China Mining Resources released its 2023 annual report and report for the first quarter of 2024: the company's revenue for 2023 was 6.013 billion yuan, a year-on-year decrease of 25.22%; net profit to mother was 2,208 billion yuan, a year-on-year decrease of 32.98%; net profit to mother after deducting non-recurring profit and loss was 2.130 billion yuan, a decrease of 33.86% year-on-year. In 2024, Q1 revenue was 1,127 billion yuan, a year-on-year decrease of 45.63%; net profit to mother was 256 million yuan, a year-on-year decrease of 76.63%; net profit to mother after deducting non-recurring profit and loss was 228 million yuan, a decrease of 79.32% year-on-year.
Key points of investment
The self-sufficiency rate of lithium salt raw materials has increased, and project construction is progressing smoothly
The “Bikita lithium mine 2 million tons/year (spodumene) construction project” and the “Bikita lithium mine 2 million tons/year (lithium permeable feldspar) renovation and expansion project” invested by the company were completed in July 2023 and officially put into trial production.
On November 9, 2023, after orderly equipment installation, commissioning and trial production, the above two projects achieved stable production, reached the production capacity and product quality of the project design plan, and achieved production standards. The two projects produced about 300,000 tons of spodumene concentrate and 300,000 tons of chemical-grade lithium-permeable feldspar concentrate per year, greatly improving the raw material self-sufficiency rate of the company's lithium salt business. The self-sufficiency rate increased from 21% in 2022 to 86% in 2023.
Canada's Tanco mine currently has a spodumene mining system with a processing capacity of 180,000 tons/year. In February 2023, the company reviewed and passed the “Proposal on Investing in the Construction of 1 Million Tons/Year Mining Options for Canada's Tanco Mining Area”, and approved the investment in the construction of a new Tanco mine 1 million tons/year mineral processing project. In 2023, the company actively promoted the design of a 1 million tons/year plant selection and preparation for government EIA, approval, etc., while actively building and continuing to maintain friendly relationships with local communities and Aboriginal people.
The high purity lithium salt project with an annual output of 35,000 tons invested and built by Jiangxi Chunpeng Lithium, which belongs to the company, was put into trial production and operation in November 2023, and reached production standards in February 2024. Currently, the company has a total production capacity of 66,000 tons/year of battery-grade lithium salt.
The volume and price of cesium-rubidium business has risen sharply, and the application market continues to expand
The company is a leading enterprise in the field of cesium rubidium salt fine chemicals. It is the manufacturer with the most complete cesium industry chain in the world. It has the ability to mine, process, produce fine chemical products and provide product technical services. It has the world's main high-quality cesium resources (Canada's Tanco mine, Zimbabwe's Bikita mine), two major global production sites (****, Canada, Xinyu, Jiangxi Province, China), and cesium formate recycling sites (Aberdeen, England, and Bergen, Norway).
In 2023, the company's rare light metals (cesium-rubidium salt) sector achieved operating revenue of 1,124 million yuan and gross profit of 724 million yuan, achieving continuous year-on-year growth in revenue and profit in this sector. In the segment, the application scenarios of cesium-rubidium salt fine chemical business continued to expand, and the market size and sales price continued to increase. The total sales volume in 2023 was 999.23 tons, an increase of 25.92% over the previous year.
Accelerate the layout of copper projects, and it is expected to create new growth points in the future
In March 2024, Afmin, a wholly-owned subsidiary of the company, signed separate “Share Sales Agreements” with Momentum and Chifupu. Afmin plans to acquire 50% of Momentum's shares and 15% of Junction's shares held by Chifupu using a total benchmark of $58.5 million in cash. Junction's main asset is the Kitumba copper project in Zambia. The project is currently under development. According to the 2015 resource estimation report, the total amount of copper mineral resources recovered in the Kitumba copper mine area is 27.9 million tons, 614,000 tons of copper metal, and an average copper grade of 2.20%.
Profit forecasting
We forecast that the company's revenue for 2024-2026 will be 64.46, 78.70, and 11.656 billion yuan, respectively, and net profit to mother will be 14.53, 19.41, and 3.101 billion yuan, respectively. The PE corresponding to the current stock price is 18.0, 13.5, and 8.4 times, respectively.
Profits were under some pressure due to fluctuations in lithium salt prices, but the company's construction projects were put into operation as scheduled, the lithium mine self-sufficiency rate increased dramatically, and the results of cost reduction and efficiency were remarkable; the volume and price of cesium-rubidium business rose sharply, and downstream applications expanded at an accelerated pace; copper prices began to rise in 2024, and the company's layout of the copper sector can be expected in the future. We expect the company's performance to continue to grow, so we maintain a “buy” investment rating.
Risk warning
1) Global lithium salt lake and lithium mine production exceeded expectations; 2) lithium battery demand fell short of expectations; 3) the company's lithium mining progress fell short of expectations; 4) cargo transportation risks due to geopolitical conflicts; 5) risk of exchange rate fluctuations; 6) safety, environmental protection and natural disaster risks, etc.