China/Hong Kong Gold Sector

Transcription

1 METALS & MINING 17 January 211 OVERWEIGHT Robin TSUI Key Highlights of this Report *Detailed commodity price assumptions Page 4 *Central banks' gold holdings as % of foreign reserves Page 7 *China & India s jewellery demand Page 6 *Industrial demand for gold recovering Page 8 *Gold supply shortfall continuing Page 8 Where are we Different? *Our more bullish view on gold, copper and zinc with long dated prices assumed to stay higher for longer. Metal Price Forecasts 211E 212E 213E 214E Longdated Gold (US$/oz) BOCI 1,42 1,38 1,3 1,2 95 Consensus 1,425 1,355 1,24 1, Copper (US$/tonne) BOCI 9, 8,7 8,5 8,4 6, Consensus 9,58 9,5 9,39 8,189 5,- 6, Zinc (US$/tonne) BOCI 2,364 2,625 2,35 2,425 2,5 Consensus 2,48 2,443 2,8 2,412 1,8-2, Sources: Bloomberg, BOCI Research estimates Key BOCI Events/ Catalysts G-Resources Martabe Gold Mine site visit (IJ) CST Mining NDR (HK) 9-11 Feb 15 Feb Gold Universe Share Target Company Code Rating price price Upside (HK$) (HK$) (%) China Gold Int l 299.HK BUY G-Resources 151.HK BUY Real Gold Mining 246.HK BUY Zhaojin Mining 1818.HK HOLD Zijin Mining - H 2899.HK BUY Zijin Mining - A SS BUY (Rmb) Sources: Company data, Bloomberg, BOCI Research estimates Closing prices as of 14 January 211 All figures subject to rounding Sector Update China/Hong Kong Gold Sector Entering a golden period In 211, gold is set to ride through the year with higher price volatility, as investors digest global economic data to determine where the global economy is heading. Although gold prices have had some correction lately with the increase in investors risk appetite over the optimism of the global economic outlook, we do not see a forthcoming major price correction. After all, more than 6% of global gold consumption is driven by jewellery consumption and industrial sectors, which are positively correlated with economic growth. We upgrade Zijin Mining to BUY as its diversified production base and higher metal prices should translate to a strong year ahead. The stock underperformed against the HSI and its peers in 21 and we think its current price offers value. With the increase in price volatility, we also prefer the smaller-cap gold producers which can offer larger production and earnings growth upsides, coupled with attractive valuations. We maintain our BUY on Real Gold, China Gold International Resources and G-Resources and downgrade Zhaojin to HOLD on valuation grounds. Key Factors for Rating Global economic outlook remains uncertain. Any potential inflationary pressure should have a positive effect on gold prices. Strong global jewellery demand led by India and China, which are registering strong economic growth. Key Risks Increase in gold price volatility. Global economic recovery leading to hot money flowing from commodities to equities. Buys Zijin Mining, Real Gold Mining, China Gold International Resources, and G Resources. Figure 1. Gold Price Assumptions 211E 212E 213E 214E Gold (US/oz) - Old 1,245 1,25 1,2 1,5 Gold (US/oz) - New 1,42 1,38 1,3 1,2 Change % Street 1,425 1,355 1,24 1,168 BOCI vs Street (%) Source: BOCI Research estimates BOCI research is available electronically on Bloomberg (BOCR <go>), thomsonreuters.com and at NB: BUY = +1% compared with the relevant benchmark index over a 6-month period; SELL = -1% compared with the relevant benchmark index over a 6-month period; HOLD = +1% and -1% compared with the relevant benchmark index over a 6-month period; Not Rated (NR)

2 Table of Contents BOCI VIEW FOR KEY INDUSTRY THEMES TO LOOK AHEAD...6 G-RESOURCES...1 REAL GOLD MINING...12 CHINA GOLD INT L RESOURCES...14 ZHAOJIN MINING...16 ZIJIN MINING...18 LISTED COMPANIES IN THIS REPORT January 211 China/Hong Kong Gold Sector 2

3 BOCI VIEW FOR 211 We expect an increase in price volatility in 211 Strong demand from the jewellery and industrial sectors Gold has such a diverse range of usage that we do not think it will warrant a huge price correction In 21, gold was at the right place at the right time After registering a 3% return last year, gold had an exceptional year, beating historical highs for numerous times. Gold was at the right place at the right time. Mounting sovereign debts in the euro zone, sluggish unemployment outlook in the US, muted economic growth (with the exception of Asian markets), and deprecating currencies had investors fleeing to gold as a safe haven and currency hedge. 211 should be no repeat of 21. Moreover, demand will likely come from a different angle. Global economic data in 211, in particular from the US, are expected to read better than 21. Investors risk appetite should increase, and hot money move from commodities to equities. In 211, we expect gold price volatility to increase as investors continuously digest global economic data to determine where the global economy is heading. From the latest statistics available from the World Gold Council (WGC), investment demand now represents nearly 37% of global gold demand compared to just 16% in 25. The easy access to gold investment vehicles such as ETFs contributed to the increase in price volatility. Demand to come from a different angle Investors get increasingly nervous whether 211 will be a year of correction for gold price after the 3% gain last year. Factors such as the improving global economic conditions in the West, appreciating US dollar and increasing investors risk appetite would weaken gold s role as safe haven as well as currency hedge, leading to a decrease in investment demand. In 211, gold demand is likely to approach from a different angle to the previous. We expect an increase in consumption from the jewellery and industrial sectors, backed by the growth in the East. Investment demand should stay robust as investors view gold as an investment asset and gold has its inflation hedge function should there be any sign of inflationary pressure. After all, more than 6% of global gold consumption is driven by jewellery consumption and industrial sectors, which are positively correlated with economic growth. We do not think there will be a major price correction. Gold s uniqueness to support price Gold can be used for multiple purposes: making jewellery, investment, manufacturing of goods in the industrial and dental sectors, currency and inflation hedge, safe haven as well as store of value. No other commodities can offer this diverse range of usage. This is what makes gold unique. Since 21, gold prices have gained an average of 18% YoY, which means gold can find support during the times of boom and bust. 17 January 211 China/Hong Kong Gold Sector 3

