The increase in gross profits of the copper and cobalt sectors drove an increase in net profit attributable to the parent company

In the first quarter of 2025, the company's operating income was 46.01 billion yuan (RMB, the same below) with a year-on-year decrease of 0.25%; the gross profit margin was 22.3%; the net profit attributable to the parent company was 3.95 billion yuan with a significant year-on-year increase of 90.47%, mainly due to the company's copper and cobalt product sales prices increased compared with the same period of the last year, while continuing to improve management efficiency, and overall costs decreased year-on-year; EPS was 0.18 yuan with a year-on-year increase of 80%.

Copper and cobalt production increased but sales stagnated

In 2025Q1, the company's copper production was 171,000 tons with a year-on-year increase of 15.65%, hitting a record high, and sales were 124,000 tons with a year-on-year decrease of 1.36%; cobalt production was 30,000 tons with a year-on-year increase of 20.68%, and sales were 24,000 tons with a year-on-year decrease of 0.24%. The production was the company's own production data, and the sales volume was the final external sales volume, which showed that the company's sales volume was lagging behind. The company's annual report data showed that the global refined copper supply in 2024 was about 26.6 million tons with a year-on-year increase of 3.1%, and the demand was about 26.4 million tons with a year-on-year increase of 3.0%, and the supply was slightly higher than the demand. We believe that the demand for copper will continue to grow steadily in the future. Copper is widely used in the fields of new energy vehicles and renewable energy. In addition, benefiting from China's old-for-new policy, the demand for copper in the home appliance industry has also further increased. The company's copper sales are expected to grow in 2025. The main producers of copper are Peru and Chile, and their supply is vulnerable to strikes and conflicts. In the long run, although copper prices may fall, it will still be at a high level. A report by the Cobalt Institute showed that global cobalt consumption was 222,000 tons in 2024. Driven by the development of the electric vehicle market, global cobalt demand (excluding government inventories) would grow at an average annual rate of 7%, reaching 400,000 tons by the early 2030s. In the next few years, global cobalt supply will grow at an average annual rate of 5%. The cobalt market may face a situation of demand over supply, and cobalt prices were expected to rise. The company's cobalt business may achieve an increase in both volume and price.

Congo (DRC) suspended cobalt exports, and it is expected to have no impact on operating performance in the short term

In February 2025, Congo-Kinshasa, the world's largest cobalt producer, announced that it would suspend cobalt exports for four months. The measure will be re-evaluated after three months and can be modified or terminated if necessary. The move by Congo-Kinshasa was aimed at curbing the continued cobalt price decline caused by the oversupply of cobalt. The company actively maintain communication with the government and relevant agencies of Congo-Kinshasa. The production and operation activities of the company's TFM and KFM mining areas are proceeding in an orderly manner. The company will continue to use the cobalt products that have been exported to meet the needs of downstream customers for as long as possible. It is expected that this measure will not have an impact on the company's operating performance in the short term. In April, senior consultant of CMOC TFM was elected as the President of the Chamber of Mines of Congo-Kinshasa. The Chamber of Mines is one of the most influential industry organizations in Congo-Kinshasa. This election was of far-reaching significance and was expected to further promote the development of the company and other Chinese mining companies in the local mining field.

Acquisition of the gold company promotes business diversification

In April, the company announced that it would acquire all issued and outstanding common shares of Lumina Gold Corp at the price of C$581 million. Lumina Gold is a precious metal and base metals exploration company listed on the Toronto Stock Exchange. The company owns 100% interest of the Cangrejos gold-copper project in El Oro Province, southwest Ecuador. Cangrejos is a large-scale primary gold-copper project in Ecuador, and the pre-feasibility study was completed in 2023. The pre-feasibility study report highlighted that the project had measured and indicated resources of 1.376 billion tonnes at 0.46 g/t gold, totaling 638 tonnes of gold; proven and probable reserves of 659 million tonnes at 0.55 g/t gold, equating to 359 tonnes of gold. The mine life was expected to be 26 years. Characterized as a large-scale porphyry deposit, Cangrejos features low stripping ratios, favorable open-pit mining conditions, and strong existing infrastructure including access to power, water, roads, and ports, so the mining cost will be competitive. Continued exploration is underway both within the current concession and at depth. This acquisition indicated that CMOC had begun to enter the gold field and promote the diversification of its businesses. Coupled with the high gold prices, it is expected to bring growth to the company's revenue in the future.

Adjustment of the core management team demonstrates strategic ambition

During the 2025Q1 performance release, the company announced the adjustment of the core management team. Chairman Yuan Honglin and Vice Chairman and Chief Investment Officer Li Chaochun resigned. Que Chaoyang was appointed as Executive Vice President and Chief Operating Officer, Liu Jianfeng as Chief Investment Officer, Kenny Ives as Vice President and Chief Business Officer, and Tan Xiao as Vice President. In March of this year, the company's board of directors mentioned in the annual report that "the company still had obvious gaps in resource reserves, profitability, management level, and talent development. The company's current organizational capabilities were insufficient to support the future global mining competition landscape. A new round of organizational change and evolution would be the only way for us to move towards new goals."The company intended to strengthen international development and further enhance its international competitiveness. Looking at the resumes of the new core managers, it is not difficult to find that their work experience coincides with the company's reform philosophy.

Company valuation

The company had made guidance for the annual output of its main products in 2025, among which copper would be 600,000-660,000 tons; cobalt would be 100,000-120,000 tons; molybdenum would be 12,000-15,000 tons; tungsten would be 6,500-7,500 tons; niobium would be 9,500-10,500 tons; phosphate fertilizer would be 1.05-1.25 million tons, and the physical trade volume would be 4-4.5 million tons. The overall guidance output was higher than last year. Combined with our forecast that copper price will be at a high level and cobalt price will rise, the company's volume and price resonance is expected to achieve sustained growth in operating income. We also look forward to the development of the company's new business after the completion of the acquisition of the gold company and the changes brought to the company by the management adjustment. We raise our revenue forecast for the company, we predict that the company's revenue will be 219.4 billion yuan, 225.9 billion yuan and 233.8 billion yuan respectively in 2025-2027. EPS will be 0.72/0.85/0.99 yuan. BVPS will be 3.47/3.72/3.91, corresponding to the P/B of 1.79x/1.67x/1.59x. The company is given a P/B of 1.93 times in 2025 (Similar to the average price-to-book ratio over the past year), with a target price of HK$7.31, and we keep the investment rating of " Accumulate ". (Current price as of June 09)

Risk factors

Fluctuations in prices of major products, geopolitical and policy risks, interest rate risks, exchange rate risks, safety, environmental protection and natural disaster risks.

Financial

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