CITIC released a research report saying that to maintain Minmetals Resources (01208) "buy" rating, 2023-25 return net profit is expected to be 0. 6pm 1.99 / 463 million, with a target price of HK $3.50. In the context of the steady production of LasBambas and the continuous recovery of DugaldRiver production, 2023Q3's copper and zinc production increased month-on-month, of which LasBambas single-quarter output continued to reach the highest level since 2021, and positive developments in community negotiations injected stronger expectations for the opening of room for copper plate volume increase. At the same time, the positive changes in copper plate production and cost guidance also provide a solid basis for the bottom reversal of performance.

CITIC's main points are as follows:

The output of copper and zinc of 2023Q3 Company maintains the trend of month-on-month repair.

According to the company's Q3 production report, 2023Q3 achieved mineral copper output of 94000 tons, compared with the same period of last year-1.6% / month-on-month + 1.3% of the mineral copper output of 23Q1-3 company achieved 256000 tons, + 16.7% year-on-year. 2023Q3 achieved mineral zinc output of 59000 tons, compared with the same period of last year-2.8% / month-on-month + 18.9% of TX 23Q1-3 company achieved mineral zinc output of 140000 tons,-14.9% year on year. The company's copper and zinc production showed month-on-month repair for the third consecutive quarter.

LasBambas production and marketing continued to be sound, and community negotiations showed positive progress.

2023Q3LasBambas copper concentrate output of 82000 tons, year-on-year + 1.0% / quarter + 0.5%, continued to hit a new high since 2021; 23Q1-3 cumulative output of 221000 tons, + 21.7% year-on-year. Copper concentrate stocks fell to a new low of 10, 000 tons at the end of Q3, down more than 100000 tons from the peak at the end of Q1. The bank believes that LasBambas is expected to continue to expand increments on the basis of maintaining existing stocks. On the one hand, Peru has extended the state of national security emergency until December, and the bank believes that production stability is guaranteed. On the other hand, the company has made positive progress in negotiations with key communities, with formal dialogue resuming in early October and efforts to develop the Chalcobamba mine by the end of the year. The company estimates that the annual output of LasBambas in the mine may reach 38-400000 tons after reaching production, which is more than 60% higher than that in 2022.

The Kinsevere expansion project is progressing smoothly.

2023Q3Kinsevere electrolytic copper output of 12000 tons, year-on-year-16.2% / month-on-month + 7.8%, the stabilization of power supply led to production repair; 23Q1-3 cumulative output of 34000 tons,-7.7% year-on-year. The Kinsevere expansion project is progressing smoothly, the cobalt plant began trial operation in September, and the company expects to produce copper from sulphides in 2024 and reach full production by 2025. The company predicts that after the project reaches production, Kinsevere will produce 80, 000 tons of electrolytic copper + 4000-6000 tons of cobalt, and the equivalent copper output will double that of 2022.

Zinc plate occasionally disturbed does not change the overall steady production situation.

2023Q3DugaldRiver zinc concentrate output of 47000 tons, year-on-year-3.8% / quarter + 29.8% X 1-3Q cumulative output of 105000 tons, year-on-year-18.7%. DugaldRiver single-quarter production has returned to the central level before the disruption, and the 2023 production guidance has been slightly revised up to 14-150000 tons. 2023Q3Rosebery zinc concentrate output of 12000 tons, year-on-year + 1.7% / ring ratio-11.1% X 1-3Q cumulative output of 35000 tons,-1.0% year-on-year. Subject to lower than expected stope turnover speed and mineral processing grade, the company revised the 2023 Rosebery production guidance to 4.8-53000 tons.

Production and cost guidelines show positive changes, providing a solid basis for a bottom reversal of performance.

The company updated its 2023 copper production guidance to 32.8-353000 tons, up from the previous 30.5-353000 tons, with a 3.5% increase in central value, of which LasBambas and Kinsevere were revised up to 28.5-305000 tons and 4.3-48000 tons respectively. The company updated its 2023 LasBambasC1 cost guidance to $1.65-$1.75 / lb, down from the previous $1.70-1.90 / lb, with a 5.6% drop in hub value. The bank believes that the amendments to the above guidelines reflect that the company is gradually emerging from the haze of early disturbance or provide a solid foundation for the reversal of the bottom of the company's performance.

Risk factors: the risk of large fluctuations in copper and zinc prices; the risk that the outcome of LasBambas community negotiations is not as expected; the risk of LasBambas tax payment; the risk of production suspension or reduction due to environmental protection, safety and other disturbance events.