Everbright Securities has released a research report stating that magnesium oxide has broad application scenarios in hydrometallurgical fields, with future applications extending beyond nickel and cobalt processing to demonstrate significant potential in rare earth applications. Different grades of magnesium oxide affect various indicators in hydrometallurgy including unit consumption, precious metal recovery rates, production efficiency, and impurity content, thereby creating cost differentials. The firm is optimistic about the market potential of active magnesium oxide, as diversified application scenarios may bring price elasticity to the product. Puyang Refractories Group Co.,Ltd.'s magnesium oxide products are already used in hydrometallurgical applications and may be applicable to rare earth processing in the future. Focus is recommended on: Puyang Refractories Group Co.,Ltd. (002225.SZ).

Everbright Securities' main perspectives are as follows:

**Ammonium Salt Process for In-Situ Rare Earth Mining Causes Environmental Production Shutdowns, While Newly Developed Magnesium Salt Process Shows Green Mining Potential**

In traditional ammonium salt system (ammonium sulfate) in-situ leaching processes, producing 1 ton of rare earths (calculated as REO) requires consuming 7-12 tons of ammonium sulfate. The slow release of ammonium salts remaining in mines causes long-term ammonia nitrogen levels in mining areas and surrounding water systems to exceed standards by dozens of times, forcing some mining enterprises to halt production and creating severe shortages in medium and heavy rare earth supply.

In 2020, researchers from China Southern Rare Earth Group and Ganzhou Rare Earth Mining Technology Service Company conducted pilot tests using magnesium salt systems at the Dingnan Lingbei mining area (ionic rare earth mine). In the process, magnesium oxide slurry was added to enrichment pools during mother liquor concentration, controlling the mother liquor pH to neutral levels. After settling and clarification, the precipitate portion became rare earth hydroxide concentrate.

**Magnesium Salt Process Offers Greater Economic Efficiency**: Compared to ammonium salt processes, mining test cost analysis shows that magnesium salt processes reduce comprehensive costs by 8.0% relative to ammonium salt processes, while being more environmentally friendly.

**More Environmentally Friendly**: Ammonia nitrogen poses threats to aquatic ecological safety, and water treatment and related environmental issues directly impact mining production. The magnesium salt system introduces no ammonia nitrogen throughout the entire process, and pilot results indicate this system does not cause water hardening, salinization, or similar problems.

**Higher Resource Comprehensive Utilization**: Significantly reduces rare earth loss rates. Rare earth content in supernatant after magnesium salt system precipitation is typically 0.003g/l, while ammonium salt systems contain 0.03g/l, differing by an order of magnitude.

**Comprehensive Aluminum Recovery**: In ammonium salt systems, aluminum precipitates as impurities and requires landfill disposal; magnesium salt systems can separately obtain aluminum hydroxide products during post-processing. The pilot test showed aluminum hydroxide output of approximately 0.15-0.20t/tREO.

**Significantly Improved Product Quality**: Under magnesium salt systems, aluminum and rare earths can be fully separated, with aluminum oxide content in rare earth hydroxides below 0.3% (typically above 1.5% in ammonium salt systems); heavy rare earth content increases (gadolinium, terbium, dysprosium, holmium, erbium, lutetium, and other elements generally increase by 15%-25%).

**Substantially Improved Production Efficiency**: Magnesium salt processes use magnesium oxide solution to concentrate mother liquor, precipitating as rare earth hydroxides with clarification typically taking 1-2 hours; ammonium salt systems use ammonium bicarbonate for impurity removal with clarification times typically requiring 8-10 hours. Magnesium salt processes can significantly improve work efficiency, and processing pools of equal capacity can increase mother liquor processing capacity several times over, expanding mining production capacity.

Everbright Securities believes that rare earth applications have high requirements for magnesium oxide, primarily due to reaction mechanisms similar to hydrometallurgical nickel and cobalt processing, thus requiring certain standards for activity, purity, impurity distribution, and crystal particle size. According to the patent "A Method for Ammonia-Free Enrichment of Rare Earth Mother Liquor," different grades of magnesium oxide show significant differences in corresponding rare earth enrichment unit consumption and precipitation effects.

**Risk Warnings**: Magnesium salt process route progress may fall short of expectations, new technology pathway substitution risks, and intensified market competition.