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Halyk Finance: Kazakhmys - 1H2013 results bleak, as expected - September 3, 2013




Halyk Finance


03 Sep 2013





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Last week Kazakhmys reported the financials for 1H2013. The results were weak as expected. The miner revised its 2013 guidance on costs and capex for the better, but their impact on our valuation is limited. We revised our 12-month target price to 311GBp and kept a Hold. Over the next two years we expect the margins to be squeezed by growing operating costs and flattish commodity prices, while leverage will continue to grow. We expect the balance sheet pressure to alleviate only after 2017, when the company plans to ramp up production from its growth projects. Tight control over operating and overhead costs, sizeable reductions of sustaining capex and completion of growth projects on time and on budget have become critical for Kazakhmys’ valuation and will remain so in the years ahead. The sale of GRES-1 power station, the negotiations on which the company plans to resume, will reduce leverage and help the company to refocus on core business.

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