Event: on May 9, 2020, the company announced that it had received a "reply on the approval of 400,000 tons / year Mining Engineering Project of Keyue lead polymetallic Mine in Longzi County, Tibet Huayu Mining Co., Ltd." issued by the Development and Reform Commission of Tibet Autonomous region, marking the end of mining license processing for Keyue Mining Engineering Project. Once the mining license is completed, the Keyue project will officially enter the mining phase.
The Keyue project is expected to be put into production in the second half of 2020 and reach production in 2021. After reaching production, the company's mineral processing capacity will increase by 57%, and the company's lead, zinc, antimony and silver output is expected to increase significantly. The Keyue project is rich in resources, with ore reserves of 7.0673 million tons and lead, zinc and antimony metal resources of 450000 tons. Among them, the amount of lead metal is 212300 tons, the average grade is 3.00%, the amount of zinc metal is 172600 tons, the average grade is 2.44%, the amount of associated antimony metal is 81300 tons, the average grade is 1.15%, the amount of silver metal is 711.8 tons, the average grade is 100.72 grams / ton, and the annual mining ore is 400000 tons. The service life of the mine is 16.5 years. After production, the company's selection scale will be greatly increased by 57%, from the existing 700000 tons / year to 1.1 million tons / year. According to our estimates, the company's lead, zinc, antimony and silver output will increase by 8800 tons, 7200 tons, 5600 tons and 40 tons after production, an increase of 49%, 36%, 122% and 57%, respectively.
The company's key development projects continue to move forward. First, the construction of the tower aluminum gold industry project is in progress. The project was originally scheduled to be put into production by the end of 2019, but the construction period affected by the epidemic has been slightly delayed and is expected to be put into production by the end of 2020. after the project reaches production, the annual production of gold rights and interests is expected to be about 1.1 tons. Second, it is proposed to acquire a 40% stake in Guizhou Asia-Pacific Mining for 500 million yuan to participate in the development of the Nibao gold project. According to the company announcement, Nibao Gold Mine project gold control resources of 59 tons, grade 4.5g / ton, mining and selection of 1 million tons of ore / year, is expected to be officially put into production in 2022, gold output is expected to be 3404 tons / year, is expected to gram gold cost of 100,120yuan / g, Nibao Gold Mine reached production for the domestic larger single gold mine, with strong economic benefits, is expected to establish the company's position in the precious metals industry.
Since the end of 2017, the company has made continuous efforts to acquire gold assets at home and abroad, demonstrating the company's determination to shift its strategic focus to precious metal mines. Integrated Tajin and Essetigray projects, Nibao Project Company plans to control a total of 113 tons of gold resources and more than 50 tons of equity resources. According to our estimates, the company's gold equity output in 2021-2022 is 0.78 tons and 2.1 tons respectively. After the full production of the company's three major gold projects in 2024, gold output is expected to reach 6.6 tons, equity output is expected to reach about 3.2 tons. The company's main business metal variety is gradually changing from lead and zinc to gold and silver.
Investment advice: maintain the "buy-A" investment rating. Considering the gradual commissioning of the Keyue, Tajin and Nibao projects from 2020 to 2022, under the assumption that the prices of lead, zinc, antimony and gold are 15000 / ton, 16000 / ton, 40000 / ton and 380 yuan / g respectively, the estimated return net profit of the company is 160 million, 380 million and 560 million respectively, and the EPS is 0.31,072,1.06 yuan respectively. If we consider that the convertible bonds will increase their equity by 63 million after the conversion in 2020, the diluted EPS will be 0.27,0.64 and 0.95 yuan respectively. With the gradual production of the three major gold projects from 2020 to 2024, coupled with the fact that gold and silver prices have entered the upward channel, the company's precious metals performance and valuation flexibility will be greatly enhanced, maintaining the "buy-A" investment rating.
Risk tips: 1) the progress of new mine production and asset acquisition has been delayed; 2) the price of lead, zinc, antimony, gold and silver is lower than expected.