The main production entity is Xitulu Mining, which integrates mining and metallurgy.
Hitulu Copper Mine is located near Likassi City, Katanga Province, southern Congo (DRC), including open-pit mining, mineral processing, wet smelting and other production departments. As of June 2016, the Xitulu Copper Mine has retained resource reserves of 4.0053 million tons of copper ore and 188200 tons of copper metal, with an average geological grade of 4.70 percent. The copper mine is designed to handle 900000 tons of ore per year, and the smelter has a production capacity of 40, 000 tons of cathode copper per year.
Xitulu Copper Mine has been successfully produced for 5 years, and all the technical indicators meet the requirements, and it is praised by customers as "the best quality cathode copper in Africa".
The copper industry will be increased, and the increase in production is in progress.
In 2016, through the private placement of shares, the company acquired the minority shareholder stake in Pengxin Coal Mine and increased its equity share in SMCO from 36.38% to 72.5%. On the other hand, it raised 1.7 billion yuan to build a 20, 000 ton / a copper cathode production line project and 7000 metal ton / a cobalt hydroxide project, which is expected to greatly increase the company's performance from 2018, while Gerrard established a long-term cooperative relationship to ensure the company's supply of raw materials.
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In 2017, the company paid A $81.4166 million for a 16.17% stake in Clean TeQ. The company has a high-grade large nickel-cobalt-scandium deposit Syerston in New South Wales, Australia, with a total of 106000 tons of cobalt metal, with an average grade of 0.10%; 660000 tons of nickel metal, with an average grade of 0.65%; and about 12800 tons of scandium metal. According to the pre-feasibility study report of the project, when Syerston reaches production, it will have an annual production capacity of 18700 tons of nickel and 32000 tons of cobalt, while the average cash cost of nickel can be as low as US $0.89 / lb after deducting associated cobalt, which is at a low level in the industry.
It is proposed to increase the acquisition of OneGold Mine, and the product structure will be more yuan.
The company issues shares and pays cash to purchase the entire equity interest in Ningbo Tianhong held by the actual controller, thereby indirectly gaining control of CAPM and its core asset, Oni Gold Mine. The Oni Gold Mine has a gold metal content of 501.74 tons and an average grade of more than 7 grams, which has a good development basis and economic benefits prospects. At present, the production of Oni Gold Mine has been suspended for 7 years, and CAPM is actively organizing the resumption of production. According to the feasibility report of the project, the production scale of the mine is 6000t/d, and the recovery of production capacity will be completed in the next six years, when the four mining areas will reach an annual production capacity of 1.98 million tons of ore and 95% of total gold.
Profit forecast and investment rating: we estimate that the company's return net profit from 2017 to 2019 is 247 million / 530 million / 734 million yuan, corresponding to EPS 0.13, 0.28 and 0.39 yuan per share, respectively, and corresponding current price PE is 73, 34 and 25x, respectively. If the fixed increase is successfully completed, the exam preparation EPS is expected to be 0.13, 0.25 and 0.35 yuan per share, respectively. Considering that the company's new production capacity will greatly increase the company's performance, while the original production capacity of Xitulu Copper Mine will remain stable in the next five years, the company's performance is expected in the context of high copper prices. We give the target price 11.20 yuan, which corresponds to 40 times PE in 2018, covering it for the first time and giving it an overweight rating.
Risk hint: new production capacity is lower than expected, copper, gold and cobalt prices fall, and Clean TeQ performance is lower than expected.