Kazakhmys First-Half Copper Output Falls 11% on Maintenance

Jul 26. Bloomberg

By Firat Kayakiran

Kazakhmys First-Half Copper Output Falls 11% on MaintenanceKazakhmys Plc (KAZ), the biggest copper producer in Kazakhstan, said first-half output of the finished metal dropped by 11 percent as maintenance halted its Balkhash smelter and the grades of metal it delivered declined.

Output in the first half slid to 136,100 metric tons from 153,000 tons a year earlier, the London-based company said today in a statement. Second-quarter production rose 9 percent to 71,000 tons from the previous three months, when adverse weather also hit output, according to the statement.

“The decrease reflects the lower volume of copper in concentrate produced and the planned repairs to the Balkhash smelter during March and April 2012,” the company said.

Copper output was 10 percent ahead of the estimate from Nomura Holdings Inc. and 17 percent better than the forecast at Liberum Capital Ltd., the two said today in separate notes.

Kazakhmys rose 1.8 percent to 675 pence by 11:26 a.m. in London trading, paring its loss for the year to 27 percent.

Kazakhmys, seeking to boost output by about two-thirds to 500,000 tons a year by opening two mines, plans to start production at its Bozshakol project in 2015 and Aktogay in 2016. The company also began extracting ore from its Konyrat mine, shut in 2008 because of lower metal grades, it said.

‘Low Grade’

“As the low grade Konyrat mine is ramped up, there will be pressure on cash costs,” Paul Cliff and Biraj Borkhataria, analysts at ING Groep NV, wrote today in an e-mail. “We forecast Kazakhmys’s cash generation ability to fall dramatically with net cash cost plus maintenance capex rising by 60 percent per pound of production over 2011-2013.”

The company said it’s on track to meet the production target of 285,000 tons to 295,000 tons of copper this year.

“Following the severe weather at the start of the year, we are continuing to raise our output and we remain on track to meet our production targets,” Chief Executive Officer Oleg Novachuk said in the statement.

The company will process the stockpiled ore and copper in concentrate in the second half, “assisted by improved availability of equipment,” according to the statement.

Output of copper in concentrate was 148,400 tons in the first half compared with 153,300 tons. The average copper grade in ore fell to 0.99 percent from 1.01 percent. Zinc contained in concentrate in the first half fell to 71,600 tons, from 75,600.

Copper for three-month delivery in London plunged by about 15 percent to average $7,829 a ton in the second quarter.