China Copper Industry - jrj.com.cnpg.jrj.com.cn/acc/Res/HK_RES/STOCK/2015/2/24/991192a2-9794-49… · China Resources Metals & Mining Industry Copper Industry Date 24 February 2015

Deutsche Bank Markets Research

Asia China Resources Metals & Mining

Industry

Copper Industry

Date 24 February 2015

Industry Update

Copper sector review - another year of surplus Another year of surplus – ample capacity with decelerating demand growth

________________________________________________________________________________________________________________

Deutsche Bank AG/Hong Kong

Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 148/04/2014.

James Kan

Research Analyst (+852) 2203 6146 [email protected]

Sharon Ding

Research Associate (+86) 21 2080 1666 [email protected]

Key Changes

Company Target Price Rating

0358.HK 13.70 to 13.00(HKD)

-

Source: Deutsche Bank

Companies Featured

Jiangxi Copper (0358.HK),HKD12.94 Hold 2013A 2014E 2015EP/E (x) 14.0 13.0 13.6EV/EBITDA (x) 5.9 5.1 5.0Price/book (x) 0.9 0.8 0.8

Zijin Mining (2899.HK),HKD2.24 Hold 2013A 2014E 2015EP/E (x) 19.9 16.8 17.6EV/EBITDA (x) 7.1 8.9 7.8Price/book (x) 1.0 1.4 1.4Source: Deutsche Bank

We expect another year of refined copper surplus in China given strong capacity addition and moderate consumption growth overall. We forecast China’s refined copper output to grow by 10%/8% YoY in 2015/2016. However, demand growth is expected to be only 5.7%/5.6% YoY during the same period. Despite potential improvement of smelting profits resulting from the utilization rate increase, we expect the weak copper price to continue to drag down profits for Jiangxi Copper and Zijin. We believe Jiangxi Copper (14x 2015E PE) and Zijin (18x 2015E PE) are currently fairly valued and maintain Hold for both.

Deceleration of growth in major downstream sectors We expect Chinese copper consumption growth to continue to decelerate, reaching 5.7%/5.6% YoY in 2015/2016 from 6.8%/6.3% YoY in 2013/2014. We attribute the demand weakness mainly to the moderated growth rate in power investments (China State Grid investment growth of c.9% YoY in 2015 vs. c.14% YoY in 2014) and the focus of these investments is on UHV projects, which are less copper-intensive. Other main factors for demand weakness are a slowdown of the property sector and general Chinese economy. Our monthly trackers (shown in Figure 7 to Figure 12) demonstrate that downstream sectors are either having sluggish growth or the growth rate is starting to slow.

However, excessive capacity addition continues While Chinese demand (accounting for more than 45% of global demand) growth will slow, there is still excessive capacity addition for copper mining and smelting/refining in China. Our global commodity team sees 5.1%/6.8% of copper mine production YoY growth in 2015/2016. Our local checks with SMM and Antaike on Chinese smelting/refining capacity also show 20%/9% YoY growth in 2015. As such, we believe there will be surplus of refined copper in China. We forecast 10%/8% of refined copper output growth in 2015/2016.

Smelters’ profitability could continue to improve and benefit Jiangxi Copper 2015 TCRCs were settled at US$107/t & 10.7c/lb, up c.16% YoY from US$92/t & 9.2c/lb in 2014. With abundant concentrates supply globally (DBe 5.1% YoY/6.8% YoY in 2015/16E) resulting in higher smelter utilization rates, we expect TCRCs to reach US$115/t & 11.5c/lb in 2016. With Jiangxi Copper’s smelting breakeven point at US$70/t & 7.0c/lb, we expect the company to make a gross profit of RMB0.6bn/1.1bn/1.3bn from its smelting business (incl. c.0.6mt smelting and c.1.2mt refining capacity) in 2014/15/16E. However, we are aware that TCRC is at a decade high and can trigger more supply response.

Maintaining Hold for Jiangxi Copper and Zijin Despite the improving profitability of Jiangxi Copper’s and Zijin’s smelting businesses, we expect Jiangxi Copper’s bottom line to decline by 4.4%/4.5% YoY in 2015/2016, and Zijin’s bottom line to decline by 4.3%/3.7% YoY in 2015/2016, respectively, mainly dragged by weak copper/gold prices. JXC’s target price (HKD13.0, 5% cut) is based on its two-year average forward PE multiple of 13.6x and 2015DBe EPS. Our target price for Zijin (HKD2.1, unchanged) is based on a life-of-mine DCF method with an 8.3% WACC. With JXC and Zijin currently trading at 2015E PEs of 14x and 18x, valuations are not attractive. With ~0% and ~7% downside potential, we rate both stocks as Hold. Major risk: stronger-/weaker-than-expected copper/gold prices.

24 February 2015

Metals & Mining

Copper Industry

Page 2 Deutsche Bank AG/Hong Kong

Another year of surplus

Surplus continues in 2015

As shown in Figure 1, in 2015 we expect another year of refined copper surplus in China on excessive capacity additions and moderating growth in the downstream sectors.

Capacity: Based on our channel checks, we expect Chinese smelting and refining capacity to grow by 1,080kt and 850kt in 2015 (Figure 2 and Figure 3), representing ~20% YoY and ~9% YoY growth. Despite the tight scrap supply, we still envision 10% YoY refined output growth in 2015 on the back of robust Chinese smelting capacity growth (Figure 1).

Demand: We expect Chinese copper consumption growth to continue to decelerate in the coming years, reaching 5.7% YoY and 5.6% YoY in 2015 and 2016, respectively. We attribute the general weakness mainly to the moderated growth rate in power investments and the focus on UHV projects, which are less copper-intensive, as well as concerns about the property sector and the broader slowdown in China’s economy. We lay out a detailed breakdown in Figure 4.

Figure 1: China refined copper demand and supply 2009 2010 2011 2012 2013 2014E 2015E 2016E

Refinery capacity kt 5,290 5,980 7,030 7,880 8,960 9,860 10,710 10,910

Net addition kt 330 690 1,050 850 1,080 900 850 200

Capacity growth YoY % 6.7% 13.0% 17.6% 12.1% 13.7% 10.0% 8.6% 1.9%

Refined copper production kt 4,123 4,578 5,185 5,617 6,179 6,849 7,534 8,137

YoY growth % 9.1% 11.0% 13.3% 8.3% 10.0% 10.8% 10.0% 8.0%

Capacity utilization % 80.4% 81.2% 79.7% 75.3% 73.4% 72.8% 73.3% 75.3%

Net imports kt 3,095 2,872 2,676 3,129 2,910 3,324 2,700 2,200

Refined copper consumption kt 6,100 6,800 7,330 7,680 8,200 8,720 9,219 9,731

YoY growth % 19.6% 11.5% 7.8% 4.8% 6.8% 6.3% 5.7% 5.6%

Supply demand deficit kt -1,977 -2,222 -2,145 -2,063 -2,021 -1,871 -1,685 -1,595

Balance* kt 1,119 650 531 1,066 889 1,453 1,015 605

Average LME cash price USD/t 5,178 7,498 8,829 7,953 7,354 6,838 6,625 6,388

YoY growth % -25.6% 44.8% 17.8% -9.9% -7.5% -7.0% -3.1% -3.6%Source: Deutsche Bank estimates, Wood Mackenzie, Antaike, Bloomberg Finance LP,*A large portion of surplus in 2009 and 2012 was absorbed by SRB buying and bonded warehouse building up. We estimate~ 500kt Chinese SRB buying in 2014.

