Dazhong Mining Co., Ltd. (001203.SZ) has reported its weakest half-year results since listing, with both revenue and net profit declining in the first half of the year. The company's core iron ore business saw a drop in production and sales, while sulfuric acid revenue growth failed to offset the gap. As the main iron ore business struggles, the company is heavily investing in lithium mining to create a second growth engine, but this has yet to generate significant profits. Financial pressure is mounting as the debt-to-asset ratio has climbed to 60.67%, and short-term liquidity ratios have fallen below 1. A 2.5 billion yuan convertible bond issuance is still pending, putting the company's cash flow under severe strain.

In the first half of the year, Dazhong Mining reported revenue of 1.778 billion yuan, down 9.86% year-on-year, and net profit attributable to shareholders of 322 million yuan, down 20.59%, marking the lowest level for the period since its 2021 listing. Net profit has now declined for five consecutive half-year periods, dropping from 894 million yuan in the first half of 2021 to 406 million yuan in the first half of 2025. The company's main products, iron ore concentrate and pellets, accounted for 82.51% of revenue. Iron ore concentrate production fell 6.93% to 1.7327 million tons, while sales of concentrate and pellets declined 19.62% and 46.05%, respectively. Revenue from iron ore concentrate dropped 10.97% to 1.248 billion yuan, and pellet revenue plunged 45.78% to 219 million yuan. Gross margins for both products declined, with iron ore concentrate margin falling 1.75 percentage points to 53.04% and pellet margin decreasing 1.86 percentage points to 30.15%. Sulfuric acid was a rare bright spot, with revenue surging 151.97% to 228 million yuan, but its contribution of just 12.8% of total revenue was insufficient to offset the core business decline. Operating metrics also worsened, with accounts receivable jumping 75.1% to 176 million yuan and inventory rising 25.15% to 985 million yuan. Inventory turnover fell from 1.34 to 1.07, while accounts receivable turnover dropped from 27.12 to 11.83, indicating growing stockpiles and slower collections.

Where to begin

To mitigate the cyclical risks of the iron ore industry, Dazhong Mining is aggressively expanding into lithium mining to create a dual-driver strategy. The company's Hunan Jijiaoshan and Sichuan Jiadali lithium mines are expected to produce a combined 130,000 tons of lithium carbonate annually once completed, with construction set to finish in the second half of this year. The Sichuan Jiadali mine began selling raw ore in September 2025, contributing 138 million yuan in revenue and 105 million yuan in gross profit from lithium mining in 2025. In the first half of this year, the company pre-sold 200,000 tons of raw ore, receiving 460 million yuan in advance payments. However, the lithium sector faces cyclical risks, with lithium carbonate prices historically swinging from 600,000 yuan per ton in November 2022 to around 60,000 yuan in 2024, before rebounding to about 120,000 yuan per ton in the second half of 2025. The average price in the first half of this year was 163,400 yuan per ton, up 132.14%, but the company warns that a slowdown in the new energy industry could pressure lithium segment performance. The greater challenge comes from massive capital investments. As of the end of the first half, the Jijiaoshan mine's 20 million-ton-per-year lithium project had invested 887 million yuan of a 2.841 billion yuan budget (31.23%), while the 40,000-ton lithium carbonate project had spent just 189 million yuan of a 2.064 billion yuan budget (9.18%). The Jiadali mine had invested 471 million yuan of a 1.32 billion yuan budget (35.67%). In March of this year, the company also proposed a joint venture for a 200,000-ton lithium salt project, with an initial investment of 2.2 billion yuan for the first two phases. These projects have driven up the debt-to-asset ratio to 60.67%, with current and quick ratios falling to 0.31 and 0.17, respectively. The company's cash holdings of 395 million yuan are far below its short-term borrowings and non-current liabilities due within one year, totaling 4.572 billion yuan, highlighting significant short-term repayment pressure. To address this, Dazhong Mining plans to issue up to 2.5 billion yuan in convertible bonds, with 550 million yuan for the Jijiaoshan mine project, 1.2 billion yuan for the lithium carbonate project, and 750 million yuan for repaying bank loans.