1Q25 results in line with our expectations

CMOC Group announced its 1Q25 results: Revenue fell 0.3% YoY and 21% QoQ to Rmb46bn. Attributable net profit grew 90% YoY but fell 25% QoQ to Rmb3.95bn, in line with our expectations.

Copper and cobalt segment maintained stable production; price hikes to boost earnings. According to corporate filings, copper and cobalt output rose 16% and 21% YoY (-2% and +3% QoQ) to 170,574t and 30,414t in 1Q25, 27% and 28% of the 2025 output guidance. Copper and cobalt sales volume in 1Q25 was 123,836t and 24,219t, down 1% and flat YoY, and down 43% and 17% QoQ. The QoQ contraction in copper sales volume was mainly because some of TFM’s mineral products were underwritten in the Democratic Republic of the Congo (DRC) in 4Q24 to a minority shareholder of TFM, and sales were recognized in advance.

According to iFinD, average prices of LME copper and MB cobalt changed +10% and -12% YoY and +1% and +8% QoQ in 1Q25, and prices of MB cobalt rose 50% MoM in March.

Gross margins of molybdenum, tungsten and niobium and phosphorus segments increased YoY along with price hikes. According to corporate filings, output of molybdenum, tungsten, niobium, and phosphorus were -4%, +4%, 4% and stayed flat YoY in 1Q25, reaching 25%, 28%, 26%, and 24% of its 2025 average output guidance.

According to iFinD, ASP of domestic molybdenum concentrates, tungsten concentrates, international ferroniobium, and monoammonium phosphate rose 5%, 15%, 3%, and 14% YoY in 1Q25. In 1Q25, gross margins of molybdenum, tungsten, niobium, and phosphorus segments rose 8.0ppt, 3.1ppt, 5.8%, and 12.4ppt YoY.

Trends to watch

Plans to acquire Lumina greenfield gold mine; gold to be included in resource portfolio. On April 21, CMOC announced that it proposed to acquire all equity stake in Lumina for CAD581mn, which holds a 100% stake in the Cangrejos gold mine. Based on the 2023 pre-feasibility study report, the gold mine has 638t of gold metal in its resources and 359t of gold metals in its reserves. The project is all open-pit mining with a low　stripping ratio and sound infrastructure. After deducting by-products, AISC is within the 15% percentile of the global gold mine cost curve in 2024.

Four international talent appointed as senior executives; organizational upgrading propels the firm to become a world-class mining company. On April 25, the firm announced the addition of QUE Chaoyang and LIU Jianfeng to its board of directors, and the appointment of four new senior executives, i.e., QUE Chaoyang, LIU Jianfeng, Kenny Ives, and TAN Xiao. The four new senior executives come from different backgrounds in mining, energy, commodity trading, and high-tech industries and are very young. The senior management team is more international, professional, and younger, laying a foundation for the development of a modern mining enterprise with refined management.

Financials and valuation

We maintain our 2025 and 2026 earnings forecasts. A-shares are trading at 10x 2025e and 9x 2026e P/E, and H-shares at 7.8x 2025e and 7x 2026e P/E. We maintain OUTPERFORM ratings for both A-shares and H- shares, and keep our target prices unchanged at Rmb11.10 and HK$9.40, implying 15.6x 2025e and 14.0x 2026e P/E for A-shares, offering 56% upside, and 12.4x 2025e and 11.0x 2026e P/E for H-shares, offering 59% upside.

Risks

Falling metal prices; disappointing progress of projects; rising geopolitical risks.