Report summary:
The company's main products are copper, cobalt, and gold: the company is one of the most advanced non-ferrous ferrous groups integrating the multi-metal industry chain in China. The company's main core assets are the Hituru Mine in the Democratic Republic of the Congo (DRC) and the Oni Gold Mine in South Africa. The core products are copper, cobalt, and gold. The company has all the elements of non-ferrous metal production and sales, from sampling and smelting to trade. Among them, the company's cathode copper product revenue accounts for 66% of the company's main revenue (excluding trade). The company's production of cobalt and gold products will be gradually released starting in 2018. It is estimated that by 2020, the company's cobalt and gold metal production may reach 7,000 tons and 5708 kg respectively. The company's business scale is expected to expand further based on the diversification of the product structure.
The company's operating performance will benefit from the release of Ooni Gold Mine's output: the company's total resource ore volume of 71.31 million tons of gold ore, 50,177 million tons of gold metal, and a taste of 744 g/ton; according to the company's production plan, the 2/4/6/7 mine of Oni Gold Mine will be (kg) in 2018-2022 (kg): 32.22, 761, 5708, 9814 and 12332; the profit of Oni Gold is expected to be 2.82 million, 75.7 million, 1,007 million million, 1.65 billion and 2.05 billion, respectively; in 2018- The average gross profit of gold production remained at 32% in 2019, and gross profit in 2020-2022 may exceed 55%. Furthermore, after Oni Gold Mine is produced, the company will become one of the top five gold producers in the country.
The company's operating stability is supported by the expansion of mineral storage resources: in addition to stabilizing the development of the existing Hituru Mine's 3.89 million tons of mineral storage resources and the Oni Gold Mine's 501.7 tons of gold and metal resources, the company signed a reimbursement agreement with Vincent for copper and cobalt raw materials. At the same time, the company signed a 25-year leasing and mining rights for the PE1078 plot with the Democratic Republic of the Congo (DRC) Mining Corporation. The vigorous expansion of the company's mineral storage resources contributed to the stability of the company's operating performance.
The company's operating scale will benefit from the integrated expansion of the new energy industry chain: the company plans to upgrade its cobalt hydroxide production line technology to stabilize its upstream supply of new energy; the company invests in CleanTeq, signs a cobalt hydroxide sales agreement with Gepai New Energy, and invests in the establishment of Shanghai Pengpo to comprehensively lay out the new energy industry chain integration and expansion. The company's diversified multi-sector business structure is conducive to the development of synergies, the expansion of its business scale, and the improvement of its resilience to risks.
The company's performance will benefit from the stable release of the company's metal product output, the continuous expansion of the company's operating scale, the expectations of production costs and production stability, and the integrated expansion of the new energy industry chain.
Risk warning: Gold and metal production at the Oni Gold Mine fell short of expectations, cathode copper production costs rose more than expected, copper and gold prices fell sharply, and there was a political risk in the Democratic Republic of the Congo (Gold) that exceeded expectations.
Expected company profit forecasts and investment ratings.
We expect the company's revenue from 2018 to 2020 to be $11.103 billion, $16.14 billion, and $22.12 billion, respectively, and net profit of $483 million, $652 million, and $844 million, respectively; the corresponding EPS is 0.22/0.3 and 0.39, respectively. We gave the company a 25-fold valuation within 6 months, with a target price of 7.5 yuan, a 40% premium compared to the current premium, and gave the company a “recommended” rating.