Kazakhmys Output Falls 5.4% on Grades; Expects to Meet Goals

May 4. Bloomberg

By Alastair Reed and Firat Kayakiran

Kazakhmys Output Falls 5.4% on Grades; Expects to Meet GoalsKazakhmys Plc (KAZ), Kazakhstan’s biggest copper company, reported a 5.4 percent decline in first-quarter output on lower ore grades while retaining full-year estimates.

The company, based in London, produced 74,200 metric tons of copper cathode, a finished form of the metal, compared with 78,400 tons a year earlier, Kazakhmys said in a statement today. Output of copper in concentrate slid 13 percent to 72,000 tons as average grades fell to 0.99 percent from 1.15 percent.

Kazakhmys reported “solid first-quarter production,” Amos Fletcher, an analyst at JPMorgan Cazenove, wrote in a note. The company fell 2 percent to 1,305 pence by the 4:30 p.m. close in London, valuing it at 6.98 billion pounds ($11.5 billion).

Kazakhmys, which expects to produce 300,000 tons of copper this year, is developing the Bozshakol and Aktogay mines to lift annual output by two-thirds in 2015 and benefit from increasing demand and prices for the metal. The company sold its copper at an average price of $9,823 a ton in the first quarter, compared with $7,037 a year earlier, according to the statement.

“We have had a solid start to the year with copper cathode production on track to meet our full-year target,” Chief Executive Officer Oleg Novachuk said in the statement.

Production of zinc in concentrate, an intermediate product shipped to refineries, fell 8.4 percent to 36,200 tons on weaker grades and ore production, according to the statement.

Share Re-rating

Net debt shrank to $295 million by the end of March from $350 million at the end of December on rising copper prices.

Kazakhmys plans to sell a stake of about 2 percent through a Hong Kong listing and is studying options for its 26 percent holding in Eurasian Natural Resources Corp. including swapping the shares for other assets, Novachuk said on March 3.

“We see the potential sale of the ENRC stake and the Hong Kong listing over the course of 2011 as likely to assist in delivering a re-rating” of Kazakhmys shares, Fletcher wrote.