4 We do not view our 211 gold price as being too aggressive as it is only 4% above the current spot price Raising commodities price assumptions We raise our gold price assumptions for 211, 212, 213 and 214 by 14%, 1%, 8% and 14% to US$1,42/oz, US$1,38/oz, US$1,3/oz and US$1,2/oz, respectively. We keep our long term price assumption at US$95/oz. Where we are different from the street is our long dated gold price. Our price assumptions for 213 and 214 are 5% and 3% higher than the street, respectively. We do not view our 211 gold price as too aggressive as it is only 4% above the current spot price. Figure 2. New Gold Price Forecasts BOCI metals price forecasts 211E 212E 213E 214E Gold (US/oz) - Old 1,245 1,25 1,2 1,5 Gold (US/oz) - New 1,42 1,38 1,3 1,2 Change % Street 1,444 1,4 1,24 1,168 BOCI VS Street (%) (2) (1) 5 3 Sources: Bloomberg, BOCI Research estimates Figure 3. Commodity Price Assumptions BOCI metals price forecasts 211E 212E 213E 214E Copper (US$/tonne) Old 8,2 8,5 8, 7,5 New 9, 8,7 8,5 8,4 Change % Silver (US$/oz) Old New Change % Zinc (US$/tonne) Old 2,22 2,423 2,232 2,12 New 2,364 2,625 2,35 2,425 Change % Lead (US$/tonne) Old 2,364 2,349 2,34 1,932 New 2,35 2,4 2,35 2,352 Change % Source: BOCI Research estimates We favour Zijin Mining, Real Gold, China Gold International Resources, and G Resources Be selective on gold stocks We upgrade Zijin Mining to BUY as its diversified production base and higher metal prices should translate to a strong year ahead. The stock underperformed against the HSI and its peers in 21 and we think the current price offers value. In the current environment with higher price volatility, we also prefer the smaller cap gold producers, which can offer larger production and earnings growth upsides, coupled with attractive valuations. We maintain our BUY on Real Gold, China Gold International Resources and G Resources. We have a HOLD on Zhaojin as we see limited upside from the current level. 17 January 211 China/Hong Kong Gold Sector 4

5 Figure 4. Valuation Matrix Global Peers Comparison Stock code Ccy Closing price Market cap Rating P/E (x) P/CF (x) Yield (%) EV/EBITDA (x) (US$) 21E 211E 21E 211E 21E 211E 21E 211E North America Golden Star Resources GSS US$ ,19 NR NA NA Iamgold IAG US$ ,662 NR Newmont Mining NEM US$ ,463 NR Agnico-Eagle Mines AEM US$ ,887 NR Barrick Gold ABX US$ ,346 NR Centerra Gold CG C$ ,189 NR Goldcorp CG US$ ,595 NR Average for North America Australia OZ Minerals OXR A$ ,547 NR Kingsgate Consolidated KCN A$ ,72 NR Newcrest Mining NCM A$ ,7 NR Average for Australia South Africa Anglogold Ashanti ANG ZAr 3,45 16,857 NR Gold Fields GFI ZAr 11,543 11,982 NR Average for South Africa Hong Kong Zijin Mining - H 2899.HK HK$ ,511 BUY Lingbao Gold - H 333.HK HK$ NR NA NA Zhaojin Mining - H 1818.HK HK$ ,73 HOLD Real Gold Mining 1819.HK HK$ ,527 BUY China Gold In t 299.HK HK$ ,61 BUY NA NA NA NA G-Resources 151.HK HK$.59 1,67 BUY NA NA NA NA 95.7 Average for Hong Kong China - A Shandong Gold Mining 6547.SS Rmb ,918 BUY Zijin Mining - A SS Rmb ,515 BUY Zhongjin Gold 6489.SS Rmb ,747 NR Average for China - A Sources: Bloomberg, BOCI Research estimates 17 January 211 China/Hong Kong Gold Sector 5

6 Figure 5. Global Gold Demand Breakdown: 9M1 Industrial 11% KEY INDUSTRY THEMES TO LOOK AHEAD Investment 37% Source: WGC Jewellery 52% Figure 6. China and India s Dominance in Gold Jewellery Consumption Rest of the World 47% Source: WGC Greater China 21% India 32% Figure 7. India s Jewellery Demand Trend tonnes (% ) E India (LHS) Real GDP YoY% (RHS) *21E figures are based on annualising the 9 month actual figures from WGC s data. Sources: WGC, BOCI Research estimates Figure 8. China s Jewellery Demand Trend tonnes (% ) E China (LHS) Real GDP YoY% (RHS) *21 figures are based on annualising the 9 month actual figures from WGC Sources: WGC, BOCI Research estimates There were several key themes that drove global gold demand and prices in 21: robust demand for jewellery from Asian markets; increase in investment demand over economic concerns in the US and Europe; potential inflation fears; and recovery in the use of gold by the industrial sector. These themes are likely to continue and we will see gold prices supported by these factors in 211. Also, central banks are likely to hold and remain a net buyer of gold as they continue to view gold as a store of value and as a means to divert investments from their US dollar foreign reserves. Below is a list of key industry themes that we should pay attention to in 211: 1. China and India s economic growth: China and India are currently the largest buyers of gold jewellery and their respective economic growth and consumer confidence will play an essential role in supporting global gold prices. According to the latest data available from the WGC, for 9M1, jewellery demand represented 52% of total global gold demand. Within the 52%, consumption from India and Greater China contributed 32% and 21%, respectively. Economic growth is linked to consumer spendings, which include the purchase of discretionary items such as gold. Our China economic team forecasts the Chinese economy will grow at 8.6% in 211, and according to IMF, India s growth will come in at 8.4%. We expect the Middle East countries and the US, which are traditionally two big buyers of gold, to pick up their jewellery consumptions as their respective economies heat up. For jewellery consumption, we see limited downside. 2. US and European economic conditions: Gold investment demand grew to 37% of total demand in 9M1 as weak economic conditions in the US and Europe had investors fleeing to gold as safe haven. Aggressive monetary expansions by central banks such as the QE2 in the second half of 21 also generated excessive hot money flowing into commodities. Both regions economic conditions should improve in 211, leading to the re allocation of funds from commodities to equities but we do not think it would warrant a huge correction in gold prices as investors still see gold as an investment asset. Negative news coming from the US unemployment report and European central bank s balance sheet will continue to put pressure on the dollar and euro, but the magnitude should be quite different from the previous year as both are in an economic recovery phase. Gold price volatility should increase amid an uncertain environment but we are confident in our gold price assumption of US$1,42/oz this year. Almost all of the clients we have talked to are bullish on gold in the near term. 17 January 211 China/Hong Kong Gold Sector 6

