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Kazakhmys profit more than doubles on copper surge

Kazakhmys Plc, Kazakhstan\'s biggest copper producer, said H2 profit more than doubled after a surge in prices for the metal used in wires and plumbing.

Net income rose to $767 million from $312.7 million a year earlier. Profit was calculated by subtracting H1 earnings from full-year figures reported today by London-based Kazakhmys Plc. It will pay a final dividend of 25.7 cents a share. Copper\'s rally has helped shares of Kazakhmys double since the initial public offering in 2005. Vladimir Kim, the company\'s chairman and largest shareholder, said demand will stay at „historically high” levels.

Kazakhmys plans to diversify its operations, reducing the company\'s reliance on one commodity. Kazakhmys\'s outlook for copper „points to continued price strength,” said Jeremy Gray, an analyst in London at Credit Suisse Group, in a note. „We were hoping to hear more on other potential deals in nickel, zinc, iron ore and copper.” Shares of Kazakhmys rose 26 pence, or 2.4%, to 1,115 pence as of 12:01 a.m. in London. They have gained 13% in the past 12 months, valuing the company at 5.21 billion pounds ($10.1 billion). That matches the gain of the 10-member Bloomberg Europe Metals & Mining Index. The company is „actively looking” for acquisitions in Kazakhstan and possibly in neighboring countries, CEO Oleg Novachuk said today in a conference call with reporters.

The company also said in its earnings statement that advisers are in „the advanced stages” of valuing London-based Eurasian Natural Resources Corp., a Kazakh producer of chrome, aluminum and iron ore. ENRC is considering options including an initial public offering, Kazakhmys said. Kim bought last year a 25% stake in ENRC Kazakhstan Holding BV, the biggest shareholder in ENRC, with an option to sell it to Kazakhmys in 2007. Kim has a 19% „indirect economic interest” in ENRC, according to a statement from ENRC e-mailed today. Last week, Kazakhmys agreed to buy Dostan-Temir LLP, a company with the rights to explore for oil and gas in the west of Kazakhstan. Kazakhmys didn\'t say how much it will pay.

Labor costs jumped 49% to $195 million last year and transportation costs rose 39%, the company said. „Operating-cost elements are higher than expected,” Charles Cooper, an analyst at NBC Group in London, said today by telephone. „Higher labor costs reflect increased competition” in mining in Kazakhstan, he added. Production of copper cathode, a finished form of the metal, increased 4.7% to 405,000 metric tons last year. Zinc metal production gained 17% to 59,500 tons and silver rose 5% to 21.6 million ounces. The company said full-year net income more than doubled to $1.4 billion, or $2.99 a share. That missed the $1.54 billion mean of four analyst forecasts compiled by Bloomberg yesterday and March 13. Sales jumped 94% to $5.05 billion last year. (Bloomberg)