Two accidents within one month make little difference to Kings Resources’ increasing profits 08-13-2019

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

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