7 Figure 9. Central Banks Becoming Net Buyers Since 2Q9 (tonnes) Q9 2Q9 3Q9 4Q9 1Q1 2Q1 3Q1 Source: WGC Figure 1. Global Gold Holdings (tonnes) 9, 8, 7, 6, 5, 4, 3, 2, 1, USA Germany IMF Source: Bloomberg Italy France China Switzerland Russia Japan Netherlands 3. Central banks are net buyers of gold: When you see the central banks become net buyers of gold, it re assures us that even the government officials are upbeat on gold prices. Since 2Q9, central banks have turned from net sellers to net buyers of gold. Why? Central banks are diversifying their foreign exchange reserves, which means they are losing confidence in the US dollar. Flight to quality, inflation hedge to offset inflationary pressure, and expectation of higher gold prices are also incentives for central banks to hold onto gold. According to WGC, the central banks of Russia, the Philippines, Thailand and Bangladesh were the latest banks to add their gold holdings. Another question we seek to answer is whether China s central bank would increase its current gold holdings of 1,54 tonnes. The latest official gold holdings show that China s holdings were 1.7% of their total foreign reserve, less than most of the developed and emerging markets. Figure 11. Central Banks Gold Holdings as % of Foreign Reserves Countries Tonnes % of total foreign reserve USA 8, Germany 3, IMF 2,846.7 Italy 2, France 2, China 1, Switzerland 1, Russia Japan Netherlands Source: Bloomberg 4. Economic growth to improve industrial demand According to the latest data available from the WGC, gold consumption from the industrial sectors represents 11% of global gold demand and the WGC expects the economic growth in key markets such as China and India to drive demand for consumer electronics. Gold s properties of conductivity, malleability and resistance to corrosion are viewed as the material of choice for industrial uses. Gold consumption from the industrial sector has returned to long term trend levels backed by the resilience of the Asian markets. Again, like jewellery demand, the demand from Chinese and Indian markets will remain the key in January 211 China/Hong Kong Gold Sector 7

8 Figure 12. Breakdown of Industrial Demand Dentistry 11% Source: WGC Other industrial demand 18% Electronic demand 71% Figure 13. Recovery in Industrial Demand (tonnes) Source: WGC Asia Europe US Other 1H9 1H1 Figure 14. Industrial Demand Trend (tonnes) E Sources: WGC, BOCI Research estimates *21E figures are based on annualising the 9 month actual figures from WGC s data. 5. The supply/demand curve: Basic microeconomics has taught us when demand exceeds supply, an increase in price will follow. The world s supply of gold from mines is decreasing. In 2, the world produced 2,59 tonnes of gold versus 2,35 tonnes in 29, a 9.2% drop. Lower gold grade, higher production cost, and production delays at mines all contributed to the decline. WGC expects mine supply to come from China, Australia and US, albeit declining ore grades and rising costs will contribute to the lower output from countries including South Africa and Peru. From the earliest available data, gold demand has been outpacing mine supply since 22, creating an average deficit of more than 1,4 tonnes every year and the deficit has only been met by other channels including central bank sales and the supply of recycled gold to the market. The deficit will continue into 211. Figure 15. Global Gold Output (tonnes) (% ) 2,7 2,6 5% 4% 3% 2,5 2% 2,4 1% % 2,3-1% -2% 2,2-3% 2,1-4% -5% 2, -6% Source: WIND database World output (LHS) YoY % (RHS) Figure 16. Gold Output from Major Producing Countries (tonnes) China Australia Russia South Africa USA Source: WIND Database 17 January 211 China/Hong Kong Gold Sector 8

9 Figure 17. Mine Supply/ Gold Demand Deficit (tonnes) M1 Mine supply 2,179 2,322 2,37 2,464 2,18 2,31 2,6 2,327 1,869 Gold demand 3,559 3,883 3,363 4,12 3,582 3,453 3,68 4,28 2,993 Surplus/(Deficit) (1,38) (1,561) (1,326) (1,548) (1,474) (1,422) (1,548) (1,71) (1,124) Central bank sales (111) Recycled gold , ,316 1,672 1,235 Surplus/(Deficit) Source: WGC 17 January 211 China/Hong Kong Gold Sector 9

10 METALS & MINING Precious Metals Target Price Change Share Price vs Index HK$ HK 14/1/1 14/2/1 14/3/1 14/4/1 14/5/1 Robin TSUI /6/1 14/7/1 G-Resources Group Ltd Sources: Bloomberg, BOCI Research Share Price Performance 14/8/1 14/9/1 14/1/1 Turnover (HK$ m) 25 14/11/1 14/12/1 (%) YTD 1M 3M 12M Absolute (1.6) Relative to HSI (6.5) (4.7) Sources: Bloomberg, BOCI Research Key Data 17 January 211 BUY 151.HK HK$.59 Target Price: HK$.61 (.51) Total issued shares (m) 14,67 Free float (%) 82 Free float mkt. cap. (HK$ m) 6,786 3M avg. daily turnover (HK$ m) 28 Net debt/equity (%) (21 E) Net cash Major shareholders (%) China Sci-Tech 9 Sources: Company data, Bloomberg, BOCI Research estimates HSI 14/1/ G-Resources Production not far off We maintain our BUY call on G-Resources and raise our target price from HK$.61 to HK$.71 based on 1.3x P/NAV. Incorporating our new commodities price assumptions, we increase our 212E earnings (the first year of gold production from the Martabe mine) by 34% to HK$79m and 213E earnings by 18% to HK$1,24m. Further exploration upside at the mine and the expected launch of production in 4Q11 will be the two foremost catalysts in 211. Construction activities at the Martabe mine are sailing smoothly and we believe a further stock re-rating should begin once the initial production date edges closer. It is now a good time to BUY the stock. Key Factors for Rating Production is expected to commence in 4Q1 Low cash production cost of below US$28/oz. Key Risks to Rating Further delays in production. Higher than expected capex. Valuation Our target price is based on 1.3x P/NAV and our DCF valuation, with a beta of 1.2, a risk free rate of 2.2%, a market risk premium of 8.% and a cost of equity of 11.36%. Investment Summary Year ended 3 Jun E 212E 213E Revenue (HK$ m) ,156 2,866 Change (%) 172 (8) , Net profit (HK$ m) (164) (352) (28) 79 1,24 Fully diluted EPS (HK$) (.181) (.25) (.2) Change (%) (86.2) (92.) (2,93.) 52.5 Consensus EPS (HK$) - (.11) (.1) Previous EPS (HK$) - - (.2).42 - Change (%) N/A Core EPS (HK$) (.181) (.25) (.2) Change (%) (86.2) (92.) (2,93.) 52.5 Fully diluted P/E (x) N/M N/M N/M Core P/E (x) N/M N/M N/M CFPS (HK$) (.8) (.1) P/CF (x) (7.4) (43.6) EV/EBITDA (x) (6.1) (72.6) (345.2) DPS (HK$)..... Yield (%) January 211 China/Hong Kong Gold Sector 1

