Gold Supercycle and Policy Synergy: Dual Drivers for the Mining Sector

Bottom Line

This week, gold prices breaking historical highs, combined with strong policy catalysts from the central government, have created a robust dual investment thesis for China's mining sector. Investors should immediately increase allocations to leading gold mining companies and smart mining equipment manufacturers with core technological advantages, focusing on structural opportunities benefiting from large-scale equipment renewal.

Key Developments

1. Zijin Mining's Record Acquisition: Gold Giant Accelerates Global Resource Consolidation — Zijin Mining plans to acquire Canada's Allied Gold for approximately RMB 28 billion in an all-cash deal, gaining four producing gold mines in West Africa. This marks its largest acquisition ever, aiming to capitalize on the window of historically high gold prices to significantly boost gold resource reserves and production. Portfolio implication: This move strengthens Zijin's resource control amid a volatile geopolitical environment and continues its "counter-cyclical M&A" strategy. Investors should view it as a core target for industry consolidation. Its economies of scale and cost-control capabilities are expected to release excess profits during the high gold price cycle, warranting continued overweight as a cornerstone holding in the gold sector.

2. MIIT Issues "Mining Equipment Renewal Implementation Plan," Setting 60% Renewal Rate Target — The Ministry of Industry and Information Technology (MIIT) released a targeted policy explicitly encouraging enterprises to renew mining equipment, with a goal of achieving a 60% renewal coverage rate, supported by fiscal, tax, and financial measures. This policy represents the concrete implementation of the national "large-scale equipment renewal" strategy in the mining sector. Portfolio implication: This policy provides top-down certainty for incremental demand in mining equipment, expected to unlock a market worth hundreds of billions over the next 2-3 years. Focus should be on leading equipment manufacturers excelling in intelligence (e.g., Sany Heavy Industry) and green initiatives (e.g., meeting new emission regulations). Their order visibility and profit margins will significantly improve, making them clear policy beneficiaries.

3. Sinomine Resource Group Completes $10B Gold Mine Acquisition in 40 Days, Unprecedented Consolidation Speed — Sinomine Resource Group completed the acquisition of Brazilian gold assets (maximum consideration $1.015 billion) in just 40 days, expected to add 5.013 million ounces of gold resources and contribute approximately 6 tons of production by 2026. Portfolio implication: This event demonstrates the urgency and execution capability of Chinese mining companies in acquiring high-quality overseas resources under the "Gold Supercycle" expectation, potentially shortening the M&A window. Investors need to reassess the growth potential and execution efficiency of leading miners (e.g., Sinomine Resource Group, Hunan Gold). Such efficient acquirers deserve a valuation premium.

4. Sany Heavy Industry Launches New Generation Intelligent Excavator, Secures Batch Orders — Sany Heavy Industry launched a new generation intelligent excavator integrated with AI and 5G technology, optimized for the Chinese market, claiming to improve mining efficiency by over 30%, and has already secured initial batch orders. Portfolio implication: This is not just a product upgrade but an evolution of the business model from "selling equipment" to "selling efficiency solutions." Sany's first-mover advantage in the smart mining track is further solidified, with order fulfillment validating market demand. It should be considered a core beneficiary of mining intelligence transformation. The increasing proportion of its high-margin intelligent products will drive valuation re-rating.

Sector Pulse

Risk Watch

• Risk of Short-Term Overbought Gold Price Correction — After breaking through $5,250/oz, gold prices show clear signs of short-term technical overbought conditions. Strong U.S. economic data or more hawkish signals from the Fed could trigger a significant price correction, subsequently dampening sentiment for mining stocks. Probability: Medium. Impact: High.

• Sudden Increase in Environmental and Safety Compliance Costs — Successive new regulations from the Ministry of Natural Resources and other departments on green manufacturing and real-time monitoring, while beneficial for industry upgrading in the long term, will directly raise compliance costs for mine operations and equipment manufacturers in the short term, eroding some profits. Probability: High. Impact: Medium.

• Political and Operational Risks in Overseas Resource M&A — Intensive M&A activities by Chinese mining companies in regions like West Africa and South America elevate geopolitical risks (e.g., resource nationalism, community issues) and cross-border operational challenges (e.g., cultural integration, supply chain), potentially affecting projected returns of projects. Probability: Medium. Impact: High.

Outlook

Key events and indicators to monitor next week:

• Gold production and consumption data for January released by the China Gold Association, verifying domestic demand strength.
• Further announcements and market roadshow feedback from Zijin Mining, Sinomine Resource Group, etc., regarding major acquisition matters.
• Equipment sales and order structure data for January from leading equipment manufacturers like Sany Heavy Industry and XCMG, observing initial effects of policy stimulus.

Positioning consideration: Under the dual themes of gold and policy, adopt a "core + satellite" allocation strategy: Core positions focus on gold leaders with abundant resource reserves and strong M&A execution (Zijin, Sinomine); Satellite positions allocate to smart/green mining equipment leaders with the highest beneficiary certainty (Sany Heavy Industry), while closely monitoring additional catalysts from the implementation of policy details.