Kaz Minerals reports on solid year of production

Kaz Minerals reported a 5% improvement in revenue in its final results on Thursday, to $2.27bn (£1.76bn), as higher production and sales offset lower copper prices.

The FTSE 250 company said full year copper sales volumes rose to 317 kilotonnes for the year ended 31 December, from 296 kilotonnes, and gold sales improved to 225,000 ounces from 169,000 ounces in the prior year.

It noted that the average London Metal Exchange (LME) copper price for the year was 8% lower at $6,000 per tonne.

Kaz reported EBITDA of $1.36bn at an EBITDA margin of 60%, up from $1.31bn, while its operating profit rose 8% to $923m.

The board claimed an “industry leading” net cash cost of 77 US cents per pound, down from 85 cents, while its gross cash costs reduced to 140 cents per pound from 144 cents a year earlier, driven by increased contribution from Aktogay and cost efficiencies at the East Region.

Gold by-product revenues rose 50% to $318m, reportedly driven by a 10% increase in production, 10% higher average London Bullion Market Association (LBMA) gold prices, and the sale of inventory.

Kaz said 2tructural factors of economies of scale, competitive energy and transport costs, and low strip ratios were still supporting its low cost position.

Net debt stood at $2.76bn at year end, widening from $1.99bn at the start of the year.

Investments made in 2019 investments included cash consideration of $436m for the Baimskaya acquisition, and $718m of expansionary capital expenditure.

Gross liquid funds totalled $541m as at 31 December, down from $1.47bn year-on-year, while the company had $1bn of committed facilities undrawn as at 28 January, following the amendment of its pre-export finance (PXF).

The board recommended a final dividend of eight cents per ordinary share, taking the total 2019 dividend to 12 cents per share, including the interim dividend of four cents which was paid on 25 October.

On the operational front, Kaz reported copper production of 311 kilotonnes and gold production of 201,000 ounces, which was up 6% and 10% year-on-year, respectively.

It said it was expecting 2020 copper production of between 280 and 300 kilotonnes, as grades were expected to decline at Aktogay, while East Region output was limited by low grades and “challenging” geological conditions.

Looking ahead, Kaz said strong performance from its producing assets was supporting its investment in near- and long-term growth.

Aktogay expansion was on track for completion in 2021, with the project budget of $1.2bn project unchanged, while the Baimskaya feasibility study was ongoing, and was expected to be completed later in the first half of 2020.

“In 2019, Kaz Minerals has continued to build on its operational track record, delivering further growth in copper production and maintaining its industry leading cost position,” said chief executive officer Andrew Southam.

“Our large scale operations in Kazakhstan achieved record levels of production and our proven, low cost asset base provides a strong platform for investment into value-accretive growth projects.”

Southam added that the Aktogay expansion project was on budget and on track to start production in 2021.

“We look forward to releasing further details of our plans for Baimskaya when the bankable feasibility study is completed.”

At 1042 GMT, shares in Kaz Minerals were up 3.52% at 526.9p.