11 Income Statement (HK$ m) Year ended 3 Jun E 212E 213E Revenue ,156 2,866 Cost of sales (28) (5) (14) (653) (756) Operating expenses (exclude (44) (85) (23) depreciation & amortisation) EBITDA (43) (84) (22) 1,56 2,144 Depreciation & amortisation (1) (1) (1) (465) 477 Operating profit (EBIT) (44) (85) (23) 1,95 1,666 Net interest income/(expenses) Other gains/(losses) (121) (271) (6) 2 Pre-tax profit (164) (352) (28) 1,97 1,67 Tax on profit (37) (467) Minority interests Net profit (164) (352) (28) 79 1,24 Core net profit (153) (352) (28) 79 1,24 EPS (HK$) (.194) (.25) (.2) Core EPS (HK$) (.181) (.25) (.2) DPS (HK$)..... Revenue growth (%) 172 (8) , EBIT growth (%) (14) 95 (73) (4,791) 52 EBITDA growth (%) (15) 98 (74) (7,83) 37 EPS growth (%) 257 (87) (92) (2,93) 53 Core EPS growth (%) 23 (86) (92) (2,93) 53 Balance Sheet (HK$ m) As at 3 Jun E 212E 213E Cash & cash equivalents 237 2, ,82 3,176 Receivables Inventories Other current assets Total current assets 271 2, ,939 3,333 Fixed assets 3 2,378 4,35 3,832 3,355 Intangible assets Other long term assets Total long-term assets 231 2,471 4,129 3,926 3,448 Total assets 52 4,828 4,795 5,865 6,781 Creditors Short-term debt Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Share capital Reserves 489 4,546 4,514 5,66 6,54 Shareholders' equity 497 4,687 4,654 5,746 6,645 Minority interests Total liabilities & equity 52 4,828 4,795 5,865 6,781 Book value per share (HK$) Tangible assets per share (HK$) Net debt/(cash)per share (HK$) (.28) (.15) (.4) (.13) (.23) Cash-flow Statement (HK$ m) Year ended 3 Jun E 212E 213E Pre-tax profit (164) (352) (28) 1,97 1,67 Depreciation & amortisation Net interest expenses (1) (4) (2) (2) (2) Change in working capital (26) (21) 12 (82) (3) Tax paid 1 Other operating cash flows (3) Cash flow from operations (184) (11) 8 1,478 2,141 Net purchase of fixed assets (1) (2,35) (2,) (262) Decrease/(increase) in invest. Other investing cash flows 76 Cash flow from investing 76 (2,35) (2,) (262) Net increase in equity (1) 4,413 1 Net increase in debt 156 Dividends paid Other financing cash flows 19 (67) 332 (2) (768) Cash flow from financing 264 4, (2) (767) Change in cash 156 1,94 (1,588) 1,213 1,374 Cash at beginning of year , ,82 Free cash flow to firm (18) (2,45) (1,92) 1,216 2,141 Free cash flow to equity 48 (2,45) (1,92) 1,216 2,141 Key Ratios Year ended 3 Jun E 212E 213E Profitability (%) EBITDA margin (146.7) (1,451.9) (148.9) EBIT margin (151.) (1,469.1) (155.6) Pre-tax margin (565.6) (6,64.7) (187.8) Net profit margin (565.5) (6,64.7) (187.8) Liquidity (x) Current ratio Interest coverage (97.7) (19.1) (52.) n.a. n.a. Net debt to equity (%) Net cash Net cash Net cash Net cash Net cash Quick ratio Valuation (x) P/E N/M N/M N/M Core P/E N/M N/M N/M Core target price N/M N/M N/M P/B P/CF (7.4) (43.6) EV/EBITDA (6.1) (72.6) (345.2) Activity ratios Inventory days Accounts receivables days , Accounts payables days , Returns (%) Dividend payout ratio n.a. n.a. n.a... Return on equity (34.2) (13.6) (.6) Return on assets (8.6) (3.2) (.5) Return on capital employed (8.9) (3.1) (.5) January 211 China/Hong Kong Gold Sector 11

12 METALS & MINING Precious Metals Share Price vs Index HK$ /1/1 P 15/2/1 15/3/1 15/4/1 15/5/1 15/6/1 15/7/1 Robin TSUI robin.tsui@bocigroup.com Real Gold Mining Ltd Sources: Bloomberg, BOCI Research Share Price Performance Turnover (HK$ m) 1,6 1,4 1,2 1, /8/1 15/9/1 15/1/1 15/11/1 15/12/1 15/1/11 HSCEI (%) YTD 1M 3M 12M Absolute (6.2) (8.4) (11.1) 11.4 Relative to HSCEI (8.1) (12.1) (6.1) 6.7 Sources: Bloomberg, BOCI Research Key Data 17 January 211 BUY 246.HK HK$13.6 Target Price: HK$15.98 ( 15.2) Total issued shares (m) 95 Free float (%) 59 Free float mkt. cap. (HK$ m) 6,975 3M avg. daily turnover (HK$ m) 7 Net debt/equity (%) (21 E) Net cash Major shareholder (%) Lead Honest 41 Sources: Company data, Bloomberg, BOCI Research estimates Target Price Change Real Gold Mining Year of Execution We reiterate our BUY call on Real Gold due to its attractive valuation and visible production growth for the next two years. The Fuyuan and Daping gold mines in Yunnan and Jiangxi are scheduled to commence production in July and October this year, respectively, bringing the company s gold production to 5 tonnes in 211, a 16% YoY growth. Given the full-year contribution from the Fuyuan and Daping mines and the expected commencement of production at the Yandan/Yantang gold mines in Guangxi in early 212, gold production should jump to 6.7 tonnes in 212, a 34% YoY growth, and a CAGR of 25% during , the highest among its peers. This year is important to Real Gold as further production delays at mines outside Inner Mongolia would bring doubts over the management s execution. However, we have heard that mine construction is going well and remain confident in the progress. The counter trades at 1x 211 P/E and remains an attractive stock. Key Factors for Rating Visible production growth in the near term. Healthy balance sheet. Key Risks to Rating Lower than expected gold prices and production volumes. Further delays in mines production. Valuation We raise our target price from HK$15.98 to HK$16.3 after incorporating our new commodities assumptions and lifting our P/NAV to 1.4x. Our DCF valuation is derived with a beta of 1.1, a risk free rate of 2.2%, a market premium of 8.% and a cost of equity of 11.8%. Investment Summary Revenue (Rmb m) 312 1,11 1,446 1,815 2,178 Change (%) Net profit (Rmb m) ,51 Fully diluted EPS (Rmb) Change (%) Consensus EPS (Rmb) Previous EPS (Rmb) Change (%) - - (1.1) Fully diluted P/E (x) CFPS (Rmb) (.34) P/CF (x) (32.4) EV/EBITDA (x) DPS (Rmb)..... Yield (%) January 211 China/Hong Kong Gold Sector 12

