Why was a 26% year-on-year increase still slightly below Citi’s expectations?

  • Zijin Mining reported net profit of 18.4 billion yuan in the third quarter of 2026, up 26% year on year but down 4% quarter on quarter. Citi said the result was slightly below its expectations, mainly because the costs and sales volumes of mined gold, copper and lithium were weaker than expected, while profit contributions from associates also fell short.
  • Excluding one-off items, recurring net profit for the quarter was 17.8 billion yuan, up 42% year on year but down 9% quarter on quarter, a larger decline than for net profit. One-off gains mainly included 550 million yuan in non-recurring fair-value gains related to equity and fund investments; total gross profit for the quarter was 32.5 billion yuan, down 5% quarter on quarter.

Why did gold gross profit fall despite higher sales volumes?

  • Pressure on the gold business came from lower gross profit per unit sold. Third-quarter mined gold sales were 22.6 tonnes, up 3% quarter on quarter; but the average selling price fell to 868 yuan per gram, down 9% quarter on quarter, while unit costs rose 2% over the same period. Higher sales volumes could not offset the squeeze from both prices and costs.
  • Citi estimates that the gold segment generated gross profit of 12.5 billion yuan in the third quarter, up 17% year on year but down 12% quarter on quarter. Its share of total gross profit fell from 42% in the second quarter to 39%, also below 51% a year earlier. Gold gross profit was still growing year on year, but had become a major source of the quarter-on-quarter decline in earnings this quarter.

How did copper overtake gold?

  • Higher copper selling prices more than covered the increase in costs. The average selling price of mined copper in the third quarter was 89,539 yuan per tonne, up 5% quarter on quarter; unit costs were 29,054 yuan per tonne, up 4%, so gross profit per unit rose to 60,485 yuan per tonne, an increase of 6%. Sales over the same period were 245 thousand tonnes, up 3% quarter on quarter, with volumes and prices both supporting gross profit growth.
  • Citi estimates that copper segment gross profit for the quarter was 14.8 billion yuan, up 74% year on year and 9% quarter on quarter. It accounted for 46% of total gross profit, up from 39% in the second quarter. This was the first time copper gross profit exceeded gold’s since the first quarter of 2025, offsetting part of the decline in the gold business.
  • However, the improvement in the quarter coincided with a decline in cumulative production: mined copper output in the first three quarters was 816 thousand tonnes, down 2% year on year, mainly because attributable production from the Kamoa project fell from 140.6 thousand tonnes a year earlier to 84.5 thousand tonnes. The lithium business provided no additional offset either; Citi estimates its third-quarter gross profit at 1.6 billion yuan, down 12% quarter on quarter.

Did the decline in profit affect cash flow?

  • Third-quarter operating cash flow was 28.8 billion yuan, up 24% year on year and 4% quarter on quarter. After 7.7 billion yuan in capital expenditure, free cash flow was 21.1 billion yuan, up 52% year on year and 3% quarter on quarter. Cash flow continued to improve during the quarter and did not decline quarter on quarter alongside profit.
  • However, the net debt-to-equity ratio at the end of the third quarter was 33%, higher than 30% at the end of the first half. Free cash flow increased alongside rising leverage, so the financial position cannot be assessed on cash flow alone.

Why does Citi maintain its Buy rating, and what does its target price depend on?

  • Citi believes near-term risk-reward is attractive with gold at about 4,000 dollars per ounce and the share price already at a low level, and maintains its Buy rating. Based on its earnings forecasts, the stock trades at 8.4 times 2026 earnings and 2.7 times book value; its target price is 60.50 Hong Kong dollars, compared with the 23 October closing price of 29.46 Hong Kong dollars.
  • The target price comprises a discounted cash-flow valuation of 58 Hong Kong dollars per share plus a net present value of 2.5 Hong Kong dollars per share for the Kamoa project. The discounted cash-flow model uses a weighted average cost of capital of 8.2% and a perpetual growth rate of 2.5%. Lower-than-expected gold and copper prices or production, project capital expenditure overruns, and rising costs eroding earnings would all weaken the basis for this valuation.