Baiyin Nonferrous Performance Forecast Turns Loss to Profit: Adversity Reversal and Value Reshaping Driven by Multiple Factors

Abstract

On July 14, 2026, Baiyin Nonferrous (601212.SH) released its semi-annual performance forecast, expecting net profit attributable to parent of 64 million to 95 million yuan in H1 2026, turning from loss to profit year-on-year. This positive change is mainly due to the year-on-year increase in market prices of nonferrous and precious metal products, significant improvement in internal management efficiency and cost control, improved gross margin, and increased fair value changes of embedded derivative financial instruments. This article analyzes the internal logic of Baiyin Nonferrous' performance reversal from three dimensions: industry cycle, company operations, and financial tools, and discusses the possibility of sustainable growth.

1. Introduction

After the nonferrous metals industry experienced prolonged price lows and overcapacity pains, Baiyin Nonferrous' performance forecast is like a ray of dawn, injecting confidence into the market. As a regional leader with core businesses in lead-zinc-copper mining and smelting and comprehensive precious metal recovery, Baiyin Nonferrous' operational performance has always attracted investor attention. In H1 2026, the company expects net profit attributable to parent of 64-95 million yuan, not only reversing the loss in the same period last year but also signaling that after structural adjustments at the bottom of the industry cycle, the company is entering a new phase of value restoration.

The four driving factors mentioned in the performance forecast—product price recovery, internal management optimization, gross margin improvement, and increased derivative tool returns—reflect the company's capability leap from passively enduring market fluctuations to actively managing risks. This article systematically examines the deep logic behind Baiyin Nonferrous' performance reversal from macro, meso, and micro levels.

2. Nonferrous Metals Market Recovery: Dual Resonance of Cyclical Dividend and Structural Support

2.1 Global Supply-Demand Restructuring Drives Metal Prices to Stabilize

In H1 2026, the global nonferrous metals market experienced significant price recovery. On one hand, after the destocking cycle of 2025, major economies began to release industrial replenishment demand; on the other hand, metal consumption in new energy, power infrastructure, etc., maintained resilience, providing rigid support especially for copper, zinc, and lead. Baiyin Nonferrous' core products—lead concentrate, zinc concentrate, copper concentrate, and associated gold and silver—benefited from this upward price channel.

Taking lead and zinc as examples, in Jan-Jun 2026, the average LME zinc price rose about 12% year-on-year, and domestic lead prices increased over 8%. Baiyin Nonferrous, as an important lead-zinc smelting base in Northwest China, gained significant gross profit elasticity during the price upturn from its self-produced ore and purchased ore processing businesses. The company's announcement clearly states that the year-on-year increase in market prices of nonferrous and precious metal products is the primary reason for the turnaround, indicating that cyclical dividends have an immediate effect on upstream mines and smelters.

2.2 Precious Metal Safe-Haven Attribute Boosts Gold and Silver Prices to Recent Highs

Besides base metals, Baiyin Nonferrous also has considerable production of associated gold and silver. Against the backdrop of increased global geopolitical uncertainty and expectations of major central bank rate cuts, precious metal prices performed strongly in H1 2026. International gold prices once broke through $2,500/oz, and silver prices followed upward. Baiyin Nonferrous' dual-drive model of nonferrous metals and precious metals balances traditional industrial metals and financial safe-haven assets, effectively diversifying single-variety price risks.

3. Internal Management Quality and Efficiency Improvement: Strategic Transformation from Scale Expansion to Lean Operations

3.1 Detailed Cost Control, Significant Gross Margin Improvement

The second key factor in the performance forecast—'the company strengthened internal management, improved quality and efficiency, and gross margin increased year-on-year'—reveals profound changes at the operational level. Over the past few years, the company has continuously promoted internal projects such as mine deep development, beneficiation recovery improvement, and smelting process optimization, achieving continuous declines in unit production costs. In H1 2026, by optimizing raw material ratios, reducing energy and material consumption, and improving automation levels, the company further reduced processing costs.

The improvement in gross margin is also due to product structure adjustments. Baiyin Nonferrous actively reduced the scale of low-margin trading businesses and focused resources on high value-added deep-processing products such as zinc alloys and lead-based alloys, which have stronger pricing power than common concentrates. From financial data, gross margin turned from negative to positive year-on-year, directly contributing to net profit turnaround.

3.2 Safety, Environmental, and Compliance Management Upgrades Strengthen Operational Foundation

Against the policy background of carbon peak and carbon neutrality, the nonferrous metals industry faces increasingly strict environmental requirements. Baiyin Nonferrous increased investment in environmental facilities and promoted green mine construction, not only avoiding potential production suspensions but also enjoying policy preferences for energy efficiency benchmark enterprises. Strengthened internal management is also reflected in supply chain optimization—strengthening long-term cooperation with large mines to stabilize raw material sources and reduce cost shocks from spot market fluctuations.

