Investor gold rush burnishes profits at Zhaojin Mining

The mining company’s profits more than doubled in the first half of the year, boosted by a safe-haven rally on the gold market, but risks remain for investors

Key Takeaways:

• The miner’s net profit for the six months surged 160%, but some analysts had been anticipating an even bigger jump
• A surge in impairment losses and other expenses took some of the shine off the earnings figures

By Lee Shih Ta

In these troubled times, gold has asserted its status as the world’s ultimate safe-haven asset, turning adversity into opportunity for the mining sector.

One beneficiary of the gold boom is Chinese miner Zhaojin Mining Industry Co. Ltd. (1818.HK), whose earnings have risen in tandem with demand for the precious yellow metal, propelled to record highs by geopolitical tensions, U.S. debt risks and persistent central bank buying.

In its half-year results, the miner announced that its revenue rose nearly 51% to 6.97 billion yuan ($974 million) from the same period last year, while net profit soared 160% to 1.44 billion yuan.

The earnings rise was powered by a rally on the international gold market, where the London spot price surpassed $3,500 per ounce and gold traded in Shanghai rocketed nearly 40% over the past year.

The earnings pace compared favorably with results from bigger rivals. Zijin Mining (2899.HK; 601899.SH) posted a 54% rise in first-half net profit to 23.2 billion yuan, while profit at Shandong Gold (1787.HK; 600547.SH) jumped102%. Meanwhile, China Gold International (2099.HK) returned to the black with a net profit of $116 million.

Unlike some of its more diversified peers, Zhaojin Mining specializes in gold extraction and smelting, making its profits highly sensitive to gold prices. When gold prices rise, so does its production volume. The company’s total gold output rose 8.42% in the first half of 2025 to 14,288 kilograms (about 459,000 ounces) from the same period a year earlier, with mined gold contributing 10,236 kilograms of the total, a rise of 13.8%. Revenue from gold sales and other gold-related operations reached around 6.16 billion yuan, accounting for 88% of revenue.

The figures also indicate an emphasis on cost control. The cost to the company of producing a gram of gold rose just 2.9% to 216 yuan in the first half, far less than a 25% increase in the international gold price during the same period. Gross profit margin improved from 42.7% to a multi-year high of 43.7% from the combined effect of cost restraint and higher gold prices.

Meanwhile, total assets increased to 58.27 billion yuan in the first half, while net assets grew nearly 9.5% year on year to 27.58 billion yuan. Cash and cash equivalents rose 60% to 3.25 billion yuan from the end of 2024. Total liabilities rose 8.1% to 30.68 billion yuan, but the gearing ratio fell from 43.4% at the end of last year to 41.2% as financial pressures eased.

Assets lose their shine

Although strong on paper, the results disappointed some analysts who had been expecting even better numbers. UBS noted that the second-quarter profit of 781 million yuan, while more than double the amount a year earlier, was well below its forecast of 950 million yuan.

More concerning was a 293% surge in what were described as “other expenses”, amounting to 943 million yuan. Impairment losses alone totaled 711 million yuan, eroding a significant portion of the profit and putting a question mark over the state of some of the company’s assets and projects.

As for full-year earnings, the market has been broadly expecting Zhaojin Mining to deliver a net profit of around 3.3 billion yuan in 2025. With only 44% of that figure banked in the first six months, the company must accelerate the pace in the second half to meet the mark, to the concern of some investors.

Meanwhile, the company is also investing in expanding its production capacity and exploration to bolster its financial prospects. In the first half, a Shandong Ruihai project with a daily capacity of 12,000 tonnes completed its first set of trial operations. The company is also accelerating deep mining projects at the Xiadian mine and has set up an exploration fund of more than 100 million yuan for prospecting at various sites. The company added 25 tonnes of new resources in the first half of the year, strengthening its reserve capacity.

With no let-up in global tensions, U.S. deficit concerns and central bank demand for gold, the outlook is favorable, but risks remain. A stronger U.S. dollar or waning safe-haven demand could trigger a sharp correction in gold prices. UBS advised close monitoring of potential impairment risks while also slightly raising its 2025 and 2026 profit forecasts for Zhaojin Mining and lifting the target share price from HK$23.6 to HK$25.3.

High hopes have already been priced into the company’s stock price. On the first trading day after the half-year results, Zhaojin Mining’s shares edged up 0.84% to HK$21.58. The stock is not exactly cheap, having risen more than 96% so far this year, supported by the gold rally.

The company’s price-to-earnings (P/E) ratio stands at 56.8 times, much higher than Zijin Mining’s 16.7 times and Shandong Gold’s 39.5 times. While it has reaped the rewards of a being a gold specialist in a bull market, the company is also more exposed to any reversal than its peers. Given the risks, short-term investors should be wary of chasing price peaks and could consider waiting for any dips before making a move.

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