KAZ Minerals: Strong results, boosting our price target (stays BUY)
KAZ is currently above our previous price target (PT). However, with new fears over Chinese growth, prompted by the coronavirus, copper has fallen 9% from the mid-January highs. With China making up c.50% of global copper demand, we see the coronavirus as a near-term threat to copper prices and believe the market is likely to be in small surplus this year. We could therefore see KAZ trade sideways for the next couple of months. However, after rolling over our NPVs to a 2020E base, increasing our gold price assumptions (and a small increase in our copper forecasts due to the US-China Phase One trade deal) and incorporating the strong 2019 results, we find more upside in KAZ, with a GBp 619/share PT (+22%), and we maintain our BUY recommendation. We still like the KAZ growth story through Aktogay II (from 2021E) and Baimskaya (from 2027E). We expect the feasibility study of Baimskaya (expected in 1H20E), and the potential for partnering and financing later this year/in 2021E to unlock value in the asset.Kaz Minerals is a holding company. Co. and its subsidiaries operates in the natural resources industry through five divisions: Bozshakol, Aktogay and East Region, which are engaged in the mining and processing of copper and other metals in Kazakhstan; Bozymchak, which is engaged in the mining and processing of copper and gold in Kyrgyzstan; as well as Mining Projects, which is engaged in the development of metal deposits and processing facilities in Kazakhstan. Co. operates the Bozshakol and Aktogay open pit copper mines in Pavlodar and the East Region of Kazakhstan, three underground mines in the East Region of Kazakhstan and the Bozymchak copper-gold mine in Kyrgyzstan.
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