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.

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.

Advertisement - Article continues below

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.

Advertisement - Article continues below

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.

Advertisement - Article continues below

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.




Investment strategy

Broker safety – your questions answered

Cris Sholto Heaton answers more of your questions about the safety of stockbroker accounts
25 Mar 2020
Investment strategy

How demographics affects stock valuations

New research suggests that stock and bond valuations are driven by the age of the population – at least in the US.
24 Feb 2020
Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020

Why investors should be “cautiously bullish” for 2020

Analysts have been out in force making rosy predictions for stockmarkets in 2020, but while there is certainly a case for optimism, investors should r…
17 Jan 2020

Most Popular


The end of the bond bull market and the return of inflation

Central bank stimulus, surging post-lockdown demand and the end of the 40-year bond bull market. It all points to inflation, says John Stepek. Here’s …
30 Jun 2020

This chart pattern could be extraordinarily bullish for gold

The mother of all patterns is developing in the gold charts, says Dominic Frisby. And if everything plays out well, gold could hit a price that invest…
1 Jul 2020
Global Economy

How “pent-up demand” could drive a V-shaped economic recovery

“Pent-up demand” is usually a myth. But not this time. The Covid lockdown has created genuine pent-up demand, says Merryn Somerset Webb. That’s now be…
29 Jun 2020