Rating: Bullish | Target Price: RMB 30-38 | Current Price: RMB 25.10 (Closing 2026-06-26) | Margin of Safety: +19.5% | Time Horizon: 12 Months
Zijin Mining is one of the world's fastest growing comprehensive mining companies—copper production CAGR of ~17% over the past five years, gold production CAGR of ~23%, and lithium starting from scratch targeting 120,000 tonnes LCE by 2026. Attributable net profit in 2025 was RMB 51.78 billion (+61.6%), which further jumped to RMB 20.08 billion in Q1 2026 (+97.5%). The current PE (TTM) is only 12.9x, at the 5th percentile over the past decade, and the forward PE (2026E consensus) is just 8.1x. The EPV zero-growth valuation of RMB 27.78 per share is already above the current price—the market is pricing a near "commodity price collapse" bearish scenario for a high-growth miner that could rank among the global top three in both copper and gold output by 2028. Key constraints: ① If commodity prices fall sharply from current highs (gold ~$4,300/oz, copper ~$10,000/t), earnings would contract significantly; ② Geopolitical risks in overseas operations (CBP detention order, DRC lithium tax hike, Allied Gold approval) are materializing; ③ High capex (~RMB 47 billion annually) suppresses free cash flow. We believe these risks are real but have already been excessively priced into the current valuation—the margin of safety at the current price is sufficient, making it suitable for building positions in tranches during commodity price pullbacks.
Key Evidence:
It must be acknowledged that as the base expands, the growth rate is converging to around 11-13% (copper CAGR 2025→2028), and in Q1 2026, the Kamoa-Kakula copper mine saw reduced output due to a mining-induced seismic event (attributable production halved YoY), putting near-term copper production growth under pressure. However, the lithium segment is leaping from 25,500 tonnes in 2025 to a 2026 target of 120,000 tonnes LCE, becoming a new volume growth engine.
Key Evidence:
OCF/Net profit has remained in the 1.46-1.75x range for three consecutive years, and the mineral products gross margin of 61.6% places Zijin in the top tier among global miners. However, caution is warranted: ① Average annual capex of ~RMB 47 billion consumes 62% of OCF, with FCF/Net profit only 0.55x; ② CapEx/Depreciation is as high as 3.87x, in the "Buffett-style capital sinkhole" range—most of the money earned each year must be reinvested to sustain growth; ③ The strength of OCF partly benefits from the cyclical tailwind of gold prices rising +44% YoY—if commodity prices fall, OCF will also contract.
Key Evidence:
The "resources" disclosed in the annual report are not "reserves". Under the internationally accepted JORC/NI 43-101 standards, converting resources to mineable reserves typically requires a conversion factor of 0.5-0.7. In addition, the DRC classified lithium as a strategic mineral in May 2026, raising the royalty from 3.5% to 10%, which has materially reduced the economic recoverability of part of the Manono lithium resource. However, even under a conservative conversion factor (0.6), the company's copper resources correspond to mineable reserves of over 65 million tonnes—based on the planned 2028 production of 1.5 million tonnes, this supports >40 years of mining, putting reserve depth among the best globally.
Key Evidence:
The current price implies the market believes: ① The current gold price near $4,300/oz is unsustainable, with a reasonable mid-cycle of $2,500-2,700/oz; ② The 2026E consensus net profit of ~RMB 82 billion carries significant risk of downward revision (minimum estimate only RMB 63.286 billion, wide divergence of RMB 29.3 billion). There is some merit to this—Citi forecasts 2026E net profit of RMB 77.9 billion as the peak, falling to RMB 70.5-71.9 billion in 2027-2028. But even under Citi's peak profit scenario, the 2026E PE of 8.1x remains extremely low; based on mid-cycle earnings (EPS RMB 2.50), a reasonable PE of 12-15x corresponds to a share price of RMB 30-38, consistent with the base case target. What truly needs watching: China Securities Finance Corp reduced holdings by 254 million shares in Q1 (-36.76%), and the share price has halved from the high of RMB 44.94 to RMB 25.10—these signals are often leading indicators of "smart money" exiting at cyclical profit peaks.
