Yunnan Copper: The cost of its main products is relatively competitive. Currently, the company has no production cut plan for the time being.

On June 27, the share price of Yunnan Copper Science & Technology Development Co., Ltd. saw a significant increase. By the close of trading on the 27th, Yunnan Copper's shares rose by 4.47%, closing at 12.62 yuan per share.

The investor relations activity record sheet announced by Yunnan Copper on June 27 showed:

I. Introduction to the Company's Basic Situation

Yunnan Copper was listed on the Shenzhen Stock Exchange in 1998. Its main businesses cover copper exploration, mining, smelting, extraction and processing of precious metals and rare dispersed metals, sulfur chemical engineering, and trade. It is an important production site for copper, gold, silver, and sulfur chemical engineering in China, with a copper cathode capacity of 1.4 million mt. The company is the only publicly listed firm in the copper industry of Chalco and China Copper.

In Q1 2025, the company produced 348,900 mt of copper cathode, up 48.15% YoY; 5.80 mt of gold, up 95.63% YoY; 128.48 mt of silver, up 54.31% YoY; 1.3872 million mt of sulphuric acid, up 23.61% YoY; and 13,900 mt of copper in copper concentrates, down 15% YoY. By the end of Q1 2025, the company's total assets were 49.256 billion yuan, with an asset-liability ratio of 62.39%. It achieved an operating revenue of 37.754 billion yuan, up 19.71% YoY; a total profit of 922 million yuan, up 14.11% YoY; a net profit attributable to publicly listed firms of 560 million yuan, up 23.97% YoY; and a basic earnings per share of 0.2793 yuan, up 23.97% YoY.

The Q&A session announced by Yunnan Copper showed:

1. What is the current situation of copper smelting and processing fees? Does the company have any production cut plans?

Yunnan Copper stated: Currently, smelting and processing fees remain low, putting pressure on enterprises in the copper industry. The company focuses on extreme operational excellence and, after years of cost reduction, quality improvement, and efficiency enhancement, the costs of its main products are competitive. Meanwhile, the company enhances its comprehensive competitiveness and mitigates the challenges brought by the decline in TC through various measures, such as continuous cost reduction, management efficiency improvement, increased profit contribution from by-products like sulphuric acid, and coordinated efforts to ensure raw material supply. Currently, the company has no immediate plans for production cuts.

2. How was the company's smelting and processing fees determined this year, and what is the proportion of long-term contracts?

Yunnan Copper stated:The company uses long-term contracts, spot cargo, and other models for processing fees. For imported copper concentrates, it adopts TC/RC settlement methods, engaging in annual and quarterly negotiations. The company purchases raw materials externally in accordance with the principles of marketization and maximizing comprehensive benefits. As one of the major copper concentrate purchasers in China, the company has maintained long-term and stable cooperative relationships with major suppliers for a long time. It actively negotiates with copper concentrate suppliers to stabilize the supply volume of long-term contracts and ensure the orderly progress of production.

3. How have the sales volume and price of sulphuric acid been for the company recently?

Yunnan Copper Science & Technology Development Co., Ltd. stated:Sulphuric acid is a by-product of the company's copper smelting process, and its price varies due to regional factors. Since the beginning of this year, the average price of sulphuric acid in major regions has increased significantly YoY. The company has actively seized market opportunities, contributing positively to its performance.

4. What work has the company done in terms of resource acquisition?

Yunnan Copper Science & Technology Development Co., Ltd. stated:The company attaches great importance to the succession of mine resources and has increased capital investment to carry out comprehensive geological studies of various mining areas and exploration work in the deep and marginal parts of mines. In 2024, the company invested 65 million yuan in exploration funds, carried out multiple mineral exploration activities and exploration work in the deep and marginal parts of mines, added an inferred and above copper resource metal content of 91,800 mt, achieved the annual target, and achieved an annual increase in reserves greater than the output and consumption of mines for four consecutive years. In addition, based on the sound operation of existing mines and smelters, the company actively pays attention to high-quality copper resource projects.

5. The company plans to issue shares to purchase 40% of Liangshan Mining held by Yunnan Copper Group. What is the basic situation of Liangshan Mining, and what aspects of competitiveness can it enhance for the company?

Yunnan Copper Science & Technology Development Co., Ltd. stated:Liangshan Mining is a copper resource production and smelting enterprise spanning the copper mining, beneficiation, and smelting industries, covering copper, iron, and sulphuric acid products. Liangshan Mining owns high-quality copper resources such as the Lala Copper Mine and the Hongnipo Copper Mine. Currently, it can produce approximately 13,000 mt of copper concentrates, about 119,000 mt of copper anodes, and about 400,000 mt of industrial sulphuric acid annually. Liangshan Mining is one of the core copper resource production and smelting bases under China Copper. The high-quality copper mine resources it holds, including the Hongnipo Copper Mine, the Lala Copper Mine, and the Hailin Copper Mine, had a retained copper metal content of 779,700 mt as of the end of March 2025, with an average copper grade of 1.16%, higher than the current average copper grade of 0.38% at Yunnan Copper. In 2024, it won the exploration right for the Hailin Copper Mine in Huili City, Sichuan Province through bidding, with a mining area of 48.34 square kilometers, further enhancing the resource reserve potential of Liangshan Mining. In addition, the copper mining costs of the mines under Liangshan Mining are relatively low, with good cost competitiveness. The sulphuric acid sales prices in south-west China, where Liangshan Mining is located, are also relatively favorable.

