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Dear Shareholders,
I present to our shareholders the annual results for the year ended 31 December 2018 of Add New Energy Investment Holdings Group Limited (the “Company”) and its subsidiaries (collectively, the “Group”).
BUSINESS REVIEW
The total comprehensive loss of the Group was approximately RMB102.4 million for the year ended 31 December 2018, representing a decrease of approximately RMB38 million or approximately 27% as compared to that of approximately RMB140.4 million for the year ended 31 December 2017. This is mainly due to: no comprehensive loss from discontinued operations of the Group in 2018, representing a decrease of approximately RMB54.4 million or 100% as compared to that of approximately RMB54.4 million for the year ended 31 December 2017, and the total comprehensive loss from continuing operations of the Group amounting to approximately RMB98.6 million for the year ended 31 December 2018, representing an increase of approximately RMB12.6 million or 14.7% as compared to that of approximately RMB86.0 million for the year ended 31 December 2017.
In order to improve the downward pressure on the sluggish economy, the PRC government has stabilised the economic growth in many aspects. The government has introduced some large scale infrastructure construction projects, and also promoted a steady increase in overall steel market demand, however, the prices of iron concentrate still did not meet the management’s expectations. The management still held a cautious attitude and decided to protect its own mine resources. To respond to the economic situation in 2018, the management mainly performed tasks in the following aspects:
| I. | Conducting processing and production based on newly-acquired mineral processing technique. |
| Shandong Ishine, a wholly-owned subsidiary of the Group, has developed a brand-new processing technique for non-magnetic minerals which could not be processed in the past, breaking the limits of non-magnetic mineral processing. In the first half of 2018, Yangzhuang Iron Mine completed the remodeling of its two processing lines with the new processing technique. Upon completion, it achieved a production capacity of 1 Mt and realized some economic benefit. | |
| II. | Acquiring global-leading solar thermal power technology with independent intellectual property rights – solar tower-free center concentrating power electricity generation technology and starting pilot test. |
| In the first half of 2018, the Group established a joint venture engaged in thermal technology industrialization. Through independent research and development and cooperation with major scientific research institutes, now it has mastered global-leading advanced solar thermal power technology with independent intellectual property rights – solar tower-free center concentrating power electricity generation technology and started the pilot test. It systematically rebuilds a set of advanced solar thermal power generation system with application of globally leading original inventions at every key points of such system. This technology is an innovative technology in the solar power electricity generation field without the use of tower and liquid medium (such as molten salt) as the heat transfer medium. Through the three stages of heat collection, heat exchange (heat storage) and power generation in the mirror field, the cost of integrated power generation is significantly reduced, and the power generation efficiency is greatly improved. The project has acquired empirical data through basic design and experiments on key technical areas conducted throughout the year, but its commercialization is subject to further technical verification. | |
| III. | Seizing opportunities from the increasing market demand for lithium carbonate and import and process spodumene with original production lines for better results performance. |
| With the rapid development of artificial intelligence and battery powered vehicles, lithium carbonate products have been in keen market demand. For the sake of long-term development, the Company has promptly recruited leading industry engineers and technicians and completed the remolding of old production lines in the shortest time possible to process and manufacture spodumene, thereby achieving industrial mass production of spodumene on the original lines of its major products. In 2018, the Group imported spodumene of 10.8 Kt and manufactured lithium powder of 18 Kt with a grade of approximately 5.5%. | |
| IV. | Placing new shares to broaden capital and shareholders base. |
| In the first half of 2018, after considering various methods of financing and based on the prevailing market condition, the Directors believe that under the prevailing market conditions, the placement of shares represents a good opportunity to raise additional funds as general working capital of the Group. In addition, it can also broaden the Company’s capital base and shareholders base without any interest burden and thus strengthening the Group’s financial position for future development. The placement was completed on 4 June 2018 under a placement agreement with net proceeds of approximately RMB29.4 million. | |
| V. | Making further exploration for quality mineral resources. |
| In 2018, the Group engaged an independent third-party exploration agency to further explore rare metal reserves in the mining areas for new resources and it successfully made a grade analysis on rare metals including rubidium, thus laying a solid foundation for fully capitalizing on its own high-quality mineral resources in the future. | |
| VI. | Expanding into mining and new energy-based block chain technology study in due course with plenty of research and studies. |
| In 2018, after conducting a large number of research and studies, the Group will, when appropriate, further play its platform role as a listed company, while ushering in the upsurge of block chain and the disruptive changes it may bring to the mining industry and new energy industry. The Group hopes to establish a decentralized global integrated mining platform and integrated new energy platform through block chain business, to promote sustainable development of its principal activities with block chain technology. | |
| VII. | Closely seizing market dynamics to actively develop market and implementing payment before delivery, while strengthening customer supervision and payment collection. |
| In order to control market risks, the Company’s business department collected market information through internet and customer channels to know market price information in due course, closely seized market dynamics, conducted analyses of market condition and proceeded market-oriented production and sales. To facilitate fund collection and risk prevention, the Group enhanced relevant management systems for the regulation of trade receivables, strengthened review of payment collection of its business department, designated person in charge and refined and specified contract terms for strict implementation. In 2018, the Group collected aged payment of approximately RMB29 million and continued developing new customers accepting payment before delivery to further reduce the risk of payment collection. | |
| VIII. | Taking the opportunity from the national initiative of “One Belt, One Road” to deploy traditional coal energy technology and trading business in Xinjiang. |
| Given the technological breakthrough of traditional petrochemical energy, such as coal, made in the future clean energy industrial chain, the Company took the initiative to form a joint venture with a subsidiary of Xinjiang Zhongtai Group, a state-owned enterprise, in a bid to seize the opportunity from the construction of national clean energy bases. | |
2019 DEVELOPMENT AND FUTURE PLANS
By closely following market demands and trend changes, the Group will maintain its competitive edge in the sector of its traditional businesses, including mining, production, sales of and other services for iron and titanium ores and concentrates and other protective mining resources. At the same time, the Group will continue to invest in the expansion of the titanium industrial chain and substantially promote its new energy business. The Group will make greater efforts towards the following plans in 2019 and further.
