Kazakhamys hit with impairment charge on ENRC holding

Kazakh copper miner Kazakhamys was hit with a 2.2bn dollar impairment charge on its holding in ENRC, the group's audited results for the year ended December 31st have shown.

The group said that ENRC - a diversified natural resources group in which it holds a 26% stake - experienced sharp declines in pricing for its major products, iron ore and ferrochrome in 2012.

Group earnings before interest, tax, depreciation and amortisation (EBITDA - a widely used measure of a company's operating profit) excluding special items was valued at $1.9bn for the year, which the group said reflected lower commodity prices, rising industry costs and lower sales volumes of copper products.

Some $1.4bn was recorded from own operations, joint venture and discontinued operations while a $548m contribution was posted from ENRC.

Segmental EBITDA was 30% below the prior year as revenues fell by 6.0% and a combination of salary inflation, higher transportation costs and greater volumes of material processed resulted in cash operating costs rising by 26% at the group's Mining Division.

With regard to the impairment charge of $2.2bn on its stake in ENRC, Kazakhmys said that the carrying value reduced to $2.0bn, equivalent to 375p per share and the holding had a market value of $1.4bn as of March 25th 2013.

Underlying profit for the year was worth $492m and the group said that this was impacted by a charge for disability benefits obligation of $207m. It included a $127m contribution from ENRC and there was an earnings per share of $0.94 based on underlying profit.

Net debt stood at $707m and the group said that it had long-term funding of $4.2bn in place for delivery of major projects and secured a new corporate debt facility to provide reserve liquidity during the development phase of major projects.

A full year dividend of 11.0 cents per share was recorded and the group said the dividend was reduced to reflect lower profitability in keeping with flexible dividend policy.

CFO: Kazakhamys in an "excellent position" to continue delivery of growth prospectsMatthew Hird, Chief Financial Officer of Kazakhamys, commented: "Debt will increase in the next couple of years as we invest in our new projects, but with $4.2bn of secured long-term funding, we are in an excellent position to continue the delivery of our growth projects."

He added: "Cost management will be a key focus in 2013 as we seek to improve cash flow from our core business and reduce the impact of rising industry costs."

Kazakhamys' share price was down 9.85% to 399.90p at 08:19 on Tuesday.

MF