This time, the company plans to acquire 40% of Liangshan Mining held by its controlling shareholder, Yunnan Copper Group, which can further resolve horizontal competition and ensure the practical implementation of relevant commitments. At the same time, Liangshan Mining has obvious resource advantages, a good profit foundation, and a return on net assets higher than the industry average. After the completion of the Hongnipo Copper Mine, its scale will reach that of a medium-to-large copper mine, and its profitability will be further enhanced. After the injection of Liangshan Mining into Yunnan Copper, it can effectively increase the publicly listed firm's equity copper resource reserves, enhance the overall asset and profit scale as well as the industry position of the publicly listed firm, facilitate the publicly listed firm to fully leverage business synergies, strengthen the reserve of high-quality resources and capacity layout, enhance comprehensive strength and core competitiveness, and promote the high-quality development of the publicly listed firm. In addition, this acquisition is a specific measure taken by the company to implement the relevant opinions of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) on improving and strengthening the market value management of listed firms controlled by central state-owned enterprises, and to carry out mergers and acquisitions and reorganizations that are conducive to enhancing the investment value of listed firms, which is beneficial for safeguarding the rights and interests of the listed firm and all its shareholders.

6. What measures has the company taken in response to the severe industry environment this year?

Yunnan Copper stated: On the one hand, the company strategically plans for "digital and intelligent transformation, expanding resources, refining mines, optimizing smelting, solidifying recycling (of copper), and meticulously managing rare and scattered (metals)", and increases the extraction of urban mines and rare and scattered metals. On the other hand, in 2025, the company focuses on the key points of extreme operation management, strives to promote the high-quality development of the company, and advances cost reduction with iron determination. After several years of cost reduction, quality improvement, and efficiency enhancement, the costs of the company's main products have become competitive. In addition, the company increases the profit contribution of by-products such as sulphuric acid, molybdenum, selenium, tellurium, platinum, palladium, and rhenium to enhance the company's comprehensive competitiveness.

7. Will the company pay attention to investment opportunities in other industries in the future?

Yunnan Copper stated: The company's main businesses mainly include mining and smelting. In the future, the company will continue to focus on its main businesses, strategically plan for "digital and intelligent transformation, expanding resources, refining mines, optimizing smelting, solidifying recycling (of copper), and meticulously managing rare and scattered (metals)", and on the basis of operating existing mines and smelters well, through a series of measures such as externally seeking resources, internally reducing costs, and benchmarking all factors in the market, on the one hand, it will continue to pay attention to high-quality resource projects and actively expand resource acquisition channels; on the other hand, it will strengthen the differentiated competitiveness of copper smelting, continuously improve asset quality, and promote the high-quality development of the enterprise.

In response to questions raised during a survey, Yunnan Copper announced in a notice on June 19 that on May 13, 2025, the company issued the "Notice on Suspension of Trading for the Purpose of Planning the Issuance of Shares to Purchase Assets and Raise Supporting Funds", stating that the company is planning to issue shares to purchase a 40% stake in Liangshan Mining Co., Ltd., held by Yunnan Copper (Group) Co., Ltd., and raise supporting funds. Currently, the company and all relevant parties are actively promoting various tasks related to this transaction.

In addition, Yunnan Copper's 2024 annual report shows that in 2024, the company achieved a total operating revenue of 178.012 billion yuan, up 21.11% YoY; and a net profit attributable to shareholders of 1.265 billion yuan, down 19.90% YoY. In 2024, the company produced 1.206 million mt of copper cathode, 12.71 mt of gold, 348.99 mt of silver, and 4.8286 million mt of sulphuric acid throughout the year.

The 2025 financial budget plan announced by Yunnan Copper Science & Technology Development Co., Ltd. in its 2024 annual report indicates the following production plans for the company's main products in 2025: The company is expected to produce 54,600 mt of copper contained in self-produced copper concentrates, 1.52 million mt of copper cathode, 16 mt of gold, 680 mt of silver, and 5.364 million mt of sulphuric acid throughout the year. The investment plan for 2025 is 1.617 billion yuan, covering fixed asset investments, digitalization projects, and geological exploration projects.

A research report previously issued by Guosen Securities on Yunnan Copper Science & Technology Development Co., Ltd. stated the following: In terms of production, the company's copper concentrate production (on a consolidated reporting basis) was 54,800 mt in 2024, a decrease of 10,000 mt YoY, due to a decline in output from the Pulang copper mine, its main mine. The attributable production volume was 57,800 mt, a decrease of 11.6% YoY. The consolidated copper cathode production volume was 1.206 million mt in 2024, a decrease of 12.6% YoY, mainly due to a 235,000 mt reduction in output from Southwest Copper due to relocation. Southeast Copper achieved a record high in copper cathode production of 470,000 mt after completing its electrolysis quality and efficiency improvement project. The smelting business is under short-term pressure but has long-term prospects. Leveraging the high-growth cycle of the copper industry in recent years, the company has improved its asset quality. As the only copper-listed platform under the Chalco Group, it is expected to receive high-quality asset injections from its major shareholder. Although the copper smelting business is under short-term pressure, the state has issued strict controls on new copper smelting capacity, and the company benefits from the global exit of copper smelting capacity, indicating a positive long-term outlook for the industry. Risk warnings: Risk of copper price decline and risk of copper concentrate TCs decline.