New stock preview | Smart Mine Secondary Disclosure: Eating by mining, gross profit margin maintained at 30%-40%

Recently, the intelligent mining industry from Tibet has once again embarked on the journey to list in Hong Kong. On October 23, Tibet Intelligent Mining Co., Ltd. from the Sheni District of Nagqu, Tibet (hereinafter referred to as "Intelligent Mining"), submitted its listing prospectus to the Hong Kong Stock Exchange, planning to IPO on the Hong Kong main board, with Sinolink (Hong Kong) and Mais Capital as joint sponsors. The company had previously submitted a listing application to the Hong Kong Stock Exchange on April 17, 2025. According to GMTEight, Intelligent Mining is a mining company whose business covers the entire operation chain of exploration, mining, concentration production, and sales. Its main products include zinc concentrate, lead concentrate, and copper concentrate. According to data from the Shanghai Nonferrous Network, in 2024, based on the average annual production of zinc concentrate, lead concentrate, and copper concentrate, the company ranked fifth, fourth, and fifth respectively in Tibet. China, as the largest consumer of refined zinc, has brought huge demand due to infrastructure and galvanizing industries. As a player in the "middle and upper reaches" of the industry, Intelligent Mining's move to list in Hong Kong undoubtedly provides an excellent opportunity for the outside world to observe the growth logic of zinc concentrate companies and industry development trends. Eating based on mining, performance fluctuates easily It is understood that the mining operations of Intelligent Mining are located in Renduo Township, Jiali County, Nagqu City, Tibet, and its operating Moya'a Mining mainly includes two parts: an open-pit mine that has been in commercial operation since 2007 and an underground mine that began commercial operation in the second quarter of 2025. As of July 31, 2025, the total ore reserves of the company's open-pit mine were 1,438.0 thousand tons, with average grades of 4.90% zinc, 0.69% lead, 0.10% copper and 10.09 grams per tonne of silver; the total ore reserves of the underground mine were 10,623.0 thousand tons, with average grades of 4.14% zinc, 2.99% lead, 0.21% copper, and 35.00 grams per tonne of silver. Overall, the Moya'a Mining can supply a total of 400.0 thousand tons of ore annually for concentration plant operations. However, the performance of Intelligent Mining seems to be unstable, with a significant decline in revenue and profits in 2024. According to the prospectus, from 2022 to 2024, Intelligent Mining achieved revenues of 482 million yuan, 546 million yuan, and 301 million yuan respectively, and net profits of 118 million yuan, 155 million yuan, and 55.854 million yuan respectively. Among them, the revenue in 2024 decreased by 44.8% year-on-year, and the net profit decreased by 63.9% year-on-year. Regarding the reasons for the decline in revenue and net profit in 2024, the company pointed out in the prospectus that on the one hand, it was due to production delays related to weather that led to a shortened production cycle during the year; on the other hand, it was due to the temporary suspension of two production lines to match the alternation and upgrade of the concentration plant during the year. Therefore, although the average selling price increased in 2024, the total sales volume of concentrate decreased significantly, leading to a reduction in the company's revenue scale. According to the prospectus, Intelligent Mining's concentrate production in each reporting period was approximately 354,000 tons, 374,200 tons, and 321,800 tons, and the amount of concentrate sold was approximately 31,000 tons, 37,100 tons, and 16,200 tons, with the amount of concentrate sold in 2024 decreasing by 56.33%. Looking at the income structure, Intelligent Mining's revenue comes from the sale of three main ore products: zinc concentrate, lead concentrate, and copper concentrate. Among them, zinc concentrate is the company's main source of revenue. From 2022 to 2024, revenue from the sale of zinc concentrate was approximately 296 million yuan, 274 million yuan, and 216 million yuan, accounting for about 61.4%, 50.1%, and 71.6% of the company's total revenue respectively. However, since April 2025, with the company resuming full operation and the completion of the upgrading project of the processing plant, the improvement in the grade of mined and purchased ores has increased concentrate production. As of July 31, 2025, the company's revenue has significantly increased to 257 million yuan, a year-on-year growth of 253.4%, and the net profit has also increased significantly to 51.737 million yuan compared to the same period last year. Furthermore, perhaps due to the high unit cost, Intelligent Mining's overall gross profit margin is not high- from 2022 to July 31, 2024, the company's gross profit margin was 36.2%, 39.9%, 34.7%, and 33.4% respectively. In 2024, the overall