The recent performance report released by Kangding Jinxin Mining and Tourism Co., Ltd. (hereinafter referred to as Jinxin Mining) once again gave the market a glimpse of the performance flexibility of small mining enterprises. In the first half of 2020, the company achieved revenue of 34.7776 million yuan and net profit of 8.1286 million yuan, a year-on-year decline of more than 50%. At the end of 2020, the company's performance achieved a reversal, with annual revenue of 213 million yuan, an increase of 10.41% year-on-year, and net profit attributable to shareholders of listed companies of 79.4595 million yuan, an increase of 5.15% over the same period last year.
Although jinxin mining company has the word "tourism" in its full name, in fact, the main business of Jinxin mining is not related to tourism, and its main business is the mining, refining and sales of gold, and the main product is synthetic gold.
After years of fighting in the capital market, Jinxin Mining is still a small mining enterprise.
Jinxin Mining was listed on the New Third Board, and the company intends to take two gold exploration projects such as Kangding Gold Mine (Extension) in Kangding City and the demand for supplementary working capital to the A-share main board market, and the amount of funds to be raised exceeds 430 million yuan, which is equivalent to the total assets of the company in mid-2020.
At present, Jinxin Mining has five mines, all of which have a production scale of less than 60,000 tons per year, all of which are small mines. 2019 was the peak year of the company's production, with a production of only 600 kg of synthetic gold.
Compared with CICC Gold, Shandong Gold, Zijin Mining and other industry giants, Jinxin Mining has a small share of gold in China, and its performance is greatly affected by international gold price fluctuations. It is worth noting that the company's two core mines involving the natural heritage buffer protection area of the Sichuan giant panda habitat are currently in a state of suspension, and it is still unknown when it will be renewed. In addition, the company's gold mine is much higher than its peers' grade is also interesting.
<h4>A small mining enterprise with 100 people</h4>
According to the prospectus, there are as many as 9 controlling shareholders and actual controllers of Jinxin Mining, with a total of 56.1866 million shares, accounting for 46.57% of the total share capital before the issuance, and are the joint actual controllers.
To the left with many actual controllers, Jinxin Mining has only 100 employees, only 113 employees in 2019, and only 1 marketing, 2 procurement, 25 management personnel, and 65 production personnel in the first half of 2020.
In the first half of 2020, the company paid social insurance for only 66 employees, paid housing provident fund for 72 employees, and the proportion of uninsured people exceeded 40%.
(Pictured: Employee composition of Jinxin Mining)
Jinxin Mining said that the company is located in the more remote Ganzi Tibetan area concentrated in a contiguous poverty area, more employees come from rural areas and other places, so they choose to pay the new agricultural cooperative, pay themselves in other places or voluntarily give up paying social insurance or housing provident fund.
However, the 21st Century Business Herald reporter checked the judgment document network and found that in 2018, Jinxin Mining was sentenced to more than 800,000 yuan in work injury compensation because it did not sign a labor contract with former employee Li Jun and paid social insurance.
What is relatively rare is that as a mining company with 20 years of experience, during the reporting period, Jinxin Mining did not have any sales expenses and research and development expenses, and the company operated with the market, lacking product pricing power and technical research and development capabilities.
During the reporting period, Jinxin Mining's customers only had 3 customers, namely China Banknote Great Wall Precious Metals, Sichuan Tianze Precious Metals, and Shenzhen Emerald Gold. In the past two years, the company has only sold high-quality gold to two customers, China Banknote Great Wall Precious Metals and Shenzhen Emerald Gold.
From 2017 to the first half of 2020, the company's composite gold production did not increase significantly. However, thanks to the sharp rise in the price of gold in the past two years, the company's revenue has increased year by year.
Jinxin Mining said that at present, there is no difficulty in the company's gold sales, but it still faces market risks caused by adverse changes in the demand of major customers, the transaction price of the company's composite gold is closely related to the gold price, and the sales of gold by the composite gold production enterprises have no pricing power, and if the gold price fluctuates sharply in the future, it may adversely affect the company's operating performance.
Northeast Securities precious metal market analysis told the 21st Century Economic Herald reporter that last year's gold price stood at a high level, the market is facing correction pressure, the recent gold price has been more than 10% of the high point of correction, which will bring performance gains and losses to gold mining enterprises.
