We maintain the investment rating for China Gold International （the "Company"） as "Accumulate", with TP of HK$34.30. Our TP represents 6.3x 2023 PER and 5.7x 2024 PER. We expect the production of the Company to be stable in 2023 and output of mined gold and copper to remain at the same level. We expect gold price to continue to rise in 2023, which will lift profitability of the Company.
　　China Gold International’s net profit to gold price is highly elastic. China Gold International produced 238,836 oz of mined gold in 2022, which is in line with its production plan but 2.2% lower than in 2021. The production of the Company in CSH Gold Mine was stable, but mined gold output from Jiama Mine decreased 5.8% yoy. The Company plans to produce 241,130-244,345 oz of mined gold in 2023, which remains at the same level. Average production costs of CSH Gold Mine decreased 12.9% yoy to US$1,340/oz due to stable production in 2022. As the Company’s production costs of mined gold were relatively high, net profit of the Company has become more elastic to gold price. We believe that the Company will benefit more when gold price rises.
　　Decreasing mined copper production costs may be another driver of profit growth in 2023. Average production costs of mined copper of Jiama Mine increased 6.1% yoy to US$3.14/lb in 2022, mainly due to less by-product revenue. We expect such situation to change in 2023 and by-product revenue of Jiama Mine to increase. As a result, average production costs of Jiama Mine is expected to decline and will further improve profitability of the Company.
　　Catalyst: Rise in gold price.
　　Risks: Decline in gold price; gold and copper mine production impact from external factors.