Buffett ApprenticeZijin Mining 24Q1: The mining giant continues to advance
On the evening of April 22, 2024, mining giant Zijin Mining Group released its Q1 2024 report.
In Q1 2024, the company achieved total operating revenue of 74.777 billion yuan, down 0.22% YoY; net profit attributable to shareholders was 6.261 billion yuan, up 15.05% YoY; adjusted net profit was 6.224 billion yuan, up 15.93% YoY; net cash flow from operating activities was 8.172 billion yuan, up 4.38% YoY. During the reporting period, Zijin's basic EPS was 0.238 yuan, up 14.98% YoY, with weighted average ROE at 5.58%, slightly down 0.31% YoY.
Zijin stated that during the reporting period, its copper and gold output increased while zinc production declined.
Specifically, from January to March 2024, gold output rose 5% YoY, copper output increased 5% YoY, while zinc output dropped 9% YoY. Mining gross margin reached 54.50%, up 0.97 percentage points YoY. Sequentially, Q1 gold output fell 5%, copper output rose 4%, and zinc output dipped 0.2% compared to Q4 2023.
In Q1 2024, Zijin effectively curbed the rising cost trend of major mineral products. Overall operating costs, especially for overseas projects, showed significant sequential declines. Unit sales costs for gold and copper concentrates dropped 14% and 13% QoQ respectively. Against the backdrop of rising gold and copper prices, the company's gross profit improved markedly.
The mining industry is capital-intensive and cyclical. Given the cyclical nature of downstream products like copper, gold, zinc and related metals, Zijin operates in a highly technical sector.
With decades of industry experience, Zijin has core advantages in mining and mineral processing, enabling cost efficiency and resource optimization.
Since 2024, factors including Fed rate hikes, U.S. debt tensions, and geopolitical shifts have driven international gold prices to record highs, benefiting Zijin's profitability.
Beyond gold, copper prices are another key focus.
Since March 13, copper prices have risen about 10% domestically and internationally. SHFE copper hit a 21-year high while LME copper approached $9,560.
Structurally, global copper supply tightness is worsening. 2024 supply growth is only 1.94%, below expectations. Key producing regions like South America and the U.S. face output declines, while power issues in Congo and policy changes in Indonesia further constrain supply.
The situation may intensify. On April 18, Zambia (2023 output: 698k tons) notified mines of force majeure due to drought, requiring up to 20% power cuts. Earlier on April 16, Vale's Sossego mine (2023 output: 66.8k tons) had its license suspended again by a Brazilian court.
Meanwhile, global copper demand grows steadily at 3.97%, with Chinese demand up 4.2% and imports rising 6%. This supply-demand imbalance may drive prices higher.
Given copper's 5-8 year investment cycle, tight conditions may persist. As a major global producer with depreciated assets, Zijin stands to benefit from rising prices.
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