CHINA GOLD INTERNATIONAL(02099.HK)：PRODUCTION OF JIAMA MINE IS EXPECTED TO RESUME NORMAL MAINTAIN "ACCUMULATE"-格隆汇

机构：国泰君安国际
研究员：Kevin Guo

　　We revise up the TP of China Gold International (the "Company") to HK$56.10 due to higher PE valuation level and maintain "Accumulate".
　　Our TP represents 16.4x, 9.0x and 7.6x 2024-2026 PER. We forecast net profit of the Company to grow steadily in 2024-2026, driven by higher metal price and more mining output.
　　The Company recorded a loss of US$25.5 million in 2023. The production of the Jiama Mine has been suspended since March 27, 2023 due to an overflow accident of its tailing pond. As a result, total mining output of the Company dropped significantly and the Company did not record any sales from Jiama Mine from the 2nd quarter of 2023. In 2023, total mined copper output of the Company decreased 76% yoy to 20,051 tons, and was the main reason of loss. Total output of mined gold also decreased 38% yoy to 147,963 oz.
　　We forecast gold price to rise in 2024 as the US Federal Reserve may cut interest rates. Gold assets are of high value during the period of US Federal Reserve interest rate cuts. If we review the performance of the gold price during the cycle from interest rate hike to interest rate cut, we may find out that gold assets are of high value in the period when there are significant changes in the US Federal Reserve’s monetary policy. When the market was affirmed that the US Federal Reserve would start to cut interest rates, the gold price experienced another round of increases. It’s widely expected that the Federal Reserve will cut interest rates in 2024 and the only debate is the timing and the number of cuts, but these two factors will not impact the gold price trend.
　　The company expects the production of the Jiama Mine to resume normal in the middle of 2024. In 2023, the Company had finished the job of repairing and reinforcing the dam of the tailing pond as required. The Company estimates that the production resumption of Jiama Mine might be approved by the government in May. The Company plans to produce 43,200-44,500 tons of mined copper and 148,536-157,861 oz of mined gold in 2024.
　　Catalysts: Rise in gold and copper price; production of the Jiama Mine may resume normal.
　　Risks: Decline in gold price; gold and copper mine production impact from external factors.