Main points of investment:

The company is an international mining company which mainly focuses on gold mine and new energy and new material mineral "two-wheel drive", and takes non-metallic ore and bulk trade as business coordination. It is also the only mining industry company in the strategic layout of "one body and two wings" of SAZI High holding Group. The company made strategic positioning in the 14th five-year Plan in 2021 and actively implemented effective strategic transformation in 2022. In 2022, the company completed the injection and consolidation of Pajingo Gold Mine (100%), the equity transfer registration of Shaanxi Loufanggou Vanadium Mine (67%), the industrial and commercial change registration of Liaoyang Lighthouse Shuangli silica Mine (35%) and the share registration of Mozambique Teng Mining (11.44%). The company has become a rising star of gold and precious metals and new energy and new materials miners in the industry.

The company's business model has changed from trading business to diversified miner business. At present, the company's main business is mainly composed of two types, namely, trade business and mining business. Among them, the trade business is still the main business of the company's revenue and profit, and the overall operation is sound and the gross profit level is optimized (the three-year average revenue is nearly 11 billion yuan, and the gross profit level is from 1.9% = > 4.9%). In 2022, trade income accounted for 98.67% of the main business, and profits accounted for 88.35%. In view of the high volatility of global commodity prices affected by multiple factors in the past three years, it can reflect that the company has a strong risk control and management mechanism in the field of bulk trade and the ability of industry chain management. The company's mining business has strong growth attributes and flexible performance, thanks to the output contribution of Parjingo Gold Mine in December 2022, the proportion of mining sector revenue and gross profit in total revenue increased to 1.32% and 11.47% respectively in 2022. Considering that Pajingo Gold Mine has entered the stage of reaching full production since 2023, and the output of Shaanxi Loufanggou Vanadium Mine is released in the later stage of superposition, it is expected that the proportion of mining business to the company's main business will show a structural rise. In addition, in view of the high gross profit characteristics of the mining and dressing business (the company's 2022 gross profit margin of mineral gold mining and dressing business is as high as 47.1%, and the per gram cost is about 220 yuan), we believe that the overall gross profit level of the company has room for continuous optimization.

Mining industry two-wheel drive strategy to speed up, the company's value attribute has undergone a qualitative change. The company efficiently implements the "two-wheel drive" main business strategy of gold and precious metals and new energy and new materials minerals, and the mining business will enter a strong growth cycle from 2023. Among them, Pajingo Gold Mine will enter a state of full production in 2023 (holding 100%, with gold resources of 53.06t (170.6 ounces) @ 4.5g/t. Based on the production capacity of 600000 tons and the recovery rate of about 90 per cent, the output of mineral gold from 2023 to 2025 is expected to reach 3.15kg 3.35max 3.58 tons respectively). Shaanxi Loufanggou Vanadium Mine is expected to start the construction of the mining project in the second half of 2023 and enter the state of trial production in 2025 (holding 67%, with 46.1029 million tons of vanadium ore and 499900 tons @ 1.08% of vanadium pentoxide resources). Based on the production capacity of 660000 tons, 15% dilution rate and about 80% recovery, it is estimated that 98% of vanadium pentoxide production from 2025 to 2027 is 2407.1b 3758.24814.2 tons respectively.

Liaoyang Beacon Shuangli silica Mine is an open-pit mine with a construction period of about 8 months. It is expected to complete the construction of the main plant and installation of equipment by the end of 2023 and reach production in March 2024 (35% of shares, 4.562 million tons of resources in the mining area, and a designed annual production capacity of 500000 tons, with a recovery rate of 97.5%). Teng Mining in Mozambique, Africa is a high-quality upstream mineral in the graphite new material industry chain, of which the Ankuabe graphite mine project has carried out infrastructure (holding 11.44%, has about 46.1 million tons of graphite resources, and has a designed annual production capacity of 1 million tons. Annual output of natural flake graphite concentrate is about 60,000 tons). Considering that the company's mining business has entered a new stage of structural growth from the resource side to the output side (the Parjingo Gold Project will be the first full year of gold mine earnings to be merged with a listed company in 2023), and the mineral sector involved in the company also has the dual attributes of hedging and growth, it is expected that the continued development of the mining business will effectively optimize the company's value attributes and valuation flexibility.

A number of competitive advantages build the company's growth advantage. Diversification advantage: the company is in a new stage of rapid development of business transformation. the diversified development of trade + mining industry chain is conducive to the optimization of company synergy, business scale and economic benefits. Team advantages: the company has a professional mining operation team and efficient management team, and the substantial optimization of the operation capacity and recovery rate of the Parjingo Gold Mine project effectively confirms the operation ability of the company's mining team; the rapid and effective implementation of strategic transformation confirms the strong cohesion, strong business ability and strong execution of the company's management team. Shareholder advantage: the company has the resource advantage of state-owned shareholders, and the controlling shareholder has mining project reserves with good resource endowment and strong financing ability to ensure the subsequent mining capital operation of the company.

Earnings forecast and investment rating: the company's performance will benefit from the expectation of rising gold production and prices, the expansion of the company's operating scale (mainly output scale) and the switching of the main business structure. We estimate that the company's revenue from 2023 to 2025 will be 11.331 million yuan, 10.839 billion yuan respectively, and its net profit will be 588 million yuan, 8296 million yuan, 949 million yuan, respectively, and the corresponding EPS will be 1.21 yuan per share, and the corresponding PE will be 13.34X/9.46X/8.27X. Taking into account the stability of the company's commodity trading business, the rising trend of the gold pricing center, the sustained growth of the company's mineral gold production, and the optimization and enhancement of the company's valuation attributes, it was covered for the first time and given a "recommended" rating.

Risk hints: metal price and ore grade decline, mining project reserve risk, project construction schedule is not as expected, actual mine operating rate is affected by policy decline, accounts receivable risk is too high, inventory risk, single customer high concentration moderate risk, resource country political risk and exchange rate risk.