UBS released a research report stating that it maintains Zijin Mining's (02899) “buy” rating, with a target price of HK$18. Yesterday (22nd), the company announced net profit of 6.261 billion yuan (same below) for the first quarter, reaching 24.6% of the bank's annual forecast of 25.422 billion yuan and 22.7% of the market forecast of 27.521 billion yuan. However, the production and sales volume of mineral gold in the first quarter of this year decreased by 830 and 1,477 kilograms compared to the previous quarter, mainly due to the suspension of production of Zijin in Shanxi. As a result, mineral gold contributed only 607 million yuan more gross profit over the previous month.
According to the report, the average price of Zijin's mineral copper increased 4% month-on-month, which is better than the London Metal Exchange (LME)'s 3% month-on-month increase. At the same time, the cost of mineral copper was also well controlled, falling 12% month-on-month. Thanks to the resumption of work at the Pogra gold mine, copper sales increased 7,700 tons month-on-month. According to the announced average sales price, unit cost, and sales volume, copper is expected to contribute 1.3 billion yuan more gross profit than the previous quarter. As for gold, the average price of Zijin mineral gold rose 9% month-on-month, which is better than the 4% month-on-month increase in gold prices in London. At the same time, the unit cost of mineral gold also fell 12% month-on-month.