Date of Report

October 22, 2024

Broker

UOB Kay Hian

Company Overview

Zijin Mining, through its subsidiaries, explores, mines, produces, refines, and sells gold, copper, zinc, and other mineral resources in China.

Stock Information

• Share Price: HK$17.40
• Target Price: HK$21.90
• Upside: +25.9% (Previous Target Price: HK$21.50)
• GICS Sector: Materials
• Bloomberg Ticker: 2899 HK
• Shares Issued: 5,988.8 million
• Market Cap: HK$514,106.6 million (US$66,141.8 million)
• 3-Month Average Daily Turnover: US$104.6 million
• 52-Week High/Low: HK$19.74/HK$10.51

Recent Performance

• Price Performance (%)
  • 1 Month: +9.3%
  • 3 Months: +7.3%
  • 6 Months: -0.1%
  • 1 Year: +53.2%
  • Year to Date: +39.3%

Major Shareholders

• Minxi Xinghang State-owned Assets Investment Co. Ltd: 22.9%

Earnings Overview

• 9M24 Earnings: Rmb24,357.5 million (+50.7% YoY)
  • Represents 80% of the full-year estimate, in line with expectations.
• Copper/Gold Output:
  • 9M24 copper output: 789,459 tonnes (+8.3% YoY)
  • 9M24 gold output: 54,265 kg (+8.3% YoY)

Gross Margin and Impact of Prices

• Mining Entities’ Gross Margin: Fell to 58.5% in 3Q24 (-1.2 ppt QoQ) due to lower copper average selling price (ASP).
• Copper ASP: Declined to Rmb55,832 per tonne (-9.5% QoQ), negatively impacting segment gross margin to 65.8% (-4.0 ppt QoQ).
• Gold Price Rally: Mitigated some impacts of copper price slump with 3Q24 ASP for mine-produced gold bullion/gold concentrate increasing to Rmb553.4/Rmb516.6 per gram (+5.8%/+4.0% QoQ).

Production Highlights

• Electricity Shortage: Constrains Kamoa mine output; expected to result in a 2-4% shortfall to Zijin’s 2024 copper output target.
• Gold Output Target: On track to achieve an annual target of 74,000 kg (+14.1% YoY) for 2024.

Financial Metrics

• Key Financials for 9M24:
  • Revenue: Rmb230,396.5 million (+2.4% YoY)
  • Gross Profit: Rmb45,000.0 million (+31.9% YoY)
  • Operating Profit: Rmb35,847.8 million (+47.4% YoY)
  • Net Profit: Rmb24,357.5 million (+50.7% YoY)

Future Outlook

• Earnings Revision: Adjustments for 2024/25/2026 forecasts increased by +6.8%/+3.5%/+5.4%, respectively.
• Recommendation: Maintain BUY with a higher target price of HK$21.90, driven by robust volume growth and effective cost reduction measures.
• Share Price Catalyst: Improvement in copper consumption and a steeper-than-expected Fed rate cut are potential positive influences on stock performance.

Conclusion

Zijin Mining’s performance for the first nine months of 2024 shows significant growth in earnings, driven by effective management strategies and resilience in diversified metal products despite challenges in the copper market.