13 Income Statement (Rmb m) Revenue 312 1,11 1,446 1,815 2,178 Cost of sales (81) (263) (365) (478) (765) Operating expenses (exclude (38) depreciation & amortisation) EBITDA ,233 1,5 1,63 Depreciation & amortisation (9) (33) (95) (1) (116) Operating profit (EBIT) ,137 1,4 1,487 Net interest income/(expenses) Other gains/(losses) Pre-tax profit ,143 1,48 1,496 Tax on profit (75) (193) (312) (384) (48) Minority interests (6) (17) (27) (34) (36) Net profit ,51 Core net profit ,51 EPS (Rmb) Core EPS (Rmb) DPS (Rmb)..... Revenue growth (%) n.a EBIT growth (%) n.a EBITDA growth (%) n.a EPS growth (%) n.a Core EPS growth (%) n.a Balance Sheet (Rmb m) As at 31 Dec E 211E 212E Cash & cash equivalents 42 1,958 3,22 3,981 5,21 Receivables Inventories Other current assets 427 Total current assets 69 2,424 3,27 4,43 5,98 Fixed assets Intangible assets Other long term assets Total long-term assets ,39 1,58 1,668 Total assets 582 3,78 4,578 5,623 6,766 Creditors Short-term debt Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Share capital Reserves 19 1,88 3,565 4,554 5,66 Shareholders' equity 497 2,484 4,36 5,35 6,41 Minority interests Total liabilities & equity 582 3,78 4,578 5,623 6,766 Book value per share (Rmb) Tangible assets per share (Rmb) Net debt/(cash)per share (Rmb) (.1) (2.55) (3.56) (4.4) (5.55) Cash-flow Statement (Rmb m) Pre-tax profit ,143 1,48 1,496 Depreciation & amortisation Net interest expenses (2) (6) (8) (9) Change in working capital (194) Tax paid (75) (193) (312) (384) (48) Other operating cash flows Cash flow from operations (75) ,126 1,234 Net purchase of fixed assets (36) (174) (85) (341) (168) Decrease/(increase) in invest. Other investing cash flows (31) (36) Cash flow from investing (271) (174) (75) (372) (24) Net increase in equity 388 1,459 1,73 Net increase in debt Dividends paid Other financing cash flows Cash flow from financing 387 1,462 1, Change in cash 41 1,915 1, ,4 Cash at beginning of year ,958 3,22 3,981 Free cash flow to firm (346) ,4 Free cash flow to equity (346) ,4 Key Ratios Profitability (%) EBITDA margin EBIT margin Pre-tax margin Net profit margin Liquidity (x) Current ratio Interest coverage n.a. n.a. n.a. n.a. n.a. Net debt to equity (%) Net cash Net cash Net cash Net cash Net cash Quick ratio Valuation (x) P/E Core P/E Core target price P/B P/CF (32.4) EV/EBITDA Activity ratios Inventory days Accounts receivables days Accounts payables days Returns (%) Dividend payout ratio..... Return on equity Return on assets Return on capital employed January 211 China/Hong Kong Gold Sector 13

14 METALS & MINING Precious Metals Share Price vs Index HK$ HK 3/11/1 4/12/1 8/12/1 12/12/1 Robin TSUI robin.tsui@bocigroup.com 16/12/1 2/12/1 24/12/1 China Gold International Res Sources: Bloomberg, BOCI Research Share Price Performance 28/12/1 1/1/11 5/1/11 Turnover (HK$ m) (%) YTD 1M 3M 12M Absolute (4.9) (3.4) NA NA Relative to HSCEI (6.8) (7.1) NA NA Sources: Bloomberg, BOCI Research Key Data 17 January 211 BUY 299.HK HK$4.45 Target Price: HK$56.6 Total issued shares (m) 396 Free float (%) 4 Free float mkt. cap. (HK$ m) 6,39 3M avg. daily turnover (HK$ m) 38 Net debt/equity (%) (21 E) Net cash Major shareholder (%) Lead Honest 39 Sources: Company data, Bloomberg, BOCI Research estimates 9/1/11 13/1/11 HSI Company Update China Gold Int l Resources Strong exposure to gold and copper China Gold International Resources, a dual-listed gold-mining company in Hong Kong and Toronto, is fully backed by China s central government. Its ultimate parent group, China National Gold, is directly supervised by the State Council of the PRC. The company has exposure to rich gold and copper resources through the ownership of the Changshanhao gold mine in Inner Mongolia and the Jiama Copper Polymetallic Mine in Tibet. We forecast the company will post a bottom-line CAGR of 181% during 21-12, the highest among its gold peers in Hong Kong. (Refer to our full initiation report dated 4 January 211) Key Factors for Rating Gold and copper prices are expected to remain strong in the near term, supported by concerns over the European credit crisis, quantitative easing in the US, potential inflationary pressure from aggressive expansionary monetary policies of central banks, global supply constraints and robust end user demand. Gold production from the CSH mine is forecast to increase from 83,57oz in 29 to 136,27oz in 212, implying a CAGR of 18%. The copper production from the Jiama Mine is forecast to increase from 8,41 tonnes in 29 to 35,598 tonnes in 212, implying a CAGR of 62%. Key Risks to Rating Failure to execute the Jiama project may result in production delays. Weaker than expected gold and copper prices. Valuation Based on a blended valuation of 211E P/E, 211E EV/EBITDA and 1.6x P/NAV, we derive our target price of HK$56.6, implying a 211 P/E of 16.4x. Our DCF valuation is derived with a beta of 1., market premium of 8.%, risk free rate of 2.2%, cost of equity of 1.2% and WACC of 8.9%. Investment Summary Revenue (US$ m) Change (%) Net profit (US$ m) 15 (9) Fully diluted EPS (US$).87 (.55) Change (%) - (163.8) (327.2) Fully diluted P/E (x) 59.9 N/M Core P/E (x) 59.9 N/M CFPS (US$) (.17) P/CF (x) (31.3) EV/EBITDA (x) (6,122.8) DPS (US$) January 211 China/Hong Kong Gold Sector 14

