What is Luoyang Molybdenum's basis for the 30 billion yuan profit forecast?

Ask AI · How will Luoyang Molybdenum’s 622 model help optimize costs?

21st Century Business Herald reporter Dong Peng

Once again, sell-side institutions have raised Luoyang Molybdenum’s profit forecasts.

After the close of trading on March 30 in the A-share market, Luoyang Molybdenum held a results briefing. The company’s newly appointed management team provided updates on copper and gold production for 2026, as well as merger and acquisition directions, among other matters.

Subsequently, multiple sell-side institutions raised their 2026 profit forecasts to more than 30 billion yuan. The highest forecast for net profit was close to 37 billion yuan, while the lowest was also above 31 billion yuan.

Keep in mind, during 2024 and 2025, the company’s net profit growth rate was over 50% in both periods. By 2025, the company’s profit base had already risen to 20.3 billion yuan, making it clearly harder to sustain growth rates of 50% or more. So why do the above-mentioned institutions remain highly confident in its growth?

The answer may be found in the company’s annual report and the results briefing.

“By 2026, there will be gold production (consolidated into the statements). Production is expected to be 6 to 8 tons, and we will strive to achieve 8 tons. The copper production guidance is 0.76 million to 0.82 million tons—so there will still be some incremental increase versus 2025.” said Luoyang Molybdenum’s president, Peng Xuhui.

In addition, after the company spent more than 820k yuan to acquire a gold mine in 2025, Luoyang Molybdenum also does not rule out launching new resource-related acquisitions in 2026. With cost reductions driven by the company’s scaling up and improved recovery rates, there is indeed room for overall profit to increase.

Of course, the above is only a forward-looking judgment based on known conditions. How the prices of metals such as copper and gold will move later remains unknown, and sell-side profit forecasts will also be continuously adjusted dynamically.

When commodity prices enter a rising cycle, overall trading activity within the industry quickly increases—for example, in the past few years when Zijin Mining, Dabe Mining, and others entered the lithium sector.

In 2025, it was a major year for the gold industry. Multiple China-based enterprises, including Luoyang Molybdenum, announced acquisitions of overseas gold mines and other assets.

In the same year, in April and December, Luoyang Molybdenum spent about 2.98 billion yuan and 7.17 billion yuan respectively to acquire gold asset packages including the Cangrejos gold mine in Ecuador and the Aurizona gold mine in Brazil.

Among them, the Brazil gold asset package includes 100% interests in the Aurizona gold mine, the RDM gold mine, and the Bahia integrated mining area. This project was already completed through delivery/settlement in January of this year. Odin Mining in Ecuador is still in the construction stage and plans to be built and put into production in 2029.

Therefore, the above Brazil gold mine projects included in the consolidated statements will become the company’s strongest incremental projects in terms of certainty at present. In the production guidance provided in the company’s annual report, the company plans to produce 6–8 tons of gold in 2026.

“(The company) will tap potential and improve efficiency, striving to achieve the 8-ton production target.” Peng Xuhui said at the results briefing convened yesterday.

If estimated using the latest London gold spot price, 8 tons of gold is worth 8 billion yuan. Most of this will be converted into Luoyang Molybdenum’s revenue increment.

At the same time, among peer companies that have already disclosed annual reports, their gross margin on mined gold generally stands at 50% or above, and some companies reach as high as 80%. These Brazil gold mine assets also have the potential to bring the company profit increments of tens of billions of yuan.

For the copper segment, which contributes most of Luoyang Molybdenum’s profit, there is no clear plan for new incremental production capacity in 2026. One of the “twin stars” projects, the KFM Phase II, needs to be put into production in 2027. However, based on the company’s existing production capacity, it still has room to tap potential.

The annual report shows that in 2025, Luoyang Molybdenum’s copper production was 741k tons, ranking steadily among the global top ten.

Regarding the existing flagship mines, the company’s vice president, Chen Xingyao, said: “Previously, TFM’s daily ore treatment volume was 63k tons. Now, through tapping potential, the ore treatment volume processed has already been increased to 80k tons.”

In 2026, Luoyang Molybdenum also plans to further raise copper output to 760k–820k tons. While the production growth rate will be lower than in previous years, it still has at least the potential for an increase of around 50k tons.

“(The company) started out with small metal businesses and has a gene for small metals. Last year, it was also a beneficiary of small metals—and that in itself is one of the company’s foundations for long-term development.” said its chairman, Liu Jianfeng.