Based on the projects we have identified (Figure 2 and Figure 3), there is another 1,080kt smelting capacity and 850kt refining capacity to come on line this year, representing ~20% YoY and ~9% YoY growth in 2015, respectively. The smelting capacity growth has been quite strong in recent years on higher contract TCRCs, which recorded 25% YoY, 31% YoY and 16% YoY rate hikes in 2013, 2014 and 2015, respectively. In addition, the higher TCRCs are encouraging higher utilization rates at existing smelters, in our view.

24 February 2015

Metals & Mining

Copper Industry

Deutsche Bank AG/Hong Kong Page 3

Figure 2: New copper smelting capacity in 2015 Region Province Copper Refinery Launch

timeNew Capacity

(kt)

Northwest Gansu Baiyin Nonferrous Metals 3Q 200

East China Shandong Fangyuan Nonferrous 1Q 300

Mid China Hunan China Minmetals Hunan Nonferrous 2Q 100

Northwest Qinghai Western Mining Qinghai Copper 3Q 100

South China Guangxi Guangxi Nanguo Copper 3Q 150

Mid China Henan China National Gold Group 2Q 200

Northwest Inner Mongolia Huading Copper 4Q 30

Total 1,080 Source: Deutsche Bank, Company data, SMM, Antaike

Figure 3: New copper refinery capacity in 2015 Region Province Copper Refinery Launch

timeNew Capacity

(kt)

Northwest Gansu Baiyin Nonferrous Metals 3Q 200

Northwest Qinghai Western Mining Qinghai Copper 3Q 100

East China Jiangsu Lianhe Copper 2Q 100

Mid China Hunan China Minmetals Hunan Nonferrous 2Q 100

South China Guangxi Guangxi Nanguo Copper 3Q 150

Mid China Henan China National Gold Group 2Q 200

Total 850Source: Deutsche Bank, Company data, SMM, Antaike

In contrast to the strong capacity growth, we expect refined copper demand growth to slow to 5.7% YoY and 5.6% YoY in 2015 and 2016, respectively (shown in Figure 4).

Figure 4: China refined copper demand breakdown 2009 2010 2011 2012 2013 2014E 2015E 2016E

Power infrastructure & equipment

kt 2,940 3,140 3,390 3,630 3,950 4,250 4,565 4,893

YoY growth % 6.8% 8.0% 7.1% 8.8% 7.6% 7.4% 7.2%

Home appliances kt 800 990 1,140 1,160 1,240 1,360 1,442 1,528

YoY growth % 23.8% 15.2% 3.0% 6.9% 9.7% 6.0% 6.0%

Transportation kt 620 750 770 790 825 860 896 932

YoY growth % 21.0% 2.7% 3.0% 4.4% 4.2% 4.2% 4.0%

Building construction kt 590 640 680 700 725 740 755 770

YoY growth % 8.5% 6.3% 2.9% 3.6% 2.1% 2.0% 2.0%

Electronics kt 450 510 545 570 600 620 640 660

YoY growth % 13.3% 6.9% 5.0% 5.3% 3.3% 3.3% 3.0%

Others kt 700 770 805 830 860 890 921 949

YoY growth % 10.0% 4.5% 3.1% 3.6% 3.5% 3.5% 3.0%

Total kt 6,100 6,800 7,330 7,680 8,200 8,720 9,219 9,731

YoY growth % 19.6% 11.5% 7.8% 4.8% 6.8% 6.3% 5.7% 5.6%Source: Deutsche Bank estimates, Antaike

As illustrated in Figure 5, nearly 50% of refined copper demand comes from the power sector in China, of which power cables account for the majority, with the rest coming from grid equipment.

24 February 2015

Metals & Mining

Copper Industry


Figure 5: Chinese refined copper consumption breakdown, 2014

Power49%

Home appliance

16%

Transportation

10%

Construction8%

Electronics7%

Others 10%

Source: Deutsche Bank estimates, Antaike

Power – Earlier this year, Chinese State Power Grid announced a power grid budget of RMB420bn in 2015, representing a 9% YoY increase over actual grid investments of RMB385.5bn in 2014 (Figure 6). Despite this record-high investment amount, the growth rate of power investments is set to decelerate in the coming years on the slower pace of China’s GDP growth.

Figure 6: China State Power Grid’s power grid investments (actual vs. budget) RMBbn except % 2009 2010 2011 2012 2013 2014 2015E

Actual 305.9 264.4 301.9 305.4 337.9 385.5

Target 250 227.4 292.5 309.7 318.2 381.5 420.2

YoY

Actual -14% 14% 1% 11% 14% 9%*

Target -9% 29% 6% 3% 20% 10%Source: Deutsche Bank, Company data, * 2015 target divided by 2014 actual

Home appliances – Euromonitor, a third-party intelligence research company, forecasts that air conditioner volumes will grow by only single digits in 2015 and 2016, compared to low teens in 2014.

Transportation – DB’s auto team expects overall auto sales to grow by about 8-9% YoY in 2015 and 2016, compared to 7% YoY in 2014. On the other hand, railway spending growth is expected to decelerate to 4% YoY and 0% YoY in 2015 and 2016.

Overall, we expect more moderate copper consumption growth in 2015 than in 2014.

In addition, we lay out the monthly (3mma) YoY growth of major end-use demand sectors to track the recent momentum (Figure 7 to Figure 12), which shows a general downtrend in almost every sector.

