Mining service & resource development two-wheel drive. The company fully transformed from a single mining service enterprise to a group mining company with two-wheel drive for “mining service” and “resource development”. In terms of mining services. As of the 2023 annual report, the company undertook nearly 40 large-scale mining engineering construction and mining operation management projects at home and abroad, and achieved 393.31 million tons of minerals in 2023, which is at the forefront of the country. In terms of resource development, the company is involved in the Shouliangcha River Phosphate Mine, the Democratic Republic of the Congo (DRC) Dikulushi Copper Mine, and the Congo (DRC) Lonshi Copper Mine, and is also participating in the San Matias copper, gold and silver mine in Colombia, and plans to acquire the Lubambi copper mine. As of the 2023 annual report, the company has total equity resource reserves of 1.2 million tons of copper metal, 179 tons of silver metal, 19 tons of gold metal, and 19.1 million tons of phosphate ore (31.87% grade).

The vast majority of the company's revenue and gross profit comes from mine engineering construction and mining operation management. In 2023, the two revenue accounts for 87.4%; total gross profit accounts for 83.1%; at the same time, the company's resource development sector contributed revenue for the first time in 2023, and copper concentrate and phosphate ore achieved sales, accounting for 8.5% of revenue, contributing 13.5% of gross profit.

The mining service business is the cornerstone and is deeply involved in overseas markets. The company's business is concentrated in the field of non-coal underground mine development services. Currently, the main business is design research, engineering construction, and mining operation in underground mine development services. As of the 2023 annual report, the total number of projects under construction in the company's mining services business is 39, including 23 domestic and 16 overseas.

The company's overseas mining service business is mainly distributed in Africa and Eurasia. The mines served include the Chambishi copper mine in Zambia, the Kamoa copper mine in the Congo (Gold), the Wassa gold mine in Ghana, the Timok copper and gold mine in Serbia, the Bor copper and gold mine, and the Chukalu-Peji copper and gold mine, etc., and the share of overseas mining service revenue continues to increase. The gross margin of the company's mining operation management and mine engineering construction business remained in the range of 25%-30% in most years, which is relatively stable.

Development and release of copper and phosphorus resources to open up new growth. The main products of the company's mining resource development business are copper and phosphate ores. ① The company holds 90% of the shares in Liangchahe Phosphate Mine in Guizhou. The southern mining area of the Liangchahe Phosphate Mine (300,000 tons/year) will be officially put into operation in 2023, and the scale of the northern mining area is expected to reach 800,000 tons/year after landing. ② The company holds 90% of the shares in the Dikulushi copper mine in the Democratic Republic of the Congo (DRC), and production stabilized. In 2023, it produced 15198.74 tons of copper concentrate, which is equivalent to the production of copper concentrate containing about 9777.49 tons of copper (equivalent). ③ The company holds 100% interest in the Lonshi copper mine in the Democratic Republic of the Congo (DRC). The Lonshi copper mine was put into operation ahead of schedule to achieve a new leap forward in resource development. It achieved cathode copper production of 4,622 tons in 2023, and plans to produce 20,000 tons of copper metal in 2024, reaching an annual output of about 40,000 tons of copper metal after production. ④ The shareholding ratio of the San Matias copper, gold and silver mine in Colombia increased to 60%, making every effort to promote project construction. ⑤ The Lubambi Copper Mine is proceeding with delivery, and it is proposed to acquire 80% of the rights in the Lubambe copper mine at a low price. After technical reform and optimization, it is estimated that the project can achieve an average annual copper concentrate output of 77,500 tons, and the copper content of the copper concentrate is 32,500 tons.

Profit forecast. According to the company's 2024 business plan and mine commissioning schedule, we expect the company to produce 300,000 tons of phosphate ore and 3/5/5 million tons of copper metal in 2024-2026, respectively. In terms of price, we expect the price of copper to be 76,000/78,000/80,000 yuan/ton in 2024-2026, respectively, and the price of phosphate ore will remain at 1,050 yuan/ton. We selected Zijin Mining, Luoyang Molybdenum, and Western Mining, which are leading companies in the domestic copper development field, as comparable companies. Based on the above volume-price assumptions, we expect the company to achieve operating income of 95/116/12.8 billion yuan in 2024-2026 and achieve net profit of 16.3/23.0/2.48 billion yuan. By the close of June 25, 2024, the company's market value of 31 billion yuan corresponds to the 2024-2026 PE 19.0x, 13.5x, and 12.5x, respectively. The 2025-2026 PE valuation is comparable to that of comparable companies. The company's steady and growing high-margin mining service business and the mining development business developed by relying on the experience and technology accumulated in the mining service business are two-wheel drive. We are optimistic about the company's development and the commissioning of the northern mining area of the Liangcha River Phosphate Mine, which was successfully merged into the Lubambi Copper Mine, and the San Matias copper, gold and silver mine. For the first time, coverage gave it a “buy” rating.

Risk warning: Copper prices fall short of expectations due to copper ore supply exceeding expectations; geopolitical risks affecting the company's overseas project progress; overseas market operating risks.