After profits more than doubled year over year in the first half to US$185 million, KAZ Minerals PLC is looking at restarting dividend payouts, CEO Oleg Novachuk told S&P Global Market Intelligence in an interview Aug. 17.
Since the creation of KAZ Minerals following the restructuring of Kazakhmys in 2014, the company has consistently grown production and revenue. A ramp-up in the company's main expansion assets, Aktogay and Bozshakol, boosted copper output to 65,900 tonnes in the second quarter, and it expects to produce up to 260,000 tonnes by the end of 2017.
According to S&P Global Market Intelligence data, the company's share price has risen over threefold over the last year, reaching £7.06 per share Aug. 17.
Novachuk said the company's main priority was to complete the ramp-up of both Aktogay and Bozshakol and to de-gear its balance sheet.
"After that, we will see what we will do next, and I definitely would like to resume dividends to shareholders, and then probably next year, we will talk about the balance capital allocation," he said. He added that guidance had been reviewed for 2018 due to stronger performance at new sites at the beginning of the year.
"We said that by the end of next year, we will produce from 235,000 tonnes to 260,000 [tonnes] of copper, zinc production will be from 70,000 tonnes to 75,000 tonnes, gold will be from 150,000 ounces to 170,000 ounces and silver will be from 3.1 million ounces to 3.3 million ounces," he said.
The company suspended dividend payouts in 2013, instead opting to shift focus toward developing projects.
CFO Andrew Southam said economies of scale allow KAZ Minerals to keep its operations low-cost and the Kazakh tenge exchange rate with the U.S. and relatively muted inflation have also helped in this regard.
"Last year Bozshakol had a cash cost of 28 cents a pound and it's slightly higher in the first half of 2017 as we do more of the normalized maintenance, but it's among the lowest cost production globally," Southam said.
Despite copper supply disruptions at the beginning of the year, Novachuk said KAZ Minerals will not be affected by further fluctuations in price. Given that China is the Kazakh company's primary market, he said demand is expected to increase and there has been interest from new buyers.
Meanwhile, he pointed out that the overall situation for the mining industry in Kazakhstan was improving, in part due to efforts by the government to revise mining laws with a view to encouraging foreign investment.
"I expect it will improve the situation in Kazakhstan because they will simplify the rules and they will simplify the relationship between the subsoil users and the government," he said, adding that the new legislation will be more understandable for external investors and he expects mineral taxes to remain at the current level.