24 February 2015

Metals & Mining

Copper Industry


Figure 7: Power equipment monthly output YoY (3mma) Figure 8: Power FAI monthly YoY (3mma)

-40%

-20%

0%

20%

40%

60%

80%

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Power Generating Equipment Voltage TransformerPower Cable

YoY

-40%

-20%

0%

20%

40%

60%

0%

20%

40%

60%

80%

100%

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

Mar

-14

Jun-

14

Sep

-14

Dec

-14

Electrical Machinery & Equipment FAIPower grid investment

YoY YoY

Source: Deutsche Bank, CEIC Source: Deutsche Bank, CEIC

Figure 9: Home appliances monthly output YoY (3mma)

Figure 10: Railway FAI and auto monthly output YoY

(3mma)

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Jun-

04D

ec-0

4Ju

n-05

Dec

-05

Jun-

06D

ec-0

6Ju

n-07

Dec

-07

Jun-

08D

ec-0

8Ju

n-09

Dec

-09

Jun-

10D

ec-1

0Ju

n-11

Dec

-11

Jun-

12D

ec-1

2Ju

n-13

Dec

-13

Jun-

14D

ec-1

4

Air conditioner Household RefrigeratorYoY

-60%

-40%

-20%

0%

20%

40%

60%

80%

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

Mar

-14

Jun-

14

Sep

-14

Dec

-14

Railway FAI Auto outputYoY


Figure 11: Property monthly sales and starts YoY (3mma)

Figure 12: Communication cable output and electronics

FAI monthly YoY (3mma)

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

Dec

-06

Jun-

07

Dec

-07

Jun-

08

Dec

-08

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

GFA sold GFA started YoY

0%

20%

40%

60%

80%

-40%

-20%

0%

20%

40%

Dec

-09

Mar

-10

Jun-

10S

ep-1

0D

ec-1

0M

ar-1

1Ju

n-11

Sep

-11

Dec

-11

Mar

-12

Jun-

12S

ep-1

2D

ec-1

2M

ar-1

3Ju

n-13

Sep

-13

Dec

-13

Mar

-14

Jun-

14S

ep-1

4D

ec-1

4

Cable for Communication & Net Electronics FAI (RHS)YoY YoY


24 February 2015

Metals & Mining

Copper Industry


Smelters’ profitability to improve on TCRC hike (16% YoY in 2015)

Negotiations between Freeport McMoRan and major Chinese and Japanese smelters regarding 2015 TCRCs were settled at US$107/t & 10.7c/lb in the concentrate market, up ~16% YoY from US$92/t & 9.2c/lb in 2014 (Figure 13). Freeport’s settlements have been adopted by other buyers and sellers as a benchmark price in recent years and most China domestic smelters have signed their contract prices based on it, according to our channel checks.

Figure 13: Copper combined TC/RC

0.0

10.0

20.0

30.0

40.0

2007 2008 2009 2010 2011 2012 2013 2014 2015

Monthly spot price Annual benchmark LT contractc/lb

Source: Deutsche Bank, Wood Mackenzie, Note: assume 25% Cu in concentrate and monthly spot price represents mine to trader representative average

As mentioned above, Chinese smelting capacity is expected to register strong growth (~18%YoY) again in 2015. Moreover, DB’s global commodity team estimates strong mined supply growth of 5.1% YoY and 6.8% YoY in 2015 and 2016, respectively. With concentrates likely to be in plentiful supply globally and higher TCRCs encouraging higher smelter utilization rates, we expect another year of growth in China copper concentrate imports.

Figure 14: China copper concentrate and scrap imports Figure 15: China copper scrap imports and spread

200

250

300

350

400

450

500

200

400

600

800

1,000

1,200

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Copper ore & conc imports (3mma)

copper scraps imports (3mma, RHS)kt kt

100

150

200

250

300

350

400

450

500

550

600

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

Imported Copper Scrap1 month average spread (refined copper - scrap) RHS

kt

Narrowing spread led domestic scrapimports decline

RMB/t

Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LP, WIND

24 February 2015

Metals & Mining

Copper Industry


On the other hand, China copper scrap import volumes have decreased for nearly two years owing to the declining refined copper/copper scrap spread (Figure 15). According to Antaike, copper scrap contributed more than one-third of total China domestic refined copper output in 2012, compared to ~30% and ~26% in 2013 and 2014, respectively. In 2015, we envision an even lower percentage of copper scrap usage given the downward pressure on the copper price.

Figure 16: Copper price and TC/RCs assumptions 2013 2014 2015E 2016E

LME cash price* USD/t 7,354 6,866 6,625 6,388

TC _LT contract $/t 70 92 107 115

RC _LT contract c/lb 7.0 8.5 10.7 11.5Source: Deutsche Bank estimates, *Deutsche Bank Global Commodity

Jiangxi Copper (0358.HK, Hold)

Jiangxi Copper engages in copper mining, smelting, processing and trading, as well as by-product businesses (gold, silver, sulphuric acid, rare metals, etc). Copper-related revenue and gross profit account for almost 90% of its total revenue and ~70% of its total gross profit.

Figure 17 illustrates the major components of Jiangxi Copper’s copper-related business.

Figure 17: Major components of JXC’s copper-related business

Copper

Self-mined conc.

Smelting and

refining

Copper processing products

Trading business

Most profitable segment - Volume 210kt- GP per tonne at ~RMB15k in 2014

Profitability to improve on TCRCs hike - TCRC at $107/t & 10.7c/lb in 2015 (16%YoY); - JXC GP breakeven point at $70/t & 7.0c/lb;- smelting capacity ~600kt, refining capacity ~1,200kt;- GP at RMB0/0.6bn/1.3bn in 2013/14/15

Segment gross profit at about RMB50-100m.

Almost breakeven at GP level

Source: Deutsche Bank estimates, Company data

Mined copper - GM to drop to ~35%/30%/24% in 2014/15/16E from 42% in 2013.

Based on our calculations, the total unit cost (incl. mined concentrate cost and smelting cost) of Jiangxi Copper’s mined copper should be about RMB28k-30k in 2014-2016E. With limited room for further cost reduction and weak fundamentals in these two years, we forecast the company’s mined copper gross margin will drop to 34%/30%/24% in 2014/15/16E, respectively.

24 February 2015

Metals & Mining

Copper Industry


Figure 18: JXC mined copper gross margin

56%

47%42%

35%30%

24%

10%

20%

30%

40%

50%

60%

2011E 2012E 2013E 2014E 2015E 2016E

Source: Deutsche Bank estimates

Smelting and refining – profit improvement, but hard to make up for the earnings drop in mined copper.

Jiangxi Copper currently has c.600kt smelting capacity and 1,200kt refining capacity (incl. 1,100kt in Guixi and 100kt in Qingyuan). The company is able to charge TCRCs on the concentrates and only refining charges on the blister, anode and scrap.

According to the company, its smelting business could reach breakeven at US$70/t & 7.0c/lb TCRCs. With 2014 and 2015 TCRCs set at US$92/t & 9.2c/lb and US$107/t & 10.7c/lb and estimated 2016 TCRCs at US$115/t & 11.5c/lb, we expect its smelting business to make RMB0.6bn/1.1bn/1.3bn gross profit in 2014/15/16E, respectively. As a result, we expect stable gross profit in 2015 compared to that in 2014 from copper-related businesses. Still, this is not enough to offset the margin decline in the mined copper segment in 2016.

Meanwhile, we should also be aware that current TCRC is at a decade high and likely to trigger more smelting capacity addition. If that happens, it might create more downside risks to Jiangxi Copper’s profits.

Copper processing – minor profit contribution at about RMB50-100m.

