JP Morgan: Maintains Zijin Mining Group (02899) "Overweight" rating with a target price of HK$20.

JPMorgan Chase released a research report stating that Zijin Mining Group (02899) officially announced the acquisition of 392 million shares of Zangge Mining (000408.SZ) last week, corresponding to a 24.82% equity stake, with a total transaction amount of 13.729 billion RMB. The bank pointed out that acquiring high-quality assets will provide additional growth momentum for Zijin Mining Group, which complements the bank's bullish expectations for copper and gold prices. It reiterated Zijin Mining Group as its top pick, maintained a "buy" rating, and set a target price of 20 Hong Kong dollars. The report stated that Zijin Mining Group's acquisition price reflects a 21 times price-to-earnings ratio for Zangge Mining in 2025. In 2024, Zangge Mining's trading price-to-earnings ratio reached 20 times when the London Metal Exchange (LME) copper price sharply rose to $9,200 per ton and approached $10,000 per ton. Excluding Zangge Mining's sales growth and its strategic value to Zijin, the bank believes that this valuation implies a bullish outlook for copper prices in 2025, expected to be between $9,000 and $10,000 per ton, with JPMorgan forecasting at $9,650 per ton. The bank believes that the strategic value of this transaction lies in Zangge's 30.78% stake in the Julong copper mine. Since 2020, Julong's copper resources and reserves have increased by 142% and 265% respectively, now becoming an important asset for Zijin, with production expected to reach around 166,000 tons in 2024 (approximately 15% of Zijin's total copper production). After the completion of the transaction, Zijin's stake in the Julong copper mine will increase to 58% (from 50% before the transaction). The bank believes that Zijin will be able to further improve the efficiency of mining at the Julong copper mine and reduce costs. Zijin aims to achieve lithium production of 250-300ktLCE by 2028. The bank believes that acquiring low-cost lithium assets will enhance Zijin's resilience in lithium profits during a downturn, while also helping to achieve its long-term production goals.