Zhaojin Mining’s Profits Surge 160% Amid Gold Market Rally
Zhaojin Mining Industry Co. Ltd. has reported a remarkable profit increase of 160% in the first half of 2025, driven by a significant rally in the gold market. The company’s net profit soared to **1.44 billion yuan** (approximately **$200 million**), reflecting a robust demand for gold amidst ongoing geopolitical tensions and economic uncertainties.
The mining company’s revenue also saw a substantial rise, climbing nearly **51%** to **6.97 billion yuan** (around **$974 million**) compared to the previous year. This surge in earnings is attributed to a favorable gold market, where prices reached record highs. The London spot price for gold surpassed **$3,500** per ounce, while gold traded in Shanghai experienced a nearly **40%** increase over the past year.
Market Context and Financial Performance
Zhaojin Mining’s strong performance stands out among its competitors. For instance, Zijin Mining reported a **54%** increase in net profit, while Shandong Gold saw a **102%** rise. In contrast, China Gold International returned to profitability with a net profit of **$116 million**. Unlike these diversified companies, Zhaojin Mining focuses specifically on gold extraction and smelting, making it particularly sensitive to fluctuations in gold prices. As gold prices rose, so did the company’s production volume, which increased by **8.42%** to **14,288 kilograms** (nearly **459,000 ounces**) during the first half of 2025.
Revenue generated from gold sales accounted for about **88%** of Zhaojin’s total revenue, totaling around **6.16 billion yuan**. The company demonstrated effective cost control, with production costs rising only **2.9%** to **216 yuan** per gram, significantly lower than the **25%** increase in international gold prices during the same period. This resulted in a gross profit margin improvement from **42.7%** to a multi-year high of **43.7%**.
Total assets also rose to **58.27 billion yuan**, with net assets increasing by nearly **9.5%** year-on-year to **27.58 billion yuan**. Notably, cash and cash equivalents surged **60%** to **3.25 billion yuan** compared to the end of 2024. Although total liabilities increased by **8.1%** to **30.68 billion yuan**, the company’s gearing ratio improved, decreasing from **43.4%** to **41.2%**.
Analysts’ Perspectives and Future Outlook
Despite the impressive figures, some analysts expressed disappointment, as they had anticipated even stronger results. UBS highlighted that Zhaojin’s second-quarter profit of **781 million yuan** was below their forecast of **950 million yuan**. Additionally, the company faced a significant **293%** surge in “other expenses,” totaling **943 million yuan**, with impairment losses alone amounting to **711 million yuan**. These factors raise concerns about the valuation of some assets and ongoing projects.
Looking ahead, the market expects Zhaojin Mining to achieve a net profit of approximately **3.3 billion yuan** for the full year of 2025. With only **44%** of this target achieved in the first half, the company faces pressure to accelerate its performance in the latter half of the year, leading to concerns among investors.
Zhaojin Mining is actively investing in expanding its production capacity and exploration efforts. The **Shandong Ruihai** project, with a daily capacity of **12,000 tonnes**, recently completed its initial trial operations. The company is also advancing deep mining projects at the **Xiadian mine** and has established an exploration fund exceeding **100 million yuan** for various prospecting initiatives. In the first half of 2025, Zhaojin added **25 tonnes** of new resources, enhancing its reserve capacity.
The outlook for the gold market remains favorable, given ongoing global tensions, U.S. deficit concerns, and sustained demand from central banks. Nevertheless, risks persist. A stronger U.S. dollar or declining demand for gold as a safe-haven asset could lead to a sharp correction in prices. UBS has advised investors to closely monitor potential impairment risks while slightly raising its profit forecasts for 2025 and 2026. The target share price has increased from **HK$23.6** to **HK$25.3**.
On the first trading day post-results, Zhaojin Mining shares climbed **0.84%** to **HK$21.58**. The stock has already appreciated over **96%** this year, buoyed by the gold rally. However, the company’s price-to-earnings (P/E) ratio of **56.8 times** significantly exceeds that of its peers, such as Zijin Mining at **16.7 times** and Shandong Gold at **39.5 times**. While Zhaojin has benefited from being a specialist in gold during a bull market, its heightened exposure to market reversals could pose challenges for investors. Therefore, short-term investors may want to avoid chasing high prices and consider waiting for potential dips before making further investments.