Copper trading – almost breakeven at the gross profit level and even accounts for more than 50% of its total top line.

Coupled with price weakness in other by-products such as gold, silver, sulphuric acid and rare metals, we revise down our bottom line by 13.9%/10.9%/7.5% in 2014/15/16E, respectively (Figure 19).

Figure 19: JXC – Deutsche Bank estimate revisions 2014E 2015E 2016E

RMB m New Old Change% New Old Change% New Old Change%

Revenue 181,893 181,765 0.1% 198,347 196,782 0.8% 215,625 210,718 2.3%

EBIT 4,155 4,754 -12.6% 3,829 4,383 -12.7% 3,558 4,128 -13.8%

NP 2,778 3,225 -13.9% 2,656 2,981 -10.9% 2,537 2,743 -7.5%Source: Deutsche Bank estimates

Our estimates stand at 98%/104%/87% of Bloomberg Finance LP market consensus in 2014/15/16E, respectively (Figure 20).

24 February 2015

Metals & Mining

Copper Industry


Figure 20: JXC – Deutsche Bank estimates vs. consensus RMB m 2014E 2015E 2016E

DBe Cons. DBe/Cons. DBe Cons. DBe/Cons. DBe Cons. DBe/Cons.

Revenue 181,893 178,518 102% 198,347 179,137 111% 215,625 194,578 111%

EBIT 4,155 4,286 97% 3,829 3,984 96% 3,558 4,317 82%

NP 2,778 2,836 98% 2,656 2,558 104% 2,537 2,918 87%Source: Deutsche Bank estimates, Bloomberg Finance LP

Jiangxi Copper – Hold, HKD13.0 TP

Our target price of HKD13.0 for Jiangxi Copper is based on its two-year average forward PE of 13.6x, applied to FY15E EPS. Currently, Jiangxi Copper is trading at 14x FY15E PE and 0.8x FY15E PB, respectively. With its current price equivalent to our TP, we maintain our Hold rating for Jiangxi Copper.

Figure 21: JXC’s short-term forward PE chart Figure 22: JXC’s long-term forward PE chart

10.0

11.0

12.0

13.0

14.0

15.0

16.0

17.0

18.0

Feb-

13

Apr

-13

Jun-

13

Aug

-13

Oct

-13

Dec

-13

Feb-

14

Apr

-14

Jun-

14

Aug

-14

Oct

-14

Dec

-14

Feb-

15

12M forward PE (LHS) Average = 13.8

+1 STD = 14.7 -1 STD = 12.9

-

5.0

10.0

15.0

20.0

25.0

30.0 Fe

b-04

Aug

-04

Feb-

05

Aug

-05

Feb-

06

Aug

-06

Feb-

07

Aug

-07

Feb-

08

Aug

-08

Feb-

09

Aug

-09

Feb-

10

Aug

-10

Feb-

11

Aug

-11

Feb-

12

Aug

-12

Feb-

13

Aug

-13

Feb-

14

Aug

-14

Feb-

15

12M forward PE (LHS) Average=10.5x

+1 STD=15.4x -1 STD=5.5x

Source: Deutsche Bank, Company data Source: Deutsche Bank, Company data

Risks A significant increase in copper prices would affect the company's bottom line. As Jiangxi Copper is a net smelter, weaker/stronger concentrate supply would affect the utilization of the company's smelting operations. An increase/decrease in mine concentrate production would have a positive/negative impact on the company's profits.

Zijin Mining (2899.HK, Hold)

We have tweaked Zijin’s bottom line by -7%/-1%/3% in 2014/15/16E, respectively, due to the mixed impacts of lower realized gold prices in 2014, higher unit cost pressure and stronger volume in the coming years (shown in Figure 23).

As shown in Figure 24, we revise up our gold unit cost assumption by 1%/5%/6% in 2014/15/16E, respectively. Zijin`s preliminary result indicated that its FY14 unit cost of mined-gold is likely to be higher than we expected. We believe there is limited room to further cut its mined-gold costs in the coming years given that: 1) Zijinshan Gold Mine is already in a very late stage, with declining ore grades and rising maintenance expenses pushing up unit costs; and 2) the major cost-cutting contributor, Australia Norton Gold Mine, is stepping into a relatively mature stage after three years of mining operation.

24 February 2015

Metals & Mining

Copper Industry


These factors will likely easily offset management’s efforts in cost cutting. We thus believe its gold unit cost will increase slightly in the coming years.

However, we increase our mined-gold volume forecasts by 2%/3%/3% and mined copper volume forecasts by 1%/7%/7% in 2014/15/16E, respectively. Management is quite confident of achieving its 34 tonne gold (7% YoY growth) and 140 kt (12% YoY growth) copper production targets in 2014, even though the Altynken gold project has been delayed to mid-2015 and there was no new capacity addition for copper in 2014 and 2015. The company’s higher-than-expected outputs both in mined-gold and mined-copper are mainly due to its mining utilization improvement.

According to the company`s 2015 guidance, Zijin has set 36t mined-gold and 150kt mined-copper production targets, which are c.6% YoY and c.7% YoY above the targets for FY14. Moreover, two gold mine technical upgrade projects are likely to expand Zijin’s mined gold capacity by 8.5 tonnes in 2015. We thus revise up our 2015 production volume assumptions and believe the utilization rate is likely to be sustained at a high level in these two years.

Figure 23: Zijin – Deutsche Bank estimate revisions 2014E 2015E 2016E

RMB m New Old Change% New Old Change% New Old Change%

Revenue 58,752 53,996 9% 55,857 52,056 7% 55,606 50,273 11%

EBIT 3,936 4,645 -15% 4,316 4,388 -2% 4,250 4,183 2%

NP 2,346 2,525 -7% 2,245 2,275 -1% 2,162 2,101 3% Source: Deutsche Bank estimates

Figure 24: Zijin – Key changes in assumptions 2010 2011 2012 2013 2014E 2015E 2016E

ASP

Mined gold - New RMB/g 255 317 327 266 237 222 211

- Old RMB/g 255 317 327 266 239 222 211

Change % -1% 0% 0%

Mined copper - New RMB/t 43,622 49,466 42,003 39,422 35,629 34,604 33,059

- Old RMB/t 43,622 49,466 42,003 39,422 35,629 34,604 33,059

Change % 0% 0% 0%

Unit cost

Mined gold - New RMB/g 74 86 121 152 148 149 151

- Old RMB/g 74 86 121 152 146 142 142

Change % 1% 5% 6%

Mined copper - New RMB/t 12,527 13,318 14,511 17,908 17,079 16,737 16,737

- Old RMB/t 12,527 13,318 14,511 17,908 17,079 16,737 16,737

Change % 0% 0% 0%

Volume

Mined gold - New kg 29,430 28,698 33,160 32,050 33,499 35,999 40,382

- Old kg 29,430 28,698 33,160 32,050 32,708 35,208 39,091

Change % 2% 2% 3%

Mined copper - New t 89,802 86,897 106,561 125,571 134,257 149,980 154,980

- Old t 89,802 86,897 106,561 125,571 132,583 139,916 144,916

Change % 1% 7% 7%Source: Deutsche Bank estimates, company data

24 February 2015

Metals & Mining

Copper Industry


As shown in Figure 25, our 2014E/15E/16E estimates for Zijin’s bottom line stand at 95%/93%/75% of Bloomberg Finance LP market consensus.

