KAZ Minerals still crumbling

The firm will announce its first-half numbers on 20 August, and its revenue has been knocked by the falling price of copper.

Miners at work
Source: Bloomberg

The miner plans to spend $80 to $100 million in 2015 on a project in the East Region, and production of copper is expected to triple by 2018, but given the slump in the price of copper it might be many years in order to see the benefit of this. KAZ Minerals is currently not paying a dividend as a way of funding its East Region project, but again it will cause pain in the short-term.

The move by Beijing to devalue the yuan against the dollar has accelerated the selloff copper has been experiencing. The Kazak based miner took a hit of $181 million last year due to currency headwinds, but the devaluation of the tenge in August by the National Bank of Kazakhstan has given the share price of the company a boost because it helps bring down costs, as half the miners costs are denominated in tenge.

Goldman Sachs has reiterated its sell ratings for KAZ Minerals, and its price target is 137p. The Wall Street titan feels that KAZ Minerals may struggle to make debt repayments in the next two years should copper keep dropping in value. According to Markit, the number of short positions on KAZ Minerals is at a 12 month high.

When KAZ Minerals announces its first-half results, the market is anticipating revenue of $327 million. The firm will report its full-year results in February 2016, and traders are expecting revenue of $723 million, and a net loss of $471 million. That compares with an annual revenue and adjusted net profit of $846 million.

Equity analysts are bullish on KAZ Minerals, and out of the 24 ratings, eight are buys, 12 are holds, and four are sells. The average target price is 225p, which is 55% above the current price. Investment banks are also bullish on Vedanta Resources, and of out the 12 recommendations, five are buys, and seven are holds. The average target price is £5.97, which is 22% above the current price.

KAZ Minerals’ share price has been in a downward trend since January 2011, and the downside target is 140p. Any pullbacks will run in to resistance at 160p, and 200p.

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