20 years of restarting life

Chapter 3879 The Dilemma of Price Inversion
"Let's talk about Luanchuan Molybdenum Industry."

Having been seen through, Zhao Chang'an proactively changed the subject and asked with concern: "What are the basic conditions of this company, such as the price of molybdenum concentrate, their costs, output, inventory, and the situation of high-value associated tailings such as scheelite and gold?"

"Taking molybdenum concentrate as an example, the current price of national standard grade 45%-55% molybdenum concentrate fluctuates between 500 and 550 yuan per ton-degree. This price has been hovering at this level for almost a year, and there are still no signs of recovery. However, it is much better than the exaggeratedly low price of 400 yuan per ton-degree at the beginning of last year."

Wen Ye also put away the disdainful smirk and began to talk seriously: "Actually, before we went to inspect at the end of last year, the group applied to the city many times, requesting a temporary halt to production, instead of having the workers divided into two shifts, working one day and resting one day. Because of the cost of such shifts, the cost of one grade was actually driven up to 700 yuan per ton."

"In fact, a large number of molybdenum mines around the world have been shut down in the past two years. For example, the world's largest molybdenum mine, the Claymax molybdenum mine, has been shut down for seven years. Although several major molybdenum mines in China have not been shut down, their economic benefits are very poor, and they can only maintain operations at a loss."

"The reason for this is that these molybdenum mines in China, including Luanchuan Molybdenum, are all state-owned enterprises. Their economic behavior is not only responsible to the enterprise itself, but also to society. After deducting various taxes and fees, the pure cost of a grade of molybdenum concentrate is less than 400 yuan per ton. If the enterprise stops production without authorization, this 300 yuan per ton tax difference cannot be generated, which can easily lead to a chain of problems."

"The reason why some molybdenum mines are still operating overseas is related to the local environment. With the use of large machinery and more convenient mining areas, the mining cost can be reduced to 350 yuan/ton-degree. Local authorities often hold shares in these mines, resulting in lower taxes and surcharges, sometimes even below 100 yuan/ton-degree. Even if they sell at 500 to 550 yuan/ton-degree, they still maintain a good profit, and they can also use this low price to crush other molybdenum mining companies."

"Given Luanchuan Molybdenum's current industrial and technological capabilities, even with numerous policy and tax reductions, they still cannot achieve a price range of 500. If all the mines were operating at full capacity, the average price could barely reach 600. Right now, they are losing money while trying to promote their products; the more they produce, the more money they lose."

Wen Ye meant that if the Molybdenum Group were to stop production now, although it would still suffer continuous losses, the upper limit would be limited.

By doing so, businesses can gain more time to survive and wait for the spring, which still shows no signs of recovery. This is clearly a correct strategy in terms of business behavior.

However, once it ceases production, it will bring a series of chain problems to the outside world.

Worker wages, third-party cooperative services, water resources, and electricity and gas supply all depend on the upstream supply chain of the molybdenum group.

Everything will be greatly affected.

The ripple effects are far-reaching, and the fact that these thousands of workers are not even receiving their wages raises serious questions about how they and their families will make a living.

The molybdenum company's proposal is tantamount to externalizing the risk.

Although several molybdenum mines have started production, these funds are still uncollected and unrecoverable. However, we are not afraid to settle accounts.

For every ton of molybdenum ore mined by the molybdenum company, after refining and grinding it into molybdenum concentrate powder, the company incurs accounts receivable for each ton of ore, including worker wages, third-party cooperation fees, and other expenses.

With such a large conglomerate and a world-class molybdenum mine right here, no one is afraid that these accounts will be wiped out.

When YiNanjing Molybdenum Group, Luoyi Asset Management Bureau, and relevant townships and counties in Luanchuan signed the equity transfer and distribution agreement, they clearly stated that their willingness to sell equity at such a low price and assist in negotiating bank loans stemmed from YiNanjing's international vision and responsible attitude towards local economic development. They also stipulated that after the joint venture was established, the annual mining output of the Molybdenum Group should not be lower than the previous year.

This requirement is actually quite demanding. Currently, international molybdenum prices remain low. Any rational investor who acquires a controlling stake in a molybdenum company would definitely undertake a series of corporate restructurings, which could take one or two years. It would be normal for them to wait until the price of molybdenum concentrate rises above the profit line before they would officially organize production.

This is also the fundamental reason why, for the past five or six years, the Molybdenum Group has been trying to find partners, but no capital has been willing to participate. Investors are willing to invest because they believe they can make a profit, rather than risk getting themselves into a deep abyss if they are not careful.

Zhao Chang'an initially decided to invest in the molybdenum company at Gu Dacong's invitation. Both Tang Shuang and Wen Ye expressed their incomprehension and opposition, because in their view, this was tantamount to creating a problem for themselves.

However, under Zhao Chang'an's insistence, they had no choice but to agree with reservations.

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Moreover, the reasoning behind the molybdenum group's default is correct. Now that OneNan has taken over the molybdenum group, after a rigorous review by the financial staff of the dispatched working group, they have basically accepted all the accounts receivable.

So the IOUs they hold in their hands mean that they are about to be honored.

Zhao Chang'an nodded and listened to Wen Ye continue.

"After the mined ore undergoes initial processing, refining, grinding, or smelting, it has long filled the tailings ponds of several mining areas. This includes a large amount of high-value slag such as molybdenum-associated scheelite and gold tailings that have accumulated over the years, which also fill the tailings ponds. We are reluctant to throw it away, but keeping it takes up space and does not generate any benefits. The company has previously cooperated with mining experts in Russia to carry out tailings storage, but building a new smelting and processing plant would require tens of millions of yuan in funding."

"Right now, we lose money every day we produce. Thanks to our taking over, the city finally agreed to let us have a holiday during the Spring Festival. Gu Dacong and his team got some money from the bank and paid the workers a month's wages. The specific resumption of work will have to wait until we sign the contract and the company is incorporated into OneNano. At that time, it will be our business."

"How many tons of molybdenum concentrate, molybdenum metal, and ferromolybdenum ore are they currently stockpiling?"

Zhao Chang'an pressed for an answer.

Wen Ye knew that Zhao Chang'an didn't care about the specific types of inventory, but rather the value of the goods. He estimated, "As for the total inventory, based on the current market price, it is estimated to be 6 million."

The figure Wen Ye reported was slightly more than the four or five hundred million yuan that Zhao Chang'an had estimated when he glanced at the data compiled by Luanchuan Molybdenum during his previous inspection.

At this price level, once the molybdenum industry recovers in the future, this large inventory will bring the company sufficient cash flow and high returns.

This was also a key reason why Zhao Chang'an decided to enter the market after much deliberation when Gu Dacong asked him if he intended to take over and control Luanchuan Molybdenum before the Lunar New Year. He wanted to use these world-class molybdenum mines as a starting point to build a world-class mining giant.