The company is a comprehensive mining resource leader with a global layout. The company's management has many years of domestic and international investment and mergers and acquisitions, and has successively completed mergers and acquisitions of TFM and KFM's world-class copper-cobalt projects and IXM trading companies. Currently, the company has formed a “mine+trade” development model, becoming the world's largest producer of cobalt, the world's leading copper producer, the second largest producer of tungsten and molybdenum, and the second largest phosphate fertilizer producer in Brazil. At the same time, the company's basic metals trading business ranks among the top three in the world, achieving “advanced” development goals in the next 5 years.
Copper: Transforming resource advantages into production advantages to become the world's leading copper producer. The company has 34.64 million tons of copper resources. The KFM project and the TFM hybrid mine were completed and put into operation in 23. The total copper production capacity of the company reached more than 540,000 tons. Of these, KFM has already been overproduced, with copper production reaching 15,000 tons in a single month in February '24; the TFM project reached production in March '24. The company's copper production guide is 52-570,000 tons. The company's copper production scale is already among the highest in the world. Over the next 5 years, copper production will surpass international resource companies such as Antofagasta (67-710,000 tons in the 24-year production guide), Rio Tinto (66-710,000 tons in the 24-year production guide), and Quantum First Minerals (780,000 tons of copper production in '23).
Cobalt: It has become the world's largest cobalt resource company. At the end of 2020, the company acquired the KFM copper-cobalt mine, and the total amount of cobalt resources reached 5.25 million metal tons, surpassing Glencore (with 3.96 million metal tons of cobalt resources) to become the world's largest cobalt resource company. The KFM project was put into operation and put into operation in Q2 '23. It only took about 2 years from acquisition to completion of the project, creating the fastest speed of similar mining construction in the world. The company's current cobalt production capacity has reached more than 67,000 tons, increasing cobalt production to 90,000 tons in the next 5 years, cobalt production is expected to reach 60,000-70,000 tons in 24, and Glencore's 24-year cobalt production guide is 35,000-40,000 tons. The company has become the world's largest cobalt manufacturer.
Supply and demand continue to be mismatched, and copper prices are already in a boom cycle. The medium to long term is affected by the capital expenditure of copper mines. Overall, there is limited room for the release of effective copper supply in the next three years. At the same time, the market has underestimated the recovery in demand — this includes not only the cyclical recovery of traditional investment demand, but more importantly, demand for new energy (wind vehicles) has reached around 10%, and the demand for new energy sources will continue to expand.
The price of cobalt has fallen to the bottom of history, waiting for the industry pattern to be clarified. MB Cobalt (standard grade) fell to around 13 US dollars/pound, and the discount factor fell to 56-58%. It has fallen to the bottom of the historical range (the lowest price point was 12.43 US dollars/lb in 2019, the price low was 10.30 US dollars/lb in 2016). The next 2 years will still be in the production capacity release period for the Congolese gold copper-cobalt and Indonesian nickel-cobalt projects. Oversupply pressure is strong, but the current price is already close to the cost of Congolese gold grab mining.
Profit forecast and investment suggestions: Assuming that the 2024-2026 copper sales volume is 600,000, 600,000 tons, and the copper price is 7.0, 7.1, and 72,000 yuan/ton, respectively; the cobalt sales volume is 5.0, 6.0, 70,000 tons, and the cobalt price is 12, 12, and 12 US dollars/lb respectively. The company's revenue for 2024-2026 is estimated to be $1952.93, 1968.43, and 201489 billion yuan, respectively. The corresponding net profit to mother is RMB105.61, 114.63 and 12.701 billion yuan respectively. 28%/9%/11%, based on the closing market value of 183.2 billion on April 9, 2024, corresponding PE was 17.3, 16.0, and 14.4X, respectively. Maintain the company's “buy” rating.
Risk warning events: risk of price fluctuations of main products, risk that the commissioning progress of projects under construction falls short of expectations, risk of NEV sales falling short of expectations, political risk of overseas mining investment, risk of deviations in demand estimation, risk of information delays or untimely updates in public data used in research reports, etc.