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Lower production volumes offset an 18 per cent rise in copper prices, leaving Kazakhmys reporting a fall in first-half profits. Copper cathode production fell to 157,100 tonnes from 163,500 tonnes in 2007's first-half after severe winter conditions restricted open pit mining operations and two smelters were shut down for maintenance. Production has increased since the first quarter, reflecting the start of operations at the new Taskura and Akbastau mines and the recommencement of the smelters.
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Gold and silver revenues increased strongly, although zinc sales fell and zinc prices were 36 per cent below those in 2007's first-half. Kazakhmys, like mining peers, faces acute cost inflation, particularly from labour and raw material inputs - accordingly, cash costs soared to 94¢ a pound (2007: 27¢ a pound), which also reflects reduced by-product sales.
The acquisition of the power business makes the group Kazakhstan's largest power provider - the financial benefits should be seen in the second half, as should the investment in larger rival Eurasian Natural Resources Corporation (ENRC). Kazakhmys increased its ENRC stake from 14.6 per cent at 31 December 2007 to just over 25 per cent, making it the largest single shareholder. Prior to these results, analysts were forecasting full-year pre-tax profit of $1,911m (£1,073m) and EPS of 281¢.
| KAZAKHMYS (KAZ) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,181p | MARKET VALUE: | £6.32bn | |
| TOUCH: | 1,180-1,181p | 12-MONTH HIGH: | 1,943p | LOW: 1,041p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 2,062¢ | NET DEBT: | 10% | |
| Half-year to 30 Jun | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Net div per share (¢) |
|---|---|---|---|---|
| 2007 | 2.79 | 1.19 | 170 | 13.6 |
| 2008 | 2.84 | 0.89 | 134 | 14.0 |
| % change | +2 | -25 | -21 | +3 |
Ex-div:01 Oct Payment:31 Oct £1=$1.80 |
||||
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A forward PE of 8 is comparable to fellow copper miner Antofagasta's rating and, whilst a better second half performance is likely, these first-half figures weren't so great. Fairly priced.
Last IC View: Fairly priced, 1,586p, 14 May 2008
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
