Why did Citi cut its earnings forecasts and target prices?

  • Citi cut its net profit forecasts for 2026–2028 by 7%, 15% and 9%, respectively, to 76.8 billion, 78.7 billion and 88 billion yuan, mainly reflecting lower mined gold output and higher unit costs for mined gold and copper. The new forecasts are 4%, 14% and 16% below Bloomberg market consensus, respectively.
  • Based on discounted cash flow valuation, Citi cut its H-share target price from HK$60.5 to HK$52.1 and its A-share target price from 52.6 yuan to 45.3 yuan, while maintaining its Buy rating.

What challenges have copper and gold production faced?

  • In the first three quarters of 2026, Zijin Mining produced 816 thousand tonnes of mined copper, down 1.7% year on year, mainly because of a lower contribution from the Kamoa project. Excluding that project, mined copper output was 731 thousand tonnes, up 6% year on year, benefiting from increased production at the Julong Copper Mine. Safety inspections at the Ashele mine and the Shanxi Zijin project also affected production.
  • Mined gold output fell short of expectations mainly because Zhaojin Mining was affected by an accident and safety inspections, reducing its attributable mined gold output. The Porgera project experienced hydropower shortages amid extreme weather, reducing attributable output.
  • Citi lowered its 2026 mined gold production forecast from 105 tonnes to 99 tonnes, and its mined copper forecast from 1.159 million tonnes to 1.112 million tonnes.

How will cost pressures affect profits?

  • Mined gold and copper costs rose in the first three quarters due to factors including higher prices for raw materials such as diesel and sulfur, higher labor costs, and declining ore grades. Higher raw material prices raised gold and copper unit costs by nearly 4% year on year.
  • Excluding the impact of geopolitical risks, the company aims to keep year-on-year increases in 2026 unit costs for mined gold and copper within 10%. Citi’s model raises its 2027 unit cost forecasts for mined gold by 6% and mined copper by 10% from its previous forecasts. For the same period, it lowers its forecast average selling price for mined gold by 11% and its mined gold gross margin forecast from 70% to 64%.
  • The company is increasing its use of electric trucks to reduce diesel consumption. As of the end of September 2026, electric vehicles accounted for more than 55% of trucks at its domestic mines. Management expects replacing diesel trucks with electric trucks to reduce related costs by 30%–40%, while diesel accounts for about 10% of the company’s total mining costs.

Which projects will drive future production growth?

  • The Julong Copper Mine produced 216 thousand tonnes of mined copper in the first three quarters of 2026, and annual output could reach 300 thousand–350 thousand tonnes once it reaches full capacity. In addition to increased production at Qulong, the Zhunuo project is expected to start production by the end of 2026, and the Xiongcun project in 2028.
  • The company plans to achieve its target of 1.5 million–1.6 million tonnes of mined copper output in 2028 through growth in its own projects and mergers and acquisitions. Two projects in Serbia using the caving method and phase two of La Arena are also expected to contribute copper production in the future.
  • Management expects to meet its full-year lithium production guidance of 120 thousand tonnes in 2026. Citi maintains its Buy rating, also citing gold, copper and lithium production growth over the next three years and its medium-term bullish view on copper prices.