Figure 25: Zijin – Deutsche Bank estimates vs. consensus RMB m 2014E 2015E 2016E

DB estimates Consensus DBe/Cons. DB estimates Consensus DBe/Cons DB estimates Consensus DBe/Cons

Revenue 58,752 49,398 119% 55,857 50,033 112% 55,606 52,568 106%

EBIT 3,936 4,714 83% 4,316 4,949 87% 4,250 4,979 85%

NP 2,346 2,473 95% 2,245 2,421 93% 2,162 2,896 75% Source: Deutsche Bank, Bloomberg Finance LP

Zijin Mining – Hold, HKD2.1 TP

We use a life-of-mine DCF to derive Zijin’s target price. We adopt 8.3% as the cost of equity for Zijin, reflecting an updated risk-free rate of 3.9%, a market risk premium of 5.6% and a beta of 1.25.

We keep our target price for Zijin of HKD2.1, which implies 16x FY14E PE and 17x FY15E PE. The target price also translates into c.1.3x FY14E PB and c.1.3x FY15E PB with an 8.4% ROE. Currently, Zijin is trading at 18x 2014E PE and 1.4x 2014E PB, which implies about 7% downside potential. We maintain our Hold rating.

Figure 26: Forward P/B vs. ROAE Figure 27: Forward P/E band

0%

10%

20%

30%

40%

50%

60%

70%

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Dec

-03

May

-04

Oct

-04

Mar

-05

Jul-0

5D

ec-0

5M

ay-0

6O

ct-0

6M

ar-0

7Ju

l-07

Dec

-07

May

-08

Oct

-08

Feb-

09Ju

l-09

Dec

-09

May

-10

Sep

-10

Feb-

11Ju

l-11

Dec

-11

Apr

-12

Sep

-12

Feb-

13Ju

l-13

Dec

-13

Apr

-14

Sep

-14

Feb-

15

12M forward PB (LHS) Average=4.2x +1 STD=7.1x-1 STD=1.3x ROE %(RHS)

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Jan-

04M

ay-0

4O

ct-0

4M

ar-0

5Au

g-05

Dec

-05

May

-06

Oct

-06

Mar

-07

Aug-

07D

ec-0

7M

ay-0

8O

ct-0

8M

ar-0

9Ju

l-09

Dec

-09

May

-10

Oct

-10

Feb-

11Ju

l-11

Dec

-11

May

-12

Sep-

12Fe

b-13

Jul-1

3D

ec-1

3M

ay-1

4Se

p-14

Feb-

15

Stock Price Max=63.4x Min=5.9x Average=18.0x +1 STD=27.0x -1 STD=9.0x

Source: Deutsche Bank, Company data, Bloomberg Finance LP Source: Deutsche Bank, Company data, Bloomberg Finance LP

Risks Given that over 60% of Zijin’s revenue exposure is to gold and 20-30% to copper, higher-than-expected gold and copper prices are the main upside risks to our outlook. Other risks include lower-than-expected raw material and other operating costs. Meanwhile, downside risks include lower-than-expected mined copper/gold production volumes and further expansion development issues.

24 February 2015

Metals & Mining

Copper Industry


Model updated:24 February 2015

Running the numbers

Asia

China

Metals & Mining

Jiangxi Copper Reuters: 0358.HK Bloomberg: 358 HK

Hold Price (24 Feb 15) HKD 12.94

Target Price HKD 13.00

52 Week range HKD 11.84 - 15.18

Market Cap (m) HKDm 44,808

USDm 5,777

Company Profile

Jiangxi Copper is the largest integrated copper company in China. The company's main scope of operations includes mining, milling, smelting, and processing of non-ferrous metal and rare metals. Jiangxi Copper has a large reserve/resource base, which accounts for around one-third of China's copper reserves/resources. The company owns six mines, one smelter, and six copper product-processing plants.

Price Performance

10121416182022

Feb 13May 13Aug 13Nov 13Feb 14May 14Aug 14Nov 14

Jiangxi CopperHANG SENG INDEX (Rebased)

Margin Trends

23

5689

11 12 13 14E 15E 16E

EBITDA Margin EBIT Margin

Growth & Profitability

0

5

10

15

20

0

10

20

30

40

11 12 13 14E 15E 16E

Sales growth (LHS) ROE (RHS)

Solvency

024681012

-5

0

5

10

15

11 12 13 14E 15E 16E

Net debt/equity (LHS) Net interest cover (RHS)

James Kan +852 2203 6146 [email protected]

Fiscal year end 31-Dec 2011 2012 2013 2014E 2015E 2016E

Financial Summary

DB EPS (CNY) 1.88 1.26 0.90 0.80 0.77 0.73Reported EPS (CNY) 1.90 1.49 1.03 0.80 0.77 0.73DPS (CNY) 0.40 0.50 0.50 0.32 0.31 0.29BVPS (CNY) 11.4 12.4 12.9 12.5 12.9 13.2

Weighted average shares (m) 3,463 3,463 3,463 3,463 3,463 3,463Average market cap (CNYm) 64,845 52,687 43,624 36,131 36,131 36,131Enterprise value (CNYm) 59,994 47,062 37,734 29,129 27,142 26,056

Valuation MetricsP/E (DB) (x) 10.0 12.1 14.0 13.0 13.6 14.2P/E (Reported) (x) 9.8 10.2 12.3 13.0 13.6 14.2P/BV (x) 1.23 1.34 0.86 0.83 0.81 0.79

FCF Yield (%) 10.7 5.6 9.3 13.8 9.6 6.8Dividend Yield (%) 2.1 3.3 4.0 3.1 2.9 2.8

EV/Sales (x) 0.5 0.3 0.2 0.2 0.1 0.1EV/EBITDA (x) 6.7 6.1 5.9 5.1 5.0 5.0EV/EBIT (x) 7.7 7.3 7.7 7.0 7.1 7.3

Income Statement (CNYm)

