Eighteen months ago, an investment in KAZ Minerals (KAZ) resembled what gamblers would recognise as an accumulator bet: a wager on multiple events, each of which must occur for the original stake to make a return. Well, all of the horses have come in. Commissioning and ramp-up of the Bozshakol and Aktogay mines have been practically flawless, leading to a 110 per cent increase in copper production to 118kt. At the same time, ruthless cuts to gross cash costs at both projects have pushed KAZ to the foot of the global cost curve. All the while, copper prices are steadily climbing on heightened Chinese demand and forecasts of a supply crunch by the end of the decade.
A setback on just one of these fronts might have caused shares in the copper miner to collapse, such was the scale of KAZ’s borrowings in the period. Now, net debt has peaked and should start to unwind rapidly. In the six months to June, the group generated $269m (£209m) in free cash flow before interest payments.
With the copper price now 14 per cent above the average for the period, and group cash costs for Aktogay and Bozshakol both lowered, investors may well conclude that the average analyst forecast for operating profit of $547m is too low. One of those, broker Macquarie, expects full-year adjusted profit of $451m and EPS of 101¢, up from $180m and 40¢ in 2016.
| KAZ MINERALS (KAZ) | ||||
| ORD PRICE: | 724p | MARKET VALUE: | £3.23bn | |
| TOUCH: | 723-724p | 12-MONTH HIGH: | 753p | LOW: 162p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 14 | |
| NET ASSET VALUE: | 187¢ | NET DEBT: | $2.44bn | |
| Half-year to | Turnover | Pre-tax | Earnings per | Dividend |
| 30 Jun | ($m) | profit ($m) | share (¢) | per share (¢) |
| 2016 | 302 | 91 | 16.0 | nil |
| 2017 | 721 | 240 | 41.0 | nil |
| % change | +139 | +164 | +156 | - |
| Ex-div: | n/a | |||
| Payment: | n/a | |||
| £1=$1.29 | ||||
