Industrial Securities has issued a research report initiating coverage on MMG (01208) with an "Add" rating. The report states that medium to long-term copper prices are expected to trend higher, and the Las Bambas mine has resumed stable operations. The company's guidance, based on maintaining stable operations, projects copper production for 2026 to be between 490,000 and 530,000 tonnes, representing a change of -2.7% to +4.2% year-on-year. Zinc production is projected to be between 220,000 and 240,000 tonnes, a change of -7.4% to +1.3% year-on-year. In the medium term, the Khoemacau expansion project is expected to contribute an additional 90,000 tonnes of copper, with a further 160,000 tonnes in the longer term. The China Minmetals Corporation group has set a target to exceed 1 million tonnes of copper production by 2030, with MMG positioned as the primary contributor to achieving this target, indicating promising long-term growth potential. The company is seen as undervalued with high earnings sensitivity. The brokerage forecasts net profit attributable to shareholders for 2026, 2027, and 2028 to be $1.623 billion, $1.704 billion, and $1.750 billion, respectively, representing year-on-year increases of +218.6%, +5.0%, and +2.7%.
Key points from the report are as follows:
MMG recently released its 2025 annual report: revenue increased 39% year-on-year to $6.22 billion, net profit rose 161% to $960 million, and net profit attributable to shareholders surged 215% to $510 million. While the Las Bambas mine operated stably, the Kinsevere mine recorded an impairment of $290 million in the second half of 2025, primarily due to cobalt export restrictions, power supply volatility, and fiscal policy uncertainty, leading to profits falling short of expectations. The company's copper production for 2025 increased 27% year-on-year to 507,000 tonnes, while zinc production grew 6% to 232,000 tonnes. Driven by higher volumes and prices, revenue increased 39% to $6.22 billion, and EBITDA grew significantly by 67%. EBITDA contributions from Las Bambas, Kinsevere, Khoemacau, Dugald River, and Rosebery increased by +78%, +49%, +33%, +4%, and +36% year-on-year, reaching $2.83 billion, $100 million, $170 million, $180 million, and $170 million, respectively.
The Las Bambas mine maintained stable operations. Guidance for 2026, based on prudent considerations, anticipates full production capacity and stable operations. In 2025, copper production at Las Bambas increased 27% year-on-year to 410,000 tonnes. By-product gold production rose 35% to 86,000 ounces, and by-product silver production increased 33% to 5.256 million ounces. C1 cost decreased by $0.39 per pound to $1.12 per pound, primarily driven by economies of scale, lower processing fees, and increased by-product revenue. The 2026 guidance for Las Bambas projects copper production between 380,000 and 400,000 tonnes, with C1 cost expected to be in the range of $1.20 to $1.40 per pound. If gold and silver by-product prices remain high, further optimization of C1 cost is possible.
Operational challenges at the Kinsevere mine, primarily due to unstable power supply affecting production, led to the $290 million impairment. Addressing the power supply issue is a key focus for 2026. Copper production at Kinsevere in 2025 increased 18% year-on-year to 53,000 tonnes, but fell short of expectations due to power and operational challenges hindering the ramp-up. Mitigation measures have been implemented, and for 2026, the mine plans to prioritize deploying a battery energy storage system to alleviate the impact of frequent power outages and enhance operational stability. C1 cost decreased slightly by $0.14 per pound year-on-year to $3.12 per pound. The $290 million impairment for Kinsevere considered factors including cobalt export quota restrictions, power supply volatility, challenges related to capacity increases and operations, and instability in the local fiscal policies of the Democratic Republic of Congo. The 2026 guidance for Kinsevere projects copper production between 65,000 and 75,000 tonnes, with C1 cost expected to be between $2.50 and $2.90 per pound.
The Khoemacau mine has commenced a 130,000-tonne expansion project, with first production of copper concentrate expected in the first half of 2028, and a target to reach 200,000 tonnes annual capacity by 2030. Copper production at Khoemacau in 2025 increased 36% year-on-year to 42,000 tonnes, slightly below guidance, mainly due to a temporary impact on ore supply from a contractor transition in Q3 2025; a new contractor has now fully taken over. C1 cost decreased by $0.57 per pound year-on-year to $1.97 per pound. The 2026 guidance for Khoemacau projects copper production between 48,000 and 53,000 tonnes, with C1 cost expected between $2.00 and $2.30 per pound. The expansion project officially broke ground on February 6, 2026, aiming to increase annual capacity to 130,000 tonnes of copper contained in concentrate, with associated silver production exceeding 4 million ounces. The project is expected to optimize the mine's average life-of-mine C1 cost to below $1.60 per pound.
The Dugald River mine faces increasing mining difficulty in 2026, leading to a cautious production guidance. Zinc production at Dugald River in 2025 increased 12% year-on-year to 183,000 tonnes, with C1 cost remaining flat at $0.65 per pound. The 2026 guidance projects zinc production between 170,000 and 180,000 tonnes, with C1 cost expected between $0.80 and $0.95 per pound.
The Rosebery mine benefits from significant by-product revenue, leading to continued optimization of C1 cost. Zinc production at Rosebery in 2025 decreased 14% year-on-year to 49,000 tonnes. Benefiting from higher precious metal by-product revenue and lower processing fees, the C1 cost was -$0.94 per pound. The 2026 guidance projects zinc production between 45,000 and 55,000 tonnes, with C1 cost expected to be between -$0.60 and -$0.10 per pound.
Interest-bearing debt at the period-end decreased by $1.35 billion year-on-year to $3.28 billion, with the leverage ratio falling to a historical low of 33%. Seizing expansion opportunities, capital expenditure for 2026 is budgeted to increase to $1.6-$1.7 billion. This includes $800-$850 million allocated to Las Bambas, focusing on core areas like the Ferrobamba mining area and tailings storage facility expansion; $500-$550 million for the Khoemacau mine to complete its Phase 2 expansion. If the acquisition of the Brazilian nickel assets is successfully completed, additional capital expenditure will be required in 2026.
China Minmetals Corporation has set a target to exceed 1 million tonnes of copper production by 2030, pursuing both organic reserve growth and external expansion, indicating promising long-term growth potential. As of the end of H1 2025, MMG's copper resources stood at 18.62 million tonnes. In November 2025, the company stated that the Minmetals group's existing copper resources exceed 50 million tonnes. MMG is expected to be the primary contributor to achieving the group's copper production target. Exploration at Las Bambas has covered less than 20% of the total mining license area. The group is gradually integrating assets; in December 2025, Metallurgical Corporation of China Ltd. sold three of its copper assets to China Minmetals Corporation. These assets include the Saindak copper-gold project in Pakistan (in production, with copper resources of 1.79 million tonnes as of H1 2025), the Aynak copper mine in Afghanistan (with copper resources of 12.36 million tonnes as of end-2024), and the Sia Diq copper project in Pakistan (all approvals obtained), indicating ongoing potential for exploration and reserve growth.
The report concludes with risk warnings regarding copper price volatility, local community unrest, and potential delays in expansion projects.
Comments