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｜Summary of past inquiries
Q: What is the market situation this year? What’s the plan for the beginning of this year?
A: From the perspective of domestic iron ore supply, the number of mines in production is decreasing due to the continuous tightening of national policies in land, safety and environmental protection, and it is difficult for the major foreign producers to achieve a significant increase in production levels either. Therefore iron ore supply and demand market is expected to maintain a tight and balanced pattern. This year, the Company plans to produce 1,000 kilotons of iron concentrate, stabilize the production cost of iron ore business, and promote the construction of the Shangma Mine project. The company also has high-purity iron business accounting for more than 50% of the market share, and plans to produce 900 kilotons in 2021, actively respond to the suggestions of the 14th Five Year Plan by providing high-quality raw materials for the large-scale wind turbines in China. The gold project in Australia will continue to explore increase resource and reserves, complete the feasibility study and start construction soon.
Q: Would you please introduce the cost composition of high purity iron? Can the rise in sales prices offset the rise in raw material prices?
A: The main raw materials of high-purity iron are iron ore powder and coke. The increase of the main raw materials price will be transmitted to the sales end, resulting in the increase of the sales price of high-purity iron. On the one hand, through capacity expansion, Hanking increases scale effect. On the other hand, through technological transformation it improves production efficiency to hedge the impact of rising production costs per ton.
Hanking has the iron ore business and the downstream high-purity iron business, so it can earn profits from the upward price of upstream iron concentrate. In addition, as the price rise is transmitted to the downstream, on the premise of proper cost control, it also can obtain the profit from the upward price of high-purity iron.
Q: Can technological transformation reduce the use of iron ore fines and coke? Will coke be purchased at a better price than the market price?
A: Technological transformation can not significantly reduce the use of iron ore fines and coke. However, the company reduces other costs through scale effect and technological transformation, such as electricity and depreciation, and controls costs through reasonable control of procurement. On the other hand, the cost increase will also be transmitted to the downstream through sales, making the gross profit margin of the company's high-purity iron relatively stable.
Q: Will the company consider repurchasing shares? The current share price is lower than the previous issue price 1.6HKD and the current business situation is much better than before, isn’t it? If the dividends were used to buy back the shares, the shares will certainly soar and the shareholders will make a lot of money.
A: The company hopes to achieve development with shareholders together through dividends, and will buy back shares at the right time. For future information, please pay attention to the company announcement.
Q: Does the company produce ductile casting iron with all iron ore raw materials coming from its own mines, or purchased from outside? If there is outsourcing, what is the approximate percentage?
A: Most of the iron ore raw materials of ductile casting iron produced by our company come from MaoGong Mine located in AnBen metallogenic belt. Its raw materials contain low content of sulfur, phosphorus and titanium etc., so our product has the advantages of high tensile strength and strong corrosion resistance, and ensures the long-term stability of product parameters and quality. Partial outsourcing varies according to the monthly production plan, is about 30%.
Q: Does the current tension between China and Australia affect the acquisition of gold mine production license? Will production start on schedule in 2022?
A: In fact, our Australian team works normally and has not been affected. We are now in the final stage of the pre-feasibility study of PGO project. After the pre-feasibility study report comes out, we will announce the exact timetable. Please keep an eye on the company announcement.
Q: Is it true that the pig iron price recently quoted by the company is 5200 yuan, while the cost last year was about 2500 yuan? According to Direct Reduced Iron website, pig iron's quotation in 2020 is about 3300-3500 yuan on average, but the company's 2020 Annual Report says it is only 3000 yuan. Is it because of the tax rate? Or was it pushed down by customers? Can recent pig iron really sell for 5200 yuan?
A: The 3000 yuan per ton in the company's statement is the price excluding tax, and the converted price including tax is about 3391 yuan per ton. In addition, this is the average selling price, partly including freight.
At present, the factory price has reached more than 5100 yuan, but the average price is not that high. The prices are different due to different quality for each customer.
Q: Does the company sell iron ore and pig iron at the spot price, or have a contract signed already to lock the price?
A: Our iron ore is priced at the market spot price.
Q: Once the company receives an order, how long will it take for the sales to be recorded? A month?
A: Pig iron is also contracted at the market price with a 15-30 days settlement cycle: prepayment - production - supply - final settlement. Payment shall be made and recorded within 15 days after the arrival of the production and the invoice.
Q: Has the company's output of iron ore concentrate in this half year decreased significantly as expected in the annual report?
A: Relying on its own high-quality resources, Hanking has successfully transformed into a producer of new energy materials. The company's iron ore business is located in Anshan-Benxi metallogenic belt. Maogong Mine has been mined for 30 years, and Hanking's strategy is always exploring while mining, constantly look for ore from the periphery of its own mining area to obtain high-quality resources at the lowest cost. In the past few years, Hanking has been exploring the surrounding areas and achieved encouraging results. However, as the state further strengthens the management of mineral resources, it takes a longer process for resources from being explored to being added to the mining license to be mined. Therefore, Hanking will gradually add new exploration resources to its production plan. In 2021, the output of iron ore concentrate will decrease. However, with the commissioning of Shangma Mine and the gradual inclusion of Maogong Mine's new resources in the mining plan, the production capacity of iron ore concentrate will gradually rise.
Q: How will such iron ore shortage be resolved?
A: The company will outsource for the insufficient iron concentrate powder and has already determined the suppliers at the beginning of the year. As iron ore and high-purity iron in Hanking are business units with independent accounting and assessment, iron concentrate powder was priced according to the market price before and it will go on in the future, because outsourcing has no impact on pig iron production and cost.
Q: Will it lead to the reduction of high-purity iron production?
A: As mentioned above, there will be no impact on the production and cost control of high-purity iron.
Q: Rustlers Roost has 1.33 million ton of gold mine at a grade of only 0.84 g / ton. How much will it cost to mine and will it be profitable?
A: The cost is not only related to grade, but also related to stripping ratio and other factors. The specific data will be announced after the feasibility study report is issued. According to the current preliminary study, the mine is quite profitable.
Q: How about the production of Benxi Yuqilin recently acquired by the company?
A: Yuqilin has been put into production after the acquisition, and its production and operation have been in line with previous expectations.
Q: Based on 1100 yuan / ton of iron ore and 4000 yuan / ton of ductile casting iron, what is the expected profit in 2021?
A: The company's iron ore concentrate output will decline in 2021. When the incremental resources of Maogong Mine are extended to the scope of mining rights, and when Shangma Mine starts production, the output will rise.
Due to the acquisition of new production capacity, the output of high-purity casting iron will be increased in 2021.
The gold mine in Australia is expected to start construction in 2021, and will be a source of profit growth for the company.
Q: What is your forecast for the iron ore trend this year?
A: Driven by domestic internal circulation together with the gradual recovery of foreign economy, the demand for iron ore will be stimulated. However, in the short term, there is no significant increase in supply, especially due to environmental protection, exploration and continuous reduction of capital investment in the past few years. We believe that the iron ore price in the medium term will maintain a tight balance between supply and demand.