Sales revenue 117,119 158,006 175,292 181,893 198,347 215,625Gross profit 10,960 8,713 7,973 6,682 6,494 6,352EBITDA 9,016 7,726 6,343 5,663 5,410 5,212Depreciation 1,141 1,230 1,396 1,459 1,532 1,605Amortisation 48 48 45 49 49 50EBIT 7,827 6,448 4,902 4,155 3,829 3,558Net interest income(expense) -731 -832 -843 -1,159 -1,087 -1,051Associates/affiliates 56 9 9 9 9 9Exceptionals/extraordinaries 0 0 0 0 0 0Other pre-tax income/(expense) 557 648 664 826 938 1,009Profit before tax 7,709 6,274 4,732 3,831 3,689 3,524Income tax expense 1,060 1,026 1,100 1,073 1,033 987Minorities 61 78 76 -20 0 0Other post-tax income/(expense) 0 0 0 0 0 0Net profit 6,587 5,170 3,556 2,778 2,656 2,537

DB adjustments (including dilution) -92 -821 -443 0 0 0DB Net profit 6,495 4,349 3,113 2,778 2,656 2,537

Cash Flow (CNYm)

Cash flow from operations 9,396 5,233 5,536 6,492 5,213 4,165Net Capex -2,468 -2,303 -1,465 -1,500 -1,726 -1,714Free cash flow 6,928 2,930 4,071 4,992 3,486 2,451Equity raised/(bought back) 66 50 0 0 0 0Dividends paid -1,393 -1,741 -1,731 -1,111 -1,062 -1,015Net inc/(dec) in borrowings 6,280 2,479 0 0 0 0Other investing/financing cash flows -4,663 1,878 -180 -333 -149 -43Net cash flow 7,218 5,595 2,160 3,548 2,275 1,393Change in working capital 688 -1,373 473 2,235 984 -17

Balance Sheet (CNYm)

Cash and other liquid assets 11,082 16,678 19,666 23,214 25,489 26,883Tangible fixed assets 18,299 20,569 20,668 20,709 20,903 21,012Goodwill/intangible assets 847 817 864 817 817 817Associates/investments 9,677 8,750 9,132 9,150 9,168 9,186Other assets 28,244 31,274 38,429 37,651 37,788 38,979Total assets 68,150 78,088 88,759 91,541 94,166 96,877Interest bearing debt 15,405 18,716 21,791 24,265 24,572 24,897Other liabilities 12,938 15,510 21,336 22,722 23,837 25,003Total liabilities 28,344 34,226 43,127 46,987 48,408 49,900Shareholders' equity 39,303 42,775 44,516 43,457 44,661 45,881Minorities 503 1,088 1,117 1,097 1,097 1,097Total shareholders' equity 39,806 43,863 45,632 44,554 45,758 46,977Net debt 4,323 2,038 2,125 1,051 -918 -1,986

Key Company Metrics

Sales growth (%) nm 34.9 10.9 3.8 9.0 8.7DB EPS growth (%) na -33.0 -28.4 -10.8 -4.4 -4.5EBITDA Margin (%) 7.7 4.9 3.6 3.1 2.7 2.4EBIT Margin (%) 6.7 4.1 2.8 2.3 1.9 1.6Payout ratio (%) 21.0 33.5 48.7 40.0 40.0 40.0ROE (%) 17.9 12.6 8.1 6.3 6.0 5.6Capex/sales (%) 2.1 1.5 0.8 0.8 0.9 0.8Capex/depreciation (x) 2.1 1.8 1.0 1.0 1.1 1.0Net debt/equity (%) 10.9 4.6 4.7 2.4 -2.0 -4.2Net interest cover (x) 10.7 7.8 5.8 3.6 3.5 3.4

Source: Company data, Deutsche Bank estimates

24 February 2015

Metals & Mining

Copper Industry


Model updated:24 February 2015

Running the numbers

Asia

China

Metals & Mining

Zijin Mining Reuters: 2899.HK Bloomberg: 2899 HK

Hold Price (24 Feb 15) HKD 2.24

Target Price HKD 2.10

52 Week range HKD 1.60 - 2.62

Market Cap (m) HKDm 48,859

USDm 6,299

Company Profile

Zijin Mining is a mining conglomerate in the PRC. It is engaged primarily in the exploration, mining and sale of gold and other non-ferrous metals. The company is one of the largest and most efficient mine-produced gold producers in the PRC.

Price Performance

1.2

1.6

2.0

2.4

2.8

3.2

Feb 13May 13Aug 13Nov 13Feb 14May 14Aug 14Nov 14

Zijin Mining HANG SENG INDEX (Rebased)

Margin Trends

48

1216202428

11 12 13 14E 15E 16E

EBITDA Margin EBIT Margin

Growth & Profitability

051015202530

-10-505

10152025

11 12 13 14E 15E 16E

Sales growth (LHS) ROE (RHS)

Solvency

0

5

10

15

20

25

010203040506070

11 12 13 14E 15E 16E

Net debt/equity (LHS) Net interest cover (RHS)

James Kan +852 2203 6146 [email protected]

Fiscal year end 31-Dec 2011 2012 2013 2014E 2015E 2016E

Financial Summary

DB EPS (CNY) 0.26 0.24 0.08 0.11 0.10 0.10Reported EPS (CNY) 0.26 0.24 0.10 0.11 0.10 0.10DPS (CNY) 0.10 0.10 0.08 0.08 0.08 0.07BVPS (CNY) 1.1 1.3 1.3 1.3 1.3 1.3

Weighted average shares (m) 21,812 21,812 21,812 21,812 21,812 21,812Average market cap (CNYm) 84,410 52,398 36,491 39,398 39,398 39,398Enterprise value (CNYm) 89,340 62,184 48,751 59,071 57,024 58,828

Valuation MetricsP/E (DB) (x) 14.8 9.9 19.9 16.8 17.6 18.2P/E (Reported) (x) 14.8 10.1 17.2 16.8 17.6 18.2P/BV (x) 2.11 1.92 1.04 1.40 1.37 1.35

FCF Yield (%) nm nm 0.9 nm 13.9 4.4Dividend Yield (%) 2.6 4.2 4.7 4.3 4.2 4.0

EV/Sales (x) 2.3 1.3 1.0 1.0 1.0 1.1EV/EBITDA (x) 8.2 5.7 7.1 8.9 7.8 7.9EV/EBIT (x) 9.3 6.8 11.0 15.0 13.2 13.8

Income Statement (CNYm)

Sales revenue 39,382 47,874 49,772 58,752 55,857 55,606Gross profit 13,158 13,207 10,646 9,633 10,119 10,244EBITDA 10,881 10,826 6,891 6,672 7,316 7,456Depreciation 1,313 1,708 2,440 2,736 3,000 3,206Amortisation 0 0 0 0 0 0EBIT 9,567 9,118 4,451 3,936 4,316 4,250Net interest income(expense) -496 -804 -733 -712 -815 -873Associates/affiliates 205 243 117 111 105 96Exceptionals/extraordinaries 0 0 0 0 0 0Other pre-tax income/(expense) 0 0 0 0 0 0Profit before tax 9,276 8,556 3,835 3,335 3,606 3,473Income tax expense 2,366 2,403 973 509 901 868Minorities 1,198 942 736 480 460 443Other post-tax income/(expense) 0 0 0 0 0 0Net profit 5,713 5,211 2,126 2,346 2,245 2,162

