The copper industry is the main one, leading the industry. The company is a large-scale full-industry chain copper manufacturer integrating copper mining, smelting, processing and trade. The main products include cathode copper, copper processing materials, and products such as gold, silver, and sulfuric acid produced during the smelting process. Currently, the production and sale of cathode copper is the company's main business. The company's copper industry integrates mining, mineral processing, smelting and processing. It has complete industrial chain advantages, and the product scale continues to grow. As of 2023H1, the company has 31 subsidiaries. The actual controller of the company is the State-owned Assets Supervision and Administration Commission of the Anhui Provincial People's Government; as of the 2023 three-quarter report, Tongling Nonferrous Metals Group Holdings Co., Ltd. holds 47.26% of the company's shares and is the controlling shareholder of the company. Judging from the company's operating income and gross profit structure, the vast majority of the company's revenue comes from copper products, accounting for more than 80% since 2014; since 2016, the copper products business has contributed more than 60% of gross profit.

The Mirador copper mine has been injected, and copper production has entered a new stage. On August 2, 2023, 70% of the shares of China Railway Construction Tongguan Investment Co., Ltd. purchased by the company had completed industrial and commercial registration procedures. China Railway Construction Tongguan controls the large-scale copper resources of Corriant Resources Company located in southeastern Ecuador. Among them, the Mirado Copper Mine currently has discovered and controlled 1,257 million tons of ore, an average copper grade of 0.48%, and a copper metal volume of 6.0305 million tons. It is one of the largest copper mines in the world and has significant resource advantages. According to the transaction report, the first phase of the Mirador copper mining project has been completed and put into production, and the second phase of the project is under construction. The Mirador copper mine is in the mining stage. The first phase of the copper mine project was completed and put into trial production in the second half of 2019. The processing capacity of copper ore is 20 million tons/year, which is expected to produce about 90,000 tons of copper concentrate per year; the second phase of the project is expected to be completed and put into operation in June 2025. At that time, the total processing capacity of the first and second phases of the copper ore project will reach 46.2 million tons/year, and is expected to produce about 200,000 tons of copper concentrate per year.

Profit forecast. In terms of production, the Mirador copper mine has been consolidated, which will greatly increase the company's copper and copper production. We expect the company's self-produced copper concentrate to contain 104,200 tons, 180,000 tons, and 200,000 tons of copper in 2023-2025, respectively. In terms of price, as of the beginning of November 2023, the average spot price of cathode copper in East China during the year was 68,200 yuan/ton. We assume that the price of copper will remain at 68,000 yuan/ton in 2023-2025. Based on the above assumptions, we expect the company to achieve net profit of 3.4 billion yuan, 4.5 billion yuan, and 4.9 billion yuan respectively from 2023-2025, and achieve earnings per share of 0.27, 0.35, and 0.39 yuan. As of November 17, 2023, the company's 2023-2025 PE valuation was 11.1x/8.5x/7.8x, respectively, lower than comparable companies. We are optimistic that the company's production of self-produced copper concentrate will be greatly increased after the second phase of the company's Mirador copper mine is launched. The company's performance has increased, and for the first time, it has been given a “buy” rating.

Risk warning: The construction progress of the second phase of the Mirador copper mine fell short of expectations; copper prices fell sharply, and downstream demand fell short of expectations.