U.S. Customs Ban Has Limited Impact on Zijin Mining; Maintain Overweight Rating

Overview

This report assesses the impact of the Withhold Release Order (WRO) issued by U.S. Customs and Border Protection (CBP) against Serbia Zijin Copper, a subsidiary of Zijin Mining. Morgan Stanley believes that, despite the geopolitical noise, the incident's overall financial and operational impact on Zijin Mining is minimal because the subsidiary's products mainly flow to China rather than the U.S., and U.S. imports of copper materials from Serbia are very small. The firm maintains an 'Overweight' rating and a HKD 55 target price for Zijin Mining.

Core views

Event Background and Direct Impact: U.S. Customs' Withhold Release Order on copper and copper products from Serbia Zijin Copper took effect on June 16, 2026, based on allegations related to forced labor. However, Bloomberg data show that in 2025 the U.S. imported only 143.73 tons of copper plates/sheets/strips from Serbia, meaning that even a complete cutoff would cause minimal disruption to the physical copper market in the U.S., and therefore the actual business impact on the supplier is limited. Business Structure and Risk Isolation: Zijin management noted that most of Serbia Zijin Copper's products are sold to Chinese customers, with some sold to traders, and are not directly exported to the U.S. Morgan Stanley's analysis suggests that because the WRO targets the subsidiary rather than the parent, and the subsidiary's direct and indirect (via traders) sales to the U.S. are very low, the impact on Zijin Mining's overall revenue and profit is controllable. Financial Contribution Analysis: Serbia Zijin Copper is a 63%-owned subsidiary of Zijin Mining. In 2025, the subsidiary produced 123,000 tons of copper, accounting for 11% of Zijin's total output; generated revenue of approximately RMB 15.5 billion, accounting for 4% of total revenue; and net profit of approximately RMB 2.7 billion, accounting for 4% of total net profit. Given its non-U.S. market-oriented sales structure, the incident is not expected to alter the company's core earnings logic.

Analysis framework

Morgan Stanley employs a 'fundamental quantification under event-driven analysis' approach. First, it tracks trade data (U.S. copper imports from Serbia) to quantify the potential scale of physical supply disruption, thereby determining the macro-level impact of the event. Second, it analyzes the subsidiary's sales flow (customer geography) and financial contribution (revenue/profit share) to translate geopolitical risk into a potential loss exposure within the financial model. Finally, it incorporates the DCF valuation model and, after confirming that core assumptions (copper price, output, costs) have not been materially impaired, maintains the original valuation framework.

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  Discount cash flows using the Weighted Average Cost of Capital (WACC) and terminal growth rate

  The report builds a DCF model based on a 7.5% WACC (beta of 1.4) and 3% terminal revenue growth rate, which is the standard method for assessing the intrinsic value of long-term assets and is used to determine the target price.

• Industry/Sector Analysis FrameworkOthers

  Trade-flow and financial-exposure analysis of geopolitical risk

  By analyzing the sales destinations of a specific subsidiary (whether it directly faces sanctioned countries) and its financial weight within the group, the actual financial impact of geopolitical events on the parent company is quantified, rather than relying solely on sentiment.

Asset mapping & comparison

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

• 紫金矿业 (2899.HK / 601899.SS)

  Direct beneficiary/affected subject: the report believes the impact of the U.S. customs ban is minimal and maintains a positive stance.

  Strengths

  Serbian subsidiary has extremely low dependence on U.S. exports; potential for higher global copper prices; continued ramp-up of project capacity.

  Weaknesses

  High geopolitical sensitivity; some overseas assets face policy uncertainty.

  Risks

  Declining copper prices; project execution falling short of expectations; production disruptions caused by geopolitical factors.

Key data

• 2025 U.S. imports of Serbian copper materials143.73 tonsIndicates minimal physical supply impact on the U.S.
• Serbia Zijin Copper 2025 copper output123,000 tonsAccounts for 11% of Zijin Mining's total output
• Serbia Zijin Copper 2025 revenueapproximately RMB 15.5 billionAccounts for 4% of Zijin Mining's total revenue
• Serbia Zijin Copper 2025 net profitapproximately RMB 2.7 billionAccounts for 4% of Zijin Mining's total net profit
• Zijin Mining ownership stake63%Controlling stake in Serbia Zijin Copper
• WACC assumption7.5%Weighted average cost of capital used in the DCF valuation model

Impact & implications

The report believes the market may have overreacted to the negative impact of the customs WRO. Because the substantive financial exposure is limited and the company's core growth drivers (such as capacity ramp-up at other projects and global copper price trends) remain unaffected, the current stock price volatility presents a buying opportunity. Maintaining the 'Overweight' rating reflects the firm's confidence in the company's long-term fundamentals and valuation appeal.

Risks

• Weaker copper prices: driven by deterioration in global economic data or intensifying U.S. recession concerns.
• Insufficient Chinese policy support: lack of further economic stimulus measures.
• Project execution risk: new project construction or commissioning progress falls short of expectations.
• Geopolitical risk: causing production disruptions or supply-chain blockages.

What to watch

• Strength of copper demand in other parts of the world.
• Supply disruption situations in major copper-producing countries.
• Ramp-up progress of the company's new projects and release of undeveloped resources.