Citigroup: First initiated a "Buy" rating for ZIJIN GOLD INTL (02259), optimistic about production growth and gold price outlook.

Citigroup has released a research report initiating a "Buy" rating for ZIJIN GOLD INTL (02259), with a target price of HKD 178. The bank indicated that Zijin Mining Group (02899) holds an 85% stake in ZIJIN GOLD INTL and provides it with an experienced acquisition team. Benefiting from newly acquired assets and expansion, ZIJIN GOLD INTLs gold production growth rate outpaces its peers, while effectively controlling costs and exploration expenses. Citigroup predicts that from 2025 to 2028, ZIJIN GOLD INTLs equity gold production will achieve a compound annual growth rate of 17%, higher than its competitors, driven primarily by expansions at projects such as Rosebel, Akyem, and RG Gold. The company aims to reach an annual gold production of 100 tons by 2030, with 70 to 75 tons coming from existing mines and 20 to 25 tons from potential acquisitions. The bank cited company data indicating that the average acquisition cost from 2019 to 2025 was USD 98 per ounce, significantly lower than the industry average of USD 136, while the increased resources and reserves from exploration following acquisitions make the acquisition prices more attractive. Citigroup's commodities team is optimistic about the prospects for gold prices, predicting that in the next 6 to 12 months, gold prices could reach USD 5,000 per ounce, with an average gold price forecast of USD 4,530 in 2026 and USD 4,850 in 2027. The bank estimates that a 10% change in gold prices will affect earnings in 2026 and 2027 by approximately 16%. Citigroup calculates the net asset value using a weighted average cost of capital of 5% and values it at 1.32 times the industry average price-to-book ratio, setting the target price at HKD 178, equivalent to a forecasted price-to-earnings ratio of 20.5 times in 2026 and 16.6 times in 2027. Risks include gold prices falling below expectations, total sustaining costs exceeding expectations, production falling short of expectations, high equity concentration, capital expenditures exceeding expectations, and geopolitical risks.