Analysis Report on the Impact of Shareholding Reduction by Western Gold's Controlling Shareholder

I will now provide you with a comprehensive analysis report.

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According to announcements released by Western Gold on January 19, 2026 [1][2], the controlling shareholder, Xinjiang Nonferrous Metals Industry (Group) Co., Ltd., plans to implement the following shareholding reduction arrangements:

Item	Details
Shareholding Reduction Subject	Xinjiang Nonferrous Metals Industry (Group) Co., Ltd.
Current Shareholding	500,948,948 shares, accounting for 54.99% of total share capital
Planned Reduction Quantity	No more than 9,109,991 shares
Reduction Ratio	No more than 1% of total share capital
Reduction Period	February 11, 2026 to May 11, 2026
Reduction Method	Concentrated bidding transactions
Reason for Reduction	Own capital turnover needs
Source of Shares to Be Reduced	Shares obtained from issuing shares to acquire assets

: The shares to be reduced in this transaction are from the private placement shares issued during the 2019 major asset restructuring. The 36-month lock-up period expired in recent years, and this shareholding reduction is a normal arrangement after the lock-up shares are lifted [1].

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Based on market data, Western Gold’s current valuation is in an all-time high range [0]:

Valuation Indicator	Current Value	Industry Comparison	Assessment
P/E (TTM)	89.29x	Gold industry average is about 15-25x	Significantly overvalued
P/B	6.17x	Industry average is about 1.5-2x	Clearly overvalued
P/S	2.27x	Industry average is about 1-1.5x	Overvalued
1-Year Price Increase	+161.26%	Significantly outperforms the broader market	Bubble risk exists

• Sentiment Impact
  : Shareholding reduction by a controlling shareholder is usually interpreted by the market as a signal of weakened confidence by “insiders”, which may trigger short-term selling pressure
• Supply-Demand Imbalance
  : The concentrated bidding reduction of approximately 9.11 million shares will increase market supply, exerting direct pressure on the stock price
• Technical Aspect
  : The current stock price is already in an overbought zone (RSI indicates overbought_risk), and technical indicators themselves suggest a need for a pullback [0]

• Improved Share Liquidity
  : Moderate shareholding reduction can enhance stock liquidity and attract more institutional investors to participate
• No Impact on Control
  : After the reduction, Xinjiang Nonferrous Metals will still hold approximately 54% of shares, so control remains stable, and the company’s strategic direction will not change [1]
• Use of Funds
  : If the funds are used to support the overall development of the group, it may indirectly benefit the listed company

• Valuation reversion will depend on gold price trends, the company’s production growth, and profitability improvement
• The current valuation level of 89x P/E requires high growth in the coming years to be justified

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According to the announcement, the reason for the reduction is clearly stated as “own capital turnover needs” [1][2]. From an objective perspective:

• The reduction ratio is limited (only 1%), and the shares are from unlocked restructuring lock-up shares, not an active large-scale reduction
• After the reduction, it will still maintain an absolute controlling stake of over 54%, so control remains unshaken
• As a local state-owned enterprise, Xinjiang Nonferrous Metals’ capital needs may stem from policy adjustments or group-level capital allocation

• Choosing to reduce shares when the stock price is near its 52-week high (RMB 36.00) reflects a tendency to “cash out at a high level” in terms of timing
• The company’s fundamentals have not undergone fundamental improvement, with a net profit margin of only 2.54% in H1 2025 [0]

Dimension	Assessment
Timing of Reduction	Reducing shares when the stock price is in an all-time high range
Reduction Ratio	Limited (1%), symbolic impact greater than substantive impact
Use of Funds	Clearly stated as “capital turnover” rather than investing in competitors
Change in Control	No impact
Historical Reduction Record	Needs further tracking

: This shareholding reduction . It is more likely to reflect:

1. Routine operation after lock-up share expiration
2. Partial capital withdrawal by the controlling shareholder at a high price level
3. Compliance needs to meet group-level capital turnover requirements

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Risk Type	Details
Valuation Pullback Risk	Current P/E ratio of 89x far exceeds the industry average, and the stock price has decoupled from fundamental support
Gold Price Volatility	Gold price trends will directly affect the company’s performance and valuation
Reduction Execution Risk	Uncertainty exists regarding the actual quantity and price of shares to be reduced
Market Sentiment Risk	The reduction announcement may trigger short-term follow-up selling

Based on technical analysis results [0]:

• Trend Judgment
  : Sideways consolidation (sideways), no clear direction
• Key Price Levels
  : Support level at RMB 28.34, resistance level at RMB 31.35
• Risk Indicator
  : RSI indicates overbought risk
• Relative Strength
  : Beta 0.69, underperforms the Shanghai Composite Index

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1. Valuation Impact
   : The shareholding reduction plan will exert slight pressure on short-term valuation, but the impact is limited. The company’s current valuation is at an all-time high, with a risk of pullback.

2. Confidence Judgment
   : The shareholding reduction should not be simply interpreted as a pessimistic outlook on the company’s development prospects. Features such as the 1% reduction ratio, clear capital turnover needs, and no impact on control all indicate that this is more likely a normal lock-up share expiration and capital allocation action.

3. Investment Advice
   : Investors should focus on core fundamental factors such as gold price trends, the company’s production growth, and profitability changes, and treat the current high valuation level with caution.

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[1] Sina Finance - “Western Gold’s Controlling Shareholder Xinjiang Nonferrous Metals Plans to Reduce Shareholding by No More Than 9.11 Million Shares, Accounting for 1% of Total Share Capital” (https://finance.sina.com.cn/stock/aigc/zjchg/2026-01-19/doc-inhhvsfv6936015.shtml)

[2] Securities Times - “Western Gold: Controlling Shareholder Plans to Reduce Shareholding by No More Than 1% of the Company’s Shares” (https://www.stcn.com/article/detail/3600298.html)

[0] Jinling AI Financial Database - Western Gold Real-Time Market, Technical Analysis and Company Financial Data