Key Evidence:
Management's historical execution record is strong, but multiple operational frictions have emerged recently: ① Q1 attributable production at Kamoa copper mine plummeted from 59,000 to 27,000 tonnes due to a mining-induced seismic event; ② Serbia Zijin Copper was hit by a US CBP detention order (2026-06-16); ③ The $4 billion acquisition of Allied Gold had a ~40% premium (offer price CAD 44 vs ~CAD 31 before announcement), and NDRC approval remains pending—this contradicts the company's historical narrative of "counter-cyclical bargain acquisitions." The generous employee stock ownership plan (transfer price RMB 19.36 is only 77% of the current price) deeply aligns management and shareholder interests, which is a positive signal.
Key Evidence:
Gold, copper, and lithium show moderate positive correlations driven by macro factors (interest rates, USD, liquidity) (over the past 3 years, LME copper and LBMA gold correlation ~0.6-0.7), not a natural offsetting hedge relationship. The real value of the multi-country layout is reducing the impact of a single country's policy change (e.g., DRC lithium tax) on the overall portfolio, not eliminating risk. The recent simultaneous eruption of three high-impact negative geopolitical events within two months demonstrates the limits of "diversification"—geopolitical risks can occur on multiple fronts concurrently.
| Indicator | FY2023 | FY2024 | FY2025 | Q1 2026 | Q1 2026 YoY |
|---|---|---|---|---|---|
| Revenue (RMB 100M) | 2,934 | 3,036 | 3,491 | 985 | +24.8% |
| Attributable Net Profit (RMB 100M) | 211.2 | 320.5 | 517.8 | 200.8 | +97.5% |
| Recurring Net Profit (RMB 100M) | 216.2 | 316.9 | 507.2 | 184.6 | +86.8% |
| Overall Gross Margin | 15.8% | 20.4% | 27.7% | 36.3% | +13.4pp |
| Of which: Mineral Products Gross Margin | 49.1% | 58.0% | 61.6% | 71.0% | +11.1pp |
| Operating Cash Flow (RMB 100M) | 368.6 | 488.6 | 754.3 | 278.3 | +122.2% |
| Free Cash Flow (RMB 100M) | — | — | ~282 | — | — |
| Cash and Cash Equivalents (RMB 100M) | — | 316.9 | 655.8 | 993.9 | — |
| Interest-Bearing Debt (RMB 100M) | — | — | ~1,282 | — | — |
| Debt-to-Asset Ratio | — | 55.2% | 51.6% | — | -3.6pp |
| ROE (Weighted) | 21.4% | 25.9% | 33.0% | — | +7.1pp |
| Gold Production (tonnes) | 67.7 | 72.9 | 89.5 | 23.5 | +30.6% |
| Copper Production (10,000 t) | 100.7 | 106.8 | 108.5 | 25.9 | -0.3% |
| Lithium Carbonate Production (10,000 t) | — | — | 2.55 | 1.6 | — |
Reasons for Changes: ① Attributable net profit +61.6% in 2025 and +97.5% in Q1 2026: both volume and price increased for major metal mineral products—gold price rose significantly YoY (+44% annual average), gold production from mines +22.77%, the dual engines of profit growth (Annual Report). ② Operating cash flow +54.4% in 2025: mainly due to higher gross profit and strengthened management of receivables and payables (Annual Report). ③ Administrative expenses +44.4% in 2025: as the company's scale and profitability grew, labor costs increased correspondingly (Annual Report). ④ Cash and cash equivalents at end-2025 +106.9%: due to proceeds from the current period's Zijin Gold International IPO (Annual Report).
