Copper prices soar but no ore to sell? Hebei Iron & Steel Resources' South African mines show mixed recovery progress: Copper Phase I has resumed at low capacity, Copper Phase II expected to drain water by early April

How does the delay in resuming production under high copper prices impact the company’s performance?

Reporter: Peng Fei Editor: Yang Jun

Recently, Hebei Steel Resources (SZ000923, stock price 20.13 yuan, market value 13.139 billion yuan), which sent positive signals to the market about the smooth ramp-up of its second-phase copper capacity, has encountered a severe test from natural forces on its path to resumption.

On the evening of March 17, Hebei Steel Resources disclosed the latest progress on the underground mining restart of its South African subsidiary. The announcement showed that, affected by the most severe flooding disaster since 2000, the company’s Palabora Copper (PC) company’s underground copper mine operations had been forced to halt completely.

According to the Daily Economic News, the latest announcement indicates a mixed progress in the restart: while the first phase of copper has completed drainage and resumed production, it remains in low-load operation; the second phase, which is expected to be the main future 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.

Against the backdrop of international copper prices breaking above 100,000 yuan per ton and fluctuating at high levels, a two-month halt in copper operations will undoubtedly negatively affect the company’s annual production and sales plans. Fortunately, the company’s surface stockpile of about 100 million tons of magnetite has not been affected by the disaster, and production and shipping are proceeding normally. 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.

Second-phase copper project of tens of millions of tons delayed until April

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

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

Local 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 large amounts of water from open pits and surrounding catchment areas to flow into the mines, directly flooding parts of the first and second copper 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 emergency rescue, the restart has made substantial progress, but the overall situation remains mixed.

According to Hebei Steel Resources’ announcement on the evening of March 17, the underground drainage work for the first phase of copper has been completed, and production has resumed. Due to water damage, safety measures are in place, and current operations are at low load, with output gradually increasing based on safety conditions. For the second phase, which 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, Hebei Steel Resources revealed that the No. 6 crusher project for the second phase of copper mining had previously been progressing smoothly, with some equipment already on-site and construction underway. However, due to the underground water accumulation, construction progress has been disrupted, and personnel and equipment deployment are limited. Therefore, the planned commissioning in the third quarter of 2026 is expected to be delayed.

The Daily Economic News notes that this uneven restart progress is a “painful” experience for Hebei Steel Resources. In a January institutional survey, the company explicitly stated that, given the low ore grade and nearing closure of the first phase of the copper mine, the current copper supply mainly depends on the second phase.

It is understood that the second-phase copper 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 yuan/ton early last year to over 100,000 yuan/ton (an increase of nearly 50%), missing the high-price window for production incurs significant opportunity costs.

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

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

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

While underground copper mining is hindered by force majeure, Hebei Steel Resources’ dual-driven business model 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 investors: “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 asset.

The Daily Economic News notes that, historically, magnetite has been a “cash cow” for Hebei Steel Resources. For example, in the first half of 2025, magnetite contributed 1.83 billion yuan 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.

“Through process upgrades such as modifying grinding systems and adding drying procedures, the company plans to further process the stockpiled magnetite, aiming for an annual production of 6 million tons of high-grade (65%) iron ore, while stabilizing product quality to enhance market competitiveness and reduce costs,” Hebei Steel Resources stated during an investor communication on January 15.

The company also mentioned 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. Hebei Steel Resources explained in January that the core reason for its low gross margin on copper products is that the second phase has not yet achieved full production, resulting in small copper output but high fixed costs, which increases unit costs and depresses overall gross margin.

With the uncertain timeline for the second phase’s full resumption, during the period when underground operations are halted, the fully operational magnetite business will undoubtedly shoulder a significant portion of revenue. The company 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 tons of magnetite provides a solid bottom line, the key variable remains when the second-phase copper capacity can be fully operational, which is still the biggest uncertainty hanging over Hebei Steel Resources’ 2026 performance.

Daily Economic News