Citi has released a research report initiating coverage on Zijin Gold International (02259) with a "Buy" rating and a target price of HK$178. The firm notes that Zijin Mining (02899) holds an 85% stake in Zijin Gold International and provides it with an experienced M&A team.

Benefiting from newly acquired assets and capacity expansion, Zijin Gold International's gold production growth rate is outpacing its peers, while effectively controlling costs and exploration expenditures. Citi forecasts that Zijin Gold International's attributable gold production compound annual growth rate will reach 17% from 2025 to 2028, higher than its peers, mainly driven by expansion projects at Rosebel, Akyem, and RG Gold.

The company targets mineral gold production of 100 tonnes by 2030, with 70 to 75 tonnes coming from existing mines and 20 to 25 tonnes from potential acquisitions. Citing company data, the report notes that the average acquisition cost from 2019 to 2025 was US$98 per ounce, well below the industry average of US$136 per ounce, while post-acquisition resources and reserves added through exploration make the acquisition prices even more attractive.

Citi's commodities team holds a bullish outlook on gold prices, forecasting that gold could reach US$5,000 per ounce over the next 6 to 12 months, with average gold price forecasts of US$4,530 in 2026 and US$4,850 in 2027. The firm estimates that every 10% change in gold prices would impact 2026 and 2027 earnings by approximately 16%.

Citi calculates net asset value using a weighted average cost of capital of 5%, and values the company at the peer average of 1.32 times price-to-book ratio, resulting in a target price of HK$178, equivalent to 20.5 times 2026 forecast price-to-earnings and 16.6 times 2027. Risks include lower-than-expected gold prices, higher-than-expected all-in sustaining costs, lower-than-expected production, highly concentrated shareholding, higher-than-expected capital expenditure, and geopolitical risks.