IPO Preview | Jiaxin International: Accumulated loss of 350 million yuan in three years, tungsten giant waits patiently for commercialization of tungsten mines.

In 2024, the Chinese tungsten market experienced a drastic fluctuation of "low at both ends, high in the middle", with an average price increase of about 15% year-on-year. The highest price reached for black tungsten concentrate (65%) was 156,600 yuan/ton, and the price of ammonium paratungstate (APT) briefly exceeded 230,000 yuan/ton, setting a new high for nearly thirteen years. In 2025, the tungsten price continued to fluctuate at a high level, with the February price of black tungsten concentrate stabilizing at 143,000 yuan/metric ton, and APT maintaining at 212,500 yuan/ton. Due to the tight supply leading to an increase in the ore end price, the price increase has gradually been transmitted downstream to the industry chain. Previously, many leading tungsten enterprises, including Chongyi Zhangyuan Tungsten (002378.SZ), China Tungsten and Hightech Materials (000657.SZ), and Xiamen Tungsten (600549.SH), successively issued price increase notices, and some companies are contemplating a new round of price increases. Taking advantage of the favorable market conditions, the tungsten mining company rooted in Kazakhstan, Jiaxin G-RESOURCES Investment Limited (Jiaxin International Resources Investment Limited), submitted again to the Hong Kong Stock Exchange on March 13th, with CICC as its exclusive sponsor. Previously, the company had submitted to the Hong Kong Stock Exchange on August 19, 2024. Global Fourth Largest Tungsten Mine Expected to commence commercial production in the second quarter of 2025 According to the prospectus, Jiaxin International focuses on the development of the Bakuta tungsten mine. As of December 31, 2024, according to data from Frost Sullivan, it is one of the world's largest open-pit tungsten mines in terms of tungsten trioxide (WO3) mineral resources. As of the same date, according to Frost Sullivan, the company's Bakuta tungsten mine is also the world's fourth largest WO3 mineral resource tungsten mine (including open-pit and underground tungsten mines), with the largest designed tungsten mine capacity in a single tungsten mine worldwide. During the previous reporting period, Jiaxin International focused primarily on preparing for the commercial production of the Bakuta tungsten mine project. The project started trial production in November 2024 to test and refine processing processes. Commercial production is expected to begin in the second quarter of 2025, with an annual target mining and mineral processing capacity of 3.3 million tons of tungsten ore in 2025. According to an independent technical report as of December 31, 2024, based on JORC rules, the estimated mineral resource of the Bakuta tungsten mine is approximately 109.5 million tons of ore containing 0.211% WO3 (equivalent to 231,500 tons of WO3), including 97.6 million tons of measured resources (0.21% WO3) and 11.9 million tons of inferred resources (0.228% WO3). As of the same date, based on JORC rules guidance, the Bakuta tungsten mine has credible ore reserves of 70.3 million tons of ore, with an average grade of 0.206% WO3, equivalent to 144,500 tons of WO3. Under the land use contract entered into with the relevant Kazakhstani authorities, the company holds mining rights to the Bakuta tungsten mine (the right to mine tungsten ore). The mining contract specifies a mining area of 1.16 square kilometers, allowing for mining to a maximum depth of 300 meters below the surface, from June 2, 2015 to June 2, 2040, for a period of 25 years. Financially, the Bakuta tungsten mine project was in the exploration and development stage throughout the previous reporting period, so the company did not recognize any revenue. In the years of 2022, 2023, and 2024 (hereinafter referred to as the reporting period), the company recorded losses of 94.45 million yuan, 80.129 million yuan, and 177 million yuan, respectively, totaling a loss of 350 million yuan over the three years. According to the company's plans, commercial production is expected to begin in the second quarter of 2025. Once production commences, Jiaxin International intends to primarily sell tungsten products to Chinese tungsten processing businesses and end-users in the short term. In short, Jiaxin International is currently facing two major operational risks: firstly, the company has no income; secondly, even if the company successfully starts production, it faces the risk of customer concentration in the early stages of sales, which could have a significant adverse impact on its business, financial condition, and operational performance. The tight supply situation continues to support the high volatility of tungsten prices Rich mineral resources may benefit According to the Frost Sullivan report, global tungsten reserves increased from approximately 3.3 million tons in 2018 to 4.4 million tons in 2023, with a compound annual growth rate of 5.9%. In 2023, global tungsten