He pointed out that in 2025, the company’s businesses such as molybdenum and tungsten contributed solid financial returns.

He added that in the future, besides anchoring the “copper-gold strategy,” the company will also extend its fundamental technologies into the small metals sector, fully tap the value of associated resources, and, when appropriate, look for independent small metals mine project opportunities.

These potential external M&A deals are also expected to bring the company new performance increments.

In addition, based on Luoyang Molybdenum’s existing profit structure, the gross profit from its molybdenum, tungsten, and cobalt products in 2025 reached 8 billion yuan—making them the second-largest source of profit after the company’s copper products.

This year, the prices of the above small metals are all significantly higher than the same period in 2025, especially the rise in tungsten concentrate, which is the most prominent.

According to Antaike data, before 2025, black tungsten concentrate (65%, domestic) had long fluctuated around 150k yuan per ton. Then, after breaking above the previous high in the second half of 2025, it saw a straight-line surge in the fourth quarter of 2025 and the first quarter of 2026.

Since mid-March this year, the price of tungsten concentrate has stayed above 1 million yuan per ton. Therefore, this year Luoyang Molybdenum’s small metals segment is also expected to see a clear improvement in profitability.

Combined with support from copper and gold prices, which are also significantly higher than the same period in 2025 and still at historically high levels, the company’s 2026 revenue side indeed has the potential to continue benefiting from a dual-driven effect from both volume and price.

Alongside pushing external resource acquisitions and capacity expansion for existing projects—while enlarging the revenue scale—the company’s new management team is also seeking breakthroughs on the cost side.

At the results briefing, Chen Xingyao cited the cost-reduction effect brought by the scale effect after increasing Congolese gold output, as well as how improvements in recovery rates help the cost side.

According to the introduction, in the fourth quarter, TFM’s recovered refined copper recovery rate, equipment operating rate, and raw ore treatment volume all exceeded the calendar progress. KFM built a database of ore characteristics and a blending model. The mill productivity per unit time increased year over year by more than 30%. The two concentrators in Luoyang Molybdenum’s Brazilian niobium-related segment improved recovery rates by about two percentage points versus the previous year. The recovery rate at the Sandaozhuang molybdenum operation also reached a historical high.

Annual report data also shows that in 2025, Luoyang Molybdenum’s operating cost decreased by 11.56%, which was clearly greater than the 2.98% decline in revenue over the same period. Meanwhile, for the mining and processing segment—the company’s most important profit source—the decline in operating costs was also much smaller than the increase in revenue.

“Competition in mining is, in essence, competition in cost—an examination of system capabilities built upon resource endowments.” the company’s board of directors stated in its annual report.

In the company’s view, there are three factors that determine whether its costs are high or low.

First, natural resource endowments and industrial mining conditions—this is the underlying, innate, unchangeable prerequisite. Second, how to build an efficient, low-cost management team. Finally, because mining is a relatively closed industry, there is the possibility of reducing costs and increasing efficiency through technological means.

In its 2025 annual report, Luoyang Molybdenum also, for the first time, systematically explained its “622 model” to the outside world.

That is, 60% of the cost advantage is determined by resource endowments, while strategic acquisitions determine the company’s lifeline and gene; 20% depends on the project planning and construction level, to achieve the optimal full lifecycle cost; and the remaining 20% is determined by daily operations and management capabilities—namely, to leverage Chinese enterprises’ comparative advantages.

Over the past decade, Luoyang Molybdenum has built the resource moat accounting for 60% of the cost model above by precisely capturing multiple world-class assets.

However, if the company wants to convert its resource advantages into production capacity advantages and cost advantages, forming a systematic improvement in overall competitiveness, it needs to start with the two 20% parts: “planning and construction” and “daily operations.”

For example, standardization, process management, and intelligent systems should be integrated throughout every stage of project planning, construction, and operations—covering the entire chain from exploration, mining, beneficiation, smelting, refining, to trading.

This is not empty talk. For example, Zijin Mining’s Zanglong copper mine in Tibet relies heavily on early project planning and later operating capabilities, which clearly is not something all mining companies can achieve.

From the perspective above, Luoyang Molybdenum is also seeking to build, through platform-based development, a standardized and exportable platform management and control system similar to Zijin Mining’s “five rings unified into one.”

In 2026, leveraging the “622 model” to enhance its resource scale, and by solidifying globalized “platform capabilities,” Luoyang Molybdenum has already elevated this to a position alongside the “copper-gold dual-polar” strategy.