Kaz Minerals Jumps On JP Morgan Upgrade

Kazakhstan: KAZ Minerals approves of Aktogay GOK expansion

Shares in Kaz Minerals jumped on Thursday as JP Morgan Cazenove upgraded the stock to ‘overweight’ from ‘neutral’ and lifted the price target to 580p from 465p as it took a look at the metals and mining sector.

The bank said it had been cautious on the stock due to risks around the construction of development projects and balance sheet vulnerability in the event of a commodity price downturn.

“However, operational/project performance has exceeded expectations, while commodity prices have reduced balance sheet risk. Given those factors, coupled with an almost 20% pullback in the shares since mid-Feb, we now see an attractive entry point and upgrade.”

Meanwhile, JPM said Randgold Resources and Acacia Mining – both rated ‘overweight’ – remain its top picks in the precious metals sector. It said Randgold is “optically expensive” trading at 10/9x EV/EBITDA on spot, but is also net cash.

In addition, it pointed out that management has strict thresholds for M&A/project development and has outlined plans to return cash above $500m to shareholders.

As far as Acacia is concerned, it highlighted the fact the company generates free cash flow yield of around 7-8%, which is the highest among the UK precious peers, providing strategic flexibility. Still, JPM acknowledged near-term risks regarding the Tanzanian concentrate export ban.

Petra Diamonds, rated ‘overweight’, remains JPM’s top diamonds pick. It reckons the stock will re-rate over the medium term based on solid production growth and improving product mix and margin expansion as the proportion of undiluted ore increases.

At 0915 GMT, Kaz shares were up 8% to 520.60p, Acacia was up 4% to 484.10p, Randgold was up 5.2% to 7,325p and Petra Diamonds was 0.6% firmer at 131.80p.