Gold prices hit record highs, who is the biggest beneficiary of A-shares?
Author: Taylor, Editor: Xiaoichi Mei
In early Asia-Pacific trading on Monday, COMEX gold futures stood above the $2,150 per ounce mark, continuing to hit a record high, while spot gold short-term also soared to $2,144 per ounce, refreshing the all-time high set in May this year.
According to the first financial report, market analysts believe that the biggest driver behind this round of gold price breakthrough may be the bet on the Federal Reserve to cut interest rates, and other factors that push up include the ultra-strong buying of global central banks.
Once the gold price pivot rises and the upward trend is established, the gold mining enterprises that benefit the most will naturally have large gold reserves at home, and the production is high enough, the cost is low enough, and the gold content in assets and revenues is high.
Let's start with the reserves.
At the top of the list is Zijin Mining, a giant with a market capitalization of more than 300 billion yuan, which is controlled by the Finance Bureau of Shanghang County, Fujian. Among the resource companies, most of the leading enterprises are controlled by state-owned assets, and gold mining companies are no exception.
According to the Ministry of Natural Resources, as of 2021, Zijin Mining has 2,372.90 tonnes of gold resources and 792.15 tonnes of gold reserves, accounting for 41.1% of the country's total gold reserves. The distribution of gold mines covers almost all major gold resource towns in China, including the Zijin Mountain Gold and Copper Mine in Fujian, the Shuguang Gold Mine in Jilin, the Liba Gold Mine in Gansu, and the Shuiyindong Gold Mine in Guizhou.
Although China ranks first in the world in terms of gold production and consumption, its domestic gold resources are not particularly abundant. Like other mining giants in China, Zijin Mining has been conducting overseas mining operations for a long time, and it has become quite large-scale.
At present, Zijin Mining has six overseas gold mines, with a total gold reserve of about 800 tons, which is equivalent to rebuilding a Zijin Mine.
Among them, the Buritica gold mine in Colombia, which was acquired in 2019, is a world-class ultra-high-grade large-scale gold mine, with an average grade of 9.3 g/t, much higher than the global average grade of 1.19 g/t primary gold ore. The mine produces an average of 7.8 tonnes of gold per year, and the mining cost is about 120 yuan/gram, which is far lower than the industry average.
The second largest reserve is Shandong Gold, which is controlled by Shandong State-owned Assets.
As of the end of 2021, Shandong Gold has 13 gold mines in China, of which 9 are located in Shandong Province, the largest gold producing area in China, and 4 are outside Shandong Province, with more than 2,100 tons of gold ore resources in China and 592.41 tons of proven gold reserves, accounting for nearly 30% of domestic gold reserves, second only to Zijin Mining.
In terms of overseas resource layout, Shandong Gold has successively acquired the Villadero Gold Mine in Argentina and the Catino Resources Company in Ghana, with a total gold resource of 500 tons, of which the Villadero Gold Mine in Argentina is the second largest gold mine in South America and has become an important production capacity growth point for the Company.
In addition, Shandong Gold also spent 12.7 billion yuan last year to acquire a 20.93% stake in Yintai Gold. After the completion of the merger, Shandong Gold will not only obtain 170.45 tons of gold resources from Yintai Gold, but also realize the strategic layout of resources in the southwest and northeast regions from scratch.
It is worth mentioning that Yintai Gold is one of the largest private gold mining enterprises in China, and this acquisition will undoubtedly further deepen the control of state-owned assets over gold resources.
CICC Gold, the only state-owned enterprise among the top gold mining enterprises, ranks third in terms of reserves. As of the end of 2021, CICC Gold's gold resources were about 550 tonnes, and they were mainly concentrated in China, which is still far behind Zijin Mining and Shandong Gold.
Let's look at the yield.
Zijin Mining is still a far leader among gold miners. In 2022, the company's annual output of mineral gold will be 56.4 tons, equivalent to about 15% of the domestic total.
It is followed by Shandong Gold, which is expected to produce about 40 tonnes of gold in 2022, and CICC Gold, which produced 20 tonnes of mineral gold in 2021, still significantly behind the top two leaders.
Let's look at the cost of production.
In 2021, Zijin Mining's unit cost of sales of mineral gold was only about 176 yuan/gram, which is significantly ahead of other peers involved in gold mining and smelting, which means that the company's gold business is almost impossible to lose money, and the gross profit margin will be in the leading position in the industry.
Shandong Gold's complete cost of mineral gold is about 180 yuan/gram, slightly higher than that of Zijin Mining, and the highest cost is Zhongjin Gold, which is estimated to cost more than 200 yuan/gram. The gap between reserves and production largely determines the cost control ability of gold mining enterprises.
Finally, let's look at the revenue structure and net assets of the three gold leaders.
As of the third quarter of 2022, Shandong Gold's net assets were RMB35.1 billion, corresponding to about 8 tons of gold resources per 100 million yuan of net assets, Zijin Mining's net assets were RMB119.6 billion, with about 3 tonnes of gold resources per 100 million yuan, and CICC Gold's net assets were RMB27.8 billion, with about 2 tonnes of gold resources per 100 million yuan.
As a non-ferrous metal enterprise with the highest market capitalization in the A-share market, Zijin Mining's gold business accounted for only about 50% of its business in 2021, Shandong Gold's revenue from gold business accounted for more than 90%, and CICC Gold's revenue from gold business was about 60%, ranking between Zijin Mining and Shandong Gold.
Obviously, among the three leading gold mining companies, Shandong Gold's performance has the greatest relationship with gold prices, and it is also the company that has benefited most from the rise in gold prices.
In addition to the three gold leaders, some small and medium-sized gold mining companies are also expected to fully benefit from the upward trend in gold prices.
For example, Sichuan Gold, which was recently listed, is controlled by Sichuan state-owned assets, and its main business is concentrated in gold mining and selection. In 2022, the average gram cost of the company's gold concentrate is about 150 yuan, with a gross profit margin of nearly 50% and a net profit margin of more than 40%.
Compared with the downstream smelting and refining links, the overall gross profit margin and net profit margin of Sichuan Gold are more than 10% higher, which is an important reason why the market gives the company a higher valuation.
The content of this article related to listed companies is the author's personal analysis and judgment based on the information publicly disclosed by listed companies in accordance with their legal obligations (including but not limited to temporary announcements, periodic reports and official interactive platforms, etc.), and the information or opinions in this article do not constitute any investment or other business advice, and Market Value Watch does not assume any responsibility for any actions arising from the adoption of this article.