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    Chinese molybdenum concentrate market to rebound in Q3
    ----Interview with Wang Jingjun
    Vice General Manager
    China Gold Inner Mongolia Mining Co., Ltd.
    Set up in October 2007, China Gold Inner Mongolia Mining Co., Ltd. (“the Company”) is a joint venture between China National Gold Group Co., Ltd. and Beijing Yuji Mining Investment Co., Ltd. with each contributing RMB360 million (USD51.08 million) and RMB40 million (USD5.68 million) respectively. The Company has total fixed assets of RMB6.1 billion (USD865 million) now, and focuses on businesses including exploration, beneficiation, smelting and comprehensive utilization of nonferrous metals, as well as on investment related to mineral resources. Its key project, Unugatu Mount copper-molybdenum project with a total investment of RMB5.9 billion (USD837 million), commenced construction in August 2007 and was built in May 2012; the project has produced over 11,300t of molybdenum in total since production started.

    Asian Metal: Thanks Mr. Wang for taking our interview. As the second largest molybdenum concentrate supplier in the Chinese spot market, would you please first give a brief introduction to the history of your company? What is your current monthly output of molybdenum concentrate? How is your production going on?

    Mr. Wang: Located in New Barag Right Banner, Inner Mongolia, our company has a mine area of 9.8 square kilometers, home to copper-molybdenum associated ores with a copper metal reserve of 2.1776 million tons and molybdenum metal reserve of 520,600 tons. At present, the average grade of our mined copper ores is 0.272% and molybdenum 0.03%. The project went into construction in August 2007 and was fully built in May 2012, with a total investment of RMB5.9 billion (USD838 million). Our monthly molybdenum concentrate output remains stable within the range of 1,200-1,300t, and we maintain normal production at present.

    Asian Metal: How do you rank your company in the molybdenum industry?

    Mr. Wang: Currently in China our company ranks second in terms of molybdenum concentrate supply, and our downstream clients come from ferromolybdenum and molybdenum chemical industries, with whom we keep steady partnership. Meanwhile, as a large-sized molybdenum mine, we attach great importance to environmental protection and were granted the status of a national-level green mine in 2018.

    Asian Metal: As the COVID-19 is spreading quickly overseas now, international demand for molybdenum concentrate becomes weak and a lot of molybdenum raw materials flow into China accordingly. What are the effects upon your company and upon other molybdenum mines in China?

    Mr. Wang: China is both a big producer and consumer for molybdenum. Imports of molybdenum raw materials have been growing robustly in China since late 2018. This indicates active demand for molybdenum from the Chinese market. Imports of molybdenum raw materials at low prices have nearly no impacts upon our sales since we sell mainly via long-term contracts. But increasing supply of foreign raw materials has left Chinese molybdenum concentrate suppliers into an unfavorable situation since prices of imported raw materials are lower.

    Asian Metal: How do you think of long-term sales agreements that major molybdenum concentrate suppliers adopt?

    Mr. Wang: Downstream clients sign long-term agreements with molybdenum mines mainly as downstream ferromolybdenum producers see excess production capacities and therefore want to source stable supply of molybdenum raw materials to ensure stable production. We are the first company in China signing long-term sales agreements for molybdenum concentrate with downstream clients. We usually sign such agreements in late December of each year. Our long-term supply is about 1,100t this year, in comparison to our monthly output of 1,200-1,300t. Most long-term orders are priced on a monthly or weekly average basis. Our long-term price is calculated based upon the average market price in the second week of the month from the previous 21st to the next 20th.

    Asian Metal: How do you think of the pricing model for molybdenum concentrate in the current Chinese market?

    Mr. Wang: Most molybdenum mines in China sell molybdenum concentrate via long-term contracts and there are only a limited number of spot orders concluded on the market. Molybdenum concentrate selling model prevailing in China now is like this: major mines offer their target selling prices first, at which users make purchases, then other three medium-sized mines will invite bids, and buyers who offer the highest prices will win the orders. This pricing mechanism can affect market prices, sometimes may lead to enforced increases in market prices and therefore can’t reflect actual market trends.

    Asian Metal: What challenges do you think there will exist in the molybdenum raw material market in 2020?

    Mr. Wang: Firstly, a large molybdenum mine in China will go into production in May and its monthly molybdenum concentrate output will be over 1,000t; in the long run, increasing supply will certainly lead to decreases in our long-term sales and will also impose certain negative effects upon other mines' sales. Coupled with increasing supply of imported raw materials, molybdenum concentrate prices will see receding upward momentum. Secondly, affected by the COVID-19, it will be difficult for demand to recover in the short term, so prices for molybdenum raw materials are expected to stay at low levels in the short term. If the epidemic can be better controlled in the third quarter this year, demand from both the Chinese domestic and international markets will be released greatly and molybdenum concentrate prices will soar accordingly.

    Asian Metal: Will your company make any adjustments on your production plan in the future?

    Mr. Wang: We will maintain steady production on the whole. With supply of molybdenum raw materials increasing, we strive to maintain positive and sustainable cooperation with our downstream clients. Our goal this year is to achieve a profit of RMB800 million (USD114 million) which will be nearly all contributed by the molybdenum concentrate sector. Since our production costs for molybdenum concentrate are categorized into copper production, our molybdenum concentrate sector enjoys net profits while copper concentrate sector contributes only a little.
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