We maintain the CGN Mining (“Company”) investment rating of “buy” with a target price of HK$1.85. Our price targets correspond to 9.4 times and 8.7 times the 2024-2025 price-earnings ratio. We expect uranium prices to continue to rise in 2024 due to strong fundamentals, and the company's mineral production will grow steadily.

We expect rising uranium prices to remain the main driver of profits. The fundamentals of uranium supply and demand are expected to remain strong over the long term, and we expect uranium prices to continue to rise and remain high in 2024. Underinvestment in the uranium mining industry will have a long-term impact on global uranium supply, with limited growth in uranium production over the next 5 years. However, as nuclear power installations grow, global demand for uranium will grow steadily. Governments around the world have changed their policies relating to nuclear power, particularly at a time when the share of wind and solar power generation is rising and more stable power sources are needed. Therefore, as wind and solar power generation develops, more nuclear power plants will be planned. Global demand for uranium will grow faster than supply, and the fundamentals of uranium supply and demand will remain strong for the next 5 years. Affected by this, uranium prices will be raised to a higher level, which will significantly enhance the profitability of uranium mining companies. The average sales price of the company's mineral uranium rose 28% to $64 per pound in 2023, significantly improving the profitability of the company's mining business. We expect uranium prices to continue to rise in 2024.

CGN Mining's mineral uranium production is expected to increase steadily in 2024. CGN Mining operates uranium mining business through its joint venture Xie Company and its joint venture Austrian Company. Kazakh Nuclear Engineering is the largest uranium mining company in Kazakhstan and a partner of CGN Mining. The total production capacity of Xie Mine is 976 Tu, and the total production capacity of China Mining of Austrian Company is 2,000 Tu. Furthermore, a mining mine from the Austrian company is under construction and is expected to be put into operation in 2025, with a production capacity of 750 tU. Xie Mine and China Mining have had a capacity utilization rate of 80% in the past two years, and Kazakh Engineering plans to maintain the capacity utilization rate at around 80% in 2024. There is, however, this possibility:

If uranium prices rise significantly, Kazakh Engineering will increase the capacity utilization rate of Xie Company and Austrian Company. The company produced 2,620 tons of mineral uranium in 2023, in line with its plans. We expect the company's mineral uranium production to grow steadily in 2024.