Incident: Zijin Mining released its 2023 annual report. During the reporting period, the company achieved operating income of 293.403 billion yuan, an increase of 8.54% year on year, realized net profit of 21.119 billion yuan, an increase of 5.38% year on year, and realized net profit deducted from non-return to mother of 21.617 billion yuan, an increase of 10.68% year on year.
Looking at a single quarter, in Q4 2023, the company achieved operating income of 68.395 billion yuan, a year-on-year increase of 3.41%, a month-on-month decrease of 8.41%, and realized net profit of 4.954 billion yuan, an increase of 46.80% year-on-year and a decrease of 15.49% month-on-month.
During the reporting period, the company's performance increased due to a sharp rise in the volume and price of its main products, but rising costs dragged down profits.
From a quantitative perspective, in 2023, excluding data from uncontrolled companies, the company produced 803,400 tons of mineral copper (yoy +10.47%), with sales of 810,700 tons (yoy +9.75%); mineral gold production: 64.84 tons (yoy +15.97%), sales 66.71 tons (yoy +9.68%); mineral zinc production: 411,600 tons (yoy +2.31%), sales volume of 414,900 tons (yoy +3.32%); mining silver production (yoy +3.32%) , sales volume 411.40 tons (yoy +1.99%).
In terms of price, in 2023, the average price of SHFE copper was 68,027.44 yuan/ton (yoy +1.68%), the average price of SHFE gold was 450.35 yuan/gram (yoy +14.71%), the average price of SHFE silver was 5,578.50 yuan/kg (yoy +17.67%), the average price of SHFE lead was 15,768.57 yuan/ton (yoy +3.08%), and the average price of SHFE zinc was 21,488.16 yuan/ton (yoy -13.74%).
In terms of cost, in 2023, costs increased year-on-year due to factors such as exchange rate fluctuations, falling selected grades, and rising fuel and electricity prices. Among them, mine gold ingots cost 286.09 yuan/gram (yoy +13.78%), mine gold concentrate cost 158.83 yuan/gram (yoy +10.99%), mine copper concentrate cost 19,998 (yoy +6.08%), mine copper production cost is 29,862 yuan/ton (yoy +25.22%), mine electric copper decomposition cost 3,4 098 yuan/ton (yoy +45.64%), mine zinc production cost 9,266 yuan/ton (yoy +15.58%), mine silver cost 1.72 yuan/gram (yoy +5.35%). In 2023, the company's C1 copper costs and gold AISC costs were in the top 20% of the world.
There was a slight increase in the cost rate during the period. The company's expense ratio for the 2023 period was 4.47%, an increase of 0.77pcts year-on-year. 1) In terms of sales expenses, due to the increase in consolidated companies, sales expenses increased 23.63% year on year to 766 million yuan, and the sales expenses ratio increased from 0.23% to 0.26%, up 0.03 pcts year on year. 2) Due to the increase in consolidated enterprises, consolidated payments and welfare expenses increased 25.00% year on year to 4.232 billion yuan, management expenses increased 20.08% year on year to 7.523 billion yuan, and the management expenses ratio was 2.36% → 2.32%, down 0.04 pcts year on year. 3) In terms of financial expenses, due to the increase in the scale of financing and the increase in interest rates on foreign currency loans, interest expenses increased 48.28% year on year to 5.486 billion yuan. The total financial expenses were 3.268 billion yuan, up 71.57% year on year. The financial expense ratio increased 0.41 pct year on year from 0.70% → 1.11% year on year.
4) The R&D cost rate increased by 0.08pcts year on year from 0.46% → 0.53%.
Internal research and external expansion further expand the incremental space, and the foundation for future sustainable development will continue to be consolidated.
On the internal side: The company carried out continuous exploration and storage expansion work. In 2023, the company invested 379 million yuan in exploration capital according to equity, adding 82.41 tons of gold resources, 2.467 million tons of copper, 722,900 tons of zinc (lead), 161,000 tons of tungsten, 64,400 tons of molybdenum, 650.32 tons of silver, and 1,014,400 tons of lithium carbonate equivalent.
External side: The company completed the merger and acquisition of 48.59% of the shares in the Junuo copper mine in Tibet, adding 1,427,800 tons of copper, 27,800 tons of molybdenum, and 456 tons of silver. In addition, the company completed a merger and acquisition of resources such as the remaining 34% interest in the Xiangyuan hard rock lithium mine in Daoxian County, 20% interest in the Yajiangcuola spodumene mine, and 49% interest in the iron ore.
