On June 24,
2019, Kings Resources announced that an accident took place at a plant in its
subsidiary, Zhejiang Amethyst Mining Co., Ltd (Amethyst Mining) on June 23,
causing one death. Production stopped right away after the accident. It is
reported that this is already the second accident in the same month. In terms
of the impact of the accident on the company’s performance, Kings Resources
expressed that the suspended production would not affect the company very much
since the company has sufficient inventory.
Some market
insiders hold an opinion that the internal control of the company could be a
great reason for what happened to Kings Resources and it should be adjusted in
a better way soon. Two times of production suspension within a month are likely
to exert a detrimental effect on the company’s performance with different
uncertainties. The growth in the company’s profits is probably due to the
increasing prices of fluorite. However, there is still a huge uncertainty in
the future prices of fluorite, which may affect the sustainable development of
Kings Resources.
The accident likely to affect output in the
second and the third quarter of Amethyst Mining’s project 2019
Kings
Resources, founded in 2001, is a mining company focusing on development and
production of fluorite, which is considered as a strategic mineral resource in
China. The main products of the company consist of acid grade fluorite powder
and high grade fluorite ore lump.
Amethyst
Mining, a subsidiary of Kings Resources, planned to extract around 1000 tonnes
raw ore per day during the second and the third quarter of the project, so that
170 tonnes of fluorite fine powder and 140 tonnes of high grade fluorite ore lump
could be produced each day according to the schedule. However, because of the
accident the mining operation would be delayed for one month, which would lead
to a lack of supply of raw ore to the company. Therefore, Amethyst Mining’s
output in this period is predicted to face a certain reduction.
Internal control is condemned as a main problem
that causes the frequent accidents in Kings Resources
As the only
one listed Fluorite Company in China, Kings Resources has quite strong market
shares with increasing prices in its products. According to some official data,
the quotation of fluorite wet powder from 97% of the markets was RMB 3,059 per
tonne in the first quarter of 2019. As a contrast, the one in the same period
of last year was RMB 2,668 per tonne.
When there
is a boom in the fluorite industry, Kings Resources increases the output of the
material accordingly. As the history report of the company demonstrates, the
output of the fluorite products from Kings Resources reached 220,700 tonnes in
2017. By the end of this year, all production lines achieved the target output
at full capacity. In 2018, the company increased the output of all fluorite
products to 254, 500 tonnes.
At the
beginning of 2018, Kings Resources acquired 95% shares of the biggest fluorite
company in Asia, Xiangzhen Mining. With the help of Xiangzhen Mining, the target
output would be reached in the second quarter of 2019. Hence, the company
increase the capacity once again from 350,000 tonnes to 450,000 tonnes in 2019.
With the
rapid expansion of production, safety becomes a main issue in the company. For
just more than half a year, 3 accidents took place constantly in Kings
Resources, with latest two happening in the same month. Some insiders pointed
out that growth of output should depend on the internal control of the company.
And production management should be able to keep up with the capacity. Since
fluorite is a new mine, training regarding safety and management should be also
put in place.
For more
information about China’s fluoride market, please have a look at our monthly
newsletter China
Fluoride Materials Monthly Report