What gives Luoyang Molybdenum the confidence to expect a profit of 30 billion yuan?

Seller institutions once again raise profit expectations for Luoyang Molybdenum.

Recently, Luoyang Molybdenum held an earnings presentation, where the new management team introduced production forecasts for copper and gold in 2026, as well as acquisition strategies.

Subsequently, multiple sell-side firms raised their profit forecasts for 2026 to over 30 billion yuan, with the highest expected net profit approaching 37 billion yuan, and the lowest exceeding 31 billion yuan.

It is worth noting that during 2024 and 2025, the company’s net profit growth rate exceeded 50%, and by 2025, the company’s profit base had risen to 20.3 billion yuan. Maintaining over 50% growth becomes significantly more challenging, so why do these institutions remain so confident in its growth?

Part of the answer may be found in the company’s annual report and earnings presentation.

“By 2026, gold production (consolidated) is expected to be between 6 and 8 tons, aiming for 8 tons. The copper production guidance is 760k to 820k tons, still with some increase over 2025,” said Luoyang Molybdenum President Peng Xuhui.

Additionally, after investing hundreds of millions in acquiring gold mines in 2025, Luoyang Molybdenum may also initiate new resource acquisitions in 2026. Coupled with the cost reduction benefits from scaling up and improved recovery rates, the company’s overall profitability indeed has some room for improvement.

Of course, these are only forecasts based on known conditions. The future trend of prices for copper, gold, and other metals remains uncertain, and sell-side profit expectations will continue to be dynamically revised.

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Consolidation of gold mines, increased copper production

When commodity prices enter an upward cycle, the overall market activity tends to accelerate rapidly, as seen in recent years with Zijin Mining, Zhongda Mining, and others entering the lithium industry.

2025 is also considered a golden year for gold, with many Chinese companies, including Luoyang Molybdenum, announcing acquisitions of overseas gold mines and assets.

In April and December of the same year, Luoyang Molybdenum spent approximately 2.98 billion yuan and 7.17 billion yuan respectively to acquire gold assets such as the Cangrejos gold mine in Ecuador and the Aurizona gold mine in Brazil.

Among them, the Brazilian gold assets include 100% equity in the Aurizona gold mine, RDM gold mine, and Bahia comprehensive mining area. The project was completed in January this year, while the Ecuador Odin Mining is still in the planning stage, with a planned commissioning in 2029.

Therefore, the aforementioned Brazilian gold mine project, consolidated into the financial statements, will be the company’s most certain incremental project. The company’s annual report guidance is to produce 6–8 tons of gold in 2026.

“(The company) will tap potential and improve efficiency to achieve the 8-ton production target,” Peng Xuhui said at the recent earnings presentation.

Based on the latest London gold spot price, 8 tons of gold would be worth about 8 billion yuan, most of which would translate into revenue growth for Luoyang Molybdenum.

Meanwhile, peer companies that have disclosed annual reports generally have gross profit margins on mineral gold above 50%, with some reaching 80%. The Brazilian gold mines are also expected to bring the company tens of billions of yuan in profit increments.

The copper sector, which contributes most of Luoyang Molybdenum’s profits, has no clear new capacity additions planned for 2026. The KFM Phase II project, one of the “Twin Stars,” is not expected to start production until 2027. However, the company still has potential for further capacity utilization on existing assets.

Data from the annual report shows that in 2025, Luoyang Molybdenum produced 741k tons of copper, ranking among the top ten globally.

Regarding its main mines, Vice President Chen Xingyao said, “Previously, TFM’s daily processing capacity was 63k tons. Now, after potential mining improvements, it has increased to 80k tons.”

In 2026, Luoyang Molybdenum plans to further increase copper production to between 760k and 820k tons. Although the growth rate is slower than in previous years, there is still about a 50k-ton increase potential.

“The company started with small metals and has the inherent gene for small metals. Last year was also a beneficiary of small metals, which is one of the long-term development foundations,” said Chairman Liu Jianfeng. He added that in 2025, molybdenum, tungsten, and other businesses contributed solid financial returns.

