Kazakh copper producer Kazakhmys Plc posted better-than-expected first-half earnings on Thursday, helped by cost cutting and the sale of stockpiled inventories to China, lifting its shares more than 4 percent.
Earnings per share dropped to 96 cents on lower copper prices, compared with a consensus forecast of 41.5 cents from six analysts, from 134 cents in the year-earlier period.
We think these results will be seen as very strong by the market -- with Kazakhmys regaining a reputation as a competent operator of assets in challenging times, analysts at brokerage Liberum Capital said in a note.
Shares in the FTSE 100 company were up 4.5 percent at 958-1/2 pence by 0906 GMT, outperforming a 0.4 percent gain in the UK mining index .FTNMX1770. The stock has recovered strongly from lows around 170p seen last last year.
Demand for copper has been positive and with our strong customer relationships in China we have been well placed to take advantage of this opportunity, said Chief Executive Oleg Novachuk.
Benchmark London Metal Exchange MCU3 prices for copper, widely used in construction and manufacturing, have more than doubled this year, led by demand from top consumer China, but are still almost 30 percent below the record highs of $8,940 a tonne reached last July.
Kazakhmys expects copper production to exceed its annual target of 300,000 tonnes given an additional 15,000 tonnes produced from stockpiled material.
It anticipates copper production will remain flat in 2010, Novachuk said on a conference call.
Net cash costs were better than the group expected, but the group sees them rising in the second half as input costs, such as diesel, have risen and inflation in Kazakhstan may increase as a result of the devaluation of the country's currency.
Kazakhmys said sales on the spot market were dominated by China for most of the year.
For the 2009 financial year, it said contracts are in place for the sale of about 90 percent of its anticipated copper cathode output with sales evenly split between Europe and China.
In July, the company said it used stockpiles to boost first-half copper output by 8 percent, but said second-half production would fall.
Talks to sell 25 percent of Ekibastuz GRES-1, the largest power station in Kazakhstan, to Samruk-Kazyna are at an advanced stage and Kazakhmys said it does not anticipate making a loss on the sale.
The company said it may reduce its holding further given the capital commitment needed to increase the plant's capacity and because potential output is way above its own needs.
Novachuk said demand in the power business had been modest but the outlook for both demand and pricing was improving.
On its growth projects, Kazakhmys said pre-feasibility studies had been completed at its Aktogay and Boschekul projects that confirmed their potential as large, low-cost and long-life assets.
(Editing by Victoria Howley and David Holmes)