DB adjustments (including dilution) -8 69 -291 0 0 0DB Net profit 5,705 5,280 1,834 2,346 2,245 2,162

Cash Flow (CNYm)

Cash flow from operations 6,390 5,408 8,842 317 9,560 5,307Net Capex -6,885 -7,571 -8,519 -4,407 -4,099 -3,587Free cash flow -495 -2,163 324 -4,090 5,461 1,720Equity raised/(bought back) 0 0 0 0 0 0Dividends paid -2,652 -4,035 -3,687 -1,732 -1,710 -1,637Net inc/(dec) in borrowings 5,546 9,318 484 5,000 0 8,000Other investing/financing cash flows -1,273 -1,722 853 -1,058 -1,248 -1,447Net cash flow 1,126 1,398 -2,027 -1,879 2,503 6,637Change in working capital 2,335 -1,079 4,027 -6,303 2,607 -1,950

Balance Sheet (CNYm)

Cash and other liquid assets 6,180 7,473 4,492 2,560 5,066 6,299Tangible fixed assets 18,378 24,127 29,529 31,684 33,175 33,954Goodwill/intangible assets 7,477 9,033 8,995 8,786 8,545 8,299Associates/investments 4,406 5,658 5,854 5,854 5,854 5,854Other assets 15,879 21,064 18,029 24,395 20,472 23,379Total assets 52,320 67,354 66,898 73,278 73,111 77,785Interest bearing debt 10,393 17,516 17,133 22,133 22,133 24,727Other liabilities 11,795 16,256 16,680 16,965 15,805 16,917Total liabilities 22,188 33,771 33,813 39,098 37,938 41,644Shareholders' equity 25,009 28,182 27,612 28,226 28,761 29,286Minorities 5,124 5,401 5,473 5,954 6,413 6,856Total shareholders' equity 30,133 33,583 33,085 34,180 35,174 36,142Net debt 4,213 10,042 12,641 19,573 17,067 18,428

Key Company Metrics

Sales growth (%) nm 21.6 4.0 18.0 -4.9 -0.4DB EPS growth (%) na -7.4 -65.3 27.9 -4.3 -3.7EBITDA Margin (%) 27.6 22.6 13.8 11.4 13.1 13.4EBIT Margin (%) 24.3 19.0 8.9 6.7 7.7 7.6Payout ratio (%) 38.2 41.9 81.5 72.9 72.9 72.9ROE (%) 24.4 19.6 7.6 8.4 7.9 7.4Capex/sales (%) 19.0 16.7 17.3 7.5 7.3 6.5Capex/depreciation (x) 5.7 4.7 3.5 1.6 1.4 1.1Net debt/equity (%) 14.0 29.9 38.2 57.3 48.5 51.0Net interest cover (x) 19.3 11.3 6.1 5.5 5.3 4.9

Source: Company data, Deutsche Bank estimates

24 February 2015

Metals & Mining

Copper Industry


Important Disclosures Additional information available upon request Disclosure checklist

Company Ticker Recent price* Disclosure

Zijin Mining 2899.HK 2.24 (HKD) 24 Feb 15 14

Jiangxi Copper 0358.HK 12.92 (HKD) 24 Feb 15 14 *Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Data is sourced from Deutsche Bank and subject companies. Important Disclosures Required by U.S. Regulators

Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States. See Important Disclosures Required by Non-US Regulators and Explanatory Notes.

14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year.

For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. James Kan

Historical recommendations and target price: Zijin Mining (2899.HK) (as of 2/24/2015)

1

2

3

45

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Feb 13 May 13 Aug 13 Nov 13 Feb 14 May 14 Aug 14 Nov 14

Sec

uri

ty P

rice

Date

Previous Recommendations

Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating

Current Recommendations

Buy Hold Sell Not Rated Suspended Rating

*New Recommendation Structure as of September 9,2002

1. 09/04/2013: Buy, Target Price Change HKD3.20 4. 15/01/2014: Sell, Target Price Change HKD1.10

2. 14/05/2013: Downgrade to Sell, Target Price Change HKD1.80 5. 28/10/2014: Upgrade to Hold, Target Price Change HKD2.10

3. 26/06/2013: Sell, Target Price Change HKD1.20

24 February 2015

Metals & Mining

Copper Industry


Historical recommendations and target price: Jiangxi Copper (0358.HK) (as of 2/24/2015)

1

23

4

5 6

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

Feb 13 May 13 Aug 13 Nov 13 Feb 14 May 14 Aug 14 Nov 14

Sec

uri

ty P

rice

Date

Previous Recommendations

Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating

Current Recommendations

Buy Hold Sell Not Rated Suspended Rating

*New Recommendation Structure as of September 9,2002

1. 09/04/2013: Hold, Target Price Change HKD17.90 4. 25/09/2013: Downgrade to Sell, Target Price Change HKD11.70

2. 25/06/2013: Downgrade to Sell, Target Price Change HKD12.49 5. 06/04/2014: Sell, Target Price Change HKD11.40

3. 28/06/2013: Upgrade to Hold, Target Price Change HKD13.83 6. 29/05/2014: Upgrade to Hold, Target Price Change HKD13.70

Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that investors buy the stock. Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Notes:

1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 2007 were:

Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12-month period Sell: Expected total return (including dividends) of -10% or worse over a 12-month period