In Q1 2026, the company achieved revenue of RMB 98.5 billion (+24.8%), attributable net profit of RMB 20.08 billion (+97.5%), recurring net profit of RMB 18.46 billion (+86.8%), overall gross margin jumped to 36.33% (+13.44pp YoY), and mineral products gross margin reached 71.01%. Operating cash flow was RMB 27.83 billion (+122.2%).
The main driver of the Q1 profit doubling was the high gold price (Q1 average ~$3,800/oz, +25% YoY) and gold production growth (23.5 tonnes, +30.6%), along with a significant expansion in mineral products gross margin (from 59.9% to 71.0%). The copper segment performed relatively flat—copper production of 259,000 tonnes was slightly down YoY, mainly due to a temporary production cut at the Kamoa-Kakula copper mine from a mining-induced seismic event (attributable production plummeted from 59,000 to 27,000 tonnes), but Julong Phase II contributed 60,000 tonnes of copper in Q1 after starting up, partially offsetting the gap.
Sell-side consensus expects full-year 2026 attributable net profit of ~RMB 82.1 billion (24 institutions' average, Tonghuashun), and Q1 has already achieved 24.5% of the full-year forecast, broadly in line with linear projection. However, note: ① The production rhythm of lower in H1 and higher in H2 (Manono lithium mine starting production end of June, Julong Phase II continuing to ramp, expectation of Kamoa resumption) means Q2-Q4 profit will be significantly larger than Q1; ② Citi forecasts 2026E net profit of RMB 77.9 billion as the "peak," implying market divergence on H2 commodity price trends.
Zijin Mining operates a heavy-asset mining (multi-commodity integrated) model: it obtains mineral resources through global exploration and acquisitions, and realizes value through integrated operations of mining + beneficiation + partial smelting. Major revenues come from gold production from mines (~19% of revenue), copper production from mines (~17%), and smelting/trading of gold and copper (together ~50%). Mineral products have standard commodity attributes—the company is a price taker with no pricing power, and profitability is highly dependent on: ① market prices of mined commodities; ② production scale; ③ cost control ability. Approximately 58% of attributable net profit comes from overseas operations (17 countries), with natural foreign exchange exposure on revenue.
| Indicator | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| OCF / Attributable Net Profit | 1.75x | 1.52x | 1.46x |
| FCF / Attributable Net Profit | — | — | 0.55x |
OCF/Net profit >1.4x for three consecutive years—cash flow quality is excellent in mining. Although growth in accounts receivable (+36.7%) exceeded revenue growth (+15.0%), absolute accounts receivable are only RMB 9.3 billion, 1.8% of total assets, making the risk manageable. However, FCF/Net profit is only 0.55x, due to average annual capex of ~RMB 47 billion (mainly for Julong Phase II, Manono lithium, 3Q Salt Lake, etc.), which is strategic investment for high-growth stage rather than sustaining expenditure.
Recurring net profit check: FY2025 attributable net profit of RMB 51.78 billion vs. recurring net profit of RMB 50.72 billion, with one-off items (government subsidies, fair value changes, etc.) net contribution of ~RMB 1.05 billion, only 2%—earnings are almost entirely from core operations, with extremely low risk of cosmetic adjustments.
Estimated FY2025 ROIC of ~26% (NOPAT ~RMB 62 billion / Invested Capital ~RMB 235 billion), far exceeding the global mining weighted average WACC (~9%). ROE of 33% also leads peers (BHP ~23%, CMOC ~25%). The core driver of high ROIC is low-cost mining capability—the company uses China's leading low-grade ore mining technology to "turn waste into treasure" globally (e.g., Julong copper mine grade of only 0.29% but still profitable due to ultra-large-scale open-pit mining).
