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社区
会员
机构：中金公司
研究员：Jiaming ZHANG/Ding QI/Yan CHEN
We initiate coverage on Tongguan Gold Group (Tongguan Gold) with an OUTPERFORM rating and a target price of HK$3.52.
Tongguan Gold mainly operates gold mines in Tongguan and Subei counties.
Why an OUTPERFORM rating?
Expertise in gold exploration; strong momentum of
organic growth. Tongguan Gold recognizes the strategic importance of exploring and increasing gold reserves. Its Tongguan and Subei mines have a total of 55.0t gold reserves, with an average ore grade of 8.26g/t. As the Tongguan mine is progressing to obtain the mining permit, and will contribute incremental output, we expect the firm’s gold sales volume to reach 2.8t in 2025 and 3.4t in 2026.
Regarding costs, Tongguan Gold acquired the mining service provider Xi’an Hongshang in January 2025. We think its efforts in value chain consolidation should help reduce the production costs of the gold mining business.
Strategic investment from Zijin Mining; potential M&As
to boost growth. In April 2025, Zijin Mining acquired a 3.82% stake in Tongguan Gold through its fully-owned subsidiary Zijin Metal, which made an upfront payment of US$25mn in cash as part of the metal streaming agreement.
We think Zijin Mining’s equity investment in Tongguan Gold demonstrates its recognition of the latter’s asset quality and strategic path. Considering the additional cash flow brought by the metal streaming cooperation and the firm’s gold- exploring capabilities, we expect potential M&A transactions to boost growth.
Falling effective interest rate and PBoC’s expected continuation of gold purchases to bolster gold price
rallies. As US employment data has weakened and overall inflation remains controllable, transactions based on interest cut expectations are rising. The decline in effective interest rate may boost gold price rallies.
Moreover, the People’s Bank of China (PBoC) resumed gold purchases in November 2024. We think it may continue to increase gold purchases, and replicate the success achieved during the gold downcycle.
How do we differ from the market? We think Tongguan Gold
has long recognized the importance of gold exploration and reserves, and its potential in increasing gold production may beat the market’s expectations.
Potential catalysts: Gold prices continue to rise; Tongguan mine progresses smoothly; continued efforts in value chain consolidation contribute to cost reduction.
Financials and valuation
We forecast EPS of HK$0.16 in 2025 and HK$0.23 in 2026, a CAGR of 121% from 2024 to 2026. The stock is now trading at 17.3x 2025e and 11.6x 2026e P/E. We initiate coverage with an OUTPERFORM rating and a target price of HK$3.52, implying 15.0x 2026e P/E, offering 30% upside.
Risks
Gold prices fluctuate; progress in acquiring mining permit disappoints; gold mining costs rise more than expected.