What's new

According to an October 22 announcement, the company completed a change of control. Zijin Gold and its parties acting in concert raised their combined stake to 25.85%, becoming the controlling shareholder of Chifeng Jilong Gold Mining.

Comments

Zijin gained control through an agreed A-share transfer and an H-share private placement. Zijin Gold acquired all 241,925,746 A-shares from Chifeng Jilong Gold Mining’s actual controller LI Jinyang and his parties acting in concert at Rmb41.36 per share, totaling around Rmb10.01bn. In the Hshare placement, Zijin Gold subscribed to 310,902,731 shares at HK$29.82 per share, totaling HK$9.27bn. Following the transfer and placement, Zijin Gold and its parties acting in concert held a 25.85% stake, making it the controlling shareholder.

Zijin executives take over, setting the stage for an internal management overhaul. The company disclosed an early board re-election plan, with current board members resigning early. All five non-independent director candidates on the new board hail from Zijin (XIE Xionghui, WU Guanbin, LIAO Boshou, LAI Guihua, and XIANG Zhao) and cover geology, mine operations, internal control, and finance, with strong overseas mining backgrounds.

We believe Zijin's absolute majority on the new board yields two key benefits. First, Chifeng clearly transfers governance control to Zijin while the original chairman and some directors remain at the company to ensure a smooth transition. Second, we expect this to optimize internal management and boost operational capabilities.

Zijin's backing to unlock new growth prospects. We believe this backing creates three key opportunities.

First, reserve expansion. The company can draw on Zijin's global operating experience and technical expertise in geological exploration and deep resource prospecting to further enhance its resources and reserves.

Second, production growth. By adopting Zijin's full-cycle mining engineering management model, the company can systematically optimize operations and cost control at existing mines, driving output growth and translating resource advantages into higher production capacity and volume.

Third, M&A expansion. Raising funds through an H-share placement to the controlling shareholder will support capex for mine construction and operations while providing financial backing for future project acquisitions.

Financials and valuation

Factoring in the recent gold price correction, we cut our 2026 and 2027 earnings forecasts by 37% and 26% to Rmb3.82bn and Rmb4.88bn. A-shares are trading at 19x 2026e and 15x 2027e P/E. Given the management improvements and growth prospects under Zijin's control, we maintain our OUTPERFORM rating and target price of Rmb51.12, implying 25x 2026e and 20x 2027e P/E, offering 33% upside.

Risks

Volatile gold prices; slower-than-expected progress in projects; rising geopolitical risks.