Gold’s bull market lifts Zhaojin to more shiny earnings

The miner reported impressive profit growth in the third quarter, benefiting from U.S. dollar weakness and a 17% surge for gold in the three-month period

Key Takeaways:

• Zhaojin Mining’s profit soared 140% in the first three quarters of the year on the back of record gold prices.
• A strategic tie-up with Zijin Mining and the imminent startup of its Haiyu Gold Mine should further support the company’s profit growth

By Bai Xin Rui

The benchmark Hang Seng Index may be a shining star for investors, up 30% this year. But its luster still dims beside gold, which is up by an even bigger 50% over the same period. That’s added some sparkle to gold mining stocks like Zhaojin Mining Industry Co. Ltd. (1818.HK), whose shares have nearly tripled this year. The company looks set to keep pleasing investors, following the release of its latest financial report last week showing its net profit more than doubled in the first three quarters of the year, with more healthy growth to come.

Zhaojin was incorporated in April 2004 in East China’s Shandong province, which also happens to be the nation’s gold capital, and expanded rapidly from 2004 to 2012 by adding assets from both external sources and its state-run parent. Its core operations span exploration, mining, ore processing and smelting. Its biggest breadwinner for more than a decade has been gold, which has consistently supplied about 85% of its revenue. Its parent, Shandong Zhaojin Group, remains the company’s largest shareholder with a 34.19% stake. Another major miner, Zijin Mining (2899.HK; 601899.SH) acquired 18.2% of the company in 2022 to become Zhaojin’s second-largest shareholder.

While Zhaojin may like to attribute its bumper profits to operating efficiency and other company-specific factors, the real hero behind its stellar performance is record gold prices. Spot gold rose 16.8% in the third quarter alone – climbing from $3,303.20 per ounce to $3,859.03 during the period – lifting the miner’s revenue for the quarter to 5.08 billion yuan ($713 million), up 59% year-over-year. Its net profit more than doubled during the quarter, rising 107% year-over-year to 678 million yuan, bringing its profit for the first three quarters of the year to 2.12 billion yuan, up 140.4%.

Zhaojin has prioritized growth through acquisitions since its 2006 listing on the Hong Kong Stock Exchange. It initially focused on gold resources in interior China’s Xinjiang and Gansu regions, then added its home base in Shandong to the mix as well. It began taking its network global with the 2017 acquisition of 60% of an Ecuadorian mining company. It began investing in in Australia’s Tietto Minerals (TTM) four years later, and completed its acquisition of that company in 2024, giving it a gold mining project in the West African nation of Côte d’Ivoire.

China’s third-largest gold miner

Zhaojin possessed 1,446 tons of gold mineral resources at the end of last year, ranking third in China behind Zijin Mining with 3,973 tons and Shandong Gold Mining (1787.HK; 600547.SH) with 2,635 tons. Seven major projects, including the Xiadian, Canzhuang, and Dayingezhuang gold mines, accounted for 77.72% of Zhaojin’s total gold reserves.

Notably, Zhaojin’s production costs are low. Its comprehensive gold production costs averaged 216.2 yuan per gram in the first half of the year, equivalent to about $942.7 per ounce, according to its 2025 midyear report. With the global average gold price at $3,280.35 per ounce in the second quarter, that leaves plenty of room for fat profit margins.

Zhaojin should also benefit from its equity tie-up with Zijin Mining, following the latter’s strategic purchase of a stake in the former in 2022 from debt-strapped conglomerate Fosun. As a global mining leader with extensive experience in gold, copper and zinc, Zijin, which recently spun off its own international gold assets into a separate Hong Kong-listed company, Zijin Gold International (2259.HK), can offer its operational expertise to the smaller Zhaojin. The partnership has already generated significant synergies for Zhaojin through collaboration.

Developing China’s second-largest gold mine

The Haiyu Gold Mine, China’s second largest, will be jointly developed by Zhaojin, which holds 70% of the project, and Zijin, which holds the rest. Expected to commence production soon, the mine is expected to yield 15 tons to 20 tons of gold annually. China Post Securities estimates production costs at 170 yuan per gram, equal to about $741 per ounce, which is well below Zhaojin’s current average production cost.

Despite regularly touching new records, there’s no sign yet that gold will fall anytime soon in the face of a weakening U.S. economy and turbulence created by U.S.-led trade wars. U.S. unemployment has breached the key 4% threshold, and widespread AI-driven layoffs could further drive up joblessness. Simultaneously, stubbornly high inflation – exacerbated by the trade wars – could end up backfiring. With such deteriorating employment, the Fed’s recent rate cuts could trigger 1970s-style stagflation, which has historically favored gold prices.

Goldman raises gold price forecast

Meanwhile, U.S. debt keeps growing, which looks unsustainable as the figure nears the $38 trillion level. The country’s lack of fiscal discipline is driving greater tolerance for dollar depreciation, prompting global central banks to diversify away from dollars and U.S. treasuries and move into other assets like gold. Goldman Sachs projects emerging market central banks will buy 80 tons of gold monthly this year and 70 tons in 2026, prompting it to raise its 2026 year-end gold forecast to $4,900 per ounce from a previous $4,300.

All of this means the bull market for gold could quite likely continue for some time to come. That should play well to the outlook for Zhaojin, which will also benefit from its Zijin partnership and imminent contributions from its Haiyu mine. Analysts already expect the company’s core profit to surge 182% this year and another 25% in 2026. And with a forward price-to-earnings (P/E) ratio of 23.5 times based on profit estimates for 2026, the company’s valuation remains reasonable, even after the company’s big stock rally this year.

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