Watch These Foreign Mining Stocks As Kazakhstan Cashes In On Metal Price Recovery

Watch These Foreign Mining Stocks As Kazakhstan Cashes In On Metal Price Recovery

Kazakhstan is the world’s largest producer of uranium (URA). It stands second in chromium production (after South Africa (EZA)) and also boasts a high level of availability and mining of lead, zinc, copper, petroleum, and other minerals. Being a landlocked nation, the country also enjoys the advantage of exporting directly to its neighbors such as China (FXI) and certain European countries via Russia (RSX). Over the past few months, Kazakhstan’s mining sector has been going quite well.

Since October 2016, Kazakhstan has been recording positive growth in mining production (see chart above). Mining production increased by 14.4% in April 2017 as compared to April 2016.

Foreign investment into Kazakhstan’s mining sector

Foreign miners including the Anglo–Swiss multinational commodity trading and mining company Glencore (GLNCY), Russian gold producer Polymetal International plc (AUCOY), Luxembourg-based diversified natural resources producer Eurasian Resources Group, and Anglo-Australian resource company BHP Billiton (BBL) hold mining assets in Kazakhstan. Other large foreign mining companies that are active in Kazakhstan include Rio Tinto (RIO), Iluka Resources (ILKAY), Central Asia Metals Plc, Areva SA (ARVCY), ArcelorMittal (MT), Yildirim Group, Russian Copper Company and Rusal. A safer regulatory environment and good projects could help Kazakhstan attract more foreign capital into its mining sector (XME).

Recovery in metal prices

The recovery seen in metal and mineral prices over the last few months (see chart above) has contributed significantly to the economy of Kazakhstan. Kazakhstan’s mining companies, including Kazakhmys, KAZ Minerals (up 72% YTD as of July 19), Kazzinc (a Glencore subsidiary), Syrymbet JSC, ShalkiyaZinc, JSC AK Altynalmas, have benefitted from the same. Copper-focused KAZ Minerals reported a 43% growth in revenues in 2016 over the previous year. The depreciation in the Kazakhstani currency, the tenge, has also helped reduce the average operational cost for certain metal producers. The past two years have seen the tenge depreciate by around 45% against the US dollar.

Meanwhile, Kazakhstani petroleum producer JSC National Company KazMunayGas (up 28% YTD as of July 19), has benefitted from the oil price recovery.

As the mining industry continues to attract investments into Kazakhstan, China’s Belt & Road Initiative is another big factor contributing to increased investment into this Central Asian (AAXJ) (VPL) economy.

By Surbhi Jain, Frontera

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