CMOC Group's 2023 annual report released on the evening of March 22 shows that the company achieved operating income of 186.3 billion yuan in 2023, a year-on-year increase of 8%; net profit attributable to the parent company was 8.2 billion yuan, a year-on-year increase of 36%, both hitting record highs. Operating net cash flow was 15.5 billion yuan, basically the same as the same period last year; IXM achieved a net profit attributable to the parent company of 913 million yuan, also the best level in history.

In terms of product output: CMOC is anchored by "guaranteing production, reaching production early, and striving to exceed production”. In 2023, the company's output of all products will increase, and the output of copper, cobalt, niobium, and phosphate fertilizer will hit a record high. The company achieved copper output (based on metal content, the same below) of 419,500 tons, a year-on-year increase of 51.46%, ranking second in China and close to tenth in the world ; of which, the output in the Democratic Republic of the Congo was approximately 394,000 tons. It produced 55,500 tons of cobalt in DRC, a year-on-year increase of 173.71%, making it the world's largest cobalt producer. Its output of molybdenum and tungsten in China was 15,635 tons and 7,975 tons, a year-on-year increase of 3.45% and 6.20% respectively, maintaining its leading position in the world. Its niobium and phosphate fertilizer output in Brazil was 9,515 tons and 1.1682 million tons, a year-on-year increase of 3.29% and 2.28% respectively, reaching a record high. Its NPM copper and gold production in Australia were 25,550 tons and 18,772 ounces respectively.

CMOC announced that in 2023, the company successfully completed two world-class copper and cobalt projects and further consolidate its production capacity advantages. The KFM project produced benefits ahead of schedule in the first quarter of 2023, and reached production in the second quarter. It produced 113,700 tons of copper and 33,900 tons of cobalt throughout the year. The TFM mixed ore mine project currently has 5 copper and cobalt production lines, forming an annual production capacity of 450,000 tons of copper and 37,000 tons of cobalt. The annual output was 280,000 tons of copper and 21,600 tons of cobalt.

In April 2023, the company and its partners reached a consensus on the TFM royalty issue; in July, the "Settlement Agreement" was signed to properly resolve the TFM royalty issue, verifying its ability to deal with complex issues in international operations and laying a solid foundation for long-term development. .

In 2023, the company sold 80% of the NPM copper and gold mine and obtained substantial profits. The consortium between the company and CATL has obtained the mining rights for two lithium salt lakes in Bolivia, thus realizing a complete layout of new energy metals copper-cobalt-nickel-lithium.

On the trade side, the new management team led IXM to complete organizational upgrades, strengthen business strength, continue to improve efficiency, and give full play to the synergy between the mining and trading sectors. IXM achieved a net profit attributable to its parent company of 913 million yuan throughout the year, a year-on-year increase of 613%, the best performance in history. IXM is a major global base metal trader. Its main trading products include concentrates such as copper, lead and zinc, intermediate products such as nickel, cobalt, niobium and lithium, refined metals such as copper, aluminum, zinc and nickel, as well as small amounts of precious metal concentrates.

Resource reserves

CMOC's annual report shows that global copper resources are abundant and highly concentrated. According to data from the United States Geological Survey (USGS), as of 2023, the world's proven copper resource reserves are 1 billion tons, mainly distributed in countries such as Chile, Australia, Peru, Russia, and the Democratic Republic of the Congo. The five major resource countries control approximately 57% of the world's copper resources. China's reserves are 41 million tons, accounting for only 4% of the world's total. However, China is the world's largest copper consumer, accounting for about half of global consumption. As an important global copper producer, the company mainly sells copper cathodes and copper concentrates to the global market.

Cobalt is an important strategic metal. Global cobalt resources are mainly distributed in the Democratic Republic of the Congo, Australia and Indonesia. The three major resource countries control about 73% of the world's cobalt reserves. The Democratic Republic of the Congo is also the largest cobalt producer, accounting for more than 70% of global production in 2023. China is the world's largest producer of refined cobalt, accounting for 75% of global refined cobalt production in 2023. The company is the world's largest cobalt producer and mainly sells cobalt hydroxide to the international market.

Molybdenum is an important strategic resource. Global molybdenum resources are mainly distributed in China, the United States, Peru and Chile. According to USGS statistics, the four major resource countries control about 92% of the world's molybdenum resources. The downstream applications of molybdenum involve many fields such as steel, military industry, petrochemicals, etc. Molybdenum and its alloys can significantly improve their high-temperature strength, wear resistance and corrosion resistance. China is the world's largest producer of molybdenum, accounting for 44% of global production in 2023. At the same time, because about 79% of molybdenum consumption is concentrated in the steel industry, and more than half of the world's steel production capacity comes from China, China is also the largest consumer of molybdenum. Global consumption accounts for 45%. The company mainly sells ferromolybdenum to the domestic market.

