Incidents:
1) On 2024/3/14, Afmin, a wholly-owned subsidiary of the company, plans to purchase 50% and 15% of Momentum and Chifupu's shares in Junction on a total basis of $58.5 million in cash. Junction's main asset is the Kitumba copper mine; after the transaction is completed, the company will own 65% interest in the Kitumba copper project.
2) On 2024/3/7, China Mining (Hong Kong) Rare Metals Resources Co., Ltd., a wholly-owned subsidiary of the company, reached an agreement with DPM to acquire the Tsumeb smelter in Namibia. The subject of the acquisition was 98% of DPMTH's issued shares held by DPM, with a transaction consideration of 49 million US dollars in cash.
The Kitumba copper mine has an average grade of 2.2%. It still has good metallization potential and prospecting prospects. The Kitumba copper mine is located about 240 km north west of Lusaka in Zambia. The mining area has good infrastructure such as road conditions. The mineral rights cover an area of 248 square kilometers. The mineral rights are valid from November 2014 to November 2039. The total amount of copper resources discovered in the Kitumba copper mine is 27.9 million tons, 614,000 tons of copper metal, and the average grade of copper is 2.2%. After the acquisition is completed, the company plans to start peripheral prospecting work, conduct feasibility studies, and determine the next development plan based on the results of the research work.
With the layout of the Tsumeb smelter in Namibia, concentrate processing capacity is expected to increase by 42% after technical reform. The Tsumeb smelter is one of the few special smelters in the world that can handle complex concentrates such as high-arsenic copper concentrate; the process technology is mature, the infrastructure is perfect, transportation is convenient, and the plant is connected to the Atlantic port Walvis Bay by rail. The smelter's concentrate processing capacity is 260,000 tons/year, and the main products are crude copper and sulfuric acid; through technological upgrading, concentrate processing capacity is expected to increase to 370,000 tons/year.
Optimistic about future copper price trends, which is expected to enhance the company's profit elasticity
Copper is widely used in fields such as photovoltaics, wind power, and electric vehicles, and demand is expected to benefit from the rapid development of the new energy industry. On the supply side, due to factors such as declining ore grade and community conflicts, uncertainty about global copper supply growth intensified in 24, and the sharp decline in smelting and processing costs also confirmed that upstream mining supply was tightening. As of 2024/03/14, LME's three-month copper price was 8890 US dollars/ton, up 8% from the previous month. We are optimistic about the future trend of copper prices. The company's layout of the copper mine business is conducive to enhancing profit elasticity.
Rich experience in mineral exploration helps the company obtain high-quality mineral resources. The company is an important supplier of overseas solid mineral geological exploration technology services. It undertakes geological exploration work for major projects such as the Zijin Mining Congolese (DRC) Camoa Copper Mine, and provides professional resource evaluation and technical support for mining project investment decisions and resource reserve verification. In recent years, the main function of the solid mineral exploration business is to guarantee the company's existing mine production and find high-quality mineral resources on a global scale, providing a stable front-end resource guarantee for the company's bulk metals and new energy metals business.
Profit forecasting and investment advice
We expect the company's net profit to be 27.37/26.60/3.635 billion yuan in 2023-2025, -16.92%/-2.81%/+36.62% year-on-year, respectively; EPS of 3.75/3.65/4.98 yuan, respectively. Referring to comparable company valuations, we gave the company 13.1 X PE in 2024, with a target price of 47.81 yuan, maintaining a “buy” rating.
Risk warning: risk of macroeconomic fluctuations; risk of large fluctuations in non-ferrous metal prices; risk of project construction progress falling short of expectations; risk of exchange rate fluctuations.