(Picture: gold price trend in the past two years)
However, compared with the volatility of the main business, the greater risk comes from the fact that Jinxin Mining, which is sprinting to the listing, may face the risk of no gold to be recovered, and the mining rights and prospecting rights related to the company's development fate have even been unable to renew.
According to the prospectus, Jinxin Mining currently has a total of 5 gold mining rights and 3 exploration rights. According to the relevant regulations, the holder of mining rights shall go through the renewal registration formalities with the registration management organ 30 days before the expiration of the validity period of the mining license or prospecting license.
The prospectus discloses that the mining rights of Zhulin Gold Mine and Sanyuandong Gold Mine, which account for nearly 40% of Jinxin Mining's production capacity, have expired, but because the mining area involves a buffer zone protected by the "Sichuan Giant Panda Habitat World Natural Heritage Protection Plan (2008)". The procedures for expanding the capacity of new mining cannot be renewed until the Sichuan Provincial Forestry and Grassland Bureau has completed the revision of the natural heritage protection plan of the Sichuan giant panda habitat.
In December 2020, the Sichuan Department of Natural Resources returned the company's application documents for the renewal of the mining license on the grounds that the Zhulin Gold Mine involved the Giant Panda World Heritage Buffer Zone and the Sanyuandong Gold Mine involved the World Heritage Peripheral Protection Area and did not provide clear opinions from the relevant departments.
Due to the uncertainty of the renewal time of the company's mining license, Zhulin Gold Mine and Sanyuandong Gold Mine have suspended mining since January 2021. Not only that, Jinxin Mining's other Two Mining License Expansion Continuation Procedures for Jinping Gold Mine and San diao Gold Mine are also in the processing stage, and there are also uncertainties.
If the company is unable to obtain the extension approval of the relevant mining right after the expiration of the mining right and prospecting right permit period, or after the proven reserves in a certain area, it is unable to obtain the mining right for mineral resources in the exploration operation area, which will adversely affect the future continuing operation.
In the prospectus, Jinxin Mining claimed that the company had fulfilled the procedures in accordance with relevant laws and regulations, the former Sichuan Provincial World Heritage Authority had reviewed and agreed to build the Bamboo Forest Gold Mine and the Sanyuandong Gold Mine, and the Ganzi Prefecture Forestry and Grassland Bureau and the Kangding Municipal Forestry and Grassland Bureau had issued relevant explanations and would apply for the demarcation of the two mining areas out of the Sichuan Giant Panda Habitat World Natural Heritage Buffer Zone, believing that the above-mentioned mining area involving the scope of the Sichuan Giant Panda Habitat Natural Heritage Buffer Zone would not become a substantial obstacle to applying for a long-term mining warrant after the expansion.
In this regard, the 21st Century Business Herald reporter repeatedly verified the progress with Jinxin Mining, but the company's telephone could not get in touch.
<h4>Oddly high gold taste</h4>
Looking at the operation of Jinxin Mining, the company's biggest business highlight is to press the gold ore grade of the head gold mining enterprise. Gold ore grade is a key factor affecting the cost unit price and gross margin of composite gold products. In general, the higher the gold ore grade, the lower the unit cost of the composite gold product and the higher the gross margin.
Jinxin Mining's prospectus revealed that at present, the total amount of gold ore held in the main mining areas under the jurisdiction of the company has been reviewed and filed by the natural resource management department is 2.203 million tons, and the amount of gold metal is about 9.55 tons. During the reporting period, the average grade of the company's selected ore was 7.83 g/t, 7.85 g/t, 7.12 g/t, 5.20 g/t, and the ore grade and beneficiation recovery rate of the mines owned by the company were relatively high, and the comprehensive recovery rate reached about 95%.
Jinxin Mining's top five gold ore grades completely crush comparable listed companies in the same industry.
According to public information, the average grade of selected ore from Western Gold from 2011 to the first half of 2014 was between 3.95-4.39 g/t. The raw ore grades of Shandong Gold and Jinxin Mining in the same reporting period were only 1.81 g/t, 1.59 g/t, 1.53 g/t and 1.60 g/t, respectively. The average grade of recoverable reserves of Zijin Mining's own mines as of 2019 is around 2.75 g/t.
Jinxin Mining's gold ore grade is almost twice to five times that of listed companies in the same industry, and small mining enterprises sit on high-grade gold mines, which also makes Jinxin Mining's gross profit margin higher than the industry average all year round in the reporting period.
