China Mining Weekly: Gold-Copper Profits Surge and Iron Ore Game Intensifies, Regulatory Tightening Drives Industry Consolidation

Bottom Line

This week, China's mining sector showed significant divergence: gold and copper companies experienced a profit explosion (Zijin Mining's half-year net profit surged 68% year-on-year, and Western Mining's net profit is expected to increase by over 50%), driving overall industry prosperity upward. However, the escalation of the China-Australia game in the iron ore sector (China Mineral Resources Group froze 7.22 million tons of iron ore from FMG) and the joint crackdown by regulatory authorities on illegal mining (five ministries deployed a special action) pose short-term pressures. Investors should increase holdings in gold and copper producers with cost advantages, while reducing exposure to targets with excessive iron ore exposure, and closely monitor the crowding-out effect of regulatory enforcement on small and medium-sized mining enterprises.

Key Developments

1. Zijin Mining's Half-Year Net Profit Exceeds 39.1 Billion Yuan, Daily Profit Over 200 Million — The company released its performance forecast for the first half of 2026, achieving a net profit attributable to the parent company of approximately 39.1 billion yuan (about $5.13 billion), a significant increase of 68% year-on-year. Its main business copper and gold production reached 534,000 tons and 47 tons, respectively. Portfolio implication: Hold or increase holdings in Zijin Mining (a publicly disclosed leader), whose performance growth rate far exceeds the industry average. Moreover, its dual copper-gold main lines benefit from AI computing power (copper price at a historical high of $14,153 per ton) and safe-haven demand, leaving room for valuation upside.

2. China Mineral Resources Group Freezes 7.22 Million Tons of Iron Ore from FMG, China-Australia Game Intensifies — In early July 2026, China Mineral Resources Group notified domestic steel mills not to revoke returns on two FMG iron ore products, resulting in approximately 7.22 million tons of ore being frozen. Previously, FMG's new products were rejected, and BHP had already compromised in April by increasing the proportion of RMB settlement. Portfolio implication: The risk of iron ore supply disruption has intensified. A-share companies holding stakes in Australian miners (such as those undisclosed but data-involved) may face short-term profit pressure. It is recommended to overweight targets with high domestic iron ore self-sufficiency rates, or switch to metals like copper and aluminum that are less impacted by this shock.

3. Hunan Gold Plans to Acquire Gold Tianyue and Zhongnan Smelting for 4.334 Billion Yuan, Taking Control of the Wangu Gold Mine — Hunan Gold (002155) disclosed a draft plan to acquire 100% equity of Gold Tianyue and 100% equity of Zhongnan Smelting through the issuance of shares and cash payment, with a total consideration of 4.334 billion yuan (about $569 million), further controlling the Wangu Gold Mine in Pingjiang, Hunan. Portfolio implication: M&A in the gold industry is accelerating. The reserve potential of the Wangu Gold Mine (discovered in 2025) will enhance Hunan Gold's resource endowment. Investors can focus on horizontal M&A opportunities among regional gold mining companies, especially policy-encouraged safe and compliant leading enterprises.

4. Five Ministries Jointly Deploy Special Action Against Illegal Mining in the Mining Sector — The Office of the State Council Safety Committee and four other ministries jointly issued a document, focusing on cracking down on illegal activities such as disguised mining under the guise of ecological restoration, overcapacity production, and unauthorized construction without approval, strengthening safety supervision. Portfolio implication: In the short term, this may cause some small and medium-sized mining enterprises to suspend production for rectification, reducing output but benefiting standardized large state-owned enterprises (such as China Minmetals and Zijin Mining). It is recommended to reduce holdings in small and medium-sized mining stocks with poor safety records and high capacity utilization, and increase allocation to targets with high ESG ratings (such as CMOC Group with an AA rating).

5. Minmetals Development Plans to Acquire Minmetals Mining and Luzhong Mining for 28.115 Billion Yuan, Promoting Large-Scale Asset Restructuring — Minmetals Development (600058.SH) announced a plan to acquire 100% equity of Minmetals Mining and 100% equity of Luzhong Mining for 28.115 billion yuan (about $3.676 billion), while divesting assets worth 5.519 billion yuan (about $722 million). Portfolio implication: Central enterprise consolidation continues to deepen. China Minmetals Group will significantly enhance its control over iron ore and non-ferrous metal resources. After the restructuring, Minmetals Development's resource self-sufficiency rate and earnings stability are expected to improve. It is recommended to monitor valuation switching opportunities after asset injection.

Sector Pulse

Risk Watch

• Iron Ore Supply Chain Disruption Risk — If the ore price dispute between China and FMG/BHP escalates further, it may cause short-term supply gaps (the freezing of 7.22 million tons has already caused an impact). Probability: Medium. Impact: High.

• Regulatory "Crackdown on Illegal Mining" Enforcement Exceeds Expectations — If the joint departments (five ministries) severely investigate and punish small and medium-sized mining enterprises, it could lead to a production reduction of over 10%, especially affecting the supply of small metals like lithium and rare earths. Probability: Medium. Impact: Medium.

• Risk of Copper Price Correction from High Levels — LME copper prices have already corrected from the historical high of $14,153 per ton in May. If AI computing power investment growth slows or global recession expectations heat up, copper mining stocks may face valuation corrections. Probability: Low. Impact: High.

Outlook

Key events and indicators to monitor next week:

• Formal half-year report disclosures of A-share mining companies such as Zijin Mining and Western Mining (intensive period in mid-to-late July)
• Progress of subsequent negotiations between China Mineral Resources Group and FMG regarding frozen ore (whether it expands to other products)
• Detailed implementation rules from the Ministry of Industry and Information Technology on the policy for "installing and using well" smart mine systems (first batch of promoted equipment list)

Positioning consideration: In the short term, increase holdings in gold and copper mining leaders (Zijin Mining, Hunan Gold), reduce holdings in targets with high iron ore exposure, and allocate to CMOC Group with excellent ESG ratings (AA) to hedge against regulatory risks.