Kazakhmys Plc Ord GBP0.20 (KAZ)

Company overview

Kazakhmys PLC is an international natural resources company with its principal operations in Kazakhstan and the surrounding region. The core business is the production and sale of copper. Kazakhmys is fully integrated from mining ore through to the production of finished metal. The copper division also produces significant volumes of other metals as by-products, including zinc, silver and gold. Kazakhmys is the largest copper producer in Kazakhstan and in the top ten worldwide.  The copper division has operating sites across Kazakhstan with 17 open pit and underground mines, 10 concentrators and 2 smelting and refining complexes. Its headquarters are in London and it is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

HL Comment (26 January 2012)

In a recent production statement, Kazakhmys Plc reported that its annual copper production was in line with its target and that it anticipated maintaining similar levels in 2012. The UK registered copper mining company, whose main assets are located in Kazakhstan, announced 2011 output of 299,000 tonnes of copper cathode from its own concentrate, in line with its target of 300,000 tonnes. Furthermore, the company produced 140,000 tonnes of zinc in concentrate with total gold production for the full year being 151 koz, while the production of silver was 13,115 koz.

Negative Points:

• The company conducts the bulk of its business in Kazakhstan where political risk could be enhanced if there is a change in the political climate.
• The pressure on mining costs has been widely noted across the mining industry.
• Adverse movements in the copper price may lead to a significant impact on profit forecasts.
• The mining business involves a number of intrinsic risks, including geological and technological challenges, weather and other natural disasters. Equipment failures, delays in supplies and loss of key inputs including electricity, water and coal all of which can cause prolonged mine or plant shutdowns or periods of reduced production.

Positive Points:

• Management expressed confidence with the outlook for copper production. Today's latest announcement was the fourth consecutive year the group have met all major production targets.
• Kazakhmys Power has a 50% interest in the coal fired Ekibastuz GRES-1 plant, the largest in Kazakhstan.
• Kazakhmys holds around a 26% stake in Eurasian Natural Resources Corporation, another diversified natural resources company with significant interests in Kazakhstan.
• The company is considered to benefit from a strong balance sheet. It is in the midst of an ongoing $6 billion growth and investment programme.

Consensus:

On balance, market consensus indicates a strong buy.

All yield figures are variable and not guaranteed.

Fundamental Data

Values are quoted in the stock's local currency: US dollar.

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS ($)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
31-12-2010	3,237.00	1,590.00	2.60	9.80	0.10	154.00	0.22	0.90
31-12-2009	2,404.00	1,028.00	1.44	20.60	n/a	(56.00)	0.09	0.40
31-12-2008	3,276.00	1,144.00	1.67	1.60	n/a	(24.00)	0.14	3.80
31-12-2007	5,256.00	2,026.00	3.04	7.20	7.20	1.00	0.41	1.90
31-12-2006	5,046.50	2,167.80	2.99	5.90	n/a	128.00	0.39	2.20