Performance Rising vs. Share Price Falling: Is It the Right Time for ZIJIN GOLD INTL (02259) Valuation Repair?

On the evening of October 19, ZIJIN GOLD INTL (02259) delivered a first-three-quarter report card that any mining company would find hard to fault: mineral gold output of approximately 41 tonnes, a sharp year-on-year increase of 28%; profit attributable to owners of the parent amounting to US$2.015 billion, a substantial year-on-year rise of 123%; and net cash flow from operating activities of US$2.778 billion, a surge of 157% year on year. This performance of "rising volumes and prices" not only highlights the growth underpinnings of its position as a global gold leader, but also reinforces its core competitiveness in the global mining sector. However, this impressive performance has not translated into share price gains. Over the past three trading days, ZIJIN GOLD INTL's share price has undergone a notable pullback: on October 20 it fell more than 7% at one point, and on October 22 it fell another 4.65% to HK$127. This is mainly due to disturbances in the external macroeconomic environment: international gold prices fell for three consecutive days, compounded by rising geopolitical tensions in the Middle East, global inflation risks and interest rate hike expectations weighing on sentiment, putting the entire gold sector under pressure. Short-term market sentiment fluctuations are essentially a normal manifestation of expectation rebalancing in cyclical sectors, rather than a weakening of the company's fundamentals. Despite the short-term share price pullback, the company's long-term value logic remains unchanged. On the one hand, although its all-in sustaining cost (AISC) rose 5% year on year to US$1,649/oz, it remains at a globally industry-leading level, and the cost increase mainly stems from higher royalty payments brought about by rising gold prices. On the other hand, the company is proactively advancing multiple technical upgrades and equipment upgrades, paving the way for capacity release in the fourth quarter and in 2027. As sentiment is gradually digested and an operating inflection point approaches, the dual logic of "performance delivery + valuation repair" is becoming increasingly clear. Rising Volumes and Prices, Performance Delivery Underway Looking back at the development trajectory of ZIJIN GOLD INTL, 2025 was a major year of capital operations with accelerated deployment of its resource map, while 2026 is precisely the key year when previously acquired assets enter capacity release and performance is concentratedly delivered. In 2025, the company continued to build out its presence across the global gold sector, with its resource map continuing to expand. In April and October of that year, it completed the acquisitions of the Akyem gold mine and the Riguoduo gold mine respectively, and in July it completed the restructuring of the Porgera gold mine. According to Guotai Haitong, as of the end of 2025, the company's proven + probable gold reserves totaled 917 tonnes, with 45.6 tonnes of attributable gold resources added during the year. Resource deployment comes first, output delivery follows, and 2026 is precisely the year when ZIJIN GOLD INTL's "moves take shape." In the first half of 2026, the synergy value of ZIJIN GOLD INTL's previously acquired assets continued to be released. The Akyem and Riguoduo gold mines contributed 4.0 tonnes and 3.3 tonnes of mineral gold respectively; the original flagship mines also maintained steady growth, with Buritic, Rosebel, Aurora and Left Bank gold mines reaching mineral gold output of 4.2 tonnes, 3.8 tonnes, 2.2 tonnes and 1.8 tonnes respectively, with year-on-year growth of 8%, 15%, 10% and 6% in that order. Exploration also gathered pace in tandem, with approximately 84,000 meters of geological exploration drilling completed in the first half, adding approximately 34.7 tonnes of gold metal, with considerable resource increments at Buritic, Norton Gold Fields, the Rosebel RGM mining area and the Riguoduo gold mine. Relying on Zijin Mining Group's mature global mine operating system, ZIJIN GOLD INTL has achieved dual-wheel drive of external acquisitions and organic growth. Its mining assets are spread across Central Asia, Africa, Australia and South America, diversifying single-region operating risks, while its large-scale management capabilities continue to be honed, efficiently converting acquired mineral resources into stable gold production capacity. With capacity ramp-up combined with rising gold prices, ZIJIN GOLD INTL's growth logic of rising volumes and prices is clearly landing. In the first half of 2026, the company achieved operating revenue of US$3.99 billion, a sharp year-on-year increase of 100%; net profit attributable to the parent was US$1.45 billion, soaring 179% year on year. Of this, gold business revenue was US$3.90 billion, also up 100% year on year, and the gross margin of the gold segment rose to 58%, up 11.8 percentage points year on year. At the output level, gold production in the first half was 27.3 tonnes, up 44% year on year, with output progress completing 46% of the full-year target; gold sales volume was 26.1 tonnes, up 33% year on year. The company's average gold selling price was US$4,643/oz, close to 99% of the average Comex gold price over the same period, enabling it to fully capture the earnings dividend brought by rising gold prices. Behind the impressive revenue and profit, its earnings quality also remains at a high level. In the first half, the company's consolidated gross margin was 58%, net margin 42%, and ROE reached 18%, with profitability at the upper end of the industry. Its management and control capabilities also continued to optimize, with the period expense ratio at only 4.0%, down 1.0 percentage point year on year; the debt-to-asset ratio was 26%, down 3 percentage points year on year, with risk resistance continuing to strengthen. Cash flow, as the most intuitive touchstone for testing the quality of a company's operations, also performed well at ZIJIN GOLD INTL. In the first half, the company's net operating cash flow was US$1.80 billion, surging 331% year on year; in the first three quarters, operating