Incident: In 2023, the company's net profit to mother was 148 million, -59% year-on-year, after deducting non-net profit of 140 million yuan, -61% year-on-year.
Technical reforms in Jinshan mining, falling zinc prices, etc. affected the release of the company's performance, and the subsequent impact may be gradually eliminated.
1) Jinshan Mining's silver production declined due to technical reform of the company's silver production: in 2023, the company's silver production/sales volume was 145.1/145.25 tons of metal, -28.5%/-33.2% year on year. The main reason is that in 2023 Jinshan Mining controlled the selection of native ore, the beneficiation processing volume dropped significantly (the main reason for the technical reform of the plant is that as the depth of mining increases, the nature of the ore gradually changed from oxidized ore to primary ore with a relatively high recovery rate). In the future, the technical reform of Jinshan Mining is expected to be completed at the end of September 2024, and production will be carried out in 24Q4. It is expected that the subsequent impact will gradually be eliminated. In terms of price, the average price of silver in 2023 was 5559.38 yuan/kg, +17.8% year-on-year, making a positive contribution to the company's silver sector performance. 2) The decline in zinc prices affected the release of profit in the lead/zinc business: in 2023, the company's lead production/sales volume was 135/13,800 metal tons, -8.0%/-13.9%, zinc production/sales volume was 2.48/274,000 metal tons, -8.5%/-0.5% year-on-year. Overall production and sales decreased slightly. Meanwhile, LME lead/zinc prices in 2023 were -0.56%/-23.9% year-on-year, respectively. Among them, the decline in zinc prices was significant, affecting the release of lead-zinc sector performance. 3) Jinye Environmental Protection calculation goodwill impairment preparation: Jinye Environmental Protection mainly recycles nickel, copper, etc. through solid hazardous waste, and due to the difficulty of collecting and storing raw materials, production capacity was not at full capacity, compounded by falling nickel prices. Therefore, in 2023, the company reduced Jinye Environmental Protection's reputation by 10.874 million yuan.
With active efforts on the resource side, the company will accelerate growth in the future. 1) Caiyuanzi Gold Mine: In 2023, the company acquired 53% of the shares in the Caiyuanzi Gold Mine. Currently, the mining project has basic conditions to start construction. The planned annual production scale is 396,000 tons/year, gold grade 2.82 g/t, and copper grade 0.48%; 2) Dongsheng & Deyun: In 2023, Dongsheng Mining obtained 250,000 tons/year mining project approval for Bayanoura silver polymetallic ore mining project. This year, it will continue to actively promote approval and approval for the use of grassland. Construction procedures. In February 2024, the company obtained a silver polymetallic ore mining license in the Bayan Baoleg mine area of Deyun Mining. The certified production scale is 900,000 tons/year. The future commissioning of Dongsheng & Deyun will further increase the company's silver production.
Profit forecast and investment advice: The company's net profit is expected to be 3.5/55/ 8.2 billion in 2024-2026. Considering the rise in precious metals prices, the company will continue to expand production in the long term, giving the company an “increase in wealth” rating.
Risk warning: Federal Reserve tightening exceeded expectations, mine grade fluctuated, profit forecasts fell short of expectations.