Journey 1995:Non-Stop

Chapter 406 Mutually Beneficial Investment
What Yan Hui said to Wang Yongjun might lead Wang Yongjun to misunderstand. Wang Yongjun might think that the successful risk control was related to Sun Lei.

If Wang Yongjun interprets it this way, Yan Hui doesn't care, and that's not a bad thing.

We often say that leaders shouldn't speak too clearly, and this is exactly the kind of situation we're referring to.

Some foolish bosses don't even explain the tasks clearly when assigning them; they're just plain stupid.

In the following days, Yan Hui met with several tile factory clients and also visited a supplier's mine.

Tile production relies directly on mineral raw materials, with kaolin being the most important. Especially now that Yan Hui aims for a high-end market, kaolin is indispensable. It effectively enhances the whiteness and gloss of tiles, and also possesses excellent plasticity and fire resistance.

The main component of kaolin is AlSiO(OH). At high temperatures, the AlO and SiO in the dehydrated metakaolin recrystallize to form AlSiO, which is also called mullite crystal. The reaction process is very simple; just control the temperature and ratio.

To get a mine sorted out, the core issue is obtaining the mining license, and then handling the environmental impact assessment, safety assessment, and other procedures, which is similar to that of a chemical plant.

The extracted kaolin is typically crushed, ground, separated by water flow, and purified by magnetic separation to remove iron. The final product is high-purity kaolin, but the purity at this stage is still insufficient. Generally, it needs to undergo reduction bleaching, sedimentation concentration, vacuum filtration, and kiln drying to meet the standards used in tile factories.

With funds at Yan Hui's level, he would naturally be interested in the word "mining".

Not all mines are high-value deposits like gold or iron ore. Some mines, such as marble, kaolin, and quartz, are not as expensive as one might imagine. Some mines can obtain a mining license for just a few million or a little over ten million yuan. The kaolin mine that Yan Hui visited is considered a mid-to-high-end mine. From participating in the bidding for the mining license to the subsequent equipment investment, it would cost approximately 4000 million yuan.

Yan Hui had heard that the profit margins for kaolin mines were relatively thin, but even so, it was still a profitable industry, as it was the most primitive mining industry and possessed a certain degree of pricing power. Yan Hui had high requirements for kaolin, and this mine could meet his needs. However, the high-gradient magnetic separator here was somewhat outdated, dating back to the 90s. He came this time to discuss equipment upgrades with the mine owner, with whom he had been cooperating for several months.

"Mr. Yan, your requirements are a bit too high. Our magnetic separation equipment is a bit outdated, but we can definitely control the iron content." The speaker was Mr. Yang, the mine owner, who was the actual controller and major shareholder of the company, with a net worth of at least 30 to 40 million.

"How much does a decent piece of equipment cost these days? How many do we need?" Yan Hui asked.

"It'll be around 150 million, and we need at least two units. Spending 300 million here is really unnecessary and doesn't contribute to product improvement," Mr. Yang still felt the pinch. That's 300 million!
“Here’s what I’m thinking: we don’t care about the other products, but our company uses kaolin, and we want it to have a lower iron content. So, we can pay for the high-gradient magnetic separator on one of the production lines; we’ll cover the 150 million yuan,” Yan Hui suggested.

"Huh?" General Manager Yang didn't expect Yan Hui to think that way. "What good does this do for you? You're in the tile business, do you really need coating-grade kaolin for papermaking?"

The price of kaolin used in ordinary ceramic tiles is about 1700 yuan per ton. "Hmm?" Yan Hui was a little puzzled and changed the subject, "What is coating-grade kaolin?"

"The kaolin used for ceramic tiles only needs to reach a whiteness of 90%. It can be further ground and bleached to achieve a fineness of less than two micrometers. This would cost at least five thousand yuan per ton. That's too expensive, and we mainly rely on imports. I've heard that some factories in China can achieve a fineness of four or five micrometers, which is also used in papermaking. We don't have that technology, and I don't think it's necessary," General Manager Yang subtly reminded him.

He didn't quite understand why Yan Hui always had such high requirements for quality and didn't pursue price as much.

"So, this field is still untapped in China?" Yan Hui suddenly saw a business opportunity.

"It's not a problem with the equipment, it's a problem with the raw materials. If you ever get into mining, you'll understand. Mechanical screening and chemical purification can never compete with natural resources." Mr. Yang is also an educated man. "The river sand in our river may have 95% silica content, but that's worthless. However, if the purity reaches three nines, it can be used to make circuits; if it's five nines, it can be used to make chips. The same goes for kaolin. I've heard that the best high-grade kaolin is from the United States."

"So the quality of domestic specimens is indeed not good enough," Yan Hui sighed. "As for exploration, that's none of our business."

"Yes, that's why I said our magnetic separator is sufficient," General Manager Yang explained.

“Mr. Yang, this is what I’m thinking. You’ll need to upgrade your equipment sooner or later, but we want higher quality. A lower purity isn’t a big deal, but a lower iron content will definitely improve the effect on our tiles. How about this: we’re willing to invest in a 150 million yuan high-gradient magnetic separator. You can offset this cost by delivering goods over the next year, gradually, without interest.” Yan Hui’s proposal was a win-win situation for both parties. For the mining company, delivering an extra tens of thousands of yuan worth of goods each month is definitely better than spending money; it’s essentially an interest-free loan.

There's no need for coating-grade kaolin, but there are different grades of kaolin used for ceramic tiles, so why not use the best?

For Yan Hui, such a gesture of goodwill would also benefit future cooperation. As for the annual interest of 150 million yuan, that amount was insignificant. It would guarantee priority supply of kaolin for the coming year, strengthen the relationship, and be a sure-fire deal.

"Mr. Yan really knows how to do business. How about this, I'll discuss it with the other two major shareholders, and I think there shouldn't be any major problems." Mr. Yang was quite interested.

"Yes, it's a pleasure doing business with you."

Yan Hui's path to success may differ from others. Most people, including Director Xiang of the plywood factory with which Yan Hui has consistently collaborated, have focused on minimizing costs from the very beginning. Yan Hui initially followed this path as well; precise cost calculation was his forte. However, after his success in the chemical industry, Yan Hui realized that technological leadership is the key to success.

Technological leadership leads to high profits, which in turn fuels research and development, maintaining technological leadership. Therefore, high profits do not necessarily equate to technological leadership, but technological leadership always guarantees high profits.

(End of this chapter)