CapEx/Depreciation is as high as 3.87x (FY2025)—current capex far exceeds sustaining levels, fitting a "high-investment, high-growth" model. Assuming sustaining capex ≈ depreciation (~RMB 12.2 billion), of the current ~RMB 47 billion capex, about RMB 35 billion is growth investment. This implies: ① If future metal prices decline forcing growth investment to be scaled back, FCF would quickly emerge (from RMB 28.2 billion to RMB 63.2 billion); ② However, if growth investments fail to deliver expected returns (e.g., lithium ramp-up disappoints), the massive capex will become sunk cost. Key observation window: 2027-2028, when projects like Julong Phase II, Manono, and 3Q reach full production—whether capex intensity declines as expected.
Moat Sources: ① Resource scale barrier (109.68 million tonnes of copper resources, top five globally); ② Low-cost mining technology (ability to develop low-grade ores, gold AISC ~$1,501/oz below industry average); ③ Global diversified layout (30+ mines in 17 countries, single country/commodity risk controllable); ④ Counter-cyclical acquisition capability (historically most core assets acquired at low prices during commodity downturns).
Red Flag Signals: ① Smelting business continues with low margins—smelting gold gross margin 1.03%, smelting copper 2.08%, smelting zinc -2.07%, collectively accounting for ~50% of revenue but representing low-quality revenue; ② Growth in accounts receivable (+36.7%) exceeding revenue growth (+15.0%)—watch collection pace; ③ Large fluctuations in derivative fair value—FY2025 losses of RMB 1.75 billion on commodity contracts not designated as hedges, derivative financial liabilities of RMB 3.80 billion (+201%).
| Promise | Actual | Assessment |
|---|---|---|
| 2025 plan: gold 73 tonnes (2024 Annual Report guidance) | Actual 90 tonnes (+23%) | Significantly exceeded, but guidance was conservative |
| 2025 plan: copper 1.07 million tonnes (2024 Annual Report guidance) | Actual 1.09 million tonnes (+2%) | Basically delivered |
| 2026 target: gold 105 tonnes (2025 Annual Report guidance) | Q1 achieved 23.5 tonnes (annualized 94 tonnes) | Q1 progress normal, to be monitored |
Management's production guidance tends to be conservative, with actual execution typically exceeding targets—a pragmatic communication style (low promise, high delivery), but this also reduces the signaling value of "beating guidance."
| Segment | Revenue Share | Gross Margin | YoY (Production) | Business Logic |
|---|---|---|---|---|
| Mine Gold (Gold Bullion + Gold Concentrate) | 18.5% | 59%-74% | +22.8% | Gold price-driven, high-margin core profit source |
| Mine Copper (Copper Concentrate + Electrowon Copper + Electrolytic Copper) | 16.6% | 49%-65% | +1.6% | Dual driven by copper price + production, second-largest profit pillar |
| Smelting & Processing & Trading Gold | 36.0% | 1.0% | -28.6% | Contributes revenue scale, generates almost no profit |
| Smelting Copper | 14.3% | 2.1% | -6.7% | Thin margin from smelting processing, capacity supports mines |
| Mine Zinc | 1.5% | 33.9% | -12.2% | Zinc price under pressure, non-strategic focus |
| Lithium (Lithium Carbonate) | <1% | 61.4% | New business | Second growth curve, 2026 target of 120,000 tonnes LCE |
Profit Main Engine Assessment: Mine gold and mine copper combined account for only 35% of revenue but contributed approximately 87% of gross profit—they are the true profit engines. Smelting & processing gold/copper together account for about 50% of revenue, but gross margins are only 1-2%, generating almost no economic value, primarily serving to maintain scale effects and smelting capacity utilization.
Gross Margin Structure Divergence: The highest gross margin (gold concentrate 73.9%) and the lowest (smelting zinc -2.1%) differ by 76pp—the former is pure mining profit from high-grade gold mines, the latter is value destruction in the smelting processing stage. The company's strategy is gradually reducing smelting proportion and increasing the share of mine products. The FY2025Q1 consolidated gross margin of 36.3% already reflects this shift.
