The company plans to acquire 65% interest in the Kitumba copper mine in Zambia
On March 15, 2024, it was announced that African Minerals Limited, a wholly-owned subsidiary of the company, plans to acquire 65% of Junction Mining Limited's shares in cash on a total basis of $58.5 million. Its main asset is the Kitumba copper project in Zambia. After the transaction is completed, the company will hold a total of 65% of Junction's shares and a 65% interest in the Kitumba copper project.
Kitumba copper mine has considerable potential to increase storage, and the cost is advantageous
The Kitumba copper mine is rich in resources and has considerable potential to increase reserves. The Kitumba deposit is an iron oxide copper-gold (IOCG) deposit. According to the 2015 resource estimation report, the total amount of copper resources recovered in the Kitumba copper mine area is 27.9 million tons, 614,000 tons of copper metal (border grade 1%), and the average grade of copper is 2.20%. Zambia is a major copper-producing country located in the China-Africa copper belt. The Kitumba copper project in Zambia has large resources, convenient transportation, perfect infrastructure, and a good foundation for development. There are still several gravitational and magnetic anomalies, electric shock anomalies, and soil geochemical anomalies outside the discovered area in the mining area. Work has shown that the abnormal area has developed the same type of IOCG-type copper mineralization, and has good potential for mineralization and prospecting prospects. After the acquisition of the mine is completed, the company plans to start peripheral prospecting work, conduct a feasibility study on the Kitumba copper project, and determine the next development plan based on the results of the researchable work.
The Kitumba copper mine is currently still under development, and is expected to produce nearly 40,000 tons per year after commissioning. According to the 2015 Preliminary Research Report, the copper mine has a lifespan of about 13 years, and the average annual copper production during the life cycle can reach 37,000 tons. The cash cost is 1.6 US dollars/lb (equivalent to 3,527 US dollars/ton), and the full cash cost is 1.93 US dollars/lb (equivalent to 4255 US dollars/ton), which has a cost advantage. The estimated capital expenditure of the project is $433 million.
Accelerate the layout of the copper sector and the development of the entire industry chain
The company has accelerated the strategic layout of the copper sector and increased its copper ore resource reserves. According to the company's 2023 semi-annual report, the company already owns a number of copper mining rights in Zambia. The Shifuma copper mine in northwestern Zambia uncovered a total amount of 34.06.9 million tons of copper ore and 222,700 tons of copper metal, with an average grade of 0.73%; the total ore volume of 3.2226 million tons and 70,000 tons of copper metal, with an average copper content of 2.17%. In the first half of 2023, a total of 45,000 tons of ore was mined, and the average grade of copper was 2.47%. The Kabwe copper mine in Zambia has a total ore volume of 11.041 million tons and a copper metal content of 154,600 tons, with an average grade of 1.4%. The acquisition of Kitumba Copper Mine in Zambia has increased the company's copper mineral resource reserves, providing a more adequate resource guarantee for the company's copper resource mining development, and the company's market competitiveness and sustainable development capacity are expected to improve.
In March 2024, the company acquired the Tsumeb smelter in Namibia, and the copper industry chain has achieved a multi-link layout. According to China Nonferrous Metals News, on March 7, 2024, a wholly-owned subsidiary of China Mining Resources acquired Dundee Precious Metals Ins. (DPM) holds 98% of the issued shares of Dundee PreciousMetals Tsumeb Holding (Pty) Ltd. (DPMTH), with transaction consideration of $49 million. DPMTH's main asset is the Tsumeb smelter in Namibia. Tsumeb smelter is one of the few specialty smelters in the world that can handle complex concentrates such as high-arsenic copper concentrates. Currently, the smelter's concentrate processing capacity is 260,000 tons/year. Through technological upgrading, it is estimated that the concentrate processing capacity can be increased to 370,000 tons/year.
Focusing on building an international mining group company, the copper sector is expected to become a new growth point for the company. According to the company's 2022 annual report, the company is focusing on building an international mining group company with the production and supply of lithium battery new energy materials, development and utilization of rare light metal resources, solid mineral exploration and mineral rights development. The copper sector is expected to become an important mining development growth point in the company's long-term development.
Investment advice:
We expect the company to achieve operating income of 76.50, 50.47, and 6.975 billion yuan respectively in 2023-2025, and achieve net profit of 29.57, 14.02, and 1,851 billion yuan, corresponding EPS of 4.06, 1.92, and 2.54 yuan/share, respectively. Currently, the corresponding PE price is 10.0, 21.2, and 16.1 times. The company maintained a “buy-A” rating, and the target price for 12 months was adjusted to 50.8 yuan/share, which is 20 times the corresponding 25-year PE.
Risk warning: Lithium prices fluctuated greatly, demand fell short of expectations, and project progress fell short of expectations.