The company is a leading precious metals company. Results in 2023 fell short of expectations and improved significantly in 2024. In terms of main business, the company is mainly engaged in the selection and sale of non-ferrous metal ores. The main products of native mining include silver ingots (GB 1 #、2 #）、黄金、含银铅精粉以及含银锌精粉。 The company has 7 mining subsidiaries under Yindu Mining, Jinshan Mining, Everbright Mining, Jindu Mining, Dongsheng Mining, Deyun Mining, and Honglin Mining, with silver resource reserves of nearly 10,000 tons and a harvesting capacity of about 2 million tons, and is in a leading position in the industry. In terms of profit, in 2023, the company achieved net profit of 0.148 billion yuan, a year-on-year increase of about -59.41%; in the 1st to 3rd quarter of 2024, the company achieved net profit of 0.199 billion yuan, a year-on-year growth rate of 48.73%.

Gold and silver prices continue to be bullish. Based on our gold estimates, as of the second quarter of 2024, the intrinsic value of gold should be $2787.3 per ounce. As of November 13, 2024, the actual price of gold in London was $2,572.20 per ounce. We believe that the reason why gold did not decline in October due to an increase in Trump's win rate was mainly due to the continued increase in the previous period in the US dollar M2 growth rate, or driven by intrinsic value. Trump was elected to implement it after the election. The increase in the slope of the US dollar index may be one of the drivers of the recent decline in gold prices, but it should have ended the profit after the price of gold reaches its intrinsic value. In the future interest rate cut cycle, real interest rates may trend downward, which will give a boost to the price of gold. Silver is more elastic than gold.

The technical transformation of Jinshan Mining's mining engineering was completed, and the mine's equity was upgraded. On the Jinshan side, the Jinshan mining deep infrastructure project's main underground infrastructure project increased the mining capacity by 0.6 million tons/year. After the completion of this infrastructure project, while improving ventilation and drainage systems, it can fully guarantee that the mine's annual production capacity will increase to 0.48 million tons/year approved by the mining license, and profitability will be further improved. At the same time, the company plans to acquire the remaining 33% of Jinshan Mining's shares, and will make payments and initiate commercial and commercial change procedures as soon as the shareholders' meeting reviews and approves them. In addition, the company plans to issue shares to seven counterparties, Zhou Qinglong, Ma Ling, Chen Lin, Chen Wenlin, Guo Fuan, Shu Guixian, and Yi Yihui, to purchase the remaining 47% of Honglin Mining's shares. With the completion of Jinshan's technical reforms and the increase in shares in major mines, the company's performance is expected to improve, and the company's development is gradually improving.

Investment advice. With the completion of the company's mining technology reform and the rise in precious metals prices, the company's net profit to mother is expected to be 0.36, 0.58, and 0.74 billion yuan respectively in 2024-2026. First coverage, giving a “buy” rating.

Risk warning: The price of silver fluctuates greatly, the progress of the company's projects falls short of expectations, and the environmental protection policy is getting stricter.