The company's recent situation

According to the company's announcement, its Tibet Julong Copper Mine and Heilongjiang Tongshan Copper Mine added a total of 18.377 million tons of registered copper resources and 5.777 million tons of additional registered copper reserves, accounting for 14.2% 1 of China's copper reserves at the end of 2022, marking that the company has achieved significant results in China's new round of prospecting breakthrough strategy actions.

As of 2023, the company holds 74.56 million tons of copper, about 3,000 tons of gold, and 10.7 million tons of lead and zinc. Of these, more than 50% of copper and gold, and more than 90% of lead and zinc were obtained through independent exploration.

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This increase in storage is mainly concentrated in two mines. First, Julong Copper Mine became the copper mine with the largest amount of registered resources in China. According to the announcement, after the completion of this new filing, the amount of copper resources in the Julong Copper Mine reached 25.88 million tons, with an average grade of 0.29%, an increase of 14.726 million tons compared to the 2022 filing. It is about 2.5 times the amount of resources verified by the company during the merger and acquisition in 2020, and it is also the copper mine with the largest amount of registered resources currently in China. Second, the Tongshan copper mine has made a major breakthrough in prospecting and increasing storage. The Tongshan Copper Mine has added 3.651 million tons of copper resources. Among them, the V mine system is the only large-scale copper ore discovered in Northeast China in the past 40 years.

In terms of development potential, according to the announcement, the first is that Julong Copper achieved 154,400 tons of copper mining in 2023. Currently, the second phase of the renovation and expansion of the Julong Copper Mine has been fully started. The company expects trial production in 1Q26, and the annual copper production will increase to about 30-350,000 tons after delivery. At that time, it will become the largest world-class super-large copper mine in China. At the same time, the company is planning the third phase of the project. If the project is approved, Julong Copper Mine may become the largest copper mine in the world, producing about 600,000 tons of copper per year. Second, in 2023, Duobaoshan Copper achieved mining production of 110,000 tons of copper and 2.6 tons of gold. Currently, underground mining of the Shallow No. 2 ore body in the Tongshan Copper Mine is under construction. The company expects to start production in 2024, with an annual extraction scale of 3 million tons, and an additional 12,000 tons of copper production after production.

The $2.5 billion refinancing was successfully completed, helping the company on a new five-year journey. On June 25, the company's $2.5 billion H-share refinancing issuance was fully completed. First, it saved more than 1 billion yuan in financial expenses, and the other was to lay the capital foundation for a new journey over the next five years. The company announced the “Five-Year Development Plan” in May. It plans to achieve production targets of more than 1.5 million tons of copper, more than 100 tons of gold, and 250,000 tons of equivalent lithium carbonate, accelerate the transformation of resource advantages into production capacity and economic advantages, and accelerate progress to the top 3-5 global mining companies.

Profit forecasting and valuation

The company's long-term copper, gold, and lithium production has been systematically rising, and is responding positively to the national “increase storage and production” policy, maintaining the 2024 net profit forecast of 31.9 billion yuan, introducing a 2025 forecast of 39 billion yuan, maintaining an A/H share outperforming industry rating, considering the upward shift in the valuation center of the non-ferrous sector, and raising the target price of A/H by 55.4%/30.5% to 23 yuan/21.4 HKD. Currently, A shares correspond to 2024/2025 P/E 14.6x/12x. The target price corresponds to 2024/2025 19x/16x, implying room for upward movement 31%; current H shares correspond to 2024/2025 P/E 12x/10x, target price corresponds to 2024/2025 16x/13x, implying 30% upside.

risks

The company's project expansion fell short of expectations; the company's cost increase exceeded expectations; and the investment of new copper ore supply exceeded expectations.