Goldman Sachs maintains Zijin Mining Group (02899) with a "buy" rating and a target price of 21.5 Hong Kong dollars.

Goldman Sachs released a research report stating that Zijin Mining Group (02899) is one of the few mining companies that can benefit from the increase in commodity prices. With the rise in copper prices, the bank expects Zijin's recurring net profit to increase from 22.4 billion RMB in 2023 to 41.4 billion RMB in 2026, with a compound annual growth rate of 23%. The bank maintains a "buy" rating on Zijin H shares and a target price of 21.5 Hong Kong dollars, believing that its current valuation is attractive. The bank believes that the continued execution of new project expansions and the rise in copper prices will serve as catalysts. Zijin's management pointed out that cost reduction measures have yielded positive results, with the unit production cost of copper concentrate expected to be 18,500 RMB per ton in 2024 and the unit production cost of mined copper to be 22,400 RMB per ton, representing a year-on-year decrease of 7% and 4%, respectively. The unit production cost of Zijin's copper concentrate in the first half of this year decreased by 8.8% on a semi-annual basis, mainly due to overseas projects. Cost reduction measures include renegotiating prices for diesel and explosives used in mining, adjusting outsourcing project prices, optimizing production processes, and reducing mining secondary blasting. However, Zijin believes that in the long run, as ore grades decline, unit production costs will gradually increase. The report stated that the company recently raised $2.5 billion through convertible bond issuance and new H-share issuance, primarily to replace high-interest US dollar debt. The company expects to save 1 billion RMB in financial costs annually, which will be reflected in the profit and loss statement starting in 2024. As for the dividend policy, Zijin has set the minimum payout ratio at 30% and will balance capital expenditures to increase the dividend yield. Goldman Sachs believes that as one of the world's largest copper miners and gold producers, Zijin Mining Group produced 1.007 million tons of copper and 68 tons of gold in 2023. The company's copper production is expected to increase from 1 million tons in 2023 to 1.1 million tons in 2024 and 1.2 million tons in 2025. The bank estimates that by 2026, Zijin Mining Group's gold and copper production will reach 91 tons and 1.5 million tons respectively, ranking it among the top five gold producers and top three copper producers globally.