Non-ferrous metals: acquisition of overseas mine assets right now

Commodity prices have plummeted and international mining giants are in trouble. Commodities from oil to iron ore to non-ferrous metals have plummeted in the past two or three years across the board, and the prices of many commodities have even hit new lows for many years. During the commodity bull market, the international mining giants had large-scale debt expansion: radical mergers and acquisitions, huge capital expenditures, and some mining companies even entered the oil and gas industry across industries. The plunge in commodity prices has brought heavy blows to these highly leveraged mining companies: The company’s operating cash flow has dropped sharply, and asset writedowns caused by the collapse of commodity prices have made these mining giants even worse. International mining giants such as Glencore, Anglo American, Freeport and BHP Billiton have not been spared in this round of commodity price slumps. The heavy debt burden has made these companies difficult to manage. In order to improve the debt situation, the international mining giants had to sell some quality assets in exchange for funds: Glencore sold Las Bambas copper mine in Peru, BHPB sold North Parke copper gold mine in Australia, and the latest is Anglo American sells Brazilian phosphoric acid Salt mine assets and antimony minerals, Freeport Group sells its rights in Congo’s largest copper-cobalt mine.

Leading domestic mining companies have expanded their positions and laid a solid foundation for long-term development in the future. The domestic high-quality mining companies such as Zijin Mining, Luoyang Molybdenum, and Minmetals Resources, etc., have maintained significant profitability under current commodity prices due to their significant production cost advantages, and the company’s balance sheet is healthy and the overall level of liabilities. low. The slump in commodity prices has caused the troubled high-leverage international mining giants to sell their mine assets to improve their debt situation, which has given domestic mining companies a rare opportunity for expansion. Due to the size of the required funds, most of the assets sold by the international mining giants are high-quality assets, including world-class mines. In addition, due to the fact that commodity prices are still low, the current valuation of mine assets is also historically low, and the cost of domestic company acquisitions is relatively low. The leading domestic mining companies have successfully acquired a number of overseas mine assets in the past two years, and will continue to acquire more assets, make full use of the current favorable timing to actively expand, and lay a good foundation for the future development of the company, and in the next The benefits of the round of commodity upturns.

Zijin Mining has developed into a comprehensive large-scale metal mining company. Zijin Mining has high-quality mine assets and the production costs of mineral metals are extremely advantageous. In the past two years, Zijin has successfully acquired several overseas assets: The company successfully acquired Porgera gold mine from Barrick, making the company's gold resources increase by 10.1% to 1,476.8 tons; the company from Ivanhoe Acquired the Kamoa copper mine in Congo, a newly discovered world-class large-scale copper mine. Zijin’s copper resources will increase by 73.6% after completion of the acquisition to 269.74 million tons. In addition, the company has multiple mine assets in Australia, Central Asia, Africa and other places. Successful overseas acquisitions have enabled Zijin's mineral resources to grow significantly and lay a solid foundation for future development. Our target price for the company is HK$2.78 and the investment rating is “Accumulate”.

The overseas acquisition of Luoyang Molybdenum is efficient and rapid. In 2014, Luoyang Molybdenum successfully acquired BHP Billiton’s North Parke copper and gold mine in Australia, which is Australia’s top-ranking copper-producing gold mine. In the past month, LoMo also announced that it will acquire Anglo Resources Group's phosphate mineral assets and antimony mineral assets in Brazil, and acquire its equity in the Congo Tenke copper-cobalt mine from the Freeport Group. After the completion of the acquisition, Luo Mo will become the world's second largest producer of antimony, further consolidating its leading position in the field of special alloys and becoming an important phosphate producer in Brazil. In addition, after the successful acquisition of the Congolese copper-cobalt mine, the company's equity copper production will increase 2.5 times. Our target price for the company is HK$1.75 and the investment rating is “Accumulate”.