Tongling Nonferrous: Mirador Copper Mine Resumes Normal Production with Dual Production Lines

On the evening of January 2, Tongling Nonferrous Metals announced that the Mirador Copper Mine, the core asset of its controlling subsidiary, China Railway Construction Tongguan Investment Co., Ltd., had suspended production due to the impact of Ecuador's power rationing policy. The company received a report from China Railway Construction Tongguan stating that the Mirador Copper Mine resumed normal dual-series production starting January 1, 2025 (Ecuador time).

Tongling Nonferrous Metals provided details in a previous announcement regarding the impact of the power rationing policy on the Mirador Copper Mine:

On November 13, 2024, the company disclosed the "Announcement on the Impact of the Power Rationing Policy on the Controlling Subsidiary." The Mirador Copper Mine, the core asset of China Railway Construction Tongguan, is located in Ecuador, South America. Due to insufficient rainfall and prolonged drought in Ecuador, water levels at major hydropower stations dropped, leading to tight electricity supply. To ensure the safe and orderly supply of electricity, the country implemented large-scale power outages and rationing policies. On November 8, 2024 (Ecuador time), Ecuador's Ministry of Energy and Mines issued an official document to the Mirador Copper Mine, requiring industrial users, including the Mirador Copper Mine, steel plants, and others, to minimize electricity consumption from the national power transmission line within 15 days of the document's issuance to ensure the stability and continuity of public electricity services. In compliance with these requirements, the Mirador Copper Mine planned to suspend dual-series production for 15 days.

On November 26, 2024, the company disclosed the "Progress Announcement on the Impact of the Power Rationing Policy on the Controlling Subsidiary." Following active negotiations between China Railway Construction Tongguan, Ecuador's Ministry of Energy and Mines, and the National Electricity Corporation, the Mirador Copper Mine resumed single-series production on November 20, 2024 (Ecuador time).

On December 18, 2024, the company disclosed the "Progress Announcement on the Impact of the Power Rationing Policy on the Controlling Subsidiary." On December 13, 2024 (Ecuador time), Ecuador's National Electricity Dispatch Center held an emergency video conference for AV2 users (industrial high-voltage electricity users, including ECSA, the main operating entity of the Mirador Copper Mine). The meeting required all AV2 users to completely suspend production for 15 days starting at 00:00 on December 16, 2024 (Ecuador time). During the meeting, ECSA secured a minimum power load of 5 MW to ensure the continuation of waste rock dam construction, maintenance of beneficiation equipment, and normal progress of the Phase II project. In compliance with these requirements, the Mirador Copper Mine planned to suspend production for 15 days starting December 16, 2024 (Ecuador time).

Tongling Nonferrous Metals stated: According to a notification from Ecuador's National Electricity Dispatch Center, ECSA resumed normal power supply starting at 00:00 on January 1, 2025 (Ecuador time). As of the date of this announcement, the Mirador Copper Mine has resumed normal dual-series production. ECSA will maintain regular communication with Ecuador's electricity authorities to ensure production stability.

Regarding the impact on the company, Tongling Nonferrous Metals stated: China Railway Construction Tongguan primarily engages in the mining, beneficiation, and sales of copper metal, with copper concentrates as its main product. From January to September 2024, China Railway Construction Tongguan achieved operating revenue of 6.8461 billion yuan and net profit of 1.4800 billion yuan (unaudited financial data). From November 8, 2024 (Ecuador time) to the date of this announcement, the Mirador Copper Mine suspended dual-series production for 28 days and adjusted to single-series production for 26 days due to the power rationing policy. The specific impact of this power rationing on the company's overall production and operations will be subject to the annual audit results of the auditing institution. Moving forward, ECSA will focus on maintaining regular communication with Ecuador's electricity authorities, further optimizing power solutions, and organizing all aspects of production and operations to the fullest extent.

A previous announcement by Tongling Nonferrous Metals provided an overview of China Railway Construction Tongguan: China Railway Construction Tongguan was established on December 10, 2009, with a registered capital of 5.6186 billion yuan. It primarily engages in the mining, beneficiation, and sales of copper metal, with copper concentrates as its main product. The company holds a 70% stake in China Railway Construction Tongguan, while China Railway Construction International Investment Co., Ltd. holds the remaining 30%. The Phase I mining and beneficiation project of the Mirador Copper Mine has completed construction and reached full production, while the Phase II project is under construction. The Phase I project is designed to process 20 million mt of ore annually, with a copper metal content of approximately 96,000 mt. In 2023, China Railway Construction Tongguan produced 126,500 mt of copper contained in self-produced copper concentrates. As of December 31, 2023, China Railway Construction Tongguan had total assets of 18.5877 billion yuan and net assets of 9.3115 billion yuan. In 2023, it achieved operating revenue of 8.0165 billion yuan and net profit of 1.7896 billion yuan (audited financial data). From January to September 2024, China Railway Construction Tongguan produced 96,300 mt of copper contained in self-produced copper concentrates. As of September 30, 2024, China Railway Construction Tongguan had total assets of 18.7394 billion yuan and net assets of 10.4740 billion yuan (unaudited financial data). The annual production plan for 2024 includes 116,000 mt of copper contained in self-produced copper concentrates. From January to October 2024, China Railway Construction Tongguan had already produced 101,900 mt of copper contained in self-produced copper concentrates.

On December 1, Huayuan Securities released a research report, assigning an "Overweight" rating to Tongling Nonferrous Metals. The main reasons for the rating include: 1) Regional leader with an integrated industry chain layout; 2) Steady growth in smelting and deep processing; 3) Contribution from Mirador and steady progress in Phase II to drive performance. Risk warnings: litigation risks related to the net equity of smelting subsidiaries under China Railway Construction Tongguan; risks of metal price declines exceeding expectations; safety production risks; geopolitical risks.

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