Zijin Mining's H1 2025 Profit Surge: Sustainable Growth Catalyst or Commodity-Driven Blip?

Zijin Mining Group (HK:2899) has delivered an eye-catching 54% year-on-year jump in net profit for the first half of 2025, reaching RMB23.2 billion. This performance, driven by soaring copper and gold production volumes and prices, has sparked investor optimism. But as commodity markets remain volatile and lithium demand looms large, the critical question remains: Is this profit surge a sign of lasting growth, or merely a fleeting commodity boom?

The Copper and Gold Engine: Momentum or Mirage?
Zijin's H1 results are anchored in robust production gains. Copper output rose 9.5% year-on-year to 287,571 metric tons in Q1, while gold production surged 13% to 19,065 kilograms. These increases were amplified by a 37% jump in gold prices on China's Shanghai Gold Exchange, pushing Q1 net profit above RMB10 billion for the first time in the company's history.

However, the sustainability of this growth hinges on two factors: commodity price cycles and operational resilience. Copper and gold prices have been buoyed by global macroeconomic uncertainty and China's stimulus-driven demand. Yet, as central banks normalize rates and inflation eases, these metals could face headwinds.

The company's operational improvements offer a counterbalance. Gross profit margins for mining entities rose to 59.94% in Q1—up 5.4 percentage points year-on-year—due to better cost control and higher ore grades. This efficiency gains suggest Zijin can weather moderate price dips, but a prolonged downturn could test its margins.

Lithium: The Wildcard in Zijin's Future
Zijin's long-term growth narrative now pivots on its lithium ambitions. The company's acquisition of Zangge Mining in early 2025 added critical assets, including the Mamicuo salt lake project in Tibet, which aims to produce 50,000 tonnes of lithium carbonate annually once fully operational. Combined with projects in Argentina and other salars, Zijin targets 120,000 tonnes of lithium carbonate production by 2025, part of a five-year plan to become a top-10 global lithium producer.

Yet, lithium remains a double-edged sword. Prices have plummeted 90% since late 2022 due to oversupply, and Zangge's Q1 lithium carbonate production (2,165 tonnes) reflects this volatility. While long-term demand from EVs and energy storage is bullish, short-term oversupply risks could delay profitability. Zijin's strategy to diversify into lithium—coupled with its core copper-gold business—reduces dependency on any single commodity, but execution remains key.

Valuation and Technicals: A “Buy” with Caveats
Analysts rate Zijin Mining a “Buy” with a HK$21.50 price target, implying 15% upside from current levels. The stock's valuation metrics—12x forward P/E and 2.5% dividend yield—appear reasonable given its growth trajectory. Technical sentiment also leans bullish, with rising volumes and momentum indicators.

However, investors must weigh these positives against risks. Zinc production fell 10% in Q1 due to mine maintenance, and lithium's uncertain pricing environment could strain margins. Additionally, geopolitical risks—such as Argentina's regulatory hurdles for the Tres Quebradas project—add execution risk.

Investment Thesis: Strategic Entry, but Mind the Cycle
Zijin Mining's H1 surge is no blip. Its operational discipline, margin improvements, and lithium expansion create a durable foundation for growth. Yet, investors should avoid complacency:

1. Buy on dips: Use pullbacks below HK$18 (a 20% discount to the target) to accumulate shares, especially if copper/gold prices stabilize.
2. Monitor lithium execution: Track production ramp-ups at Mamicuo and Tres Quebradas; delays could pressure the stock.
3. Stay cyclical-aware: Commodity price trends will dominate near-term performance—pair a Zijin holding with exposure to broader mining ETFs for diversification.

In conclusion, Zijin Mining's H1 results signal more than a commodity boom. By combining cost discipline with strategic bets on lithium, it's positioning itself for sustained growth. For long-term investors, this is a stock to watch—and buy—if valuations remain attractive and operational risks are managed.

Final Take: Hold for the long game, but stay nimble on near-term volatility.