Zijin Mining Group - H (02899): UBS sees Julong as Zijin's key 2026-27 copper growth engine, with Tibet projects extending the next growth phase.

Overview

UBS's site-visit report examines Zijin's Tibet assets, led by Julong, as the basis for near-term copper delivery and a longer production-growth pipeline. The report argues that Julong's Phase II ramp-up offsets part of the pressure around group guidance, while later Tibet projects and potential Serbian expansion support the next growth leg.

Core views

UBS's central conclusion is that Julong is Zijin's most visible incremental copper source in 2026-27. Phase II, commissioned in January 2026, is ramping up well: recovery reached about 86% within six to seven months despite initially oxidised ore, compared with four to five years for Phase I to attain a similar recovery rate. Management guides Julong to 300-310kt of copper in 2026 and 310-320kt in 2027, with higher throughput and recovery improvement driving the increase. This makes Julong the principal offset to potential pressure from an approximately 50kt shortfall at Kamoa against Zijin's unchanged 1.2Mt group copper-production guidance for 2026. The report sees a larger Julong production opportunity later in the decade. Mining is expected to enter higher-grade areas in 2029-30, with some benches potentially grading around 0.8% copper. UBS notes that combined Phase I and II output could reach about 350-400kt without Phase III, with the grade transition potentially adding at least about 50kt of annual copper output by around 2030. Phase III and recovery from waste rock grading around 0.15-0.17% copper are additional options, but neither is firm: Phase III depends on an integrated tailings solution, land-use requirements, regulatory quotas and approvals, while waste-rock recovery still lacks final technical, capital and timing parameters. Near-term costs remain a key counterweight. Julong generated Rmb21.2bn of revenue in 8M26, about 61% of its full-year plan. Per-ore cost was Rmb90.73/t, up about 1.7% year-on-year, while copper unit cost after by-product credits rose about 17% to around Rmb25,000/t. UBS attributes this mainly to the switch to owner-operated mining, higher labour expense and new equipment purchases; higher resource and land-related taxes also contributed. Management expects a more meaningful cost decline in 2027 as Phase II throughput improves fixed-cost absorption and transition costs moderate. Battery-electric and autonomous haulage are part of this logic: the fleet could be 50-55% self-driving electric initially and 75-80% by end-2027, with estimated savings of 15-20% in relevant transportation costs. The regional project pipeline broadens the growth profile beyond Julong. Xianglong-Zhunuo is expected to begin commissioning by end-2026, contribute about 5-7kt initially, rise to about 60kt in 2027 and average about 76.4kt annually at full capacity. Its early challenge is ore quality: more than 85% of initial feed is oxidised, recovery is about 50%, and unit cost is estimated at Rmb47,000-48,000/t; recovery could improve to about 65% as oxidation declines through 2031. Tianyuan-Xiongcun is scheduled to commission at end-October 2028, with copper production expected at about 9.3kt in 2028, 34.7kt in 2029 and 49.8kt in 2030. Lakkor Tso Phase II is targeted for 1H28 with 50ktpa LCE capacity, following Phase I reaching design capacity; management expects Phase II unit costs of about Rmb32,000/t excluding acquisition-accounting effects, versus Rmb35,000/t in 8M26. UBS also identifies optionality outside Tibet. Serbia could increase copper production from roughly 290kt to 400kt over time if natural-caving and lower-ore-zone approvals progress, although falling grades and regulatory and development uncertainty reduce visibility. The report adds that about 48% of Zijin's resources have been discovered through in-house exploration and resource expansion around existing mines, while the Zangge acquisition has shifted the company toward a combination of organic development and acquisitions. The report retains a Buy rating and sets a HK$57.80 12-month target price, based on a SOTP multiple, versus a HK$33.58 share price on 23 September 2026. UBS forecasts 72.1% price appreciation, 4.6% dividend yield and 76.7% forecast stock return. Its estimates show 2026 revenue of Rmb511.6bn, UBS diluted EPS of Rmb3.12 and EBIT of Rmb121.8bn, followed by 2027 revenue of Rmb610.3bn, EPS of Rmb3.36 and EBIT of Rmb141.4bn.

Analysis framework

UBS combines a Tibet site visit and management discussions with project-level operating data, production guidance, cost drivers and the company's financial forecasts. It builds the investment case from Julong's ramp-up, then assesses later Tibet projects, Serbian optionality, execution constraints and a sum-of-the-parts valuation.

