Report Interpretation

Overview

JPMorgan's Tibet trip update argues that Zijin Mining's Julong operation is delivering strongly and that a broader Tibet project pipeline can underpin growth through 2026-28. The report maintains Overweight on both share classes while identifying tailings approvals, possible tax reform, cost pressure, commodity prices and acquisition execution as important risks.

Core views

The site visit reinforced JPMorgan's positive view on Zijin Mining and on Tibet as a contributor to 2026-28 growth. Julong produced 186.4kt of copper in 8M26, up 47% year on year, while revenue rose 96% to Rmb21.2bn and attributable net profit reached Rmb6.6bn. Management targets 2026 output of 300-313kt, up 57-62% year on year, revenue of roughly Rmb35.0bn, up 110%, and attributable net profit of Rmb10.5bn. Phase I entered trial production in January 2026 and achieved 86% recovery despite a higher oxide-ore mix; management attributes the ramp-up to mining and blending discipline, blasting optimisation and processing improvements. Mineral-processing recovery has reached 90%, up 2.7 percentage points year on year. Near-term output growth is expected to be more modest in 2027, at 310-320kt versus the 2026 target base, but management sees larger later upside. Julong has yet to enter deeper, higher-grade zones, where the maximum grade is indicated at 0.8%; entry is expected around 2029-30E. Management believes lower mining benches and higher average grades could lift capacity to 350-400kt over time even without Phase III, while Phase III remains under early-stage work and is seeking inclusion on the national major-project list. Costs are rising as Julong shifts from outsourced mining to self-operation and faces higher resource- and land-related taxes and wage inflation. In 8M26, ore unit cost was Rmb90.73/t, up 13.9% year on year; copper unit cost after by-product credits was Rmb24,700/t, up 17.7%, while cost before by-product credits was Rmb34,000/t. Labour represented about 15-16% of total cost and was expected to approach about 18% by year-end. Management expects Phase II scale, diesel-to-electric conversion and autonomous mining to offset part of the pressure in 2027. The operational programme includes Rmb860mn invested in intelligent-mine digitalisation, more than 20 systems, intelligent control covering 1,032 vehicles, over 270 electric drilling units, a fully electrified concentrator, energy-recovery conveyors and solar generation supporting roughly 66mn kWh annually. The report highlights Xianglong and Tianyuan/Xiongcun as additional Tibet copper growth projects. Xianglong Phase I is designed for 18mtpa of ore processing, a 28-year mine life and 76.4ktpa of copper at nameplate; Rmb6.5bn had been invested, installation was 72% complete and tailings works 93% complete, with management targeting more than 60kt of copper next year. Tianyuan/Xiongcun, 45%-owned by Zijin and 55%-owned by Jinchuan, is expected to begin Phase I production by end-October 2028 and reach 46.6ktpa of copper, about 4.9tpa of gold and about 35tpa of silver by 2030. Both projects face elevated early-stage costs of about Rmb47,000-48,000/t of copper because of oxide ore, with improvement expected as oxide ore declines at Xianglong after 2031 and deeper sulphide ore contributes more at Tianyuan/Xiongcun. Lakkor Tso adds a lithium growth option. It has 2.16mt of lithium-carbonate-equivalent resources and Phase I capacity of 20kt LCE. In 8M26, lithium carbonate output was 4kt versus 0.5kt in 8M25, revenue was Rmb1.6bn and profit was Rmb8.7mn. Phase I production cost is around Rmb35,000/t. Phase II is intended to add 50kt LCE, with completion targeted for January 2028 and ramp-up in March 2028; management targets total production cost below Rmb32,000/t after Phase II. Tailings storage is the principal gating item for Tibet copper growth, particularly Julong Phase III and other regional projects, because new tailings dams face policy constraints and local geographic and community limitations. Possible solutions—including raising existing dams, relocating farmland, alternative sites, tunnel or pipeline transport, and nearby-mine acquisitions—require approvals and coordination. Resource-tax reform is also unresolved: a stricter regime could add Rmb1.0-1.5bn of annual cost at Julong, depending on treatment of by-products and low-grade ore. Management did not view power as a major constraint, indicating that expanding Tibet hydro and solar capacity should generally support demand despite Julong electricity use potentially rising from about 3.8bn kWh currently to 5.5-6.0bn kWh after Phase III and electrification. JPMorgan's investment thesis also rests on copper and gold, which represented 36% and 43% of Zijin's 2025 gross profit, respectively. It expects tighter copper supply-demand to support a further price rally and sees Zijin's mine-expansion record and cost control supporting its target of more than 10% volume CAGR through 2028. The A-share Dec-27 target price of Rmb46.00 is based on a DCF using a 13% WACC and 2% terminal growth rate, implying FY27E P/E of 13x and EV/EBITDA of 8x. The H-share HK$50.00 target uses a 9% average three-month A/H premium to the A-share target and implies FY27E P/E of 12x and EV/EBITDA of 7x.