Based on the extracted financial reports, no obvious signs of financial engineering were found. Items to note: ① Derivative accounting treatment—fair value changes (-RMB 1.75 billion) from commodity contracts not designated as hedging relationships are directly recorded in current period profit/loss; future adoption of hedge accounting could smooth profit volatility. ② Smelting zinc gross margin has been persistently negative (-2.07%), and the company has not recognized impairment for this segment. ③ Accounts receivable growth rate (+36.7%) significantly exceeds revenue growth (+15.0%), but the absolute scale is not large (RMB 9.3 billion).
| Metric | FY2023 | FY2024 | FY2025 | Consistent with Management Explanation |
|---|---|---|---|---|
| Unit Sales Cost (Gold Bullion, RMB/gram) | — | 287.2 | 333.9 | Yes: Lower grade, increased haul distance, higher royalties |
| Unit Sales Cost (Copper Concentrate, RMB/tonne) | — | 19,139 | 22,362 | Yes: Same as above |
| Consolidated Gross Margin | 15.8% | 20.4% | 27.7% | Yes: Price increases + cost management |
| R&D Expenses (RMB 100 million) | — | 15.8 | 19.0 | Not separately explained by the company; growth matches scale |
Data changes across periods are generally consistent with management explanations, with no obvious definitional jumps between periods. Note that in FY2025 the R&D expense capitalization rate was zero (all expensed), indicating a conservative accounting approach.
| Mine | Commodity | Resources | Grade | Reserves | Mine Life | FY2025 Production |
|---|---|---|---|---|---|---|
| Kamoa-Kakula | Copper | 39.85 million tonnes | 2.48% | 17.08 million tonnes | 40 years | 389,000 tonnes |
| Julong Copper Mine | Copper | 25.68 million tonnes | 0.29% | 19.45 million tonnes | 44 years | 190,000 tonnes |
| Cukaru Peki | Copper | 22.34 million tonnes | 0.84% | 12.91 million tonnes | 66 years (lower zone) | — |
| Buriticá | Gold | 385 tonnes | 6.95g/t | 143 tonnes | 14 years | — |
| Rosebel | Gold | 360 tonnes | 0.82g/t | 159 tonnes | 24 years | — |
| Porgera | Gold | 514 tonnes | 2.59g/t | 179 tonnes | 20 years | — |
| Manono | Lithium Carbonate | 6.47 million tonnes LCE | 3.72% | 4.39 million tonnes LCE | 27 years | Newly commissioned |
| 3Q Salar | Lithium Carbonate | 8.42 million tonnes LCE | 768mg/L | 1.51 million tonnes LCE | 16 years (Phase I) | Newly commissioned |
Reserve Replacement Ratio: FY2025 exploration added attributable resources—Gold 100 tonnes, Copper 2.58 million tonnes, Zinc-Lead 450,000 tonnes, Silver 320 tonnes, Molybdenum 15,000 tonnes. More added via M&A: Akyem Gold 483 tonnes, Zangge Copper 2.07 million tonnes, etc. Reserve replacement ratio far exceeds 1, resource base continuously thickening.
| Country | Political Risk | Tenure Status | Recent Events |
|---|---|---|---|
| DRC | High | Kamoa until 2042 | Lithium royalty increased to 10% (May 2026) |
| Serbia | Medium | Cukaru Peki until 2033 | CBP temporary seizure order (June 2026) |
| Colombia | Medium-High | Buriticá until 2043 | Regional security situation |
| Papua New Guinea | Medium-High | Porgera until 2043 | Porgera restart steady |
| Mali | High | Allied Gold pending approval | Transaction deadline extended to July 29, 2026 |
| Tibet, China | Medium | Julong until 2039 | High-altitude operations |
| Argentina | Medium | 3Q Salar until 2039 | Policy volatility |
Conservative NAV/share approximately RMB 35-45 (SOTP sum): Gold segment ~RMB 15 + Copper segment ~RMB 18 + Lithium segment ~RMB 3 + Zinc/Silver/Molybdenum ~RMB 4 - Net debt ~RMB 5 = RMB 35 (lower bound). Mid-cycle NAV center approximately RMB 40/share. Current price of RMB 25.10 implies a discount of about 37%. Input precision is limited by availability of mine-level FCF estimates; NAV is a reference range, not an exact value.
