Key points of investment:
Overseas mines have entered a period of rapid growth for the high elasticity of gold and antimony when production is put into operation. The company mainly focuses on the development of mineral resources. Currently, there are domestic and overseas resource mergers and acquisitions and development plans. According to the company announcement, the Kangqiaoqi Gold and Antimony Mine, a subsidiary of Talu Gold, has a planned production capacity of 2.2 tons of gold and 16,000 tons of antimony. The company holds 50% interest in Talu Gold. The first batch of gold concentrate harvested in the Kangqiaoqi surface mine in January 2023 arrived at Lanzhou Port in China. It is expected that the Kangqiaoqi gold and antimony mine will enter a period of rapid growth in the future.
Global antimony supply and demand continue to tighten, and antimony prices continue to be high. Supply side: Production continues to shrink, and new supply is limited. According to data from the US Geological Survey, global antimony reserves in 2021 were about 1.97 million tons, mainly in China, Russia, Bolivia, Kyrgyzstan and other countries; in 2018-2021, global antimony ore production fell from 147,000 tons to 109,000 tons, with production falling 25.9%. The Kangqiao Antimony Gold Mine in Tajikistan, owned by Huayu Mining, was put into operation in 2022Q2. The planned production capacity is 16,000 tons of antimony/year. The production capacity climbing cycle is expected to be around two years. Demand side: PV glass clarifiers drive demand for antimony to continue to grow. Sodium pyroantimonate is the main component of photovoltaic glass clarifiers. According to estimates, the global demand for antimony for photovoltaic glass clarifiers in 2023-2025 was 28,700 tons/34,400 tons, respectively, and the CAGR was 21.7%, driving the continuous rise in antimony demand. Supply and demand:
The global antimony supply and demand balance from 2023-2025 was -202,000 tons/-0.87 million tons/-18,200 tons, respectively. Antimony supply and demand will continue to tighten, and antimony prices are expected to rise over a long period of time in the future.
The Fed's interest rate cut cycle is coming, and there is plenty of momentum to support rising gold prices. Judging from historical data, gold demand is essentially a demand for value preservation, and the price of gold is significantly negatively correlated with real interest rates. The Federal Reserve initiated this rate hike in March 2022. As of July 2023, interest rates have been raised 11 times, with a cumulative interest rate increase of 525 basis points. The Fed announced in December 2023 that the benchmark interest rate will remain between 5.25%-5.5%. This is the third time since September this year that the Fed has suspended interest rate hikes for the third time in a row. We believe that the Federal Reserve is expected to enter the interest rate cut channel in 2024. On the other hand, according to data from the US Department of Labor, the US CPI in November 2023 increased 3.1% year on year and 0.1% month on month, and inflation is still high. As the Fed's interest rate cut cycle approaches, the value preservation properties of gold are highlighted, and the price of gold is expected to receive upward support.
For the first time, high-growth, high-elasticity gold and antimony standards were covered and given a purchase rating. The main increase in the company's future will come from the release of the Kangqiaoqi gold and antimony mine in Tajikistan. According to the company announcement, the Kangqiaoqi gold and antimony mine, a subsidiary of Talu Gold, has a planned production capacity of 2.2 tons of gold and 16,000 tons of antimony. The company holds 50% of Talu Gold's interests. We believe that the tightening of global antimony supply and demand is expected to continue, and that antimony prices will rise for a long time in the future. On the other hand, there is a high degree of certainty that the Fed will usher in a cycle of interest rate cuts, and there is sufficient momentum to support the upward trend in gold prices. The release of the company's overseas gold and antimony ore production combined with the industry's upward cycle is expected to enter a period of rapid growth. It is expected that the company will achieve net profit of 1.86/4.09/564 million yuan in 2023-2025. Considering that with the release of Kangqiaoqi gold and antimony mine production, the company's future growth will be better. Choosing 2024 PEG as a comparable valuation is reasonable. The company's 2024 PEG was 0.23, lower than the industry average, and was given a buying rating for the first time.
Risk warning: the new installed capacity of photovoltaics falls short of expectations, and the release of overseas mining production falls short of expectations