Global tungsten resources are highly concentrated, with 52% concentrated in China, and 81% of global tungsten consumption concentrated in China. The value of the tungsten industry chain is concentrated in the upstream resource mining and downstream deep processing ends. China's tungsten products are exported to Europe, Japan, South Korea, the United States and other places in large quantities, with a total export volume of 35,416 metal tons. With the natural depletion of domestic mine resources in production and the increasingly stringent production restriction policies of national environmental protection inspections, domestic mining costs have increased year by year, which has provided certain cost support for tungsten prices. The company mainly sells ammonium paratungstate (APT) to the domestic market.

The supply concentration of niobium resources is very high, mainly in Brazil. The main consumption areas are low-alloy high-strength structural steel, automobile steel, high-rise building steel, bridge steel, petroleum steel and magnetic amorphous fields. The high concentration of supply structure will remain unchanged in 2023. On the supply side, global production will be about 83,000 tons in 2023, and Brazilian Mining and Metallurgical Company (CBMM) accounts for about 75% of the global market. Global niobium consumption is approximately 73,500 tons. As China's requirements for the strength of building steel bars continue to increase, and large-scale infrastructure such as airports, high-speed rail stations, and large-scale exhibition and sports facilities improve the various properties of steel, the demand for ferroniobium continues to increase. 0.02%-0.03% niobium is added to carbon steel. The earthquake resistance, corrosion resistance and fracture resistance are significantly improved. The company mainly sells ferroniobium to the international market and domestic market.

Regarding the industry structure and trends, CMOC said in its annual report:

(1) Copper market: The global economy will still face challenges in 2024, but as the Federal Reserve’s interest rate hike cycle comes to an end, macro pressure will gradually ease. The Chinese government will continue to introduce growth-stabilizing measures to stabilize the economy, and policy expectations continue to be positive. Although external demand is declining and domestic demand is slowly recovering, as more economic policies are introduced, it is expected that macro-control on the policy side will continue to support the recovery of the real economy and terminal consumption, especially electric vehicles, renewable energy, and power transmission and distribution. In industries such as the Internet, demand for copper will further increase, thus supporting copper price performance.

(2) Cobalt market: The domestic economy is generally recovering in 2024, and the terminal demand for cobalt is uncertain, depending on the degree of recovery in the ternary power battery field, the improvement in 3C electronics demand, and the increase in demand for cemented carbide. The policy side has made it clear that it will continue to support the development of new energy vehicles, which will benefit cobalt consumption. However, as the supply continues to increase and the share of lithium iron phosphate is squeezed, the price recovery is obviously volatile, mainly affected by the arrival of raw materials and seasonal destocking.

(3) Molybdenum market: In 2024, there will be no large-scale new production capacity on the molybdenum supply side. At the same time, large-scale domestic molybdenum mines are facing varying degrees of decline in raw ore grades, while on the consumer side, under the national high-quality development requirements, demand for high-end molybdenum-containing steel is still promising.

(4) Tungsten market: In 2024, the prosperity level of domestic and foreign manufacturing industries has rebounded. The automotive, consumer electronics and engineering machinery fields are stable and improving. Domestic cemented carbide consumption has generally improved slightly; at the same time, the silicon wafer solar panel cutting field has been upgraded. , the gradual promotion of photovoltaic tungsten filaments, industry organizations predict that the demand for tungsten in the photovoltaic field will increase by approximately 10,000 metal tons in the next 5 to 10 years. The APT market will operate stably and strongly. At the same time, after a three-year cycle, the 3C electronics field will also enter a new replacement cycle. In 2024, with the gradual recovery of the 3C electronics field and the expansion of new energy photovoltaic tungsten filament applications, tungsten prices will remain relatively stable at historically high levels.

(5) Niobium market: The global demand for ferroniobium is expected to increase steadily in 2024, due to the high stability of supply and demand in the industry, which will fluctuate within a narrow range under the influence of exchange rates. The price of ferroniobium will continue to be strong in 2024. The global economy is expected to continue to recover, the U.S. dollar interest rate hike process is gradually coming to an end, and emerging economies are boosting global economic vitality; however, regional conflicts will still bring some uncertainties to economic growth. According to the World Steel Association report, global steel demand will continue to grow by 1.9% in 2024, reaching 1.8491 billion tons. For China, 2024 is a critical year in the "14th Five-Year Plan". Policies will provide greater support for industry development and structural optimization, and will also promote the upgrade of steel consumption, thereby boosting demand for niobium.

