Zijin Mining: Copper offsets gold weakness; Goldman Sachs cuts target prices but remains positive on production growth
Recurring net profit rose 42% year on year in the third quarter, but gold volumes and prices came under pressure and investment spending increased. Goldman Sachs remains positive on copper prices and production growth, while lowering its 2026 earnings forecast and A- and H-share target prices.
Original source：Goldman SachsFirst published on Unhidea：Original source date：
Key takeaway
Goldman Sachs’ buy rating rests on rising copper prices and production, but gold costs, project progress and investment cash flows will determine how much of that growth translates into shareholder returns.
Why was profit growth of 42% only broadly in line with expectations?
Zijin Mining reported third-quarter 2026 net profit of 18.4 billion yuan, up 26% year on year. Excluding one-off gains mainly from fair-value changes, recurring net profit was 18 billion yuan, up 42%. Recurring net profit for the first three quarters was 56.8 billion yuan, representing 70%–71% of Goldman Sachs’ and Bloomberg’s full-year forecasts. Goldman Sachs judged the overall result broadly in line with expectations.
Performance diverged across businesses: Goldman Sachs estimates third-quarter copper mining gross profit at 14.8 billion yuan, equivalent to 27% of its full-year forecast and above expectations. Gold mining gross profit was 12.5 billion yuan, equivalent to only 21% of the full-year forecast and below expectations. Copper’s performance offset the drag from gold.
Where did the gap between copper and gold lie?
Third-quarter mined copper production was about 281 thousand tonnes, up 7% year on year. Goldman Sachs estimates the realized copper price at 89,540 yuan per tonne, up 5% quarter on quarter. Although unit selling costs rose about 4% quarter on quarter, they were below Goldman Sachs’ expectations, so prices and costs together supported gross profit above the bank’s forecast.
Gold faced pressure on volumes, prices and costs: production fell 1% year on year, while the realized price fell 9% quarter on quarter to 868 yuan per gram. Unit selling costs rose about 12% year on year and were above Goldman Sachs’ expectations. The decline in gold profitability had more than one cause, beyond the retreat in gold prices.
Higher volumes partly offset lower lithium prices: third-quarter lithium chemicals production was 35.5 thousand tonnes of lithium carbonate equivalent, up 30% quarter on quarter. The realized price fell 11% quarter on quarter, while unit selling costs fell 8%. Goldman Sachs estimates lithium gross profit at 1.6 billion yuan, broadly in line with expectations.
Why will future growth depend more on copper?
Goldman Sachs expects copper production growth to accelerate from 2%–4% in 2025–2026 to 9% in 2027. In its model, copper production rises from 1.131 million tonnes in 2026 to 1.337 million tonnes in 2028, while copper mining gross profit rises from 59.5 billion yuan to 84.8 billion yuan. Growth depends on both prices and projects increasing output on schedule.
The bullish copper price case rests on the distribution of supply: the US has imported and stockpiled ahead of potential tariffs, while a shortage of scrap copper in China has increased demand for refined copper. Goldman Sachs therefore widened its forecast copper deficits in markets outside the US for 2026 and 2027 from 640 thousand and 170 thousand tonnes to 950 thousand and 220 thousand tonnes, respectively, even though domestic Chinese demand remains weak.
Gold production expansion also adds support, but its near-term contribution is limited: Zijin completed its acquisition of a 25.85% stake in Chifeng Gold on 22 October. Based on Chifeng’s fourth-quarter production target, Goldman Sachs expects an attributable gold contribution of about 1 tonne in 2026, equivalent to 1% of Zijin’s full-year gold production forecast.
Is earnings growth translating into more free cash flow?
Third-quarter operating cash flow was 28.8 billion yuan, up 24% year on year, but investing cash outflow rose 116% to 18.9 billion yuan, bringing free cash flow down to 9.9 billion yuan, a decline of 32%. Faster-growing investment spending absorbed part of the increase in operating cash.
The net debt ratio at period-end was 40%, below 56% at the end of 2025 but above 38% at the end of the second quarter. Deleveraging continued, while changes in cash inflows and outflows still affect the ratio between quarters.
Why maintain buy ratings while cutting target prices?
Goldman Sachs updated its copper, gold and lithium price assumptions and incorporated lower associate and joint venture earnings and higher unit gold costs, adjusting its earnings forecasts for 2026, 2027 and 2028 by −2%, +1% and −5%, respectively. Associate and joint venture earnings for the first three quarters were 3.7 billion yuan, down 10% year on year and only 56% of its full-year forecast, also constraining earnings.
Goldman Sachs maintained buy ratings on the A and H shares and kept them on its Conviction Buy list, but cut its 12-month target prices from 49 yuan and 51 Hong Kong dollars to 46 yuan and 48 Hong Kong dollars. Valuation remains based on the historical relationship between price-to-book and return on equity. The 2026 ROE assumption fell from 37.0% to 36.4%, and the corresponding valuation multiple was lowered accordingly.
One scenario supporting its positive valuation view is that, if the 2028 target is met, the current H-share price implies a copper price of about 8,158 US dollars per tonne, 42% below the spot price of 14,199 US dollars per tonne cited in the report. This valuation case depends on both delivery of higher production and the path of metal prices.
