KAZ gets a forex boost

This was KAZ's first interim release since completion of a restructuring that involved spinning off its older, lower-margin mining assets into a separate vehicle owned by two of its shareholders. The restructuring has undoubtedly produced a more focused and efficient business, but the group is still in thrall to the copper price, which is now at a multiyear low. As a consequence, KAZ booked gross profits of $113m (£72.4m), marking a 45 per cent decline against the 2014 half-year. Free cash flows held up reasonably well through the period, but the unexpected good news on costs couldn't have come at a more opportune time.

Even prior to the devaluation of the Kazakh tenge, KAZ managed to reduce its gross cash costs to an equivalent rate of $2.70 a pound, or 10 per cent below the upper range of guidance. Management has reduced its unit cost estimates for the full year, even though some operating costs are expected to be weighted to the second half.

KAZ's big development mines - Bozsfakol and Aktogay - remain on track and within budget, although a recent fire at the former pit has delayed commissioning to the first quarter of next year. Once up and running, they will increase the group's annual copper output by more than 200 per cent, transform its cash flows and make KAZ one of the lowest-cost producers in the world. These developments don't come cheap, but the group doesn't appear to be having undue difficulties servicing the debt, even with copper prices in the doldrums. In addition, KAZ doesn't have to negotiate its debt covenants until 2017, by which time Bozsfakol will be on stream and Aktogay will be coming into production.