democratic Republic of the Congo (DRC) respectively, holding a total of 80% of the shares, and the mine is one of the world's largest reserves and highest-grade copper-cobalt mines, accounting for 14% of the world's cobalt production alone, making it the second largest cobalt mine in the world and one of the top ten copper mines in the world.
According to Everbright Securities, when CMOC became the owner of the mine, the copper price was at a relatively low level of US$4,900-6,200 per tonne. CMOC's acquisition of a 95% stake in KFM for US$550 million in December 2020 (with a strategic investment in early 2021 and a 23.75% stake) is another major step in the company's copper and cobalt layout.
Image source: Everbright Securities
According to the 2023 annual report, the company produced 419,500 tons of copper and 55,500 tons of cobalt, an increase of 51% and 174% year-on-year, respectively, and its copper output is close to the top ten in the world, while cobalt production surpasses Glencore to become the world's largest cobalt producer. According to a research report by Everbright Securities, copper metal output is expected to be 600,000 tons in 2025, an increase of 210,000 tons compared with 2023. Cobalt production will reach 67,000 tons, an increase of 11,000 tons compared to 2023.
In addition to copper and cobalt, the company's mergers and acquisitions in other minerals are basically low-point entry. For example, according to Everbright Securities, in October 2016, the company acquired the niobium phosphorus business in Brazil for US$1.5 billion, which was at the relative bottom of niobium phosphorus prices at that time. In 2022, the gross profit of the niobium and phosphorus sector will be 2.8 billion yuan, a year-on-year increase of 90%, mainly due to the concern of the fertilizer crisis caused by the Russia-Ukraine conflict and other reasons, resulting in a large increase in phosphorus prices.
At the same time, the company actively explores new business models, through the acquisition of IXM, the world's third largest metal trader, to achieve the extension of metal trading business types, and gradually establish the development model of "mining + trade". Headquartered in Geneva, Switzerland, the company is a well-known metals trader with a global network.
As for the above-mentioned investors' doubts about the "low gross profit margin" of the trading business, the company explained that it "hopes to reach out to downstream customers and increase its voice in the pricing of related varieties". In fact, this is the road of Glencore and Trafigura, the world's first and second largest metal traders, so that industry and trade resonate at the same frequency, producing the effect of "1+1>2".
The following chart shows the time point of CMOC's mergers and acquisitions in recent years. After reading the clothes with only capital letters, it is so accurate!
Image source: Kaiyuan Securities
What CMOC wants is not even a simple mining giant, but even the new energy industry, which wants to make a difference - the strategic investment introduced by KFM in early 2021 as mentioned above comes from the battery giant CATL!
Specifically, in 2021, CMOC transferred a 25% stake in the KFM project with the introduction of Brunp Times, a subsidiary of CATL, and currently CMOC and Brunp Times indirectly hold 71.25% and 23.75% of KFM's equity respectively. This not only alleviates the pressure of mergers and acquisitions for CMOC, but also strengthens the "moat" of CATL's upstream resources, which can be described as a win-win choice.
The cooperation between CMOC and CATL has not only shined in Congo, but also extended its tentacles to Bolivia in South America, ready to develop lithium resources there!
Relevant data show that Bolivia, Argentina and Chile have 65% of the world's lithium resources, with a total reserve of 51 million tons. It is known as the "lithium triangle" of South America, and even known as "lithium pec".
Due to the previous political situation and slow development, Bolivia was previously relatively quiet, but after continuous exploration, its latest lithium reserves rose to 23 million tons, more than a quarter of the world's proven lithium resources.
On January 20, 2023, Bolivia's National Lithium Company (YLB) signed a cooperation agreement with the CATL-Ningde Bangpu-CMOC Consortium (CBC), officially signing the pilot plant agreement on January 17 this year.
It is reported that CBC expects to build two lithium salt processing plants in Bolivia to extract lithium from the two salt lakes of Uyuni and Oruro in Bolivia. Meanwhile, last June, Bolivia President Luis Arce confirmed in his media the amount of $1.4 billion in the first phase of the investment. In the future, two more lithium extraction plants will be built, and the annual production capacity of lithium carbonate will reach 50,000 tons.
So far, CATL has joined hands with CMOC to realize the complete layout of new energy metals copper-cobalt-nickel-lithium. CMOC has grown from a single mining enterprise to an industrial giant spanning multiple fields through mergers and acquisitions and cooperation.
End
Behind the invincibility of cross-border mergers and acquisitions is not only the forward-looking prediction of the industry, but also a deep understanding of the capital chess game and the law of cycles. Once these two points are achieved, I believe that the road for Chinese enterprises to go overseas will be smoother and smoother in the future.