AM: Thank you very much for accepting Asian Metal’s interview. First of all, congratulations on your opening business.

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Mr. Liu: Thank you!

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AM: As a new star in antimony industry, Xiangyun Transit Antimony Industry Co., Ltd(ZOTN), with strong momentum of development, has become a dark horse in this field after being founded two years ago, despite economic recession and market downturn in 2011 and 2012. Some participants have built business relationship with the company while others are unfamiliar with it. Would you please introduce ZOTN?

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Mr. Liu: Well. ZOTN is a joint-equity enterprise, focusing on non-ferrous metal and nonmetal minerals smelting, processing and trading. It is attached to Dali Xiongzhao Industry Co., Ltd and its brother enterprise is Hunan Xiangfeng Antimony Industry Co., Ltd.

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ZOTN Smelting Plant project is divided into three phases: the first phase started in July, 2009 and finished at the end of February, 2010 with 12 open-hearth furnaces and 4 reverberatory furnaces; annual antimony concentrate capacity reached 5,000t. The second phase, starting in July, 2010, aiming to build three vertical-type volatile furnaces and 4 reverberatory furnaces with designed capacity of 7,000tpy, which is under pilot production at present. ZOTN, with more than 270 staffs, produced 4,700t of antimony ingot with the tax payment of RMB23 million in 2011.

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AM: ZOTN acquired remarkable achievement even though antimony market remained sluggish in 2011. In addition, it is reported that most producers have reduced their outputs as raw materials prices keep at a high level or demand softens. Will ZOTN keep stable production in the coming months?

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Mr. Liu: ZOTN mainly depends on the 12 open-hearth furnaces, which consume 120-140tpd of antimony ore in total; there are only three volatile furnaces in total; two of them are under production with the antimony ore consumption of 180tpd. If antimony ore 8% is used, the daily output will come to 24 metal tons. However, monthly output is not stable due to instability of ore supply. Both low grade and high grade ores are used according to actual conditions. Daily output will decrease to 15 metal tons if the ore grade is lower than 5%; sometimes, the ore grade can reach as low as 3%. ZOTN cannot be particular about ore grade because it proves that the enterprise is of no competiveness.

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AM: ZOTN can maintain production by consuming both low and high grade ores during an age of resources depletion, unlike other enterprises. Would you please introduce your special production technologies compared with other smelting plants?

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Mr. Liu: Most smelting plants focus on wind furnaces or diameter roasters in Hunan, while ZOTN mainly uses open-hearth furnaces.

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AM: Antimony market has kept sluggish since Q2, 2011. Is it related to the economic conditions? And are there any signs for the market to improve? What is your opinion on current domestic economy?

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Mr. Liu: First of all, demand for antimony products has close relationship with economy. Entity enterprises have less confidence toward the future market and are inactive in purchasing in economic downturn period, resulting in decreasing demand. Secondly, I think domestic economy is not positive at present. Monetary policies tighten and circular funds turn to fixed assets which are taken out then due to regulation policies in real estate market. Most enterprises are under great pressure of tight capital flow. Entity enterprises are influenced significantly as economy decreases and real estate consumption declines.

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AM: Low reserves and output keep left antimony ignored in the previous years. Hence, excessive mining occurs and antimony supply exceeds. However, antimony price has almost tripled by March, 2011, compared with that one year ago, and then it became a famous star for investors and speculators. As the first-tier participant in antimony market, you are sure to understand the market thoroughly. Would you please talk about it?

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Mr. Liu: Domestic antimony market is unhealthy as miners ask for higher prices while antimony trioxide plants look for lower quotations for raw material. Hence, problems occur to antimony ingot producers without strong capital: firstly, low position ability. Most producers have to sell no matter what prices consumers offer; as they have to purchase raw material due to insufficient inventories. Secondly, tight raw material supply and over capacity. Import volume of downstream products continues to increase while export volume of raw material decreases in China, resulting in shortage of raw material. Thirdly, policy depression. Mining volume of antimony ore was controlled below 105,000t per annum. Considering European debt crisis and uncertain global economy, most suppliers have decreased quotations and operations, decreasing pressure from inventories in some degree. Excessive inventory occurs under tense capital turnover, but they cannot stop production as they have to pay workers. Most producers keep operating under losses. In addition, over capacity continues in the whole industry. Most producers make panic purchasing and prices climb, resulting in limited space for profits.

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AM: Insiders understand that antimony ingot smuggling ran wild in the past years despite reiterated crackdown. However, central government has stepped up efforts to shut down smuggling channels since early February, which is unprecedented compared with policies in the previous years. What do you think of its favorable effects?

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Mr. Liu: In fact, fighting against smuggling is helpful to every enterprise, which promotes them to improve financial regulations, and can show operation information to banks, benefitting corporate finance. However, antimony is a kind of special metal; quota system is applied in both mining and exporting. Total export quota of antimony ingot and antimony trioxide was about 68,300t while total output was 140,000t in domestic market in 2011. If the government cut off the smuggling channels, inventories of antimony products left in Chinese domestic market could come to around 70,000-80,000t, which would be a severe challenge for the Chinese domestic market.

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AM: What is your opinion on antimony market outlook, considering economic downturn and soft demand at home and abroad?

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Mr. Liu: Antimony market will step into the darkest period in May and June. Antimony ingot prices decreased sharply to RMB77,000/t in late June from RMB105,000/t in early May last year. In fact, there is limited space for prices to drop this year but figures are sure to fall. The highest prices of antimony ingot is hard to increase to RMB90,000/t this year and figures are expected to rebound in July.

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AM: Finally, thanks again for accepting the interview. Wish your company every success in the future!

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Mr. Liu: Thank you!

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