At Bozshakol, the Company increased its ore output by 9% y/y to 8.9 mn tons due to the large amount of clay ore extracted to gain access to sulphide ore. Copper and gold production was reduced due to lower content (0.44% copper, 0.25 g/t gold). Meanwhile, the Company expects an increase in the average content of gold and copper grade at Bozshakol until the end of 2019, confirming the forecast range of copper and gold production for 2019 at the level of 105-115 ktons and 130-140 koz, respectively.
At Aktogay, copper production from sulphide ore increased to 31 ktons (+ 46.9% y/y) due to a higher level of extraction, while the copper cathode production from heap leaching reached 5.7 ktons (+ 7.5% y/y) compared with last year, when production was affected by low temperatures at the beginning of the year. Ore output in 1Q2019 increased by 30% y/y compared to 1Q2018 due to increased production at the Aktogay sulphide concentration plant.
The volume of ore processing in the Eastern Region and Bozymchak was reduced to 625 ktons (-33% y/y) due to the planned shutdown of the Nikolayevsky plant, which resulted in a 32% reduction in copper production to 9.5 ktons. Zinc production decreased to 6.2 ktons as the result of a decrease in the volume of processing and lower average grade at Orlovsky mine. Due to lower processing volumes, gold production (-8% y/y) and silver (-45% y/y) decreased in 1Q2019 compared to 1Q2018.
Our opinion:
In general, due to the increased recovery rates and an increase in the volume of ore processed in 1Q2019 on Aktogay, copper production in the amount of 37 ktons was achieved, compensating for the seasonal fluctuation of oxide production and a decrease in the average copper grade in the ore. The company predicts an increase in production at Bozshakol and in the Eastern region during the following nine months of 2019. By the end of the year, an increase in the processing volume is expected at the Nikolayevsky and Bozshakolsky plants for the processing of clay ore. KAZ Minerals operating results for 1Q2019 do not have significant deviations from our expectations and do not make changes to our annual forecast. We maintain our Buy recommendation and 12MM TP 760 GBp/share.