Percentile Warning: Current PE is at an extreme low for the past 10 years. However, low PE at peak earnings for cyclical stocks is the norm, not a value signal. Use percentiles only as a reference.
| Company | PE(TTM) | Forward PE | PB | EV/EBITDA | Revenue Growth | ROE |
|---|---|---|---|---|---|---|
| Zijin Mining | 12.9x | 8.1x | 3.5x | — | +15.0% | 33.0% |
| BHP Group | ~18x | — | 3.2x | 8.5x | -8% | 23.1% |
| Freeport-McMoRan (FCX) | ~15x | — | 3.8x | 7.0x | +1.8% | ~20% |
| Southern Copper (SCCO) | ~28x | — | 12.0x | 14.0x | +17.4% | 55.3% |
| CMOC Group (603993) | ~12x | — | 2.8x | 6.5x | -3.0% | 24.7% |
| Shandong Gold (600547) | ~25x | — | 4.5x | 12.0x | +26.4% | 15.6% |
| Barrick Gold (GOLD) | — | — | — | — | +31% | — |
| Newmont (NEM) | — | — | — | — | +21% | — |
Zijin Mining has the highest growth rate among comparable miners (copper production 5-year CAGR 17%), yet the lowest valuation (forward PE 8.1x vs. peers 15-28x), with a PEG of only ~0.14. This extreme discount reflects the market's deep concern over "unsustainable peak-cycle earnings."
The current price of RMB 25.10 implies the market is pricing in the following expectations: mid-cycle gold price of only ~$2,500-2,700/oz (well below current $4,300) and copper price of ~$8,000-9,000/t (below current $10,000). In other words, the market has not only failed to pay for growth, but is pricing the stock at roughly a 10% discount to its EPV zero-growth value of RMB 27.78. For a growing mining company driven by triple engines of copper, gold, and lithium, with production potentially ranking global top three by 2028, the reasonableness of this pessimistic pricing depends on commodity prices—if the $4,300 gold price proves to be a cyclical peak rather than a new equilibrium, then the RMB 25.10 price is justified; otherwise, there is significant revaluation potential.
| Layer | Per-Share Value | % of Current Price | Explanation |
|---|---|---|---|
| Asset Value (Floor) | RMB 6.98 | 27.8% | Book equity (excludes resource revaluation) |
| EPV Zero-Growth | RMB 27.78 | 110.7% | Based on mid-cycle gold $2,700/oz + copper $9,000/t, current capacity |
| Growth Option | Systematic Backfill | -10.7% | Current price below EPV; growth option not yet priced by market |
Current price is below EPV zero-growth value—the market has effectively priced Zijin's growth prospects as negative. This is only justified under the dual pessimistic assumption that "current profits are unsustainable and future volume growth cannot offset price declines."
| Scenario | Probability | Fair Value Range | vs. Current Price | Key Swing Factors |
|---|---|---|---|---|
| Bear | 25% | RMB 16-20 | -20% to -36% | Gold $2,500/oz + Copper $7,000/t; Julong/Kamoa delays; Allied Gold failure |
| Base | 50% | RMB 30-38 | +20% to +51% | Gold $3,800/oz + Copper $12,500/t + Li Carbonate RMB 140,000/t; production guidance met |
| Bull | 25% | RMB 45-55 | +79% to +119% | Gold $5,000/oz + Copper $15,000/t; production exceeding guidance; lithium segment fully delivered |
Bear case cross-check: Lower bound RMB 16 already covers Citi's peak-earnings-reversal scenario (implied RMB 22-25), but does not cover Smartkarma David Blennerhassett's extreme valuation (RMB 5.1-6.4, based on market cap US$20-25bn). The latter assumes the market prices Zijin at liquidation value rather than going concern—inconsistent with the company's producing mines and sustained cash flow—so it is not adopted.