production was 78,000 tons, with global tungsten consumption estimated at around 124,100 tons, resulting in a gap as high as 46,100 tons, reflecting the scarcity of tungsten resources and strong demand. Looking ahead, with the rapid growth of downstream markets leading to an increasing demand for tungsten, such as the photovoltaic (PV) industry also consuming a large amount of tungsten, it is expected that tungsten consumption will reach 151,100 tons by 2028, with a compound annual growth rate of 4%. In the short term, it is believed that the continued tight supply situation, resonating with loose macroeconomic policies at home and abroad, is expected to drive demand improvement. The further upward movement of tungsten prices is poised to set historical highs. On the supply side, Chinese tungsten concentrate supply has tightened, and global tungsten inventories have been reduced to historical lows; on the demand side, China's steady growth policy is expected to drive domestic demand, and overseas demand is expected to benefit from loose fiscal and monetary policies in Europe and America, as well as global supply chain restructuring; coupled with increased geopolitical risk, the demand for hoarding tungsten "safety stock" may open up, and tungsten concentrate prices are expected to continue to rise, potentially reaching historical highs. In this context, companies with abundant tungsten mines are increasingly highlighted in terms of value. CITIC Securities has pointed out that current Chinese tungsten enterprises are focusing on both ends of the industry's "smile curve", accelerating the injection and development of upstream tungsten resources to enhance resource security and increase profit elasticity in the price increase process; and expanding the production capacity of tungsten powder, hard alloy tools, and PV tungsten wire, promoting the transformation of product structure towards high-end, enhancing the added value and growth prospects of end products. Focusing on Jiaxin International, as mineral resources continue to be mined, the company may benefit from the rising trend of tungsten prices. However, to ensure that the company's tungsten mining projects reachTo reach the "reservation can be used" status, as well as to maintain normal operations, the company also faces high capital costs and operating costs.The prospectus shows that Jiashin International has incurred capital costs for the Baktuu Tungsten Mine Project since 2020, with a total capital cost of 1.691 billion yuan from 2020 to 2024. The preliminary development of the Baktuu Tungsten Mine Project, followed by the upgrading of the tailings dam and the closure of the mining field, is expected to incur a total capital cost of 2.619 billion yuan, with an estimated capital unit cost for the entire mine service life of 37 yuan/ton of ore and 14,900 yuan/ton of concentrate. In terms of operating costs, it is estimated that the total operating cash cost of the Baktuu Tungsten Mine Project in 2025 will be 463 million yuan, with a unit operating cash cost of 156 yuan per ton of ore and 77,400 yuan per ton of concentrate. By 2027, as the Baktuu Tungsten Mine Project is expected to reach a target annual production of 4.95 million tons and is expected to install a second-phase commercial production ore sorting system, the total operating cash cost is expected to increase to 563 million yuan, with a significantly lower unit operating cash cost of 113 yuan per ton of ore and 49,000 yuan per ton of concentrate. The prospectus also shows that as of the end of 2024, Jiashin International had cash and cash equivalents of 41.44 million Hong Kong dollars. Jiashin International stated in the prospectus that the company mainly provides capital expenditure through bank borrowings and internal funds. The company's future working capital, payment of other payables, and repayment of matured and outstanding debts will mainly depend on whether the company can generate sufficient cash inflows from its operating activities and obtain adequate external financing. Jiashin International also pointed out that, given the company's past net losses and limited funds, it cannot guarantee that it will be able to generate sufficient cash flow from operations in the future or fundamentally provide funds for the company's operations. The company may need to seek additional financing through equity or debt financing, or may be forced to reduce or delay capital expenditures, so the company may not be able to execute its development plans as planned. In conclusion, Jiashin International owns the Baktuu Tungsten Mine, which has the fourth largest WO3 tungsten mineral resource in the world and the largest designed tungsten mineral production capacity in a single tungsten mine. It may benefit from the upward trend in tungsten prices, and long-term growth is promising. However, the company still faces high capital expenditures and operating costs, significant liquidity risks, and may also face concentration risks in the early stages of commercialization.