(6) Phosphorus market: Global grain crop production in 2024 will still be affected by unstable factors such as El Niño climate, regional wars, and export regulations. However, agencies predict that grain output in Argentina and Brazil will remain at historically high levels in 2024, thereby diluting the negative impact. As a result, global food prices will fall further. China's phosphate fertilizer supply and demand in 2024 will remain unchanged from the fundamentals of 2023. Morocco and Western Sahara's phosphate fertilizer production will continue to increase as planned. Russia's phosphate fertilizer exports will be less and less affected by the war and are expected to continue to recover. The overall global phosphate fertilizer supply is expected to be higher than in 2023 year, while Brazil’s domestic demand for phosphate fertilizers is limited. In the first half of the year, which is the off-peak season for domestic fertilizer demand in Brazil, phosphate fertilizer prices are expected to fall slightly from their highs in the first quarter and bottom out at the end of the second quarter. In the second half of the year, which is the peak season for domestic fertilizer demand in Brazil, phosphate fertilizer prices will continue to rise. The overall level of 2023 will be maintained in 2024; according to the World Food Security Organization's forecast, the grain output of Brazil, Argentina and other countries will still remain at a historical high in 2024, and the demand for chemical fertilizers will still be strong. The Brazilian phosphate fertilizer market price is expected to be stable compared with 2023. A slight downward trend.

The 2024 production guidance announced by CMOC in its annual report shows that in 2024 the company plans to produce 520,000-570,000 tons of copper, 60,000-70,000 tons of cobalt, 12,000-15,000 tons of molybdenum, 6,500-7,500 tons of tungsten, and 9,000-10,000 tons of niobium.

A letter to shareholders in CMOC’s annual report stated:

We have put forward development goals for the next five years, which are to complete the second step of the "three-step" strategy and initially enter the ranks of the world's first-class mining companies: to achieve an annual output of 800,000-1 million tons of copper metal and 900,000 tons of cobalt metal. -100,000 tons, 25,000-30,000 tons of molybdenum metal, and over 10,000 tons of niobium metal ; international operation capabilities have been significantly improved, the "5233" structure has been successfully established, the digital intelligence Qianli Molybdenum SAP project has been successfully completed, and the international governance system has formed distinctive features , ESG has reached the level of world-class enterprises.

This year, both TFM and KFM will enter the first year of full-load production. TFM will reach production in the first quarter and meet the standard in the second quarter. KFM will achieve stable and high output to ensure that it can produce more than 520,000 tons of copper and 60,000 tons of cobalt throughout the year. The above makes the company one of the top ten copper producers in the world and remains the world's largest cobalt producer.

CMOC's official WeChat information shows: At the beginning of 2024, the company is in good operating condition and all mining areas maintain fast-paced production. Taking KFM as an example, its copper production exceeded 14,000 tons in January, and its output in February set a new record, exceeding 15,000 tons. The company still had 139,800 tons of copper inventory and 37,100 tons of cobalt inventory at the end of 2023. Based on the current copper and cobalt prices, the copper and cobalt inventory is worth about 18 billion yuan. This year, the company will strengthen geological exploration work, launch a reserve increase plan, and prepare for the development of TFM Phase III and KFM Phase II. On March 20, the average daily processing capacity of the TFM mixed ore east zone oxidation ore line for seven consecutive days was 12,883 tons, exceeding the design capacity by 27.6%; the mixed ore line's average daily processing capacity for seven consecutive days was 17,677 tons, exceeding the design capacity by 4.0%; copper and cobalt in a single day The maximum output was 678 tons and 36 tons, exceeding the design standards by 16.9% and 9.0%, fully achieving the production target. The monthly output of copper and cobalt hit a record high at the end of March. The TFM mixed ore project is China's largest investment in a single project in the Democratic Republic of the Congo, with a total investment of US$2.51 billion. It consists of a 5.6 million tons/year mixed ore production line in the east area, a 3.3 million tons/year oxide ore production line, and a 3.5 million tons/year central area. Annual mixed ore production line composition. Currently, TFM has five copper and cobalt production lines. Its production capacity has increased from the original daily ore processing capacity of 15,000 tons to 63,000 tons, and its annual copper output has increased to more than 450,000 tons. It ranks among the top ten copper mines in the world and is also the world's largest copper mine. The second largest cobalt mine (the world's largest cobalt mine is KFM, a subsidiary of CMOC). In 2024, with TFM and KFM fully operational, CMOC will also contribute 100,000-150,000 tons of incremental copper production.

CMOC said in its annual report: Affected by domestic stimulus policies, global macroeconomic expectations, weak domestic recovery and the strengthening of the U.S. dollar index, copper prices experienced a process of highs and then lows, but as the Federal Reserve‘s interest rate hikes were expected to end and inventories have remained low, copper prices rebounded at the end of the year.

