25th Feb 2016 12:38
LONDON (Alliance News) - KAZ Minerals PLC Thursday said it plans to increase production by at least 50% each year until 2018 as it progresses its major growth projects in Kazakhstan, building on its performance in 2015 that saw the miner return to profit despite the ongoing commodity rout.
KAZ shares were up 5.3% to 152.75 pence per share on Thursday afternoon.
KAZ, which operates in Kazakhstan, reported a pretax profit of USD12.0 million in 2015. Although a tiny sum, that profit compares to the USD169.0 million loss booked in 2014.
That profit was achieved despite revenue falling to USD665.0 million from USD846.0 million, caused by a 22% fall in copper prices in the year and a 6% fall in copper sales volumes.
Prices for its by-products also fell, with zinc prices down 10%, gold prices down 3% and silver prices falling 17%. Alongside lower sales volumes, that caused revenue from by-products in 2015 to fall by USD83.0 million from 2014.
It was the significantly reduction in impairments and exceptional items that helped push the miner back into the black despite the difficult market conditions and fall in revenue.
Impairments in 2015 only amounted to USD15.0 million in 2015 compared to USD137.0 million last year, whilst other exceptional items provided a USD2.0 million net gain compared to a USD132.0 million loss in 2014.
Finance costs were also lower at USD270.0 million, compared to USD399.0 million. The higher charge last year was driven by a USD181.0 million net loss from foreign exchange following the devaluation of the tenge.
Finance costs may have fell in the year, but the company's net debt rose considerably, standing at USD2.25 billion at the end of 2015 compared to USD962.0 million at the end of 2014. However, KAZ is left with plenty of liquidity headroom with USD1.50 billion worth of available funds, including USD250.0 million of undrawn credit facilities.
Earnings before interest, tax, depreciation, amortisation and special items fell to USD202.0 million in 2015 from USD355.0 million in 2014, but the lower level of impairment charges and other items led its operating profit to remain broadly flat year-on-year at USD90.0 million compared to USD94.0 million last year.
Operationally, KAZ hit its production guidance in the year, while also managing to lower its cash costs even further than originally expected. KAZ also paid out considerably less in sustaining capital expenditure in the year than it budgeted.
Gross cash costs averaged 230.0 US cents in 2015, around 17% lower than the higher end of its guidance whilst sustaining capital expenditure only amounted to USD68.0 million, 32% less than the top end of its guidance range of USD80.0 to USD100.0 million.
Gross cash costs will continue to fall this year, in tandem with a substantial rise in production.
In 2016, KAZ is aiming to produce "industry leading" growth, aiming to increase production by 50% per year until 2018 through its expansion projects at the Bozshakol and Aktogay mines. The increase in production will also benefit from the company's continuing focus to lower costs further.
In 2015, copper cathode production experienced a slight dip to 81,100 tonnes from 83,500 tonnes whilst gold bar production remained flat at 34,600 ounces.
Total production in 2016 is expected to be in the region of 130,000 to 155,000 tonnes of copper cathode equivalent and 90,000 to 120,000 ounces of gold bar equivalent. If achieved, it will mean copper cathode production in 2016 will be between 60% to 84% higher this year whilst gold production will be between 1.6 to 2.4 times higher than in 2015.
Due to the company's major growth projects, KAZ did not re-introduce a dividend in 2015 - an unsurprising outcome in the current market as numerous large-cap miners have sacrificed their dividends in light of the current environment.
However, KAZ has returned USD2.09 billion to its shareholders since listing back in 2005 and said it does intend to bring back its dividend once the major growth projects are completed.
"Our immediate priorities in 2016 are the ramp up of Bozshakol, the construction of Aktogay and to keep operating costs low across the group. The delivery of our world-class projects will enable us to de-gear the balance sheet and complete our transformation into a low-cost operator of large scale, open-pit copper mines in Kazakhstan," said Chief Executive Oleg Novachuk.
By Joshua Warner; [email protected]; @JoshAlliance
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