* See H2 pressure on costs on rising inputs prices, currency
* Reiterates on track to meet year production target
* Shares up 3.9 percent, outperform mining sector
(Adds conference call, analyst comments, shares)
By Eric Onstad
LONDON, Aug 26 (Reuters) - Kazakh copper miner Kazakhmys posted an expected 130 percent rise in underlying first-half earnings per share on higher prices and warned about rising costs in the second half.
The London-listed group said it expects cost pressures from input costs such as diesel and steel as well as currencies and has forecast that full-year gross cash costs would rise to 180-200 cents per pound from 159 cents last year.
"It's likely to be towards the north of that guidance because we are seeing some cost pressures," Chief Financial Officer Matthew Hird told a conference call on Thursday.
Costs increases in the second half might be in the region of about 5 percent, he added.
It reiterated it was on track to meet its full-year output target of just over 300,000 tonnes.
Analysts said the profit numbers were solid as expected, but Kazakhmys was still undervalued compared to peers.
Its shares gained 3.9 percent to 1115 pence by 0855 GMT, outperforming a 1.9 percent increase in the UK mining index.
EXTREMELY CHEAP
Evolution Securities boosted its target price to 1295 pence from 1185 pence due to an increase in its forecast copper price and because it now expects the firm to exceed its target and produce 320,000 tonnes of copper this year.
JP Morgan Cazenove said in a note: "Valuation remains extremely cheap... while copper pricing looks likely to remain firm for the foreseeable future given the absence of supply growth."
Kazakmys trades on a 2010 price/earnings ratio of 6.9 times versus 14 for rival copper producer Antofagasta, according to Thomson Reuters data.
Underlying EPS for the first six months of the year surged to 130 cents from 50 cents a year ago, including the impact of its 26 percent holding in rival ENRC.
On Aug. 18, ENRC posted a 63 percent rise in first-half earnings per share, but was wary about commodity prices in the second half.
Kazakhmys said earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 87 percent to $1.34 billion.
This was largely in line with a consensus forecast compiled by the company of EPS of $1.28 and EBITDA of $1.33 billion.
It declared an interim dividend of 6 cents. There was no interim dividend last year during the financial downturn, but there was a full-year payout of 9 cents.
The profit gains were lifted by strong copper prices. The company said it sold its metal at an average of $6,981 per tonne, up 73 percent from last year.
Kazakhmys CEO Oleg Novachuk played down concerns that Kazakhstan may adopt copper export duties and said consultations between government officials and the industry were ongoing.
"Our government is very commercially driven and definintely very aware that the introduction of unnecessary taxes may create an unfriendly investor climate," he said.
"At the momemnt we have very positive dialogue with them, mutual understanding and a decision will be made in due course." (Reporting by Eric Onstad; Editing by Erica Billingham and Michael Shields)