Methodology notes

• Valuation methodsSOTP (Sum-of-the-Parts) Valuation

  SOTP multiple

  UBS states that its target price for Zijin-H is based on a sum-of-the-parts multiple, valuing the company through its constituent operations rather than a single consolidated multiple.

• Industry AnalysisVolume-price decomposition

  Mine production, ore grades, recovery rates and unit-cost analysis

  The report assesses project value through production volumes, grade progression, metallurgical recovery, throughput and unit costs, explaining how these operating variables affect future output and profitability.

Asset mapping & comparison

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

• Zijin Mining Group - H (2899.HK)

  Primary covered company; Julong and the Tibet project pipeline are presented as the main drivers of future copper and lithium growth.

  Strengths

  Julong Phase II ramp-up, higher-grade ore potential, a broader Tibet pipeline, exploration-led resource additions and potential Serbian output growth.

  Weaknesses

  Elevated near-term Julong costs, high oxidation and low initial recovery at Xianglong-Zhunuo, and uncertain tax treatment.

  Comparison

  Julong's Phase II reached about 86% recovery in six to seven months, versus four to five years for Phase I to reach a similar recovery level.

  Risks

  Mine ramp-up, tax, tailings approval, construction, commodity-price, overseas political, ore-grade and foreign-exchange risks.

Key data

• Julong copper production guidance300-310kt in 2026; 310-320kt in 2027Phase II throughput ramp-up and further recovery improvement are expected to drive growth.
• Julong recovery ratec.86%Achieved since commissioning despite the high oxidation ratio of initial ore feed.
• Julong copper unit cost after by-product creditsc.Rmb25,000/tUp c.17% year-on-year, principally due to owner-operated mining transition, labour and equipment spending.
• Julong potential combined Phase I and II outputc.350-400ktPotential 2029-30 output without Phase III as higher-grade ore enters the processing mix.
• Potential Julong tax costc.Rmb1.0-1.5bn annuallyPotential additional annual costs from unresolved by-product and low-grade ore tax treatment.
• Xianglong-Zhunuo full-capacity copper outputc.76.4kt annuallyInitial commissioning is expected by end-2026; initial recovery is constrained by oxidised ore.
• Tianyuan-Xiongcun copper outputc.9.3kt in 2028, c.34.7kt in 2029, c.49.8kt in 2030Commissioning is scheduled for end-October 2028.
• Lakkor Tso Phase II capacity50ktpa LCETargeted for commissioning in 1H28.
• 2026 UBS diluted EPS forecastRmb3.12Up 60.1% from Rmb1.95 in 2025.
• 12-month valuation snapshotHK$57.80 target price; HK$33.58 price; 72.1% forecast price appreciationUBS retains a Buy rating.

Impact & implications

UBS views Julong's ramp-up as the clearest support for Zijin's 2026-27 copper delivery, while the Tibet pipeline underpins further growth after 2027. The upside case depends on execution, grade progression, cost normalisation and approvals for optional projects; unresolved taxes and Phase III tailings capacity remain material constraints.

Risks

• Julong's unresolved by-product and low-grade ore tax treatment could add about Rmb1.0-1.5bn of annual costs.
• Julong Phase III lacks a final integrated tailings solution and a firm development timetable.
• Xianglong-Zhunuo faces high initial ore oxidation, low recovery and elevated unit costs.
• Tianyuan-Xiongcun faces normal construction and commissioning risks, while Lakkor Tso Phase II depends on timely commissioning and ramp-up.
• Group-level cost pressure includes labour inflation, taxes and declining ore grades.
• The report cites commodity-price volatility, regulatory change, production disruption, overseas political risk and foreign-exchange risk as company or sector risks.

What to watch

• Julong Phase II throughput, recovery improvement and whether unit costs decline in 2027.
• Delivery against Zijin's unchanged 1.2Mt copper-production guidance for 2026, including the extent of any Kamoa shortfall.
• The outcome of Julong's negotiations on by-product and low-grade ore taxes.
• Progress on tailings, land-use and regulatory approvals needed for Julong Phase III.
• Xianglong-Zhunuo commissioning by end-2026 and its recovery improvement as oxidised ore declines.
• Tianyuan-Xiongcun construction and planned end-October 2028 commissioning.
• Lakkor Tso Phase II commissioning targeted for 1H28 and Serbia development approvals.