The recent geopolitical situation in the Middle East has become increasingly tense, with the international gold price once breaking through $2,400 per ounce, and some gold mining stocks have also seen significant increases.

On the morning of April 15, Zhaojin Mining Industry (01818.HK), whose stock price doubled in two months, announced a placement of 130 million shares, equivalent to about 3.9% and 4.8% of the expanded issued shares and H-shares, with a placement price of HKD 13.2 per share, raising a total of HKD 1.74 billion; on the morning of April 15, Zhaojin Mining Industry fell by 8.62%, closing at HKD 13.36, dragging down a batch of gold mining stocks.

Industry insiders believe that the trend of gold prices depends on the changes in the geopolitical situation, as well as the interest rate reduction process of central banks such as the Federal Reserve. With the gold price breaking through historical highs, whether central banks will slow down their purchases of gold is also unknown. Investors should be cautious about the current enthusiasm, as there have been financing booms in gold mining stocks during previous periods of gold price surges.

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"The placement is to lay the foundation for future debt financing."

Before the opening on April 15, Zhaojin Mining Industry issued the aforementioned placement announcement, claiming that it "lays the foundation for future debt financing."

Zhaojin Mining Industry stated: The group has always been focused on the exploration, mining, beneficiation, smelting, and sales of gold and other metal products. The net proceeds from the placement can supplement working capital, support the development of the main business and the implementation of major projects, and will help to provide better investment returns for shareholders. The board of directors believes that the placement raises funds to strengthen the capital base, reduce the debt-to-asset ratio, and improve the financial condition and net asset value base; the placement will diversify the shareholder base by attracting multiple high-quality investors to participate in the placement, and will expand the share capital and lay the foundation for future debt financing.

On the evening of April 12, Zhaojin Mining Industry announced its performance for the first quarter of 2024, with operating income of about 1.981 billion yuan, a year-on-year increase of 13.94%; net profit attributable to the equity holders of the parent company was about 221 million yuan, a year-on-year increase of 124.3%; basic earnings per share were 0.07 yuan.

Minsheng Securities analyst Qiu Zuxue said that at the end of the first quarter, Zhaojin Mining Industry's debt-to-asset ratio was 52.59%, down 5.79 percentage points year-on-year. Looking at the gold industry, the gold price has been setting historical highs in April, and the gold price has remained strong. Currently, the Federal Reserve is in a "transition" period where its interest rate policy is shifting from raising rates to lowering them. It is highly likely that the rate reduction cycle will start within the year. Looking back at the same period in history, gold prices tend to rise and are difficult to fall. In the medium and long term, the status of gold in the asset allocation of central banks around the world is continuously rising.

Considering that the good news on performance has basically been realized, some analysts also expressed a cautious attitude to the First Financial Daily reporter: the gold price per ounce has risen from over $2,000 to $2,400, and the recent increase has been relatively hasty. It is expected that there will be some resistance at $2,400, but in the long run, gold has not yet peaked, and the trend of central banks around the world lowering interest rates remains. However, there may be delays in the rate reduction actions. On the other hand, the recent rise in gold prices is also due to the increase in holdings by central banks. It is unpredictable whether the central banks will slow down their purchases after seeing the rise in gold prices. The background of this financing by Zhaojin Mining Industry is actually that its valuation is already high, and it also affects the stock prices of the same industry in the short term. Overall, after the release of various good news about gold prices, investors in gold mining stocks should be more cautious in the short term.

Annual profit increased by 70% year-on-year.In 2023, Zhaojin Mining Industry has already benefited from the rise in gold prices, and other gold mining stocks have similar situations, also announcing their first-quarter performance forecasts.

In 2023, Zhaojin Mining Industry achieved a total operating income of 8.423 billion yuan, a year-on-year increase of 6.82%, and a net profit attributable to the shareholders of the parent company of 686 million yuan, a year-on-year increase of 70.77%. The gross profit margin for the year 2023 was approximately 40.01%, an increase of about 6.33 percentage points compared to the gross profit margin in 2022. In 2023, the company's main business, gold business, achieved a revenue of 7.672 billion yuan, a year-on-year increase of 7.77%, and the copper business achieved a revenue of 301 million yuan, a year-on-year increase of 9.34%. Minsheng Securities stated that in 2023, the average price of TD gold on the Shanghai Gold Exchange was 449.31 yuan per gram, a year-on-year increase of 14.58%, and the overall gross profit margin of the company in 2023 increased due to the upward drive of gold prices.

Zhaojin Mining Industry stated that the international gold price opened at $1,822.79 per ounce in 2023, closed at $2,062.68 per ounce, with a high of $2,146.79 per ounce and a low of $1,804.50 per ounce, with an average annual price of $1,943.30 per ounce.

On April 11, Shandong Gold (600547.SH) announced that, based on preliminary calculations, it is expected to achieve a net profit attributable to the owners of the parent company of 650 million yuan to 750 million yuan for the first quarter of 2024, an increase of 48.11% to 70.90% year-on-year; the net profit attributable to the owners of the parent company after deducting non-recurring gains and losses is expected to be 660 million yuan to 760 million yuan, an increase of 50.18% to 72.94% year-on-year. Shandong Gold stated that the continued rise in gold prices in the first quarter of 2024 and the acquisition of Yintai Gold also played a positive role in promoting the company's profit increase.

Huang Tengfei, an analyst at Southwest Securities, said that the long-term outlook for gold prices remains optimistic: The Federal Reserve's monetary policy is in a transition period, with increasing economic growth pressure, and the long-term U.S. Treasury yield and the U.S. dollar are still in a downward cycle; the U.S. debt scale has repeatedly hit new highs, and gold, as an alternative to credit money, has increased its intrinsic value; deglobalization, an increase in global risk events, and central banks' continued gold purchases will drive the central axis of gold prices to continue to rise.

As gold prices rise, will other gold mining stocks follow the pace of Zhaojin Mining Industry and seize the financing window? So far, no other major domestic gold mining stocks have announced large financing actions. The last gold mining stock financing craze occurred in 2016, when Trump's election as President of the United States triggered a surge in gold in the first half of the year, with the leading stock Shandong Gold's A-share financing amount approaching 4.5 billion yuan, and Zijin Mining's A-share financing amount being about 4.6 billion yuan. However, after Shandong Gold and Zhaojin Mining stocks peaked in July 2016, the stock prices entered a two-year downward channel, and the stock prices rose again in 2019.