15 Income Statement (US$ m) Revenue Cost of sales (2) (56) (85) (226) (255) Operating expenses (exclude (9) depreciation & amortisation) EBITDA Depreciation & amortisation (2) (6) (11) (31) (47) Operating profit (EBIT) (3) Net interest income/(expenses) (3) (6) (9) (1) (5) Other gains/(losses) 21 (15) (12) Pre-tax profit 15 (2) Tax on profit (6) (7) (45) (49) Minority interests (1) (3) (5) (6) Net profit 15 (9) Core net profit 15 (9) EPS (US$).87 (.55) Core EPS (US$).87 (.55) DPS (US$)..... Revenue growth (%) n.a EBIT growth (%) n.a. (853) EBITDA growth (%) n.a. (17,164) EPS growth (%) n.a. (164) (327) Core EPS growth (%) n.a. (164) (327) Balance Sheet (US$ m) As at 31 Dec E 211E 212E Cash & cash equivalents Receivables Inventories Other current assets Total current assets Fixed assets Intangible assets Other long term assets Total long-term assets ,85 1,169 1,168 Total assets ,564 1,651 1,88 Creditors Short-term debt Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Share capital ,227 1,227 1,227 Reserves (51) (62) (38) Shareholders' equity ,188 1,364 1,553 Minority interests Total liabilities & equity ,564 1,651 1,88 Book value per share (US$) Tangible assets per share (US$) Net debt/(cash)per share (US$) (.45) (.8) (1.31) Cash-flow Statement (US$ m) Pre-tax profit 15 (2) Depreciation & amortisation Net interest expenses Change in working capital (29) Tax paid (5) (7) (45) (49) Other operating cash flows (2) (31) (76) Cash flow from operations (28) Net purchase of fixed assets (27) (37) (8) (96) (3) Decrease/(increase) in invest. Other investing cash flows 14 1 Cash flow from investing (13) (36) (8) (96) (3) Net increase in equity Net increase in debt (152) (5) Dividends paid Other financing cash flows (3) (6) (9) (1) (5) Cash flow from financing (162) (55) Change in cash (14) (16) 144 Cash at beginning of year Free cash flow to firm (41) (14) Free cash flow to equity (25) 6 99 (16) 144 Key Ratios Profitability (%) EBITDA margin (.5) EBIT margin (8.7) Pre-tax margin 5.6 (2.8) Net profit margin 49.6 (11.6) Liquidity (x) Current ratio Interest coverage (.7) Net debt to equity (%) Net cash Net cash Net cash Quick ratio Valuation (x) P/E 59.9 N/M Core P/E 59.9 N/M Core target price 83.8 N/M P/B P/CF (31.3) EV/EBITDA (6,122.8) Activity ratios Inventory days Accounts receivables days Accounts payables days Returns (%) Dividend payout ratio. n.a.... Return on equity (24.7) (24.7) Return on assets Return on capital employed January 211 China/Hong Kong Gold Sector 15

16 METALS & MINING Precious Metals H 17 January 211 HOLD ( BUY) 1818.HK HK$32.4 Target Price: HK$32.5 ( 26.86) Robin TSUI robin.tsui@bocigroup.com Zhaojin Mining Limited upside at this point Rating Change We downgrade Zhaojin to HOLD on valuation grounds. Despite the company s superior acquisition strategy, acquisition growth potential and track record compared to its peers, the stock has gained 11% in 21 and we see limited upside at the current level. We raise our 21E, 211E and 212E earnings by 2%, 19% and 6%, to Rmb1,398m, Rmb1,775m and Rmb1,626m, respectively, after incorporating our new commodities price assumption. The stock trades at 211 P/E of 22.4x and P/NAV of 2.6x. From the P/E perspective, the stock trades in line with its historical average of 23-24x, and from the P/NAV perspective, the stock trades at above the historical average of 1.5x-2.x. We advise investors to accumulate on any stock price weakness. At this point, we prefer the smaller-cap producers, which we believe can offer more share price upside. Share Price vs Index HK$ /1/1 15/2/1 15/3/1 15/4/1 15/5/1 15/6/1 15/7/1 Zhaojin Mining Industry 15/8/1 Sources: Bloomberg, BOCI Research Share Price Performance 15/9/1 15/1/1 Turnover (HK$ m) /11/1 15/12/1 HSCEI (%) YTD 1M 3M 12M Absolute (.8) (1.1) Relative to HSCEI (2.7) (4.9) Sources: Bloomberg, BOCI Research Key Data Total issued shares (m) 1,457 Free float (%) 35 Free float mkt. cap. (HK$ m) 16,716 3M avg. daily turnover (HK$ m) 33 Net debt/equity (%) (21 E) Net cash Major shareholder (%) Zhaojin Group 38 Sources: Company data, Bloomberg, BOCI Research estimates 15/1/11 Key Factors for Rating The stock is trading at a substantial valuation premium to its peers. Key Risks to Rating Further M&A activities domestically. Valuation We increase our target price from HK$26.86 to HK$32.5 based on 2.6x P/NAV, implying 211E P/E of 23.1x, in line with its historical average. Our DCF valuation is derived with a beta of 1.1x, market premium of 8.%, risk free rate of 2.2%, cost of equity of 1.2%, and WACC of 8.8%. Investment Summary Revenue (Rmb m) 2,154 2,798 4,195 4,94 4,876 Change (%) (1) Net profit (Rmb m) ,398 1,775 1,626 Fully diluted EPS (Rmb) Change (%) (8.1) (8.4) Consensus EPS (Rmb) Previous EPS (Rmb) Change (%) Fully diluted P/E (x) CFPS (Rmb) P/CF (x) EV/EBITDA (x) DPS (Rmb) Yield (%) January 211 China/Hong Kong Gold Sector 16