51 %

41 %

7 %24 % 21 %15 %

050

100150200250300350400450

Buy Hold Sell

Asia-Pacific Universe

Companies Covered Cos. w/ Banking Relationship

24 February 2015

Metals & Mining

Copper Industry


Regulatory Disclosures

1. Important Additional Conflict Disclosures Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing. 2. Short-Term Trade Ideas Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com. 3. Country-Specific Disclosures Australia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively. Brazil: The views expressed above accurately reflect personal views of the authors about the subject company(ies) and its(their) securities, including in relation to Deutsche Bank. The compensation of the equity research analyst(s) is indirectly affected by revenues deriving from the business and financial transactions of Deutsche Bank. In cases where at least one Brazil based analyst (identified by a phone number starting with +55 country code) has taken part in the preparation of this research report, the Brazil based analyst whose name appears first assumes primary responsibility for its content from a Brazilian regulatory perspective and for its compliance with CVM Instruction # 483. EU countries: Disclosures relating to our obligations under MiFiD can be found at http://www.globalmarkets.db.com/riskdisclosures. Japan: Disclosures under the Financial Instruments and Exchange Law: Company name - Deutsche Securities Inc. Registration number - Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA, Type II Financial Instruments Firms Association, The Financial Futures Association of Japan, Japan Investment Advisers Association. Commissions and risks involved in stock transactions - for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are not registered credit rating agencies in Japan unless Japan or "Nippon" is specifically designated in the name of the entity. Reports on Japanese listed companies not written by analysts of Deutsche Securities Inc. (DSI) are written by Deutsche Bank Group's analysts with the coverage companies specified by DSI. Malaysia: Deutsche Bank AG and/or its affiliate(s) may maintain positions in the securities referred to herein and may from time to time offer those securities for purchase or may have an interest to purchase such securities. Deutsche Bank may engage in transactions in a manner inconsistent with the views discussed herein. Qatar: Deutsche Bank AG in the Qatar Financial Centre (registered no. 00032) is regulated by the Qatar Financial Centre Regulatory Authority. Deutsche Bank AG - QFC Branch may only undertake the financial services activities that fall within the scope of its existing QFCRA license. Principal place of business in the QFC: Qatar Financial Centre, Tower, West Bay, Level 5, PO Box 14928, Doha, Qatar. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Business Customers, as defined by the Qatar Financial Centre Regulatory Authority. Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, any appraisal or evaluation activity requiring a license in the Russian Federation. Kingdom of Saudi Arabia: Deutsche Securities Saudi Arabia LLC Company, (registered no. 07073-37) is regulated by the Capital Market Authority. Deutsche Securities Saudi Arabia may only undertake the financial services activities that fall within the scope of its existing CMA license. Principal place of business in Saudi Arabia: King Fahad Road, Al Olaya District, P.O. Box 301809, Faisaliah Tower - 17th Floor, 11372 Riyadh, Saudi Arabia. United Arab Emirates: Deutsche Bank AG in the Dubai International Financial Centre (registered no. 00045) is regulated by the Dubai Financial Services Authority. Deutsche Bank AG - DIFC Branch may only undertake the financial services activities that fall within the scope of its existing DFSA license. Principal place of business in the DIFC: Dubai International Financial Centre, The Gate Village, Building 5, PO Box 504902, Dubai, U.A.E. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Professional Clients, as defined by the Dubai Financial Services Authority.

David Folkerts-Landau

Group Chief Economist Member of the Group Executive Committee

Raj Hindocha

Global Chief Operating Officer Research

Marcel Cassard Global Head

FICC Research & Global Macro Economics

Richard Smith and Steve Pollard Co-Global Heads Equity Research

Michael Spencer Regional Head

Asia Pacific Research

Ralf Hoffmann Regional Head

Deutsche Bank Research, Germany

Andreas Neubauer Regional Head

Equity Research, Germany

Steve Pollard Regional Head

Americas Research

International locations

Deutsche Bank AG Deutsche Bank Place Level 16 Corner of Hunter & Phillip Streets Sydney, NSW 2000 Australia Tel: (61) 2 8258 1234

Deutsche Bank AG Große Gallusstraße 10-14 60272 Frankfurt am Main Germany Tel: (49) 69 910 00

Deutsche Bank AG Filiale Hongkong International Commerce Centre, 1 Austin Road West,Kowloon, Hong Kong Tel: (852) 2203 8888

Deutsche Securities Inc. 2-11-1 Nagatacho Sanno Park Tower Chiyoda-ku, Tokyo 100-6171 Japan Tel: (81) 3 5156 6770

Deutsche Bank AG London 1 Great Winchester Street London EC2N 2EQ United Kingdom Tel: (44) 20 7545 8000

Deutsche Bank Securities Inc. 60 Wall Street New York, NY 10005 United States of America Tel: (1) 212 250 2500

Global Disclaimer The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively "Deutsche Bank"). The information herein is believed to be reliable and has been obtained from public sources believed to be reliable. Deutsche Bank makes no representation as to the accuracy or completeness of such information.

Deutsche Bank may engage in securities transactions, on a proprietary basis or otherwise, in a manner inconsistent with the view taken in this research report. In addition, others within Deutsche Bank, including strategists and sales staff, may take a view that is inconsistent with that taken in this research report.

Opinions, estimates and projections in this report constitute the current judgement of the author as of the date of this report. They do not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Prices and availability of financial instruments are subject to change without notice. This report is provided for informational purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. Target prices are inherently imprecise and a product of the analyst judgement.

In August 2009, Deutsche Bank instituted a new policy whereby analysts may choose not to set or maintain a target price of certain issuers under coverage with a Hold rating. In particular, this will typically occur for "Hold" rated stocks having a market cap smaller than most other companies in its sector or region. We believe that such policy will allow us to make best use of our resources. Please visit our website at http://gm.db.com to determine the target price of any stock.

The financial instruments discussed in this report may not be suitable for all investors and investors must make their own informed investment decisions. Stock transactions can lead to losses as a result of price fluctuations and other factors. If a financial instrument is denominated in a currency other than an investor's currency, a change in exchange rates may adversely affect the investment. Past performance is not necessarily indicative of future results. Deutsche Bank may with respect to securities covered by this report, sell to or buy from customers on a principal basis, and consider this report in deciding to trade on a proprietary basis. Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies.

Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the investor's home jurisdiction. In the U.S. this report is approved and/or distributed by Deutsche Bank Securities Inc., a member of the NYSE, the NASD, NFA and SIPC. In Germany, this report is approved and/or communicated by Deutsche Bank AG, a joint stock corporation with limited liability incorporated in the Federal Republic of Germany with its principal office in Frankfurt am Main. Deutsche Bank AG is authorised under German Banking Law (competent authority: European Central Bank) and is subject to supervision by the European Central Bank and by BaFin, Germany’s Federal Financial Supervisory Authority. In the United Kingdom, this report is approved and/or communicated by Deutsche Bank AG acting through its London Branch at Winchester House, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank AG in the United Kingdom is authorised by the Prudential Regulation Authority and is subject to limited regulation by the Prudential Regulation Authority and Financial Conduct Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from us on request. This report is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. This report is distributed in Singapore by Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch (One Raffles Quay #18-00 South Tower Singapore 048583, +65 6423 8001), and recipients in Singapore of this report are to contact Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch in respect of any matters arising from, or in connection with, this report. Where this report is issued or promulgated in Singapore to a person who is not an accredited investor, expert investor or institutional investor (as defined in the applicable Singapore laws and regulations), Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch accepts legal responsibility to such person for the contents of this report. In Japan this report is approved and/or distributed by Deutsche Securities Inc. The information contained in this report does not constitute the provision of investment advice. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register Number in South Africa: 1998/003298/10). Additional information relative to securities, other financial products or issuers discussed in this report is available upon request. This report may not be reproduced, distributed or published by any person for any purpose without Deutsche Bank's prior written consent. Please cite source when quoting.

Copyright © 2015 Deutsche Bank AG

China Copper Industry - jrj.com.cnpg.jrj.com.cn/acc/Res/HK_RES/STOCK/2015/2/24/991192a2-9794-49… · China Resources Metals & Mining Industry Copper Industry Date 24 February 2015

Documents