According to a research report from Morgan Stanley, Zijin Mining (ASX: 02899) reported third-quarter results that fell short of expectations. The bank maintained its "Overweight" rating and a target price of HK$60, and continues to list Zijin as its top pick.
For the first three quarters of this year, Zijin Mining recorded a net profit increase of 51.9% year-on-year to RMB 57.5 billion. Third-quarter net profit came in at RMB 18.4 billion, down 3.8% quarter-on-quarter and up 26% year-on-year, missing the bank's forecast. Recurring net profit was RMB 17.8 billion, down 9% quarter-on-quarter but up 42.4% year-on-year.
The bank noted that gold production rose 8% year-on-year to 70 tonnes in the first nine months, with third-quarter output at 23.4 tonnes, up 1% quarter-on-quarter but down 1.4% year-on-year. Copper production reached 816,000 tonnes in the first nine months, down 1.7% year-on-year, though excluding KK output it rose 6.1% year-on-year; third-quarter copper output was 281,000 tonnes, up 2.2% quarter-on-quarter and up 6.9% year-on-year. Lithium production rose to 79,100 tonnes LCE in the first nine months, with third-quarter output at 35,500 tonnes, up 29.9% quarter-on-quarter, although sales volumes still lagged behind production.
Zijin Mining completed the acquisition of a 25.85% stake in Chifeng Gold on October 22.
In the gold business, a 9.1% quarter-on-quarter decline in gold prices offset higher sales volumes, and combined with rising unit costs, gross profit fell quarter-on-quarter to RMB 12.55 billion. The copper business benefited from a 3.4% quarter-on-quarter increase in sales volumes and a 5% quarter-on-quarter rise in average selling prices, lifting gross profit quarter-on-quarter to RMB 14.83 billion. The lithium business saw lower prices offset higher concentrate sales volumes and cost savings, reducing gross profit quarter-on-quarter to RMB 1.61 billion. Copper costs rose to RMB 29,000 per tonne, while gold costs climbed to RMB 313 per gram.
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