According to China's mining enterprise licensing system, mining exploration and mining must be produced in accordance with the production capacity issued by the mining certificate, and must not be higher than the mining scale issued by the regulatory authorities. In recent years, the utilization rate of Mining Capacity of Jinxin Mining has basically reached 100%, that is, the company's reporting period has been producing at the upper limit of 77,500 tons of production capacity specified in the mining certificate all year round.
The company said that during the reporting period, the company strictly complied with the laws and regulations related to mining rights, and there was no situation of production exceeding the capacity of the certificate, nor was there any situation of mining beyond the scope of the mining area or the use of destructive mining methods to cause damage to mineral resources.
However, the 21st Century Business Herald reporter checked the output of its gold products and the processing capacity of tailings and found that there were large differences in the production data.
From 2018 to 2020, the raw ore mining output of Jinxin Mining was 77242.84 tons, 77488.21 tons and 86545.41 tons, and the capacity utilization rate was 99.67%, 99.98% and 82.03% respectively.
(Pictured: Jinxin Mining capacity is operating at full capacity)
However, compared with the data in 2018 and 2019, it is not difficult to find that the production capacity of Jinxin Mining in two years is almost the same, the grade of selected ore is about 7 grams / ton, the comprehensive recovery rate of mineral processing is about 95%, and the production and sales of gold products in the two years are quite different, in 2018, the company sold 562.90 kg of synthetic gold, and in 2019 it was 602.80 kg.
In 2018, the company's discharge of solid waste from mineral processing was 100,000 tons, and in 2019, the emission was 77,739.96 tons, a difference of more than 20,000 tons in two years, and the number of tailings emission tons after refining synthetic gold was significantly higher than the company's ore mining.
Jinxin Mining did not explain this difference, and whether there is over-exploitation may only be a clear answer for the company.
<h4>The accident caused many casualties</h4>
In the prospectus, Jinxin Mining disclosed that in March 2020, Lihong Engineering, the contractor of the company's Sanyuandong Gold Mine, caused a safety production accident with 2 deaths due to the illegal operation of its workers. Because the company did not timely discover the safety production problems of Lihong Project and supervise rectification, in May 2020, it was issued an "Administrative Punishment Decision Letter" by the Kangding Emergency Management Bureau and fined 60,000 yuan.
The use of explosives, detonators and other civilian explosives and dangerous chemicals such as sodium cyanide in the gold mining process is a high incidence of safety accidents. In the process of exploration, mineral processing and refining, there is also the possibility of accidents, mechanical failures or damage.
As a small mining enterprise, Jinxin Mining and Dressing Project is outsourced, and the labor-intensive work of well and lane development and ore mining and dressing is outsourced to contractors, and the production safety and work quality of these contractors are difficult to guarantee.
The investigation by the 21st Century Business Herald reporter found that there have been many safety accidents in the history of Jinxin Mining, resulting in many casualties.
(Pictured: In 2015, Jinxin Mining and the insurance company confronted the court)
According to the judgment document network, on November 25, 2013, the roof of Jinxin Mining Shaft No. 20 fell off, causing a landslide, liu Jucai and Meng Tianlu two migrant workers were buried to death, and the Kangding County Public Security Bureau identified it as a safety production accident after investigation. After the accident, Jinxin Mining said that it had compensated Liu Jucai's family for 780,000 yuan and Meng Tianlu's family for 890,000 yuan, and because of this accident compensation issue, it went to court with Yongcheng Property insurance Company in 2015.
The Public Securities News reported that in 2020, a whistleblower posted online that Jinxin Mining had a safety production liability accident that caused the death of one person in 2005, and said that "the accident unit has not paid a penny of personal injury compensation so far".
According to the informant, the above-mentioned accident was recognized by the Ganzi Prefecture Safety Supervision Bureau as a safety production liability accident in accordance with the "Ganzi Supervisor Zi (2006) No. 16" document, that is, the "Reply of the Ganzi Prefecture Work Safety Supervision and Administration Bureau on the Investigation of the "2005.7.11" Accident".
In the feedback on the prospectus, the CSRC focused on safe production, and asked Jinxin Mining to explain whether the company had safety hazards, whether it would affect the production and operation of the issuer, and whether there were any violations of laws and regulations in terms of safe production. However, for the above accident, Jinxin Mining has never disclosed it.
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