Chifeng Gold chases new glitter in rare earths

The company currently gets 90% of its revenue from gold, but is expanding into copper and rare earths to tap anticipated future demand

Key Takeaways:

• Chifeng Gold’s profit surged 141% in the third quarter, boosted by record gold prices
• The gold miner is expanding into rare earths, which could emerge as a significant second growth engine

By Bai Xin Rui

Gold is increasingly filling a gap created by growing concerns undermining the U.S. dollar, sending gold prices to new highs this year. Miners of the precious metal have profited hugely from that shift, including Chifeng Jilong Gold Mining Co. Ltd. (6693.HK; 600988.SH), still basking in the glow of its Hong Kong IPO in March. The company reported stellar results for the third quarter, including profits that surged 141% year-on-year to 950 million yuan ($134 million) for the period, according to its newest quarterly report released in late October.

Now, the company is also hoping to find new gold in rare earths, which have captured recent headlines for their critical role in magnets used in many cutting-edge gadgets and devices, from smartphones to new energy cars and drones. Its existing but relatively small copper business could also benefit from an anticipated explosion in demand from countries looking to upgrade their electrical grids to handle heavy power requirements from AI applications.

Founded in 2005, Chifeng Gold got into its current business with its acquisition of mining rights to the Honghuagou and Zhuanshanzi gold mines in the Inner Mongolian city of Chifeng. It went public via a backdoor listing on the Shanghai Stock Exchange in 2012. Following its acquisition of Liaoning Wulong Gold Mining in 2013, the company accelerated its overseas expansion. Its current assets include the Sepon gold and copper mine in Laos and the Wassa gold mine in Ghana. With a gold output of 15.16 metric tons in 2024, the company ranked fifth among publicly listed Chinese gold miners.

Its prominent position as a gold supplier is benefiting the company lately, as an increasingly heavy U.S. debt load raises concerns among global central banks and investors, prompting them to diversify their risk by scaling back their U.S. Treasury holdings and replacing them with gold. Such buying has lifted the precious metal to fresh records repeatedly this year. In the third quarter alone, spot prices leaped almost 17% from $3,303.20 to $3,859.03 per ounce.

Chifeng Gold’s revenue jumped 66.4% year-on-year to 3.37 billion yuan in the third quarter, fueling the even bigger rise in its net profit. The company’s revenue totaled 8.64 billion yuan in the first nine months of the year, up 38.9% from the year-ago period. Its net profit for that period jumped 86% to 2.05 billion yuan.

Soaring gold price

Chifeng Gold’s revenue primarily comes from the gold that’s part of its name. While its volume of mined gold dipped 2.56% year-on-year in the first nine months of the year to 10,700 kilograms, the price it got for that gold leapt 44.1% to 729.58 yuan per gram. That helped to push its gold revenue to 7.78 billion yuan, accounting for 90% of its total.

Copper products, chiefly cathodes and concentrate, are Chifeng’s second major revenue source, generating 383 million yuan in the first nine months of this year, or 4.4% of overall revenue during that time.

The AI age is bringing the stability of electric grids into focus, as such applications consume huge amounts of power. Yet decades-old electricity networks in many developed markets are often weak links in that chain, posing crucial security risks. Urgently needed grid infrastructure upgrades will require massive copper demand for cabling and critical electrical components, leading some to start calling the metal “the new oil.”

Expected demand from grid upgrades has helped to lift copper futures 30% or more at their peaks this year. Crucially, the International Copper Study Group (ICSG) currently forecasts a global refined copper shortage of nearly 150,000 metric tons in 2026, creating further pricing tailwinds that could significantly benefit miners like Chifeng Gold.

Another potential gold maker lies in the company’s fledgling rare earths segment. That unit produced 448.9 metric tons in the first nine months of this year, yielding a relatively modest 77.36 million yuan in revenue, equal to less than 1% of the company’s total. Yet with selling prices averaging 172,300 yuan per ton, the unit economics are rich with promise if it can scale up that business.

Rare earths have taken on outsized importance lately due to their strategic value and China’s dominance of the market. Rare earths are used primarily as magnets critical for motors in EV powertrains and other sophisticated devices like humanoid robots, which require up to 50 motors per robot. They also feature strongly in defense technologies, which recently drove the U.S. government to invest in mining enterprise MP Materials Corp. (MP.US) after China moved to severely restrict or cut off supplies to foreign buyers.

Laotian rare earth mines

Chifeng’s move into rare earths has been gradual over the last few years. It currently holds rights to CIRE Mining’s Mengkham Rare Earth Element Project and LXML’s Sepon Rare Earth Element Project, both in Loas, each containing medium-heavy rare earths. Notably, for those mines, the company formed a joint venture with Xiamen Tungsten (600549.SH), called Chijin Xiawu. The prospectus for the company’s Hong Kong IPO in March stated that rare earths are expected to become a new growth driver for the company.

Chifeng completed its Hong Kong IPO in March. Its older Shanghai listing contains 87.6% of its shares, while the Hong Kong listing contains the remaining 12.4%. The company’s overall shareholder base remains highly fragmented. Its largest shareholder is Li Jinyang, with just 12.7%, while its Chairman, Wang Jianhua, holds 3.9%. Its top 10 shareholders collectively hold 40.8%. With no single shareholder controlling over 50%, a lack of consensus among such a diverse group could represent a major risk factor for ordinary stock investors.

Growing desire for gold as a hedge against U.S. dollar depreciation, along with strong demand for copper and rare earths, are all providing tailwinds for Chifeng Gold and its profit outlook. Analysts expect the company’s profits to grow by 86% this year and 17% next year, reaching 3.28 billion yuan and 3.83 billion yuan, respectively.

Chifeng Gold trades at a price-to-earnings (P/E) ratio of 16.7 times, based on its expected profit for this year, compared with 28 times for Zhaojin Mining (01818.HK) and 22.9 times for Shandong Gold (01787.HK). That makes Chifeng look significantly undervalued at its current price compared with its peers, leaving potential upside for its stock as a leading Chinese gold miner with additional potential in the copper and rare earths businesses.

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