When it comes to the cobalt industry, CMOC said: In the first half of the year, the performance of the new energy vehicle industry chain missed expectations. Enterprises in all aspects of the industry destocked. Demand for digital batteries did not improved, and metal cobalt and pricing coefficients continued to decline. Since mid-June, overseas metal cobalt prices were raised. Coupled with the supply of raw materials in the spot market and expected changes, both the price of metal cobalt and the pricing coefficient of cobalt hydroxide strengthened. With the large amount of raw materials from the Democratic Republic of Congo arriving in the third quarter, domestic smelters began to have excess inventory from the fourth quarter. The backlog of inventory in ports and smelters became the norm. In addition, the demand for power batteries and digital batteries weakened significantly in the second half of the year, and the price of metal cobalt and the pricing coefficient stopped rising and then fell. The price of cobalt reached the lowest level for the year at the end of the year. The pricing coefficient continued to fall, which in turn caused the price of cobalt raw materials to fall to a five-year low at the end of the year.

Copper spot market: According to SMM quotations, the average price of SMM1# copper cathode on December 30, 2022 was 66,185 yuan/ton, and the average price on December 29, 2023 was 69,230 yuan/ton, with an annual increase of 4.6%. Copper prices previously hit highs due to expectations of production cuts by Chinese refineries, and recent comments from the Federal Reserve have affected copper price trends. Expectations for an interest rate cut were hit by a speech by the president of the Federal Reserve Bank of Atlanta. It is expected that interest rates will be cut only once in 2024. The strength of the U.S. dollar has suppressed copper prices. In terms of fundamentals, in terms of consumption, the decline in copper prices has led to a certain recovery in consumption, but the overall desire for downstream replenishment was still not strong. If copper prices continue to fall, consumption is expected to gradually recover. Overall, supply remains adequate. Due to the influence of macro sentiment will move at highs in the near future.

Cobalt spot market: In terms of the price of cobalt sulfate, which is closely related to the price of cobalt hydroxide, in 2023, due to the impact of subsidy reduction, the recovery of the power end was less than expected. With the expansion of production capacity, the market supply exceeds demand and the price has always been difficult to return to high levels. In the first quarter of 2023, affected by the CNY holiday, the domestic power and digital markets both saw poor demand, and market transaction inquiries were limited. Driven by demand and cost, cobalt prices continued to decline. Later, as leading overseas mining companies were hampered in the shipment of intermediate products due to force majeure, which posed a threat to the stability of subsequent raw material supply, the price of cobalt raw materials stopped falling and rebounded, and the price of cobalt sulfate also rebounded . In the second quarter of 2023, the power market showed signs of slight recovery, and some downstream ternary and tetracobalt companies had some replenishment behavior. However, due to the downstream buyers pushing for lower prices, cobalt sulfate prices remain in downward track. Then at the end of the quarter, due to delays in the transportation of cobalt intermediate products, the support of raw materials for cobalt salt prices increased. At the same time, the purchasing demand for cobalt sulfate from refined cobalt manufacturers increased. Coupled with the replenishment needs of ternary companies, cobalt salt companies' quotations increased, and the price support sentiment is strong, driving the price of cobalt sulfate to continue to rise. In the third quarter of 2023, the demand for ternary products weakened, as there was over-stocking at some downstream buyers. This coupled with traders selling off goods caused the price of cobalt sulfate to continue to decline. Later, due to the temporary mismatch of cobalt raw materials in some integrated enterprises, the external purchasing volume increased. As a result, smelters were reluctant to sell at higher prices, and the decline in cobalt sulfate slowed. In the fourth quarter of 2023, smelters were affected by thin profits or even losses and found it difficult to accept the existing raw material prices, so output decreased. However, due to weaker demand performance and a certain amount of accumulated inventory in the market, prices fell in the fourth quarter amid strong supply and weak demand. Later, with the transfer of market inventory, there was less factory inventory, so the market supported prices. In addition, at the end of the year, some companies had immediate needs to replenish their inventories, so spot prices rose due to the temporary recovery in demand. Afterwards, as demand picked up, it was difficult for prices to rise. However, affected by the domestic Chinese New Year holiday, smelters were less willing to cut prices, so spot prices remained stagnant at the end of the year. In March 2024, from the supply side, the Chinese New Year holiday is over and some smelters have gradually resumed production; however, due to high raw material prices and high costs for recycling companies, the resumption of work has been delayed. Therefore, the expected increase in production may be less than expected. From the demand side, due to the large reserves of precursors and tetracobalt downstream, short-term demand purchases are limited; however, some companies with sulfate production lines for electro-cobalt have also switched to cobalt salt for production due to the difficulty in finding low-price raw materials, driving some demand for cobalt sulfate. Given rising raw material prices, cobalt salts prices were raised. It is expected that in the future, if the price of intermediate goods continues to be high, the price of cobalt salt may remain strong; however, it cannot be ruled out that some traders ship at low prices, which will affect the price of cobalt salt and decline.