Copper Prices Soar but No Ore to Sell? Hebei Iron & Steel Resources Shows Divergence in Resumption of Production

Hegang Resources (SZ000923, stock price 20.13 RMB, market value 13.139 billion RMB), which recently sent a positive signal to the market about the smooth ramp-up of Phase II copper production capacity, has encountered a severe test from natural forces on its restart journey.

On the evening of March 17, Hegang Resources disclosed the latest progress on underground mining resumption by its South African subsidiary. The announcement showed that, affected by the most severe flooding disaster since 2000, the company’s Palabora Copper (PC) had to suspend underground copper mine production entirely.

The “Daily Economic News” reporter noted that the latest announcement indicates a mixed progress in resumption: while Phase I copper has completed drainage and resumed production, it remains in low-load operation; meanwhile, Phase II copper, which is expected to be the main supply source with a designed capacity of 11 million tons per year, is still draining water due to its deeper location, with an expected completion in early April.

Amidst international copper prices breaking above 100,000 RMB per ton and fluctuating at high levels, a two-month halt in copper operations will undoubtedly negatively impact the company’s annual production and sales plans. Fortunately, the approximately 100 million tons of magnetite stockpiled on surface remains unaffected by the disaster, with normal production and shipment ongoing. This “cash cow” business, contributing over 60% of revenue, may serve as the only “ballast” to hedge against this unexpected risk and support the full-year performance.

Phase II copper mine project delayed until April

In early 2026, an extreme rainstorm in South Africa disrupted Hegang Resources’ production rhythm.

According to the company’s disclosure on February 5, recent heavy rainfall and regional flooding affected the Palabora Copper (PC) site in Limpopo Province and neighboring Pumalanga Province, experiencing the most severe flooding since 2000.

Meteorological data shows that the region received over 890 mm of rainfall in January 2026 alone, significantly exceeding South Africa’s multi-year average annual rainfall of about 450-500 mm. The heavy rains caused surface pits and surrounding water runoff to flood into the mines, directly leading to water accumulation in parts of Phase I and Phase II tunnels, with some key facilities submerged. PC was forced to suspend underground mining and construction activities at the initial stage of the disaster.

After nearly two months of rescue efforts, substantial progress was finally made in resumption, but overall progress remains mixed.

According to the announcement on the evening of March 17, the underground drainage work for Phase I has been completed, and production has resumed. Due to previous water inundation, safety measures are in place, and current operations are at low load, with output gradually increasing based on safety conditions. For Phase II, since the area is located at a deeper level, drainage is progressing more slowly, and it is still underway, with an expected completion in early April.

Additionally, the flooding has directly affected supporting infrastructure construction. During an investor communication on February 11, Hegang Resources revealed that the No. 6 crusher project for Phase II of the copper mine had previously been progressing smoothly, with some equipment already onsite and construction underway. However, the underground flooding has disrupted construction progress and limited personnel and equipment deployment. As a result, the planned commissioning in Q3 2026 is likely to be delayed.

The “Daily Economic News” reporter observed that this uneven resumption progress is a “strong pain point” for Hegang Resources. In a January institutional survey, the company explicitly stated that, given the low ore grade and nearing closure of Phase I copper mine, the current copper supply mainly depends on Phase II.

It is known that the Phase II project was previously in the “capacity ramp-up stage,” with a designed ore capacity of 11 million tons per year, expected to reach full capacity by the end of 2026. Now, with the main mining area mired in drainage issues and copper prices rising from below 70,000 RMB/ton early last year to over 100,000 RMB/ton (an increase of nearly 50%), missing the high-price window for production incurs significant opportunity costs.

According to CICC Futures on March 17, the market expects copper prices to continue high amid a game of strong expectations versus weak reality.

Hegang Resources admitted in its March 17 evening announcement that the disruption caused by this event to underground mining operations is expected to negatively impact the company’s annual copper product production and sales plan, with the specific extent to be assessed based on subsequent resumption progress.

100 million tons of magnetite stockpile may serve as a performance buffer

While underground copper mining is hindered by force majeure, Hegang Resources’ dual-driven business structure of “copper and iron” demonstrates resilience at critical moments.

Unlike deep underground copper mines vulnerable to water damage, the company’s magnetite mainly comes from surface stockpiles, offering a natural risk-avoidance advantage. The announcement repeatedly reassures: “As of this announcement date, the company’s surface stockpile of magnetite is about 100 million tons. Currently, surface magnetite production and shipment are normal, with an expected annual sales volume of 10 million tons.”

This 100 million tons of surface stockpile is a byproduct of copper ore processing accumulated over decades of mining, now forming the company’s foundational performance support.

The “Daily Economic News” reporter noted that historical financial data shows magnetite as a “cash cow” for Hegang Resources. For example, in the first half of 2025, magnetite contributed 1.83 billion RMB in revenue, accounting for 64.84% of the company’s total revenue.

On the logistics front, conditions are also improving. As South Africa’s economy gradually recovers, local railway capacity demand is increasing, ensuring smooth transportation of surface products.

“Hegang Resources plans to upgrade processing systems, add drying processes, and further process the stockpiled magnetite to produce high-grade iron ore with 65% Fe content, aiming for an annual output of 6 million tons, while stabilizing product quality to enhance market competitiveness and reduce costs,” the company stated during an investor call on January 15.

The company also indicated that increasing ore grade from 58% to 65% slightly raises costs per ton, but the overall economic benefit improves due to price differences.

However, even with magnetite as a “performance ballast,” the disruption of copper operations remains the biggest challenge for the company this year. Hegang Resources explained in January that the core reason for its low gross profit margin on copper products is that Phase II copper mine has not yet reached full production, resulting in small copper output but high fixed costs, which increases unit costs and drags down overall margins.

With the uncertain resumption of Phase II, during the period when underground operations are halted, the fully operational magnetite business will undoubtedly carry the company’s revenue. Hegang Resources stated in its March 17 announcement that it will continue to supervise PC to promote copper production safely and will disclose relevant progress in periodic or interim reports as required.

Overall, while the 100 million-ton magnetite stockpile provides a solid bottom line, the timing of full production from Phase II remains the biggest variable hanging over Hegang Resources’ 2026 performance.

Cover image source: Meiri Media Library

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