(Yicai Global) Aug. 24 -- Chinese iron ore company Hainan Mining will spend CNY1.1 billion (USD164 million) to seek opportunities in the battery materials industry for the first time.

The company will build a lithium processing plant in southern China's Dongfang, the Hainan province-based firm that is controlled by conglomerate Fosun International said in a statement yesterday.

Moreover, the mining company revealed its first-half earnings results. In the first six months of this year, the firm's net profit surged by 30 percent to CNY578 million (USD89.2 million), according to the report published yesterday. Its revenue jumped 61 percent to CNY2 billion.

This is the first time the company in the steel industry is entering the upstream lithium battery business. However, another Fosun subsidiary has three battery production bases in eastern China, with some of the products already ready to be sold to carmakers.

The after-tax rate of return of the new project in Dongfang can reach about 19 percent, according to Hainan Mining. The annual output of the plant should be 20,000 tons of battery-grade lithium hydroxide. It should take 18 months to finish the project. The facility will use spodumene imported from Australia as its raw material.

The project should make use of tax incentives offered by the free trade port. Moreover, the nearby Basuo Port is one of the largest deepwater ports in Hainan, providing good transport conditions.

The updates didn't manage to boost the company's stock price today. Hainan Mining's equity price [SHA: 601969] was 6.1 percent down at CNY19.42 (USD3) in the afternoon, still more than three times up this year.

Editor: Emmi Laine, Xiao Yi