Cangge Mining's Profit Recovery Last Year: Copper Investment Supports 70% of Profits, Lithium Carbonate Business Continues to Shrink

Securities Star Lu Wenyen

In the first year of its change in ownership, Zijin Mining (601899.SH) ended the two-year decline in revenue and net profit for Zangge Mining (000408.SZ), returning to growth. In 2025, the company achieved revenue of 3.577 billion yuan, a year-on-year increase of 10.03%; attributable net profit was 3.852 billion yuan, up 49.32%; and net profit after deducting non-recurring gains and losses was 4.03 billion yuan, an increase of 58.28%.

Securities Star notes that the core driver behind Zangge Mining’s profit surpassing its revenue is its substantial investment income from its associate company, Tibet Julong Copper Co., Ltd. (“Julong Copper”). Benefiting from rising copper prices, this income reached 2.782 billion yuan in 2025, accounting for 72.23% of attributable net profit. On the other hand, the rapid profit growth is also due to the imbalance caused by Zangge Mining’s dual focus on potassium and lithium. Its lithium carbonate business, a secondary growth driver, continued to shrink due to production halts and low prices. In 2025, both volume and price declined, turning it from a profit engine into a performance shortcoming.

“Investment Dependency” Intensifies

The high growth in Zangge Mining’s performance is mainly driven by its strategic investment in Julong Copper.

Under the dual influence of supply-demand gaps and macro policies, copper prices have steadily risen, becoming the main factor behind Zangge Mining’s profit surge. Data shows that in 2025, spot copper prices fluctuated upward, starting at 73,830 yuan/ton and ending at 99,180 yuan/ton, a 34.34% increase for the year.

In 2025, Julong Copper’s capacity was further released, with copper mine production reaching 193,800 tons and sales of 193,700 tons, generating revenue of 16.663 billion yuan and net profit of 9.141 billion yuan. Zangge Mining holds a 30.78% stake in Julong Copper and earned 2.782 billion yuan in investment income during the period, up 44.34%, accounting for 72.23% of attributable net profit.

However, the impressive figures mask structural concerns in Zangge Mining’s business model, as its reliance on investment income continues to grow. From 2022 to 2024, Julong Copper contributed approximately 725 million yuan, 1.296 billion yuan, and 1.928 billion yuan in investment income, respectively, representing 12.82%, 37.9%, and 74.72% of each period’s attributable net profit. This indicates that investment income has become the main source of profit, while the company’s core business “self-sustaining” ability is gradually marginalized.

Zangge Mining’s asset structure reflects a heavy emphasis on strategic investments, further highlighting its high dependence on Julong Copper. As of the end of 2025, total assets were 17.692 billion yuan, with long-term equity investments totaling 7.296 billion yuan, accounting for 41.24% of total assets, mainly invested in Julong Copper. Fixed assets used for production amounted to 2.197 billion yuan, only 12.42% of total assets. This asset structure indicates that the company allocates significant funds to external investments while its own production assets are relatively limited. Due to the significant impact on operations, long-term equity investments are listed as a key audit matter annually.

Data shows that Julong Copper is jointly held by Zangge Mining and Zijin Mining, with 30.78% and 57.35% stakes, respectively. After Zijin Mining took control of Zangge Mining in 2025, it further strengthened its absolute control over Julong Copper’s Julong Copper Mine and accelerated the construction of phases two and three. In January 2026, the phase two project was officially completed and put into operation, increasing daily mining and processing capacity to 350,000 tons. The annual copper production from the mine is expected to rise from 190,000 tons in 2025 to approximately 300,000–350,000 tons. Julong Copper is also planning to implement phase three of the project, which, upon completion, will produce about 600,000 tons of copper annually.

Securities Star notes that the hidden risks behind high-yield investments are also significant, with over-reliance on a single asset and cyclical fluctuations being the biggest concerns. Copper price volatility and changes in production costs will directly affect the actual contribution of investment income. If global copper prices enter a correction phase, Zangge Mining’s investment income could be the first to suffer.

Imbalance in Dual-Drive Strategy

Data shows that Zangge Mining’s main business involves the research, production, and sales of potassium chloride and lithium carbonate. The company started with fertilizer and officially entered the lithium battery materials sector in 2017. Relying on the 724.35-square-kilometer salt lake mining rights in Qarhan Salt Lake, Qinghai, it has gradually developed a dual-driven growth model based on potassium and lithium.

Currently, Zangge Mining’s main business exhibits a “steady one, weak one” differentiation. As the second-largest producer of potassium chloride domestically, the company’s traditional potassium chloride business performed steadily in 2025. Data shows that in 2025, the company’s potassium chloride production and sales reached 1.0332 million and 1.0843 million tons, respectively, with a completion rate of 103.36%, continuing to operate at a high level. The sales volume increased by 3.77%.

On the price side, driven by market supply and demand, the average tax-included selling price of potassium chloride in 2025 was 2,964.28 yuan/ton, up 28.57% year-on-year. Driven by volume and price increases, potassium chloride revenue grew by 33.42% to 2.949 billion yuan, with its proportion of total revenue rising to 82.45%.

In contrast, the lithium carbonate business, as the second growth driver, faced significant challenges. Due to a total of 87 days of temporary production halts, the planned 11,000-ton production and sales target at the beginning of 2025 was revised down to 8,510 tons. Actual production was 8,808 tons, and sales were 8,957 tons, down 23.85% and 34.05%, respectively. The temporary halts directly lowered overall capacity utilization, with Zangge Mining’s battery-grade lithium carbonate capacity utilization rate dropping from 115.66% in 2024 to 88.08% in 2025.

Adding to the difficulties, the continued low market prices for lithium carbonate caused the company’s 2025 lithium carbonate tax-included selling price to be 74,800 yuan/ton, down 12% from 2024. Due to production halts and falling prices, lithium carbonate sales revenue in 2025 was 593 million yuan, significantly dragging down overall company revenue.

Securities Star notes that Zangge Mining’s lithium carbonate business has long been in a state of continuous decline. From 2022 to 2024, revenue from this segment was 4.323 billion, 1.98 billion, and 1.022 billion yuan, respectively, with diminishing growth momentum. Its revenue share fell from 52.76% to 31.43%.

Profitability also looks bleak. From 2022 to 2024, gross profit margins for lithium carbonate were 92.2%, 80.51%, and 45.44%. In 2025, due to reduced production and scale effects, unit sales costs increased by 5.12% to 43,100 yuan/ton, causing gross profit margin to decline to 34.82%, a drop of 10.62 percentage points, more than 60% lower than in 2022.

Despite the current difficulties, Zangge Mining is actively expanding its lithium sector. The company’s designed capacity for battery-grade lithium carbonate is 10,000 tons/year, with an under-construction capacity of 50,000 tons/year. The Tibet Mami Cuo Salt Lake project, which carries hopes for future lithium expansion, has completed mining rights registration and is currently under construction. According to current plans, it is expected to fully produce in the third quarter of 2026, with annual lithium carbonate output estimated at 20,000–25,000 tons, and the company’s attributable output around 5,000–6,000 tons.