Kazakhstan-focused Kaz Minerals (KAZ) has seen a large increase in the amount of gold it produces as a byproduct of copper mining. Its 39,100 ounces of gold production in the first half of 2016 is 143% higher versus the same period a year earlier.

The big increase in gold production came from its Bozymchak open pit mine which started operating in 2014 and a maiden contribution from the Bozshakol mine which has been operating for less than a year.

Kaz Minerals quotes its gold output figures as ‘gold bar equivalent’ which includes the finished metal equivalent of gold in concentrate form.

It expects to produce between 95,000 and 115,000 ounces of gold in 2016 as a whole. That range has been narrowed from previous guidance of 90,000 to 120,000 ounces.

The boost in gold output is well timed, given the 25%+ rally in the gold price this year. It helps put a shine on Kaz Minerals’ half year results which are published today and which beat market expectations.

The key takeaways from the results apart from higher gold output are costs below expectations and news it will spend less money than previously guided on keeping its mines running. This helps drive up the share price, rising 11.5% to 182.5p.

Operating profit has soared from $15 million in the first half of 2015 to $68 million. However, revenue fell 11% to $302 million as higher sales from Bozymchak partially offset the effect of lower copper prices.

The miner says it benefited from strong copper and gold output from the East Region and Bozymchak in the six months to 30 June.

VSA Capital Research is optimistic about Kaz's operational performance, but warns that its earnings outlook is likely to depend on the strength of the tenge currency and that the stock is highly exposed to copper prices.


Issue Date: 18 Aug 2016