KAZ Minerals sinks under Goldman Sachs sell rating

18th Aug 2015 11:28

(ShareCast News) - Goldman Sachs has reiterated its 'sell' recommendation on KAZ Minerals as the copper-focused miner is expected to deliver disappointing first-half results on Thursday. Shares in KAZ fell 2.1% to 146.7p by 1140 BST on Tuesday, as Goldman kept its 12-month target price at 137p.Interim results from KAZ on 20 August are forecast to show a 52% half-on-half decline in EBITDA, mainly on the back of a 13% decrease in copper cathode output - revealed in a recent trading update - and 13% fall in copper prices, while gross cash costs have remained flat."We believe investors will focus on management comments regarding growth projects, especially the timing of Bozshakol commissioning given the fire reported at this asset last week."Goldman acknowledged that KAZ offered "structurally appealing production volume growth", with volume expected to triple by 2018, with the company looking well positioned at the lower end of the global copper cash cost curve according to the bank's analysis.However, GS has a bearish outlook for the copper price, pencilling in $4,725 per tonne in 2016, and so estimates KAZ's 2016-17 free cash flow will be insufficient to cover debt repayments under existing loan agreements."Hence, until we see a sustainable debt solution coupled with spotless execution on growth we stay cautious on the equity."Other possible upside that could see the rating altered would be higher-than-expected copper, zinc and gold prices, weaker forex, and projects being ahead of schedule and with capex below budget.