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UPDATE 3-Kazakhmys Q3 copper output dips, to hit 2010 target

Published 10/28/2010, 04:43 AM
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* Q3 copper cathode output down 9.3 percent to 74,600 tonnes

* On track to meet annual target of 300,000 tonnes

* Shares rise 1.1 percent, in line with sector

(Adds analyst comment, shares)

By Eric Onstad

LONDON, Oct 28 (Reuters) - Kazakh miner Kazakhmys posted a 9.3-percent fall in third-quarter copper production on Thursday, in line with analysts' expectations, and stuck to its full-year target as demand remained buoyant.

Shares in London rose 1.1 percent to 1,335 pence by 0800 GMT, compared with a 1.2 percent increase in the British mining index.

Kazakhmys shares have rallied by nearly a quarter since touching a low in August.

"Kazakhmys has reported a steady quarter with copper production falling modestly... but tracking well in line to hit guidance," JP Morgan analyst Amos Fletcher said in a note. Output of by-product zinc was higher than expectations, which would help with cash costs, he added.

The group said sales to China, the world's biggest consumer of industrial minerals, continued at a rapid pace.

"Production of copper rod, which is produced to customer order, increased markedly in 2010 due to strong demand from the Chinese market," a statement said.

Kazakhmys, the world's 10th biggest copper miner, said it produced 74,600 tonnes of copper cathode from its own concentrate, down from 82,200 tonnes in the third quarter last year, mainly due to lower grades of ore mined.

"We've always said that grades were trending down and that they would be going down to 1 percent, and that's what you're seeing happening," said John Smelt, head of corporate communications.

Kazakhmys also said it was on track to meet its target to produce at least 300,000 tonnes of copper this year, after producing 239,000 tonnes in the first nine months of the year.

Last year's total output was 320,400 tonnes.

TRIMS DEBT AS COPPER PRICE JUMPS

Kazakhmys, which has 16 operating mines and two smelters in the country, mainly sells its copper to China and Europe. It also produces gold, silver and zinc as by-products.

"This has been another solid quarter for production in our copper division and, combined with firm markets and pricing, has led to further strengthening of our balance sheet," said Chief Executive Oleg Novachuk.

The company trimmed net debt to $489 million at the end of the quarter from $585 million at the end of June.

The reduction of debt was helped by strong realised copper prices, which averaged $7,100 per tonne during the first nine months of the year, up 54 percent over the same period in 2009.

In August, the London-listed miner posted a 130 percent jump in underlying first-half earnings per share on higher prices and warned about rising costs in the second half.

The power division posted unchanged electricity generated in the third quarter at 2,411 gigawatt hours while it rose 26 percent for the first nine months of the year.

Earlier this month, the company's chairman, Vladimir Kim, sold nearly a third of his stake to the Kazakh government, sparking concerns about increasing government involvement.

Kim sold part of his stake ahead of a possible secondary listing in Hong Kong next year. (Reporting by Eric Onstad; Editing by Mike Nesbit and David Cowell)

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