In-house earnings estimate (FY2026E): Revenue RMB 480-550 billion, net profit attributable to parent RMB 75-90 billion, EPS RMB 2.82-3.39. Key assumptions: average gold price $3,800/oz, average copper price $12,500/t, average lithium carbonate price RMB 140,000/t; mine gold 105 tonnes (+17%), mine copper 1.2 million tonnes (+10%), lithium carbonate 120,000 tonnes (+370%).
Undervalued. Current price of RMB 25.10 corresponds to a FY2026E PE of only 8.1x—pricing in a "commodity price collapse" pessimistic scenario for a growing miner with copper+gold production CAGR >11%, ROE 33%, and top-tier global resource reserves. The base case (50% probability) fair value range is RMB 30-38, offering a margin of safety of +20% to +51%. The main risk is not that the stock is "expensive," but that commodity prices fall significantly from current highs—however, even with a 20-30% price decline, the earnings buffer from volume growth should support current valuations.
Copper Market: Global copper market size was approximately US$248.2 billion in 2025 (Grand View Research), with copper mining sub-segment around US$9.78 billion. Market CAGR for 2020-2025 was about 3-5%, expected CAGR for 2026-2033 is about 5.9%. Global mined copper production was approximately 23.5 million tonnes in 2025 (ICSG), +1.4% YoY. Global copper reserves about 870 million tonnes (USGS), static life of approximately 38 years.
Gold Market: Global gold demand totaled 5,002 tonnes in 2025, a record high (World Gold Council), with market value about US$555 billion. Gold mine production was 3,672 tonnes, +1% YoY. Volume CAGR for 2026-2034 is about 4.70% (Fortune Business Insights). Central bank purchases exceeded 800 tonnes for three consecutive years (2023-2025). China's central bank gold reserves as a share of total reserves is still only about 6% (global average ~15%), leaving huge room for increase.
Lithium Market: Global lithium carbonate demand in 2025 was approximately 1.4 million tonnes LCE, driven by NEVs (global sales about 16.6 million units in 2025, +17%) and energy storage. Demand is expected to exceed 3.0 million tonnes LCE by 2030.
Zijin operates in an integrated upstream mining + midstream smelting model. Industry value distribution: Upstream mining & beneficiation (gross margin 61.6%, Zijin's core profit zone) → Midstream smelting (gross margin 1-3%, nearly no value creation) → Downstream processing / final consumption. Leveraging its own mine advantage, Zijin's mineral product gross profit accounts for about 87% of total gross profit, placing the company in the first tier among global miners in terms of value retention capability.
Bargaining power with upstream (mining rights, equipment) is strong (global layout + in-house exploration team); towards downstream (commodity pricing) it is a price taker—core profit drivers are commodity prices and production volume, not bargaining power.
Copper Supply/Demand: ICSG forecasts a slight refined copper surplus in 2025-2026 (289,000 tonnes / 209,000 tonnes), but the mine supply side is structurally tight—TC/RC for copper concentrate is at historically low levels (~$10/tonne), reflecting mine supply far tighter than smelting. Medium to long term, CRU predicts global copper entering a deficit from 2029, with the gap widening to 6.0-7.5 million tonnes after 2030. Drivers: global grid investment (over US$380 billion in 2025), EVs (80kg copper per vehicle vs. 23kg for ICE, 3.5x), AI data centers (copper density per rack increasing 2-3x).
Gold Supply/Demand: Supply-demand roughly balanced in 2025. Investment demand (gold ETF net additions of 801 tonnes) and central bank purchases (over 850 tonnes) are strong, offsetting declines in jewelry consumption.
