Goldman Sachs: Zijin Mining, a name rising rapidly in the global mining industry!

Super market share, super growth rate, a global mining giant is rising...

In 2023, Zijin Mining's copper production reached 1 million tons, accounting for 4% of global supply. Over the past decade, the company has increased its copper production and resource accumulation based on mines by 7-8 times through greenfield projects, post-acquisition transformations, etc., a growth rate far exceeding the 1-3% growth rate of other major global peers.

On October 2, Goldman Sachs analysts Joy Zhang, Trina Chen, Jolin Liu, Fiona Ye released a report stating that Zijin Mining is expected to continue increasing its copper assets in the coming years and reach a copper production of 2.4 million tons by 2035, mainly driven by the expansion of existing projects. Goldman Sachs also stated:

"Zijin Mining represents the resilience of Chinese producers, and its competitive moat will drive Zijin's continued growth over the next decade and keep it resilient throughout the cycle."

Scarce Resources, Zijin Leaving Peers Behind

Fundamentally, the development of copper and gold resources is limited.

According to data from the U.S. Geological Survey, global copper and gold reserves in 2023 were 1 billion tons and 59,000 tons, respectively. Goldman Sachs estimates, "This means mine life spans of 45 years and 20 years, respectively." Meanwhile, against the backdrop of declining ore grades, increasingly stringent environmental regulations, and rising geopolitical risks, exploring and developing new gold and copper resources has become increasingly difficult and expensive.

As a result, several large greenfield copper mining projects planned to start production between 2025 and 2030 have not yet commenced construction. Projects like Taca Taca in Argentina are still awaiting approval for ESIA (Environmental and Social Impact Assessment), Resolution in the U.S. has spent nearly a decade in its environmental impact permit process, and Tia Maria in Peru has been delayed due to environmental issues and community opposition.

However, in the face of these challenges, Zijin Mining has stood out, still managing to rapidly increase its reserves and production strength. Its report shows that its equity copper reserves have grown by 805% over the past decade, while the copper reserves of major global peers have remained stable or declined during the same period.

Furthermore, Zijin has led or participated in the development of all three new copper mines that started production after 2020, with the total copper resource of these mines ranking among the top 20 globally.

Outstanding Operational Capabilities

Goldman Sachs believes that Zijin Mining, with its strong technical background and over 40 mines developed and operated domestically and internationally over the past 30 years, has accumulated technical skills and talents in processing various ores. Zijin has established unique operational advantages in developing low-grade mines and in ore selection with competitive costs and speed.

This is specifically reflected in three aspects:

• Lower project capital expenditure and faster project execution speed. For most copper mining projects, Zijin Mining's greenfield project construction typically takes only 2-3 years, while the average construction time for peers is 5-8 years

• Strong self-exploration capabilities. Zijin Mining stated that by the end of 2023, the company's reported copper and gold resources were 37.4 million tons and 1,540 tons respectively, with about half of the resources being internally explored.

• Competitive operating costs. From a global cost curve perspective, Zijin's reported copper mine C1 cost ranks 27th in the global C1 cost curve, lower than major global peers such as BHP, Freeport, and Glencore.

Global Layout, Steady Performance

Over the past 20 years, Zijin has been actively expanding through domestic and overseas acquisitions, with its production scale ranking among the top five copper mines and top ten gold mines globally.

As one of the earliest Chinese companies to venture overseas, Zijin Mining encountered setbacks in the initial stages but quickly adjusted its acquisition strategy, achieving success in most of its subsequent acquisitions. Zijin Mining has proven that it can create better returns and profitability for acquisition projects after asset restructuring.

Goldman Sachs noted that this is reflected in a significant increase in return on equity (ROE) to over 15%, an extension of mine life, a 40% increase in reserves, reaching 12 times. Moreover, these projects continue to drive the growth of Zijin Mining's gold and copper production to date.

With the continuous growth in copper, gold, and lithium mining volumes, Goldman Sachs expects:

"Zijin Mining's net profit in 2023 is expected to nearly quadruple over the next 10 years, reaching RMB 84 billion by 2035. Zijin Mining's copper production is expected to continue growing over the next decade, mainly benefiting from the expansion of existing projects. By 2035, Zijin Mining's copper production is expected to reach 2.4 million tons, consolidating its position as the world's largest copper producer.

With the continuous expansion of high-return projects and the increasing contribution of copper profits, Zijin Mining's return on invested capital (ROIC) is projected to increase from 11.5% in 2023 to 21.6% in 2035, exceeding global top peers by 2035."