gross profit margin decreased mainly due to the decrease in the gross profit margin of lead concentrate, which decreased from 49% during the period to 37.6%, mainly due to the increase in unit production costs in 2024 resulting from the decrease in ore grade and the decrease in ore mining and concentrate production volume. It is not difficult to see that as a small and medium-sized mining enterprise in Tibet, Intelligent Mining is provided with a certain development foundation by its resource reserves and regional position, but its performance is significantly affected by the high-altitude environment, cost control capabilities, and market fluctuations. Strong market demand, "reducing costs and increasing efficiency" is key From the industry trend perspective, Intelligent Mining is in a golden development period driven by policies, technological integration, and strategic value. Taking the value chain of the zinc industry as an example, after refining zinc ore into concentrate, upstream mining companies generally sell concentrate to traders, who then resell it to smelters. Smelters will refine the concentrate into ingots. Downstream companies further process ingots into galvanized sheets, alloys, zinc oxide, and other products. These processed zinc derivatives are ultimately used in industries such as real estate, automobiles, and infrastructure. In 2024, China's domestic consumption of refined zinc reached 6,642.0 thousand tons, with the most significant consumption coming from infrastructure and construction, accounting for approximately 34.0% and 22.0% of total consumption respectively, while transportation and durable consumer goods together accounted for 30.0%. In recent years, there has been a continuous increase in China's demand for zinc concentrate. As the largest consumer of refined zinc, China has brought huge demand due to infrastructure and galvanizing industries. It is expected that from 2025 to 2028, due to the development of downstream industries, demand will increase at a compound annual growth rate of 2.2%. Contrary to the strong demand, the Chinese zinc concentrate market is facing a shortage of supply, as demand exceeds domestic production, necessitating the import of zinc concentrate from overseas. From 2018 to 2024, due to the short lifespan and unstable ore grades of some domestic mines, domestic production has declined at a compound annual growth rate of -2.3%. During the same period, to meet downstream demand, imports have increased significantly, with a compound annual growth rate of about 5.8%. It is expected that from 2025 to 2028, the commissioning of new projects will further increase supply, with domestic production expected to maintain a compound annual growth rate of 2.8%, while the compound annual growth rate of imports will decrease to 2.0%. This "strong demand, supply shortage" mismatch clearly provides a favorable development opportunity for Intelligent Mining, a producer of zinc concentrate. In addition, in recent years, China and several other major mining countries globally have elevated mine safety, green environmental protection, and intelligent upgrading to a national strategic level. China's "14th Five-Year Plan" and relevant documents from the National Mine Safety Supervision Bureau require or encourage mining companies to undergo intelligent upgrades, setting clear construction goals and timetables. These driven policy factors also bring numerous development opportunities to the industry. However, for companies like Intelligent Mining, there is a strong demand for reducing costs and increasing efficiency- in the fluctuating mining cycle, companies need to maintain competitiveness by increasing production efficiency, reducing energy consumption, and material consumption. Intelligent systems can achieve fine management of the entire production process, significantly improving resource utilization and equipment utilization. Additionally, it is worth noting that zinc, lead, and copper are major commodities globally and domestically, and their prices are influenced by various complex factors such as global macroeconomic and political events and sentiments, regional conflicts; supply and demand of zinc concentrate and lead concentrate; expectations of interest rates and inflation rates; and the actual and forecasted actions of central banks regarding the purchase and sale of related minerals. Therefore, fluctuations in the market prices of zinc, lead, and copper concentrates may have an adverse effect on the profitability and cash flows of Intelligent Mining. In conclusion, the performance profile of Intelligent Mining exhibits cyclical characteristics, and product prices are easily influenced by economic cycles. During economic prosperity, industrial demand is strong, metal prices rise, and the company can tell a very compelling "mining" story. However, its "foundation" is not solid: lower profitability and fluctuating performance levels are also issues that the company needs to address.