17 Income Statement (Rmb m) Revenue 2,154 2,798 4,195 4,94 4,876 Cost of sales (1,74) (1,349) (1,653) (1,789) (1,926) Operating expenses (exclude (64) (17) (284) (327) (265) depreciation & amortisation) EBITDA 1,16 1,279 2,258 2,823 2,685 Depreciation & amortisation (252) (25) (327) (391) (444) Operating profit (EBIT) 764 1,29 1,931 2,433 2,241 Net interest income/(expenses) 1 (11) (93) (98) (13) Other gains/(losses) (55) (3) (2) (3) (3) Pre-tax profit 71 1,15 1,836 2,331 2,135 Tax on profit (171) (264) (464) (589) (54) Minority interests (4) Net profit ,398 1,775 1,626 Core net profit ,398 1,775 1,626 EPS (Rmb) Core EPS (Rmb) DPS (Rmb) Revenue growth (%) (1) EBIT growth (%) (8) EBITDA growth (%) (5) EPS growth (%) (8) (8) Core EPS growth (%) (8) (8) Balance Sheet (Rmb m) As at 31 Dec E 211E 212E Cash & cash equivalents 689 2,269 2,521 3,248 3,595 Receivables Inventories Other current assets Total current assets 1,526 3,18 3,317 4,95 4,49 Fixed assets 2,148 2,763 3,377 3,767 4,118 Intangible assets 1,847 2,365 2,942 3,23 3,54 Other long term assets Total long-term assets 4,45 5,564 6,83 7,498 8,139 Total assets 5,931 8,582 1,12 11,593 12,629 Creditors Short-term debt Other current liabilities Total current liabilities 1,11 1,551 1,925 2,172 2,295 Long-term borrowings 8 1,546 1,555 1,565 1,575 Other long-term liabilities Share capital 1,457 1,457 1,457 1,457 1,457 Reserves 2,598 3,11 4,187 5,368 6,239 Shareholders' equity 4,55 4,567 5,645 6,826 7,696 Minority interests Total liabilities & equity 5,931 8,582 1,12 11,593 12,629 Book value per share (Rmb) Tangible assets per share (Rmb) Net debt/(cash)per share (Rmb) (.14) (.8) (.18) (.62) (.78) Cash-flow Statement (Rmb m) Pre-tax profit 71 1,15 1,836 2,331 2,135 Depreciation & amortisation Net interest expenses (1) Change in working capital (223) (19) Tax paid (273) (332) (464) (589) (54) Other operating cash flows (32) (78) (37) (43) (42) Cash flow from operations 433 1,132 1,958 2,3 2,81 Net purchase of fixed assets (1,872) (1,299) (1,559) (92) (92) Decrease/(increase) in invest. Other investing cash flows (48) Cash flow from investing (1,612) (1,118) (1,38) (738) (968) Net increase in equity Net increase in debt 13 1, Dividends paid (199) (242) (594) (755) (691) Other financing cash flows (93) (98) (13) Cash flow from financing 251 1,566 (669) (835) (767) Change in cash (928) 1, Cash at beginning of year 1, ,269 2,521 3,248 Free cash flow to firm (1,113) ,577 1,128 Free cash flow to equity (1,3) 1, ,482 1,38 Key Ratios Profitability (%) EBITDA margin EBIT margin Pre-tax margin Net profit margin Liquidity (x) Current ratio Interest coverage Net debt to equity (%) Net cash Net cash Net cash Net cash Net cash Quick ratio Valuation (x) P/E Core P/E Core target price P/B P/CF EV/EBITDA Activity ratios Inventory days Accounts receivables days Accounts payables days Returns (%) Dividend payout ratio Return on equity Return on assets Return on capital employed January 211 China/Hong Kong Gold Sector 17

18 METALS & MINING Precious Metals Robin TSUI Share Price vs Index H shares HK$ /1/1 H A 15/2/1 15/3/1 15/4/1 15/5/1 15/6/1 15/7/1 Zijin Mining - H 15/8/1 Sources: Bloomberg, BOCI Research 15/9/1 15/1/1 15/11/1 15/12/1 Share Price Performance H shares Turnover (HK$ m) 2, HSCEI 15/1/11 1,5 1, YTD 1M 3M 12M Absolute (%) (7.1) (5.6) (14.4) (1.4) Relative to HSCEI (%) (9.) (9.4) (9.5) (15.1) Sources: Bloomberg, BOCI Research Key Data H shares 17 January 211 BUY ( HOLD) 2899.HK HK$6.8 Target Price: HK$8.4 ( 6.29) BUY ( HOLD) SS Rmb7.51 Target Price: Rmb1.8 ( 7.5) Total issued shares (m) 14,541 Free float (%) 3 Free float mkt. cap. (HK$ m) 26,87 3M avg. daily turnover (HK$ m) 212 Net debt/equity (%) (21E) Net cash Major shareholders (%) Minxi Xinghang 29 Sources: Company data, Bloomberg, BOCI Research estimates 5 Zijin Mining Offers value Rating Change We lower our 21E earnings by 6% after the management s latest guidance, but raise our 211E and 212E earnings by 7%, and 2%, after revising our price and cost forecasts. We are turning more positive on Zijin in 211. Zijin s diversified production base should translate to a stronger year ahead. The stock underperformed both the HSI and its peers in 21 and we see limited downside from the current level. Although it is becoming difficult for Zijin to find gold mines domestically that could make a meaningful contribution to production growth, in light of our higher metal price forecasts this year, Zijin should report a bottom line of Rmb6,969m in 211, a 41% YoY growth. Besides, the stock now trades at 12x 211E P/E and the current level offers value. Bounded by negative news flows last year surrounding its social and environmental responsibilities, we think the worst is over. Subsequent rectification measures or possible damages/fines arising from further environmental issues should be immaterial to the bottom line as demonstrated last year. We upgrade the stock from HOLD to BUY with a target price of HK$8.4. Key Factors for Rating Attractive valuation at 12x 211E P/E. Stable production of metals amid a rising price environment. Key Risks to Rating Lack of acquisition targets. Valuation We increase our H share target price from HK$6.29 to HK$8.4 derived from 1.9x P/NAV from our DCF valuation with a beta of 1.1, risk free rate of 2.2%, market premium of 8.%, cost of equity of 11.% and WACC of 8.1%. Our A share target price of Rmb1.8 is derived by applying a 2% premium to its H shares, based on last 3 months A H premium. Investment Summary H Shares Revenue (Rmb m) 16,322 2,215 29,221 32,758 32,827 Change (%) Net profit (Rmb m) 3,66 3,552 4,95 6,959 6,872 Fully diluted EPS (Rmb) Change (%) (1.3) Consensus EPS (Rmb) Previous EPS (Rmb) Change (%) - - (6.4) Fully diluted P/E (x) CFPS (Rmb) P/CF (x) EV/EBITDA (x) DPS (Rmb) Yield (%) January 211 China/Hong Kong Gold Sector 18