He pointed out that beyond the “copper-gold strategy,” the company will extend its foundational technology into small metals, fully exploring the value of associated resources, and may seek independent small metal mine projects when appropriate.

These potential external acquisitions could also bring new performance growth.

Furthermore, based on Luoyang Molybdenum’s current profit structure, molybdenum, tungsten, and cobalt products generated gross profits of 8 billion yuan in 2025, making them the second-largest profit sources after copper.

All these small metals prices are significantly higher than in 2025, especially tungsten concentrate, which has seen the most notable increase.

Antaike data shows that before 2025, black tungsten concentrate (65%, domestic) fluctuated around 150k yuan/ton for a long time. It broke through previous highs in the second half of 2025, with sharp price increases in Q4 2025 and Q1 2026.

Since mid-March this year, prices have remained above 1 million yuan/ton, so Luoyang Molybdenum’s profitability in the small metals sector is also expected to improve significantly.

Supported by copper and gold prices still at historic highs compared to the same period in 2025, the company’s revenue in 2026 is likely to benefit from both volume and price increases.

“622 Model” and platform-building

While promoting external resource acquisitions and expanding existing projects to grow revenue, Luoyang Molybdenum’s new management team is also seeking breakthroughs in cost control.

At the earnings presentation, Chen Xingyao cited the cost reductions achieved through scale effects after increasing production in the Democratic Republic of Congo, as well as the benefits of higher recovery rates.

It was introduced that TFM’s copper smelting recovery rate, equipment utilization, and ore processing volume in Q4 2025 exceeded the calendar schedule. KFM built a mineral database and blending model, with grinding efficiency improving by over 30%. The recovery rate of two plants in Brazil’s Niobium segment increased by about 2 percentage points year-over-year, and the recovery rate at Sanhedao molybdenum also hit a record high.

Data from the annual report also shows that in 2025, Luoyang Molybdenum’s operating costs decreased by 11.56%, significantly more than the 2.98% decline in revenue. Meanwhile, the main profit-generating mining and processing segments saw operating cost increases far below revenue growth.

“The essence of mining competition is cost competition, a systematic capability competition based on resource endowment,” the company’s board stated in the annual report.

In the company’s view, three factors determine its cost levels:

First, the natural resource endowment and industrial extraction conditions, which are fundamental, innate, and unchangeable prerequisites. Second, how to build an efficient, low-cost management team. Lastly, as a relatively closed industry, mining has the potential to leverage technology to reduce costs and improve efficiency.

In the 2025 annual report, Luoyang Molybdenum also publicly explained its “622 Model” for the first time.

That is, 60% of the cost advantage is determined by resource endowment, with strategic acquisitions defining the company’s core and DNA; 20% depends on project planning and construction to optimize full lifecycle costs; and the remaining 20% is determined by daily operational management, leveraging China’s comparative advantages.

Over the past decade, Luoyang Molybdenum has captured multiple world-class assets, building a resource moat accounting for 60% of the cost model.

However, to turn its resource advantages into capacity and cost advantages, and achieve systemic competitiveness, the company needs to focus on the other 20%—“planning and construction” and “daily operations.”

For example, standardization, process automation, and intelligentization should be integrated into all project phases—exploration, mining, beneficiation, smelting, environmental management, and trading.

This is not empty talk; for instance, Zijin Mining’s Tibet Julong copper mine heavily relies on early project planning and later operational capabilities, which not all mining companies can achieve.

From this perspective, Luoyang Molybdenum is also seeking to build a standardized, output-ready platform management system similar to Zijin’s “Five Rings in One” through platformization.

By 2026, leveraging the “622 Model” to expand resource scale and consolidating global “platform capabilities,” Luoyang Molybdenum has elevated this to a position alongside its “copper-gold dual strategy.”

(Author: Dong Peng, Editor: Luo Yifan)