Analysis framework

JPMorgan combines observations from the Julong site visit and management meetings with production, recovery, cost, construction-progress and resource data. It then links operational execution and project timing to future copper and lithium output, evaluates infrastructure and policy constraints, and values the A shares using DCF before deriving the H-share target from an A/H premium.

Methodology notes

• Valuation methodsDCF (Discounted Cash Flow)

  Discounted cash flow valuation

  JPMorgan values the A shares by discounting projected cash flows using a 13% WACC and 2% terminal growth rate.

• Industry AnalysisSupply-demand framework

  Copper supply-demand balance

  The report's positive commodity view relies on an expectation that tighter copper supply and demand will support prices.

• Industry AnalysisVolume-price decomposition

  Production volume, grade and cost analysis

  The report separates output growth, recovery, ore grade, unit costs and by-product credits to explain the outlook for Julong and other Tibet projects.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Zijin Mining A (601899.SS)

  Primary covered A-share security benefiting from Julong execution and Tibet growth optionality.

  Strengths

  Strong Julong ramp-up, mine-expansion track record, cost-control initiatives and targeted volume growth above 10% CAGR through 2028.

  Weaknesses

  Rising self-operation, tax and wage costs; growth is partly dependent on project progression.

  Comparison

  A-share Dec-27 target price is Rmb46.00, implying FY27E P/E of 13x and EV/EBITDA of 8x.

  Risks

  M&A overpayment, geopolitical risks at overseas mines, weaker copper or gold prices, and delayed or incomplete Allied Gold or Chifeng acquisitions.

• Zijin Mining H (2899.HK)

  Primary covered H-share security linked to the same operating and project outlook.

  Strengths

  Shares the group's Julong delivery, Tibet pipeline and copper-and-gold exposure.

  Weaknesses

  Subject to the same cost, approval and project-execution constraints as the group.

  Comparison

  HK$50.00 Dec-27 target is derived using a 9% average three-month A/H premium to the A-share target; it implies FY27E P/E of 12x and EV/EBITDA of 7x.

  Risks

  M&A overpayment, geopolitical risks at overseas mines, weaker copper or gold prices, and delayed or incomplete Allied Gold or Chifeng acquisitions.

Key data

• Julong 8M26 copper production186.4kt+47% year on year
• Julong 2026 copper-output target300-313kt+57-62% year on year
• Julong potential capacity350-400ktPotential over time with lower benches and higher grades, even without Phase III
• Julong 8M26 copper cash cost after by-product creditsRmb24,700/t+17.7% year on year
• Xianglong nameplate copper output76.4ktpaPhase I design capacity
• Tianyuan/Xiongcun copper output at full production46.6ktpaManagement expectation by 2030
• Lakkor Tso Phase II addition50kt LCECompletion targeted January 2028; ramp-up targeted March 2028
• Potential Julong tax-cost impactRmb1.0-1.5bn annuallyManagement indication if a stricter resource-tax framework is adopted

Impact & implications

JPMorgan sees Julong's operational execution and future grade uplift as the core of Zijin's medium-term growth case, supplemented by Xianglong, Tianyuan/Xiongcun and Lakkor Tso. However, the pace and scale of Tibet expansion depend materially on tailings approvals, tax outcomes and the ability to contain rising operating costs.

Risks

• Tailings-storage approvals and policy coordination could delay Julong Phase III and other Tibet projects.
• A stricter resource-tax reform could add Rmb1.0-1.5bn of annual cost at Julong.
• Zijin could overpay for acquisitions relative to eventual returns.
• Geopolitical risks surrounding overseas mines could affect the group.
• Gold and copper prices could be weaker than expected.
• Delays or non-completion of the Allied Gold and/or Chifeng acquisitions would reduce base-case production and earnings forecasts.

What to watch

• Julong's progress toward its 2026 output target of 300-313kt and the 2027 output indication of 310-320kt.
• Timing of access to Julong's deeper, higher-grade mining zones around 2029-30E.
• Tailings approvals and potential solutions for Julong Phase III and other Tibet projects.
• The final design and implementation of Tibet resource-tax reform.
• Xianglong construction completion and its target of more than 60kt of copper output next year.
• Tianyuan/Xiongcun's planned production start by end-October 2028 and its path to full production by 2030.
• Lakkor Tso Phase II completion and ramp-up targets in 2028.