| I. | Utilising the brand new processing technique acquired and achieving mass production while maintaining its competitive edge in the sector of its principal businesses. |
| The Group will continue to maintain its competitive edge in mining, production and sales of protective mining resources, while providing after sales services to establish close relationships with upstream and downstream businesses within the industrial value chain of the sector. In particular, the Group will utilize the intellectual proprietary rights of the brand new processing technique acquired in 2018 and strengthen its efforts towards achieving mass production. The Group will strive to bring economic benefits for the Group by leveraging on this technique. The Group will continue to make greater efforts in the planning and implementation of a comprehensive industrial value chain, including mining and processing of ilmenite ore and production of titanium concentrates, high titanium slag, titanium tetrachloride and sponge titanium. Based on internal research and development of production, the Group will continue to enhance research and development cooperation with the Chinese Academy of Sciences and technology transfer cooperation with the Russian Academy of Sciences with an aim to achieve significant technical breakthroughs. In response to market demands, the Group will make timely investments in technical transformation and strive to transform the above-mentioned technical advantages into productivity, with an aim to improve the profitability of the Company. | |
| II. | Actively expanding the clean energy business of solar thermal power. |
| By applying the world advanced solar thermal power generation technology, the Group will systematically rebuild a set of advanced solar thermal power generation system with the application of globally leading original innovations at every key point of such system (including research and development, production and manufacturing, and technological consultancy). In 2019, the Group will continue to proceed the business in a stable manner and based on the experimental data and key area verification conducted in 2018. | |
| III. | Seizing opportunities from the increasing market demand for lithium carbonate and import and process spodumene with original production lines for business expansion. |
| With the rapid development of artificial intelligence and battery powered vehicles, lithium carbonate products have been in keen market demand. For the sake of long-term development, the Company has promptly recruited leading industry engineers and technicians and completed the remolding of old production lines in the shortest time possible to process and manufacture spodumene, thereby achieving industrial mass production of spodumene. The development of this business will bring long-term economic benefit to the Group. | |
| IV. | Capitalising on the platform as a listed group and taking proactive measures for various projects in the capital market, and seeking opportunities in mergers and acquisitions as and when appropriate. |
| Capitalising on the financing platform as a listed group, the Group will take proactive and adequate measures in respect of shareholders communication and investor relations, while continuing to strengthen its financing efforts, expand its shareholder base and enhance liquidity of its shares. Financing will also be provided for key construction projects, merger and acquisition projects, or expansion of the titanium industry value chain. Given the technological breakthrough of traditional petrochemical energy, such as coal, made in the future clean energy industrial chain, the Company took the initiative to form a joint venture with a subsidiary of Xinjiang Zhongtai Group, a state-owned enterprise, and planned to engage in the finance business within trading chain, so as to fully apply the resources of both parties on the expansion of the clean energy business and trading business, thereby bringing benefits for both listed group and shareholders, in a bid to seize the opportunity from the construction of national clean energy bases. |
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| V. | Taking full advantage of the national policy on comprehensive utilization of wasted resources in old mining areas and adopting various measures to increase revenue. |
| In response to the state’s call for comprehensive utilization of wasted resources in old mining areas in 2019, firstly, the Company made comprehensive use on the existed waste ore and other resources to meet the demand for construction sand in the market, while returning waste land to forest through planting, with an aim to make further improvement to the mine environment on the basis of the national green mines. Secondly, making full use of wasted mine resources and the brilliant scenery of green mine, as well as the large-scale mining areas, the Company proactively pursued to the building of the a national filming base and rural integrated zone and seek for government funding, so as to enhance the revenue and effectiveness of the Company. | |
| VI. | Making full use of the strengths from the existing technology of the Company as well as the independent mining third party to promote the exploration efforts of rare metals with low cost and continuously increase mining resources of new rare metals and non-metals so as to bring various resource reserves for listed groups and shareholders to enhance mine value. |
| In conclusion, new profitability potential will be realized out of traditional businesses; significant technological breakthroughs will be achieved in the areas of new energy and clean energy in order to make preparations for commercial production; the Group will also strengthen its financing efforts through the capital market in order to help its various businesses build a solid basis for future performances. This will also make new contributions to the development of the real economy. The Group will actively seek new sources of economic growth, with a view to rewarding our investors with better returns. | |
Last but not least, I express sincere gratitude to all members of the Board for their valuable opinions! I would also like to express my gratitude to the management and all staff for their effort and dedication in their respective job positions!
Li Yunde
Chairman
Hong Kong, 29 March 2019
