Incident: On March 14, 2024, the company plans to acquire 50% of Momentum's shares in Junction Mining Limited and 15% of Chifupu's shares in Junction on a combined basis of $58.5 million in cash.
Junction's main asset is the Kitumba copper project in Zambia. After the transaction is completed, the company will own 65% interest in the Kitumba copper project.
Acquired the Kitumba copper mine and Tsumeb smelter to begin the deployment of copper resources. 1) On the mining side, the Kitumba copper project is currently in the development stage. According to the 2015 resource estimation report, the total amount of copper resources found in the Kitumba copper mine area is 27.9 million tons, 614 million tons of copper metal, an average grade of 2.20% of copper, and the price for a single ton of copper is about 147 US dollars/ton. According to the 2015 Feasibility Study Report, the cash cost of Kitumba copper mine C1 is 1.6 US dollars/pound (about 3,527 US dollars/ton), and the all-in cash cost is 1.93 US dollars/pound (about 4,255 US dollars/ton), and the cost is highly competitive. There are still several gravity and magnetic anomalies and soil geochemical anomalies in the mining area, such as Kakozhi, Mushingashi, and Mutoya. Work has shown that the abnormal area has developed the same type of IOCG-type copper mineralization, and has good metallization potential and prospecting prospects. After the mine acquisition is completed, the company plans to start peripheral prospecting work and conduct feasibility studies on the Kitumba copper project to determine the next development plan based on the results of the research work. 2) On the smelting side, it is planned to acquire the Tsumeb copper smelter for 49 million US dollars. The copper smelting output in 2023 is 189,000 tons, the 24-year production guideline is 200-230,000 tons, and the cash cost of a single ton of copper smelting in 23 years is 414 US dollars/ton.
The growth of the lithium sector continues to show. 1) On the lithium salt side, in November 23, Chunpeng New Materials successfully ignited 35,000 tons of lithium salt for trial production. The company's total production capacity of battery-grade lithium salt reached 66,000 tons/year (of which 6,000 tons are lithium fluoride), and plans to achieve 100,000 tons of high-purity lithium salt production capacity by 2025. 2) On the mine side, Bikita has a production capacity of 2 million tons of lithium permeable feldspar plus 2 million tons of lithium concentrate, and the Tanco mine has a production capacity of 180,000 tons of spodumene. It plans to invest in the construction of a 1 million tons/year extraction project in Canada's Tanco mine. Currently, it can achieve the goal of complete self-sufficiency of 60,000 tons of lithium salt.
Profit forecast and investment suggestions: We lower the company's average lithium salt shipment price for 23-25 to 24, 10,000 yuan, and 100,000 yuan/ton, respectively. We expect the company's net profit for 2023-2025 to be 24.00, 14.65 billion yuan, and 1.923 billion yuan respectively (previous net profit forecast values of 34.66, 39.10, and 4.930 billion yuan). Based on the current market value of 29.8 billion yuan, the corresponding PE is 12.4, 20.3, and 15.5X, respectively. Maintain the company's “buy” rating.
Risk warning: Risk of price fluctuations of main products; project construction progress falling short of expectations; sales of new energy vehicles falling short of expectations; supply-side capacity releases exceeding expectations; deviations in demand estimates and delays in the use of public information in research reports; profit forecasts fall short of expectations due to changes in core assumptions; there is a risk that public data used in the research report will not be updated in a timely manner, etc.