KAZ Minerals reports strong 2016 financial results

Dias KabyltayevFebruary 24, 2017

Recently, following strong operational results, KAZ Minerals has demonstrated a similarly strong financial performance for 2016.

An increase in sales by 57kt  (67% yoy) in 2016, as a result of the increased production at Bozshakol and Aktogay due to a significant growth in prices for industrial metals in the second half of 2016, enabled the Company's gross revenues to increase by 43% yoy. Thus, the total revenue of the Company for 2016 increased to $969 mln.

$ mln. 2016 2015 yoy
Total Revenue* 969 677 43%
Revenue 766 665 15%
Cost price 413 429 -4%
Net cash costs, $/lb 0,59 1,09 -46%
EBITDA 492 208 137%
Net profit 177 -12 1575%
Net debt 2669 2253 18%
CAPEX 273 1012 -73%
Source: KAZ Minerals      
* Based on pre-commercial activities      

The company’s net cash cost amounted to $0.59/lb in 2016, decreasing almost by 50% yoy (2015: $1.09/lb), while the cost of production has decreased only by 4% yoy and totaled to $413 mln. A significant impact on that had low costs at the initial period of production on Bozshakol and Aktogay projects. Net cash cost at these enterprises amounted to $0.68/lb on average in 2016 against $1.91/lb at the enterprises of the Eastern region and Bozymchak.

Following the revenue increase by 43% yoy and simultaneous decrease of the cost by 4% yoy, EBITDA showed a positive trend and amounted to $492 mln. in 2016, compared to $208 mln. last year.

At the end of 2016, through attraction of additional credit funds in the amount of $350 mln., the Company's net debt has increased by 18% yoy, totaling to $2.67 bln.

Investments in Aktogay project by the end of the year were reduced by $200 mln. and totaled to $273 mln., instead of the planned $575 mln. At the same time, the Company plans total capital investments to amount $535 mln. in 2017, out of which $120 mln will be directed to the support of production and $415 on its expansion. Last payments in the amount of $100 mln. for the loan, aimed to finance Bozshakol project, are planned to be made during this year.

The Company plans to increase copper production to 225-260 th. tons in 2017, with a subsequent increase to 300 th. tons in 2018.

Our view

As expected, due to a significant increase in production with a simultaneous decrease of costs and copper price rally in the middle of 2016 year, KAZ Minerals has demonstrated strong annual financial and operating results. These figures in some positions turned out to be much more positive than our forecasts. Moreover, 12M TP in the amount of GBp 552/share has been already reached. Considering these factors, at the moment, we have decided to revise our 12M TP.