Zhaojin Mining's Strategic Contract Renewals: A Boon for Supply Chain Stability and Margin Resilience

In the volatile world of commodity markets, stability in supply chains is a rare and valuable asset. Zhaojin Mining Industry Co., Ltd. (1818.HK) has taken a significant step to fortify its operational resilience by renewing long-term gold concentrate contracts with Shandong Zhaojin and its subsidiaries. These agreements, effective from October 10, 2025, to December 31, 2027, are not merely routine renewals but strategic moves to anchor supply-demand dynamics in a sector prone to price swings and geopolitical risks.

Supply Chain Stability: A Structured Approach

The renewed contracts include a Gold Concentrates Sales Framework Agreement and a Purchase Framework Agreement, with annual sales caps of RMB180 million for 2025, rising to RMB480 million by 2027, and purchase caps fixed at RMB480 million annually, as reported by FilingReader. This structured approach ensures predictable revenue streams and cost management, critical for a company whose gold output is projected to reach 25–26 tons in 2025, according to S&P Global Ratings. By locking in counterparties with whom it has a long-standing relationship-Shandong Zhaojin, a major Chinese gold producer-Zhaojin reduces exposure to market volatility and operational disruptions.

The pricing mechanism, tied to market prices while factoring in quality, grade, and recovery rates, further enhances flexibility. As reported by FilingReader, this structure allows Zhaojin to adjust to fluctuating gold prices without sacrificing margins. Such terms are particularly advantageous in a market where gold prices have surged due to inflationary pressures and safe-haven demand, as seen in the safe-haven gold rally (https://www.sahmcapital.com/news/content/safe-haven-gold-rally-boosts-zhaojin-mining-2025-08-29).

Operational Margin Resilience: A Track Record of Strength

Zhaojin's recent financial performance underscores its ability to convert supply chain stability into margin resilience. For the nine months ending September 30, 2025, the company reported a net profit of RMB2.12 billion, a 141% year-on-year increase, and revenue of RMB12.43 billion, up 53.7% from 2024, as FilingReader reports. Its gross profit margin hit 43.7% in 2025, driven by cost controls and higher gold prices, as noted by Sahm Capital. Historical data reveals a steady trajectory: operating margins rose from 24.52% in 2023 to 24.7% in 2025, while EBITDA margins are projected to remain above 40% through 2027, according to S&P Global Ratings and FilingReader.

This resilience is underpinned by Zhaojin's asset base. Total consolidated assets grew to RMB58.24 billion by September 2025, reflecting disciplined capital allocation and the scale of its high-grade reserves, particularly at the Haiyu mine, as FilingReader reports. Such fundamentals are critical for maintaining margins in a capital-intensive industry.

Credit Outlook: A Mixed Signal for Investors

While Zhaojin's financials are robust, credit ratings present a nuanced picture. Fitch Ratings affirmed the company's 'BB+' rating but maintained a negative outlook, citing risks from potential aggressive M&A and debt-funded investments (Fitch Ratings). Conversely, S&P Global Ratings assigned a stable outlook, emphasizing confidence in Zhaojin's creditworthiness. This divergence highlights the tension between operational strength and strategic caution.

The renewed contracts, however, may mitigate some of these risks. By aligning with Shandong Zhaojin-a partner with deep industry expertise and large reserves-Zhaojin reduces reliance on external market conditions. This partnership could stabilize cash flows, enabling the company to avoid the debt-heavy strategies that concern Fitch.

Conclusion: A Prudent Bet in a Turbulent Sector

Zhaojin Mining's renewed contracts are a testament to its strategic foresight. By securing long-term supply-demand agreements with a reliable partner, the company insulates itself from short-term volatility while leveraging its operational efficiency to sustain margins. For investors, this represents a compelling case: a firm with strong historical performance, a resilient asset base, and a supply chain strategy tailored to endure-and even thrive-in a high-risk environment.

As gold prices remain elevated and global economic uncertainty persists, Zhaojin's ability to balance growth with prudence positions it as a standout player in the gold sector. The coming years will test this strategy, but the foundations laid in 2025 suggest a company prepared for the long haul.