Incident: The company disclosed its semi-annual results for 2023, achieving revenue of 4,017 billion yuan, -19.37% year-on-year; realized net profit of 257 million yuan, +138.96% year-on-year; achieved net profit of 259 million yuan deducted from non-attributable income, +142.46%, which was basically in line with expectations. In 2023Q2, the company achieved revenue of 1,283 billion yuan in a single quarter, -41.62% year-on-year, and net profit of 114 million yuan, +257.32% year-on-year. The performance was in line with expectations.
The Pakingo gold mine was produced at full capacity, with remarkable results in reducing costs, increasing efficiency, improving quality and expanding production. The Pakingo project is mainly produced through underground mining to produce the final product, synthetic gold, which is then sold to the Perth Mint in Australia according to the closing price of the Australian international gold price on the same day. Since the delivery of the Pakingo project was completed, it has reached full production capacity. Through continuous optimization of personnel, equipment, and production plans in the Pakingo mining area, the overseas professional management team assigned by the company has achieved remarkable results in reducing costs, increasing efficiency, improving quality, and expanding production. In the first half of 2023, the Pacingo mining area achieved a gold production volume of 50,000 ounces (equivalent to 1.56 tons). Achieved operating income of 671 million yuan and net profit of 227 million yuan.
Many projects of vanadium ore, graphite ore, and silica ore are progressing steadily. The vanadium ore project broke through and came to fruition. In December 2022, the company obtained mining rights for the Loufanggou vanadium project in Shangnan County, Shaanxi Province; at the same time, the company joined hands with Dalian Rongke, a “leading enterprise” in the field of all-vanadium liquid flow energy storage batteries, to cooperate on the layout of the entire vanadium ore resource industry chain. It is expected that construction of the mining project will commence in the second half of the year. Actively lay out graphite mines in Africa. The company invested 5 million Australian dollars to invest in Chaiteng Mining, a company listed on the Australian Stock Exchange, and became its second largest shareholder, with a shareholding ratio of 11.44%. The Ankuabe graphite project owned by Chaiteng Mining is a large-scale and super-large scaly graphite mine. It has about 46.1 million tons of graphite ore resources and 248.95 million tons of recoverable reserves that meet JORC standards. Currently, it is planned to design an annual processing capacity of more than 1 million tons of raw ore and an annual output of more than 60,000 tons of natural flake graphite concentrate. The construction and commissioning of silica ore beneficiation is poised to begin. In March, the company invested 25.75 million yuan to increase its shares in Dengta Shuangli Silica Mining Co., Ltd., with a shareholding ratio of 35%.
In July, the groundbreaking ceremony for the first phase of the beneficiation plant was solemnly held. The construction of the project officially entered the substantive stage. The first phase has a design capacity of 500,000 tons/year, and the construction period is about 8 months. It is expected that the main construction of the plant and equipment installation will be completed by the end of November 2023, and the design capacity will be officially reached in March 2024.
Profit forecasting. Since delivery, the Pacingo gold mine has reached full production capacity, which is in line with expectations. We expect the company's gold production and sales volume in 2023-2025 to be 3.15/3.35/3.37 tons respectively, revenue of 110/107/102 billion yuan (reducing the gross profit sector), the net profit forecast for 2023-2025 is 5.52/600/660 million yuan, and PE corresponding to the closing price on August 25, 2023 is 13.7x/12.6x/11.5x, respectively. As a gold and precious metals sector, PE is clearly underestimated and maintains the “buy” rating.
Risk warning: gold price falls short of expectations; gold mine production falls short of expectations; impact of exchange rate fluctuations