Credit Suisse upgrades KAZ Minerals, says development risks receding

“Our concerns around KAZ have centred around execution risks at the two main growth projects and funding risks due to high levels of debt. Both are diminishing in our view and, alongside better than expected earnings we upgrade to outperform.”

CS said it remains cautious on copper prices over the next 12 months but pointed out that a third of KAZ revenues are from gold/silver/zinc, cash costs are low and copper production is set to double in the next two years.

The bank noted that the first of the two major projects, Bozshakol, is close to reaching commercial production, and the ramp-up has largely gone to plan.

Meanwhile, Aktogay has a very similar design and scale and the lessons learned from Bozshakol should lead to a similar ramp-up period through 2017.

“Cost performance at the projects and existing mines was better than expected in H116 and we have reduced our unit cost estimates over the forecast period (we previously had a buffer above company guidance).”

On Thursday, KAZ reported a rise in first-half earnings and said its new Bozshakol project is on track for commercial output in the second half.

For the six months to the end of June, the copper miner said core profit rose to $115m from $88m in the same period last year. Pre-tax profit surged to $91m fro $2m last year.

Although revenue fell to $302m from $341m, cost of sales declined to $170m from $282m and administrative expenses dropped to $51m from $71m.

At 0824 BST, KAZ shares were up 2.5% to 184.50p.