J.P. Morgan maintains Overweight on Zijin Gold International after the termination of the Allied Gold acquisition

Overview

This report is J.P. Morgan's company research and earnings review of Zijin Gold International - H (2259.HK). The key event is Zijin Gold International's termination of the Allied Gold acquisition agreement and its decision to subscribe for approximately US$295mn of Allied shares. The report believes the risk of the failed acquisition has largely been priced into the stock, that the company's valuation remains attractive excluding Allied, and that organic mine expansion can support medium-term production growth; therefore, it maintains an Overweight rating.

Core views

The report's core views include: first, the termination of the Allied Gold acquisition is no longer an incremental negative and is more likely to represent the removal of an overhang; second, even excluding Allied Gold's contribution, Zijin Gold International's gold production is expected to increase from 59 tonnes to 73 tonnes during 2026-2028E; third, the company still has opportunities to achieve its long-term production target of 100 tonnes by 2030 through future acquisitions; fourth, earnings forecasts were lowered due to the exclusion of Allied, but at approximately 13x FY27E P/E, the report considers the valuation undemanding.

Analysis framework

The report combines event analysis, production forecast adjustments, earnings forecast revisions, valuation multiples, and a DCF valuation framework. The analysis focuses on the impact of the Allied Gold transaction termination, the organic mine expansion pathway, the drivers of the share price from gold prices and interest-rate expectations, potential future acquisitions, and the rationale for maintaining a positive rating despite lowering the target price.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow valuation

  The Dec-2027 target price of HK$146 is based on DCF valuation, assuming an 8.5% WACC and a 2.5% perpetual growth rate. This target price corresponds to 16.5x FY27E P/E and 9x FY27E EV/EBITDA.

• Relative valuationP/E and EV/EBITDA

  Earnings and enterprise value multiples

  The report notes that after excluding Allied's contribution and marking the valuation at approximately 13x FY27E P/E, Zijin Gold International is still considered undemandingly valued.

• Operating forecastsProduction ramp-up model

  Growth driven by organic mine expansion

  After excluding Allied Gold's four mines, the report still expects the company's 2026-2028E gold production to be 59 tonnes, 64 tonnes, and 73 tonnes, respectively, supported mainly by expansion at existing mines.

Asset mapping & comparison

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

• 2259.HK

  Core covered asset

  Strengths

  Gold production has an organic growth pathway and is expected to reach 73 tonnes in 2028E; valuation remains undemanding after excluding Allied; the gold price outlook and potential acquisitions provide upside catalysts.

  Weaknesses

  The termination of the Allied Gold acquisition led to lower earnings forecasts, with the Dec-27 target price reduced from HK$170 to HK$146; the company still needs to rely on organic expansion and subsequent acquisitions to achieve its long-term 100-tonne target.

  Comparison

  The report states that the share price has underperformed gold peers by approximately 20% since May, indicating that the risk of the transaction not being completed has largely been reflected.

  Risks

  Gold price volatility, multi-country operating risks, project construction delays, illegal mining activities at Colombia's Buriticá gold mine, and realized metal prices below expectations.

• Zijin Mining

  Related parent-company asset

  Strengths

  Zijin Gold International is a subsidiary of Zijin Mining and benefits from the group's capabilities in acquisitions and resource expansion.

  Weaknesses

  The report does not focus on the parent's valuation, and the financial impact at the parent-company level is not discussed in detail.

  Comparison

  The coverage list also includes Zijin Mining - A (601899.SS) and Zijin Mining - H (2899.HK), but the rating and target price in this report apply to 2259.HK.

  Risks

  Acquisition, gold price, and overseas operating risks related to the subsidiary may transmit to market sentiment.

Key data

• RatingOverweightJ.P. Morgan maintains the rating.
• Target priceHK$146.00Dec-27 target price, lowered from HK$170.00 previously.
• Current priceHK$117.70As of July 29, 2026.
• Implied upsideapproximately 24.0%Estimated based on the HK$146.00 target price and HK$117.70 current price.
• Allied share subscription amountapproximately US$295mnCorresponding to approximately 12.8mn Allied shares and an expected post-completion stake of approximately 9.2%.
• 2026-2028E gold production59t / 64t / 73tForecasts excluding Allied Gold's four mines.
• 2028 production target70-75tThe report believes organic expansion can still support achievement of this target.
• 2030 long-term production target100tThe report believes future acquisitions may still help achieve the long-term target.
• Earnings forecast adjustmentFY26-28E down 12%-32%Mainly due to the exclusion of Allied Gold's contribution.
• FY25-28E earnings CAGR33%The report forecasts compound earnings growth from 2025 to 2028.

Impact & implications

The implication for investment judgment is that the termination of the Allied Gold transaction reduces uncertainty, while near-term share price drivers may increasingly come from gold prices, interest-rate expectations, and future acquisition announcements. Although earnings forecasts and the target price were lowered, the organic growth pathway still supports medium-term production increases, and valuation is considered attractive; therefore, the report maintains a positive rating.

Risks

• Gold price volatility may affect earnings, valuation multiples, and share price performance.
• Operations across multiple jurisdictions create operating, regulatory, and execution risks.
• Project construction delays may affect the pace of production ramp-up.
• The Buriticá gold mine in Colombia faces risks related to illegal mining activities.
• Realized metal prices below expectations could compress revenue and profit.
• If future acquisitions cannot be completed, achieving the long-term 100-tonne production target in 2030 may become more difficult.

What to watch

• Whether the Allied share subscription can be completed as expected around August 10, 2026, following approval by the TSX and NYSE.
• Whether the 2026-2028E production ramp-up follows the forecast path of 59 tonnes, 64 tonnes, and 73 tonnes.
• The impact of changes in gold prices and interest-rate hike expectations on the share price.
• Subsequent acquisition announcements and their contribution to the 2030 production target of 100 tonnes.
• Actual delivery against the lowered FY26-28E earnings forecasts.
• Operating stability and construction progress at the Buriticá gold mine and other overseas projects.