-- Reaffirms it's on track to meet full-year copper output target
-- 2Q copper output up on quarter due to completed Balkhash repairs and less severe weather
-- Logistic issues into China result in inventory buildup; inventory should return to normal by 4Q as issue resolved
-- 2Q Ekibastuz GRES-1 power output up 9.1% on year
(adds details, analysts comments and updated share price)
By Alex MacDonald
LONDON--Kazakhstan's largest copper miner, Kazakhmys PLC (KAZ.LN), Thursday reaffirmed that it's on track to meet its full-year copper output target after production rose in the second quarter from the previous three months when severe winter weather hampered operations.
Second quarter copper cathode equivalent production from Kazakhmys' own concentrate rose 8.8% on the quarter due to the completion of repairs to its Balkhash smelter and better weather, the U.K.-listed miner said. However, on-year copper cathode equivalent production fell 11% to 70,200 metric tons in the second quarter as the company sought to offset lower copper grades by mining more ore.
Logistical issues with the shipment of finished goods to China, which resulted in a build up of inventories, should be resolved by August or September, John Smelt, head of Kazakhmys' corporate communications, said. He forecast inventories would return to normal levels by the fourth quarter.
Consequently, sales are seen skewed to the second half of the year, Mr. Smelt said, adding that none of its full-year targets has changed.
Brokerage Liberum Capital expects copper sales in the first half to be 116,000 tons and 174,000 tons in the second half.
The FTSE-100 firm confirmed it's still on track to produce between 285,000 and 295,000 tons of copper cathode from its own concentrate this year and is on course to meet its by-product output targets in 2012.
"Following the severe weather at the start of the year, we are continuing to raise our output and we remain on track to meet our production targets set at the start of the year," said Kazakhmys' Chief Executive Oleg Novachuk. "The power business has continued to perform well, reflecting operating efficiency and strong domestic demand," he added, noting that the company is operating in a challenging global environment.
Second quarter electricity generated from the Ekibastuz GRES-1 coal-fired power station, in which it owns a 50% stake, rose 9.1% on year to 3,097 gigawatt hours while electricity tariff rose nearly 17% during the same period. The figures are on a fully consolidated basis.
Copper cathode output from its own concentrate reached 134,700 tons in the first half, meaning the company will need to produce at least 150,300 tons of copper in the second half to meet the lower end of its full-year production guidance, according to Dow Jones Newswires calculations.
Mr. Smelt said the company will seek to achieve its full-year output guidance by working through a buildup in work-in-progress inventory following the harsh winter and the restart of its Konyrat mine, which should result in more copper output in the second half.
Analysts said the results were in line to slightly better than expected.
At 0854 GMT, Kazkahmys' shares were up 1% or 7 pence at 670 pence a share, resulting in a market capitalization of GBP3.5 billion.
-Write to Alex MacDonald at alex.macdonald@dowjones.com
alex.macdonald@dowjones.com
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