cash flow further rose to US$2.778 billion, up 157% year on year. This steady stream of cash flow lays a solid financial foundation for subsequent mine technical upgrades, exploration and reserve expansion, and resource acquisitions. In addition, ZIJIN GOLD INTL's cost control capability also ranks firmly in the first tier of the global gold industry, with an all-in sustaining cost (AISC) of US$1,649/oz in the first three quarters. The slight cost increase is not due to a decline in mine operating efficiency, but rather to higher royalty payments calculated on a gold price basis after gold prices rose, compounded by disturbances from price increases in some raw and auxiliary materials, rather than a loosening of its moat. Looking ahead to subsequent operations, the company's capacity growth curve remains upward. In the third quarter, the company proactively advanced multiple mine technical upgrades, equipment repairs, slope treatment and resource supplementary exploration projects, moderately adjusting the production pace in the short term with the aim of consolidating the foundation for long-term capacity and building momentum for output release in the fourth quarter and even 2027. Expansion projects at large mines such as Rosebel, Riguoduo and Akyem are progressing steadily, the low-grade heap leaching project at Norton Gold Fields has already been put into production, and the path for mineral gold increments in the coming years is gradually becoming clear. Industry K-Shaped Divergence, Leader Embarks on Independent Rally As is well known, gold is a typical strongly cyclical commodity, and its market always divides into two phases: the first half is a game over gold price dividends, and the second half is a contest of capacity and cost. In the first half of 2026, international gold prices continued to rise, and the gold sector enjoyed a valuation premium. ZIJIN GOLD INTL, by virtue of its pure overseas gold mine assets and rapid capacity expansion, saw its share price stage a sharp upward run in the first half, fully pricing in the performance expectations brought by rising gold prices and prematurelying the sentiment premium. Entering the second half, gold prices entered a high-level oscillation range, and the market's trading logic shifted from "sentiment gaming" to "performance pricing," with the sector as a whole entering a valuation digestion phase and the industry officially ushering in an era of K-shaped divergence. Small and medium-sized mines generally face resource depletion, high costs and unstable output, with earnings elasticity continuing to contract; while leading mining companies with high-quality resources, large-scale capacity and mature operating systems can continue to harvest structural industry dividends and ride through cyclical fluctuations. It is worth noting that ZIJIN GOLD INTL is precisely a core beneficiary of this round of industry divergence. The company's mines are spread across the four major gold-producing regions of Central Asia, Africa, Australia and South America, with a resource layout that diversifies single-region risks; backed by Zijin Mining Group's global construction and management system, it can significantly shorten the cycle from commissioning to full capacity at overseas mines; with abundant cash flow and a healthy financial structure, it can both continue to invest in exploration and expansion and retain ample room to continue advancing high-quality gold mine acquisitions. At a time when the industry as a whole has entered stock-based competition, the company has built a hard-to-replicate core barrier with "incremental capacity + controllable costs + abundant cash flow," embarking on a growth trajectory independent of the industry cycle. At the valuation level, the market is completing a rational reconstruction from "sentiment premium" to "performance anchoring." The earlier rally gave the company a valuation premium as a gold price option; as positive factors are gradually delivered, capital returns to fundamental assessment, no longer granting thematic premiums, and instead strictly scrutinizing capacity delivery, cost control and the certainty of long-term growth. At present, the company's TTM price-to-earnings ratio is only 15.43x, at the lower end of the range for global gold leaders, with the valuation bubble fully cleared, leaving ample room for subsequent valuation repair. Institutions are also unanimously optimistic about the company's medium- and long-term growth value. The Pacific Securities estimates that from 2026 to 2028 the company's mineral gold output is expected to steadily rise to 59.2 tonnes, 60.3 tonnes and 74 tonnes, with steady capacity expansion driving continuous earnings growth; Guotai Haitong initiated coverage with an "Overweight" rating, assigning the company a 20x PE with reference to reasonable industry valuations, corresponding to a target price of HK$163.8, and the current price still leaves considerable upside to the institutional target. It can be seen that as short-term disturbance factors gradually fade, ZIJIN GOLD INTL's capacity delivery and valuation repair will gradually form a resonance, with earnings growth underpinning valuation upside, and a Davis double-click rally is drawing nearer. Conclusion True long-term investment is never about chasing short-term performance pulses and share price fluctuations, but about anchoring to a company's core barriers that enable it to ride through cycles. Backed by Zijin Mining Group's global resource integration capabilities, holding high-quality mining assets across Central Asia, Africa, Australia and South America, and with a clear capacity expansion path, industry-leading cost advantages and a healthy financial structure, ZIJIN GOLD INTL already possesses the core strength of a world-class gold mining leader. The short-term valuation pullback is a normal risk clearing for cyclical stocks; sustained capacity growth is the company's core confidence for riding through bull and bear markets. When market sentiment returns to rationality, and when long-term capacity increments gradually land, the valuation that has been wrongly killed by short-term sentiment will eventually usher in a moment of repair.