Competitive Landscape: Copper ore CR5 ~37% (BHP ~6.5%, Codelco ~6%, Freeport ~5.5%, Glencore ~5%, Anglo American ~4%); Gold ore CR5 ~20%. Zijin's copper share is about 4.6% (ranked 6-7th), gold share about 2.8% (ranked 4th), with both shares rapidly increasing. Entry barriers are extremely high: large copper mine capex ranges from US$3-10 billion, construction cycle 5-10 years, plus environmental approvals and ESG compliance costs—new entrants can hardly challenge the existing structure.
Cycle Positioning: Copper mining is in the mid-to-late stage of growth—structural demand growth (energy transition + AI) vs. supply constraints (long-term capex underinvestment + sharp decline in new discoveries). Short-term high-range volatility, but copper price faces 20-30% downside risk (copper industry outlook, June 18, 2026). Gold is in a strong uptrend (de-dollarization + safe haven + central bank buying), but gold price has already risen over 60% from its 2025 low, also facing pullback risk in the short term.
Key Policies: ① China's new Mineral Resources Law effective July 2025 + Implementing Regulations effective June 15, 2026—full competitive bidding for mining rights benefits well-capitalized leading miners (Zijin). ② Chile raising large copper mine nationalization rate to 60% + 10% green surtax. ③ DRC raising lithium royalty to 10%. ④ Global ESG/carbon border taxes (EU CBAM) increase compliance costs, but are relatively favorable to Zijin which has built a robust ESG framework.
(See Section X, 10.2 Peer Comparison Table)
Among comparable companies, Zijin has a significant growth advantage (copper production 5-year CAGR 17% vs. BHP 4%, FCX 2%, SCCO 3%), but is valued far below global peers (forward PE 8.1x vs. 15-28x). The core sources of this discount: ① A-share mining sector has historically traded at a discount to global peers; ② Market concerns about commodity price peaking suppress growth pricing; ③ Geopolitical risks from overseas operations are given excessive weight.
Global Positioning: Copper production rank 6-7th (share 4.6%), Gold production rank 4th (share 2.8%). Zijin is the only Chinese miner among the global top five in both gold and copper. Trend is upward—copper target 1.5-1.6 million tonnes by 2028 (share ~6.5%), gold target 130-140 tonnes.
Moat Sources: ① Low-grade ore mining technology (leading in China, enabling profitability at Julong's 0.29% grade). ② Counter-cyclical M&A capability (core assets like Kamoa, Julong, Timok all acquired cheaply during commodity downturns). ③ Chinese background offering geopolitical convenience in Africa/Central Asia (good relations with host governments, reducing operational risk). ④ Global multi-commodity diversification to hedge single mine/country/commodity risk.
It should be acknowledged that the company's self-described "global top three" status may vary under different statistical definitions. Some rankings cited in the annual report may differ from third-party sources (Wood Mackenzie, S&P Global). Investors should cross-verify using multiple sources.
Bullish. Zijin Mining possesses world-class resource reserves, outstanding management execution, and industry-leading growth (copper and gold production CAGR >11%). Current P/E (TTM) of 12.9x and forward P/E of 8.1x are at absolute historical lows over the past decade. The market has priced in the unsustainability of peak-cycle earnings to an extreme — the EPV zero-growth value of RMB 27.78 is already above the current price. The base case (50% probability) fair value range is RMB 30-38, representing 20-51% upside from the current price.
However, it must be clearly recognized: In this round of profit growth, the "price" factor (gold price +44%) far outweighs the "volume" factor (gold production +23%, copper production +1.6%). Mean reversion in commodity prices will be the greatest threat to earnings. The CSFC's significant reduction in Q1 (-36.76%), Citigroup's view that 2026E net profit will peak, the setback in the Allied Gold acquisition, the CBP detention order, and other geopolitical risks are materializing — it is recommended to build positions gradually during price pullbacks rather than chasing highs.
This report is based on public information and model estimates and does not constitute investment advice. Commodity price forecasts are subject to high uncertainty.