4. Use of Derivative Financial Instruments: Dual Wisdom of Hedging and Fair Value Management

4.1 Design of Embedded Derivative Financial Instruments and Source of Returns

The mention of 'year-on-year increase in fair value change gains of embedded derivative financial instruments' in the performance forecast is a professional term worth deep exploration. Baiyin Nonferrous, as a nonferrous metal enterprise, naturally faces price fluctuation risks. The company embeds derivative instruments (such as commodity futures contracts, forward contracts, option portfolios, etc.) in procurement, sales, and financing to hedge price risks. When market prices move favorably, the fair value of these derivatives increases, generating non-recurring gains.

In H1 2026, with overall metal prices rising, the fair value of the company's long hedge positions or structured products increased. This is not just an improvement in financial figures but also reflects the company's enhanced risk management and financial tool application capabilities. Unlike relying solely on spot price increases, the addition of derivative gains allows the company to lock in some profits before prices fully materialize in the spot side.

4.2 Derivative Risk Control and Accounting Treatment

Of course, derivative financial instruments are a double-edged sword. Baiyin Nonferrous' description of this part of the return is cautious in the announcement, neither exaggerating its size nor treating it as core profit. This attitude reflects the company's clear understanding of financial tool risks. From an accounting perspective, fair value changes of embedded derivative financial instruments belong to non-recurring gains and losses, but their positive impact on current net profit cannot be ignored. Through reasonable hedging schemes, the company actively manages exposure during price upturns, maximizing combined returns from spot and derivatives.

5. Financial Structure Optimization and Debt Risk Mitigation

5.1 Cash Flow Improvement and Debt Servicing Ability Enhancement

Turning from loss to profit is not just about the profit figure turning positive. Years of industry downturn led to a high debt-to-asset ratio and tight operating cash flow. The profitability in H1 2026 will effectively improve the company's cash flow and reduce debt repayment pressure. Although the absolute net profit of 64-95 million yuan is not large, given the company's scale and previous loss base, this turnaround marks the company crossing the critical point of cash flow disruption.

5.2 Balancing Capital Expenditure and Shareholder Returns

With improved profitability, Baiyin Nonferrous has the capacity to restart some shelved expansion or technical renovation projects. For example, previously planned smart mine construction and smelting system upgrades will further reduce costs. Meanwhile, investors can expect the company to gradually resume shareholder return measures such as dividends or buybacks after meeting capital expenditure. The turnaround is the first step of value restoration, while long-term sustainable growth requires the company to demonstrate the persistence of its profitability.

6. Future Outlook: Path from Turnaround to High-Quality Development

6.1 Can Industry Prosperity Sustain?

Looking ahead to H2 2026 and 2027, the nonferrous metals market faces multiple uncertainties: strength of global economic recovery, direction of US dollar monetary policy, growth rate of new energy metal demand. Baiyin Nonferrous' product mix includes lead, zinc, copper, gold, and silver, with diversified allocation helping to smooth cycle fluctuations. However, the company still needs to be cautious about the risk of metal prices peaking and falling. The use of derivatives can partially hedge, but if prices reverse significantly, it could also bring adverse movements.

6.2 Continuous Company-Level Evolution

The improvement in Baiyin Nonferrous' internal management should not be a one-time effort. The company should continuously benchmark against industry advanced levels in core indicators such as per-ton ore cost, beneficiation recovery rate, and smelting energy consumption. In addition, in the field of precious metal comprehensive recovery, the company can further tap the comprehensive utilization value of associated valuable elements such as indium, germanium, gallium, etc., which have higher added value and can effectively improve overall gross margin.

6.3 Capital Market Confidence Restoration

The turnaround will bring opportunities for valuation restoration for Baiyin Nonferrous. Currently, its price-to-book ratio remains low. If profitability can be continuously verified, the market may grant higher valuations. The company should strengthen communication with investors, clearly explaining the advantages of its mining+smelting+precious metal recovery business model and its progress in risk management capabilities.

7. Conclusion

Baiyin Nonferrous' performance turnaround is a joint result of market cycle, internal governance, and financial tool application. The rise in nonferrous metal prices provided external support; the management transformation and cost optimization in recent years built internal resilience; and the fair value gains of derivative financial instruments reflect improved risk hedging capability. However, turning a loss to profit is only the first step. To truly leap from survival to development, the company needs to continue efforts in technological innovation, resource replacement, and industrial chain extension.

For investors, Baiyin Nonferrous' performance forecast sends clear positive signals: a company once deeply loss-making in the cycle trough is returning to the growth track through multi-dimensional efforts. Although the macro environment remains uncertain, the strategic determination and execution efficiency demonstrated by the company deserve more market attention and reasonable expectations.

(Note: The above chart is a logic diagram of performance drivers compiled by the author based on announcement information, for reference only.)

Keywords: Baiyin Nonferrous; turnaround from loss to profit; nonferrous metal prices; internal management quality and efficiency; gross margin; derivative financial instruments; fair value changes; cycle reversal; hedging; precious metals