The 10 per cent share price rebound following KAZ Minerals' (KAZ) 2015 results wasn't just relief at the return to (very limited) profitability. As has been the case with several other embattled miners, the market had concerns over the growth of the debt pile and the squeeze on cash flow in 2015.
That’s largely because KAZ has opted for high stakes expansion over balance sheet protection. The Bozshakol and Aktogay copper projects alone sucked up $1.01bn (£730m) in capital expenditure costs in the period. And while Bozshakol should now come in $50m under budget, the $147m in interest payments on the loans funding these investments conspired with soft commodity prices to pare back free cash flow to $2m.
As it was, net debt came in below analyst expectations, while gross cash costs of $2.30 per pound smashed company guidance. The biggest boost to the income statement was beyond management control, however. That was the Kazakh central bank's decision last August to scrap the tenge's dollar peg and allow it to float freely, which reduced the miner's cost base and improved the value of its dollar-denominated copper exports.
Analysts at JPMorgan have upgraded adjusted earnings forecasts into positive territory at 1¢ a share, rising to 11¢ in 2017.
KAZ MINERALS (KAZ) | ||||
|---|---|---|---|---|
| ORD PRICE: | 171p | MARKET VALUE: | £763m | |
| TOUCH: | 170.5-171.5p | 12-MONTH HIGH: | 276p | LOW: 65.1p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 71¢ | NET DEBT: | £2.25bn | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 3.60 | 1.60 | 263 | 28.0 |
| 2012 | 3.40 | 0.20 | 12.0 | 11.0 |
| 2013* | 0.90 | 0.10 | 18.0 | nil |
| 2014* | 0.85 | -0.17 | -52.0 | nil |
| 2015* | 0.67 | 0.01 | -3.0 | nil |
| % change | -21 | - | - | - |
Ex-div: na Payment: na £=$1.39. *Figures reflect continuing operations following 2014 asset transfer to Cuprum. | ||||
