Kazakhmys Shares Rise After Copper Output Beats Estimates

Kazakhmys Plc, Kazakhstan’s biggest copper producer, rose the most in more than two months in London trading after its copper output beat analyst estimates.

Kazakhmys jumped 5.4 percent to close at 265 pence, the largest gain since Aug. 16. The company produced 70,600 metric tons of copper cathode, the finished form of the metal, in the third quarter and 214,900 tons in the first nine months, it said in a statement today.

The quarterly volume is higher than “our estimate of 64,200 tons, reflecting a higher-than-expected average mined grade,” Fawzi Hanano, an analyst at Goldman Sachs Group Inc. in London, said in a report. Kazakhmys said it’s heading for the higher end of its full-year target of 285,000 tons to 295,000 tons. “We believe the company is on track to slightly exceed this guidance, given the third quarter beat,” Hanano said.

The average copper grade in the ore extracted by Kazakhmys rose to 1 percent in the third quarter from 0.9 percent a year earlier, it said in the statement. London-based Kazakhmys is seeking to reduce production costs to counter declining metal prices, which are capping profits in the mining industry. Copper prices have declined 9.5 percent this year.

Kazakhmys is set to increase copper output in the final quarter because it hasn’t processed all the ore extracted in the previous three months, John Smelt, a spokesman, said in a phone interview. Copper concentrate production was 78,700 tons in the third quarter while copper cathode output was 70,600 tons.

‘Typically Solid’

“Typically solid production report from Kazakhmys,” Ben Davis, an analyst at Liberum Capital Ltd. in London, said in a note today. “We do see upside to our numbers and scope to upgrade if efforts to boost grade profile and reduce higher-cost production are successful.”

Investec Plc upgraded Kazakhmys’s rating to hold from sell.

Kazakhmys, which is targeting 500,000 tons of copper output a year by 2017 by building the Bozshakol and Aktogay mines, had net debt of $1.4 billion at the end of September. The company is set to receive $875 million in cash and about 77 million of its own shares from the sale of its 26 percent stake in Eurasian Natural Resources Corp.

ENRC founders Alexander Machkevitch, Patokh Chodiev and Alijan Ibragimov, along with the Kazakh government, gained acceptance from 96.23 percent of shareholders as of Oct. 4 to their offer of $2.65 in cash and 0.23 of a Kazakhmys share for each one in ENRC.

Before it's here, it's on the Bloomberg Terminal.