By the end of 2023, the company held 2,997.53 tons of gold equity resources (yoy -4%), 74.5565 million tons (yoy +1%) of copper equity resources, 9.3927 million tons (yoy -5%) of zinc equity resources, 3,057 million tons (yoy +1%) of molybdenum equity resources, and 13.4659 million tons of LCE (yoy +11%) of lithium equity resources.
Key copper and gold mining projects continue to advance, and construction of new energy projects has been accelerated, giving the company growth potential.
Copper, with a compound growth rate of about 10% in the next two years: Serbia's Pegi copper-gold mine and Boer copper mine will complete technical reform in 2025, with a total production capacity of 300,000 tons/year of copper; the Congolese (DRC) Camoa copper mine phase III project is expected to be completed and put into operation in Q2 2024. The production capacity will increase to more than 600,000 tons/year, and the 500,000 tons/year anode copper smelter is scheduled to be completed and put into operation in Q4 2024; the Tibet Dragon Phase II renovation and expansion project has been approved, and the mine will reach copper production capacity after production. 30-350,000 tons/year; Duobaoshan Copper Mine No. 2 ore mining project Proceed in an orderly manner, and production capacity may increase to 120,000 tons/year after delivery.
Gold, with a compound growth rate of about 15% in the next two years: the Rosebel main mining area and Saramacca mine in Suriname have all been put into operation, and will form a gold production capacity of 10 tons/year after production; the Pogra gold mine will resume production on December 22, 2023, with an average annual mineral gold production of 21 tons after delivery, with an equity of about 5 tons owned by the company; the new Jinshan gold mine in Longnan Zijin has been reviewed and approved, and has now entered the trial production stage; the construction of the Savayalton gold mine project is progressing at an accelerated pace, and the design will be mined first, it is expected that Lucai will be completed and put into production After that, the average annual output was about 3.3 tons, and the average annual output after land mining was completed was about 2.4 tons.
Lithium has the potential to form 150,000 tons of lithium carbonate in 25 years: the 3Q Salt Lake Phase I 20,000 tons/year lithium carbonate project has been basically completed, and the construction of the Yantian project of the 30,000 tons/year battery lithium carbonate project in the second phase is progressing in an orderly manner; the first phase of Lagocuo Salt Lake has formed 20,000 tons/year lithium hydroxide production capacity, and the first phase and phase II have all been completed and put into production, forming a lithium hydroxide production capacity of 300,000 tons/year; the first phase of Hunan's lithium hard rock polymetallic mine has been completed, and the second phase is 5 million tons/year The annual selection system is progressing in an orderly manner. It is planned to be completed and put into operation in the second quarter of 2025, after delivery It is expected to generate approximately 30,000 tons/year equivalent lithium carbonate production capacity.
The upward trend in precious metals has not changed, and the foundation of the copper bull market remains solid. As for gold, in the medium term, as residents consume excess savings and maintain high interest rates, it is difficult to avoid a cyclical decline in the US economy. With the further interpretation of de-globalization, central bank purchases will push the price of gold to new heights, and the company is expected to fully benefit as a target of outstanding resource advantages within the gold sector. For copper, the importance of changes in the demand structure has been ignored, and the impact of new energy sources has changed from marginal to global. The medium- to long-term copper concentrate shortage trend is difficult to change, especially after 2025. Supply bottlenecks are particularly prominent, and copper has a strong foundation.
Profit forecast and investment suggestions: Referring to the 2024-2025 production plan given by the company, we assume that the company's 2024-2026 mineral gold output is 75.8/90.0/93.7 tons, mineral copper production is 111.3/118.8/1.208 million tons, and mineral lead and zinc production is 48.0/49.3/498 million tons, assuming 2024-2026 annuity price 510/530 yuan/gram, copper price 7.0/7.1/7.2 million yuan/ton, zinc price 2.1/2.2/23,000 Yuan/ton. The company is expected to achieve net profit of 260.18/323.12/36.169 billion yuan in 2024-2026. The current stock price is 17.01 yuan, which corresponds to PE of 17/14/12X, maintaining the company's “buy” rating.
Risk warning: macroeconomic fluctuations exceeding expectations, risk of project construction progress falling short of expectations, geopolitical risk, risk of metal price fluctuations exceeding expectations, risk of untimely update of research report usage information, risk of model measurement errors, etc.