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机构：中金公司
研究员：Zheng WANG/Ding QI/Yan CHEN
According to the company’s announcement on the evening of December 10, JCHX Mining Management signed an equity cooperation agreement with Terra Mining in Australia and its shareholder, DAI RUI, to purchase a 51% stake in Terra Mining for AUD1. Terra Mining specializes in open-pit mine drilling, blasting, loading, transportation, crushing, as well as mining design and development.
Comments
Terra Mining's transaction consideration is low, and JCHX Mining Management will assume the bad debt losses from its tradereceivables. According to the announcement, the equity transfer of Terra Mining is primarily due to its tight financial situation. The company operates the Extension Hill Magnetite mine project under an integrated custody operation model. However, due to heavy capital investments, a long capital settlement period, and the inability to collect sales proceeds caused by customer issues, the company has nearly fully written off its bad debts.
Terra Mining reported a net loss of AUD8.64mn in FY24 (the Australian fiscal year runs from July 1 to June 30 of the following year) and net liabilities of AUD1.59mn.
JCHX Mining Management can meet Terra Mining's funding needs and assist in recovering arrears through legal means. According to theannouncement, Terra Mining’s future capital requirements can be covered by its own funds, supplemented by senior shareholder loans provided by JCHX Mining Management. Additionally, for receivables already provisioned as bad debts, JCHX Mining Management plans to help recover the arrears and reduce losses through legal measures.
Terra Mining and the firm’s mining service business complement each other, and we expect it to serve as a platform for the firm toaccelerate global expansion. Terra Mining is an Australian-registered mining service company with over 20 years of experience in Australia and a diversified professional management team. We believe that Terra Mining and the firm hold significant strengths in open-pit and underground mining services, respectively. These complementary capabilities can create synergies, supporting the expansion of the company’s business chain.
Furthermore, the acquisition provides a platform and opportunities for the firm to enter the overseas mining services market in developed regions such as Australia, while also enhancing the company’s international operations.
Overall, as a leading provider of integrated mine operation services, the firm has achieved notable milestones in its mining services and resources integration strategy, highlighting its strong assetallocation value. In the mining services segment, the firm has made progress in both domestic and overseas markets. We believe the M&A will further accelerate the internationalization of the firm's mining services segment and the globalization of its resources business. In the resources sector, the firm's mining services and resources integration strategy has transformed it from a single mine development service provider into a diversified mining conglomerate. We expect its earnings growth to accelerate as copper mine output increases.
Financials and valuation
We keep our 2024 and 2025 earnings forecasts unchanged. The stock is trading at 17x 2024e and 13x 2025e P/E. We maintain an OUTPERFORM rating and TP of Rmb57, implying 23x 2024e and 18x 2025e P/E, offering 39% upside.
Risks
Sharp fluctuations in product prices; disappointing capacity expansion; geopolitical risks in countries where overseas projects are located.
