New layout of the germanium sector to create profit growth points

On September 2, 2024, the company announced the resource volume of the Tsumeb smelter in Namibia. As of September 1, 2024, the Tsumeb smelter's germanium-zinc slag heap and copper slag heap had a germanium metal content of 746.21 tons. The company plans to increase the germanium-zinc smelting production line to create a new profit growth point. Entering the third quarter, the price of lithium salt fell sharply. We lowered our profit forecast for 2024 without considering the profit of the new layout. We maintain our profit forecast for 2025-2026. We expect net profit to the mother for 2024-2026 to be 0.969, 1.581, and 2.193 billion yuan respectively (previously estimated to be 1.157 billion yuan in 2024), and EPS was 1.33, 2.17, and 3.01 yuan respectively. The current stock price corresponds to PE 22.5, 13.8, and 9.9, respectively times. The company added copper and germanium sectors to enrich profit growth points and maintain a “buy” rating.

Tsumeb smelter slag heaps contain germanium gallium resources, and profit growth points continue to be enriched. On September 2, 2024, the company issued a resource volume announcement for the Tsumeb smelter in Namibia. As of September 1, 2024, the Tsumeb smelter germanium-zinc slag heap and copper slag heap had a germanium metal content of 746.21 tons, with an average grade of 253.51 g/ton. On August 30, 2024, China Mining Hong Kong officially completed the acquisition and settlement of 98% of the Tsumeb smelter's shares. Currently, the smelter's concentrate processing capacity is 0.26 million tons/year. The main products are crude copper and sulfuric acid. In order to fully utilize the resource value of the Tsumeb smelter, the company plans to conduct a feasibility study on the transformation of the Tsumeb smelter's existing copper smelting production line to increase the commercialization of resources as soon as possible, and provide a new profit growth point for the company's medium- to long-term development.

Utilizing tailings resources to increase revenue by 1 billion

We assume that increasing the scale of the germanium-zinc smelting production line is comparable to the current copper smelter production line, with an annual processing capacity of 0.26 million tons. Assuming that the germanium/zinc/copper smelting recovery rates are 60%, 90%, and 85%, respectively, the corresponding output is about 40 tons, 0.017 million tons, 0.017 million yuan/ton, 0.023 million yuan/ton, 0.074 million yuan/ton (all including tax) prices for the company It contributed about 1 billion yuan in revenue. Considering that resources are used as tailings depots, mining costs have been saved, and the production costs of the company's various products may be at a lower level, which is expected to contribute a new profit growth point to the company.

Risk warning: Project construction progress falls short of expectations, overseas policy risks, sharp drop in commodity prices, etc.