19 Share Price vs Index A shares Rmb Turnover (Rmb m) 7, 6, 5, 4, 3, 2, 1, 15/1/1 15/2/1 15/3/1 15/4/1 15/5/1 15/6/1 15/7/1 15/8/1 15/9/1 15/1/1 15/11/1 15/12/1 15/1/11 Zijin Mining Group Co Ltd-A Sources: Bloomberg, BOCI Research FTSE-Xinhua A5 Share Price Performance A shares (%) YTD 1M 3M 12M Absolute (12.1) (14.1) (29.7) (23.2) Relative to FTSE-Xinhua A5 (9.4) (8.6) (15.4) (1.9) Sources: Bloomberg, BOCI Research Key Data A share Total issued shares (m) 14,541 Free float (%) 3 Free float mkt. cap. (Rmb m) 32,762 3M avg. daily turnover (Rmb m) 54 Net debt/equity (%)(21E) Net cash Sources: Company data, Bloomberg, BOCI Research Investment Summary - A Revenue (Rmb m) 16,984 2,956 29,397 32,934 33,4 Change (%) Net profit (Rmb m) 3,5 3,541 4,951 7,159 6,98 Fully diluted EPS (Rmb) Change (%) (2.5) Consensus EPS (Rmb) Previous EPS (Rmb) Change (%) - - (6.4) Fully diluted P/E (x) CFPS (Rmb) P/CF (x) EV/EBITDA (x) DPS (Rmb) Yield (%) Sources: Company data, Bloomberg, BOCI Research A Laggard in 21 Bounded by negative news flows surrounding its social and environmental responsibilities in 21, Zijin s stock performance significantly lagged behind its peers and HSI. While the gold spot price was up 3%, Zijin returned a 3% versus Zhaojin s +11%, G Resources +24% and Real Gold s +21%. While the street has been concerned about Zijin s organic and acquisition growth, we think higher metal prices this year coupled with stable metal production should translate into a strong year ahead. So far in 211, the stock is down 7%, underperforming Zhaojin s 5% and G Resources 3%. The stock trades at 12x 211E P/E. We consider the current level attractive after revisiting our model assumptions. Preferring Zijin on Valuation Grounds Zhaojin was our top buy and returned a significant 11% during 21. We saw company switching from Zijin to Zhaojin during 2H1 when Zijin s copper mine leakage was first reported in early July 21. The switching was evident: Zhaojin s share price in 2H1 gained 77% versus 16% in 1H1 as investors strove for management with a good track record and execution to leverage on the rising gold price environment. Zhaojin, in our view, is now expensive, trading at 22.4x 211E P/E or 2.6x P/NAV compared to Zijin s 12.x and 1.5x P/NAV. We think investors will gradually switch from Zhaojin to Zijin to look for value and more upside potential. Zijin s higher exposure to copper (16% in 211E) is also a major factor for our upgrade. 17 January 211 China/Hong Kong Gold Sector 19

20 Income Statement H share (Rmb m) Revenue 16,322 2,215 29,221 32,758 32,827 Cost of sales (1,329) (13,642) (19,514) (2,14) (2,262) Operating expenses (exclude (1,129) (1,127) (1,912) (2,66) (2,318) depreciation & amortisation) EBITDA 4,863 5,445 7,794 1,677 1,248 Depreciation & amortisation (645) (936) (1,1) (1,21) (965) Operating profit (EBIT) 4,218 4,59 6,784 9,467 9,283 Net interest (146) (168) (81) (11) 49 income/(expenses) Other gains/(losses) Pre-tax profit 4,533 5,45 7,3 9,884 9,76 Tax on profit (639) (968) (1,349) (1,897) (1,873) Minority interests (828) (525) (731) (1,28) (1,15) Net profit 3,66 3,552 4,95 6,959 6,872 Core net profit 3,66 3,552 4,95 6,959 6,872 EPS (Rmb) Core EPS (Rmb) DPS (Rmb) Revenue growth (%) EBIT growth (%) (2) (2) EBITDA growth (%) (3) (4) EPS growth (%) (1) Core EPS growth (%) (1) Balance Sheet H share (Rmb m) As at 31 Dec E 211E 212E Cash & cash equivalents 5,39 4,138 7,658 12,931 17,446 Receivables 1,419 1,523 2,31 2,468 2,473 Inventories 1,594 2,59 3,65 3,8 3,847 Other current assets 71 Total current assets 8,52 8,961 13,565 19,198 23,766 Fixed assets 8,259 1,51 11,74 12,946 13,935 Intangible assets 4,44 5,614 6,183 6,723 7,228 Other long term assets 5,466 5,2 5,115 5,211 5,37 Total long-term assets 18,166 2,685 23,2 24,88 26,47 Total assets 26,218 29,646 36,567 44,79 5,236 Creditors ,369 1,44 1,422 Short-term debt 2,516 3,458 4,917 6,52 7,1 Other current liabilities 2,415 2,753 3,43 3,651 3,681 Total current liabilities 5,659 7,168 9,69 11,17 12,113 Long-term borrowings Other long-term liabilities Share capital 1,454 1,454 1,454 1,454 1,454 Reserves 14,681 16,716 2,212 25,145 29,169 Shareholders' equity 16,135 18,171 21,666 26,6 3,623 Minority interests 3,45 3,443 4,174 5,22 6,217 Total liabilities & equity 26,218 29,646 36,567 44,79 5,236 Book value per share (Rmb) Tangible assets per share (Rmb) Net debt/(cash)per share (Rmb) (.11) (.2) (.15) (.42) (.66) Cash-flow Statement H share (Rmb m) Pre-tax profit 4,533 5,45 7,3 9,884 9,76 Depreciation & amortisation ,1 1, Net interest expenses (49) Change in working capital (684) (899) (365) (79) (5) Tax paid (639) (968) (1,349) (1,897) (1,873) Other operating cash flows (96) Cash flow from operations 4,1 4,187 6,48 9,129 8,798 Net purchase of fixed assets (5,9) (4,955) (3,137) (2,718) (2,537) Decrease/(increase) in invest. Other investing cash flows Cash flow from investing (5,9) (4,955) (3,137) (2,718) (2,537) Net increase in equity Net increase in debt 2,957 (379) (1,632) (1,268) (1,72) Dividends paid 1,454 (1,454) (1,454) (2,26) (2,849) Other financing cash flows (6) 1,7 3,335 2,156 2,175 Cash flow from financing 3,811 (133) 249 (1,139) (1,745) Change in cash 2,83 (92) 3,52 5,272 4,516 Cash at beginning of year 2,237 5,39 4,138 7,658 12,931 Free cash flow to firm (866) (645) 3,45 6,65 6,536 Free cash flow to equity 1,84 (1,193) 1,558 5,132 5,238 Key Ratios H share Profitability (%) EBITDA margin EBIT margin Pre-tax margin Net profit margin Liquidity (x) Current ratio Interest coverage Net debt to equity (%) Net Net cash Net cash Net cash Net cash cash Quick ratio Valuation (x) P/E Core P/E Core target price P/B P/CF EV/EBITDA Activity ratios Inventory days Accounts receivables days Accounts payables days Returns (%) Dividend payout ratio Return on equity Return on assets Return on capital employed January 211 China/Hong Kong Gold Sector 2