As Antofagasta chief executive Iván Arriagada recently pointed out, his company has not been the only copper producer shredding costs in an oversupplied market, but peer KAZ Minerals (KAZ) may lay claim to the most successful expense-cutting programme. In the six months to June, the Kazakh miner reduced gross cash costs to just $1.78 (£1.36) per pound, down from $2.70 a year ago.
Granted, last summer's devaluation of the tenge had a flattering effect, as it did to a lesser extent in February’s results, but cost control initiatives and a drop in fuel prices also helped. And despite lower byproduct credits, investors can expect improved margins to hold; even accounting for depletion at the Yubileyno-Snegirikhinsky mine and scheduled maintenance work at Orlovsky, gross cash costs are not expected to exceed $2.10 this year.
At the same time, the ramp-up of the gold and silver by-product-rich Bozshakol mine bodes very well for cash generation. Copper production began in February without a hitch, and ore throughput is now above 60 per cent of capacity, meaning full-year production should reach 45-55,000 tonnes of mined ore.
Analysts at Peel Hunt are forecasting full-year pre-tax profit of $81.8m and EPS of 15¢, rising to $210m and 38¢ in 2017.
KAZ MINERALS (KAZ) | ||||
|---|---|---|---|---|
| ORD PRICE: | 183p | MARKET VALUE: | £815m | |
| TOUCH: | 182-183p | 12-MONTH HIGH: | 198p | LOW: 65p |
| DIVIDEND YIELD: | nil | PE RATIO: | 15 | |
| NET ASSET VALUE: | 85¢ | NET DEBT: | $2.53bn | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2015 | 341 | 2.0 | -3.0 | nil |
| 2016 | 302 | 91.0 | 16.0 | nil |
| % change | -11 | +4450 | - | - |
Ex-div: na Payment: na £1 = $1.31 | ||||
