It is proposed to invest 40% of the equity in Asia-Pacific Mining in the form of cash or capital increase. According to the company's announcement on November 27, the company negotiated with Guizhou Asia-Pacific Mining Co., Ltd. and its shareholder Guangxi Dirun Mining Investment Co., Ltd. it is proposed to acquire 40% of the equity interest in Guizhou Asia-Pacific Mining Co., Ltd., held by Guangxi Dirun Mining Investment Co., Ltd., the pre-evaluated price of Asia-Pacific Mining is 1.942 billion yuan, and the transaction price is estimated to be 777 million yuan.
The mining scale of the gold mine can reach 1 million tons per year, and the gold production can reach about 3.7 tons. According to the announcement "Guizhou Asia-Pacific Mining Co., Ltd. involved in mining right value estimate report" shows that the retained gold resources: sulphide ore 51.9t, average grade 4.56gxt; oxidized ore 2.27t, average grade 1.16g/t. According to the matching principle of resource reserves and production capacity, resource reserves and reserve resources within the scope of exploration rights can match to support 1 million tons / year production capacity. It is preliminarily estimated that about 3.7 tons of gold can be produced each year after mining and production.
Investment advice. According to the price of lead, zinc, silver and antimony, the EPS of the company from 2019 to 2021 is expected to be 0.23 picks up 0.80 yuan per share, and the PE of the corresponding share price is times that of 38-15-12, considering that the original business profit of the company is in the stage of bottoming out. After the company is put into production, the company's revenue is expected to increase by 78%, and the company's profit is expected to increase by 178%. The precious metal sector accounts for nearly 50 per cent of total revenue in 2020 (without taking into account price increases and thickening of the acquisition performance), which may lead to a double boost in performance and valuation. With reference to the average PB of the same type of companies in the industry in 2020, considering that the company is in the process of transformation, give a valuation of 3 times PB in 2020, with a reasonable value of 11.97 yuan per share. In view of the fact that Huayu Mining's performance valuation is expected to improve significantly, in 2020, 15 times PE is far lower than the company's average 23 times, maintaining a "buy" rating.
Risk hint. The transaction is still in the planning stage, and the proposed acquisition may be at risk of termination; the underlying company currently holds one mining right and two exploration rights, and there may be risks in the conversion of two exploration rights to mining rights and the renewal of mining rights; the price of gold fluctuates sharply.