Zijin Mining Group, China’s leading gold and copper producer, is positioned for growth, bolstered by a series of strategic acquisitions and the rising prices of gold and copper. The company is also poised to benefit from a low interest rate environment, which has supported global demand for precious metals, as well as growing electricity demand driven by the expansion of electric vehicles (EVs) and artificial intelligence (AI) technologies.
The recent easing cycle initiated by the U.S. Federal Reserve has proven favorable for gold miners, with analysts predicting that falling bond yields could push gold prices above $3,000 per ounce. Zijin Mining, anticipating continued demand, has been actively expanding its portfolio. This year, the company has made several notable acquisitions, including a $245 million deal for La Arena, a gold and copper project in Peru. The La Arena project includes two mining operations—one active heap leach gold mine and one exploration-stage porphyry copper and gold project. The mine covers 33,100 hectares across 25 mineral concessions and is valued at $320 million. Last year, it generated $190 million in revenue and a net profit of $10 million.
In addition to the Peruvian acquisition, Zijin recently acquired the Akyem gold project in Ghana for $1 billion. Akyem, located in one of the world’s major gold-producing regions, posted a profit of $128 million last year. Zijin’s acquisition spree also included investments in Chinese gold miners Longyan Kaolin Clay and Wanguo Gold Group, as well as a strategic $41.4 million investment in Canadian-listed Montage Gold Corp.
Rising gold prices have certainly fueled Zijin’s appetite for expansion. Beyond acquisitions, Zijin’s core business has been performing well, with its net profit for the first nine months of the year reaching 24.36 billion yuan, a 50.7% year-on-year increase. In Q3 alone, the company saw a 58.2% jump in profits, driven by strong sales in gold and copper, which saw prices increase by 25.5% and 13.9%, respectively.
While many assume Zijin’s gold business is its largest, copper is actually a more significant driver of the company’s revenue. In Q3, copper accounted for 44.4% of Zijin’s gross profit, surpassing gold’s contribution of 32.5%. This pattern was also seen in Q2, where copper contributed 51% and gold 30.1%. However, Zijin’s recent acquisitions may help balance the contributions of these two metals.
Zijin’s growth prospects are further supported by political and economic factors. The U.S. presidential election of Donald Trump, known for his business-friendly stance and preference for low interest rates, has also been beneficial for gold. Additionally, potential changes to U.S. corporate tax rates and increasing federal debt could weaken the dollar, further boosting the price of gold, which traditionally serves as a hedge against currency devaluation.
Meanwhile, copper is poised for a surge in demand, especially as sectors like AI and EVs drive the need for more electricity. With limited global production capacity for copper, prices are expected to rise, creating further upside for Zijin, which benefits from its strategic position in the copper market.
Zijin is also expanding into the lithium market, a key material in the growing energy transition. The company has several lithium projects, including the 3Q Lithium Salt Lake Project in Argentina, and lithium ventures in China and the Democratic Republic of Congo. The Argentinian project is set to begin production soon, with an expected output of 250,000 to 300,000 tons annually by 2028.
However, international expansions, particularly in developing countries, come with risks, including political instability and regulatory challenges. A notable example is the 2023 theft of 3.2 tons of gold worth $200 million from Zijin’s Buriticá mine in Colombia, a significant loss caused by illegal mining activities.
Despite these challenges, Zijin’s financial outlook remains strong. Analysts predict the company’s gross margin will improve to 18.9% in 2024 and 19.9% in 2025. Net profit is expected to rise 51.8% this year, reaching 32.05 billion yuan, with continued growth forecasted for the coming years.
Despite its strong financials and high efficiency—boasting a return on equity (ROE) of 25.8%, higher than global peers like Newmont and Barrick Gold—Zijin’s stock has been undervalued. Its price-to-earnings (P/E) ratio of 12.7 is lower than its competitors, such as Freeport-McMoRan at 31 times, and Newmont and Barrick at around 14.5. This may change, however, as Zijin’s recent acquisitions and the anticipated rise in gold and copper prices could improve investor sentiment.
Zijin Mining is well-positioned to capitalize on the growing demand for gold, copper, and lithium, with a diversified portfolio that should continue to drive growth in the coming years.
Related topics:
- Gold Prices Edge Higher Ahead of U.S. Payrolls Data
- Gold Prices Plunge in Chennai as Festive Demand Fades
- Gold Prices Rise Ahead of US Jobs Data Amid Election Uncertainty
