Transformation and transformation, focusing on gold and new energy and new material mining
The company began transformation in 2019, divesting traditional steel pipe business and new energy assets, and transforming commodity trade. In 2020, the company changed its name to Shandong Yulong Gold Co., Ltd., and plans to enter the gold mining business through the acquisition of Australian gold producers and complete two mine acquisitions to promote business transformation in 2022 and 2023, and acquire control of the Pachingo Gold Mine in Queensland in eastern Australia and the mining rights for the Loufanggou Vanadium Project, respectively. In 2024, Yulong Co., Ltd. will firmly clear the relevant bulk trade business, and will no longer engage in bulk trade business unrelated to the mining business in the future. The company invests in the mining business through subsidiary investments, invests in the Pajingo mining area through NQM, invests in the Huasheng Loufanggou vanadium mine through Shaanxi Shanjin Co., Ltd., and invests in quartz rock mines through Dengta City Shuangli Silica Mining Co., Ltd., and realizes the layout of the graphite mining industry through energizing the mining industry.
Gold mining sector: Acquiring the Pachingo Gold Mine, optimizing the management structure, and reaching a new high in production profitability in March 2021, Yulong Co., Ltd. announced that it plans to purchase all of its shares in Batuo Industrial from Tianye Group through its wholly-owned subsidiary Lanjing Mining (the core is the Southern Cross gold mine project in production) and control the gold assets operated by Batuo Australia in Australia through Batuo Industrial. In this deal, Batuo Industrial promised to double its gold mining volume in the future, which was later terminated due to changes in the external macroeconomic environment such as the international economic situation. On November 30, 2022, all shares of NQM were registered under the name of the wholly-owned subsidiary Yurun Gold, and the company obtained control of the Parjingo Gold Mine in Queensland in eastern Australia. After the company acquired the Pachingo Gold Mine, it was optimized from various angles such as team, equipment, production management and system, personnel structure and positions, and suppliers, which led to a reduction in Kejin's cost, thus being able to better release Kejin's profits during the upward period of gold prices. In 2023, the Pachingo Gold Mine achieved 91,500 ounces (2.85 tons) of gold production, a record high in the mining area's production in the past 15 years, completed 134.68% of the three-year performance promise, and exceeded the performance gambling target one year ahead of schedule.
New energy and new material ore sector: Various projects are progressing smoothly. The vanadium ore project discovered that on September 22, 2022, the new ore company subscribed to Yiteng Mining to issue targeted additional shares through NQM. Keteng Mining has about 46.1 million tons of graphite ore resources that meet JORC standards. Other regions are in the resource exploration stage, and there is great potential for prospecting. In December 2022, 67% of Shaanxi Shanjin's shares were acquired in cash, and the transfer registration procedure for the shares was completed in March 2023. The core asset of Shaanxi Shanjin is mining rights for the Loufanggou vanadium mine project in Shangnan County, Shaanxi Province. The company increased its capital and shares in Dengta Shuangli Silica Mining Co., Ltd. The core asset of the Shuangli Silica Project is the metallurgical quartz rock mine. The mining period of the project is valid (until March 28, 2029). The company's Liaoyang Shuangli Silica Project Phase I beneficiation plant has begun construction. The first phase has a design capacity of 500,000 tons/year, 1 crushing line, and 2 beneficiation production lines.
Investment advice
We forecast that the company's revenue for 2024-2026 will be 27.10/28.15/3,040 billion yuan, respectively, up 11.8%/3.9%/8.0% year on year; 2024-2026 net profit to mother will be 587/6.35/ 660 million yuan, respectively, up 31.8%/8.2%/3.9% year on year, corresponding EPS of 0.75/0.81/0.84 yuan respectively. As of May 24, the closing price was $11.06, and the corresponding PE was 14.67/13.56/13.06, respectively. The company's gold business currently contributes the main revenue. As a gold stock, PE valuation is lower than the industry average valuation. In summary, coverage for the first time gave Yulong shares a “buy” rating.
Risk warning:
1) The company's gold mine production falls short of expectations; 2) The construction progress of projects under construction falls short of expectations; 3) risk of exchange rate fluctuations; 4) changes in metal prices fall short of expectations; 5) Mine safety production risks; 6) The proposed divestment business has not yet been completed, and there is uncertainty