Kazakhmys Mining Company Set to Borrow $2 Billion for Boschekul and Aktogay Copper Projects

---

Researched by Industrial Info Resources (Sugar Land, Texas)--London-based Kazakhstani mining company Kazakhmys plc (LON:KAZ) is set to borrow $2 billion to get two of the company's major copper projects moving. The loan is financed by the Chinese-government-established China Development Bank (Beijing, China) and Kazakhstan's Samruk-Kazyna National Welfare Fund Joint Stock Company (JSC) (Astana, Kazakhstan).

In another move to raise cash, Kazakhmys has sold a 25% stake in the Ekibastuz GRES-1 power plant to Samruk-Kazyna for $339 million. The funds from this sale are to be used to pay some of the company's debts, which at the end of June 2009 stood at $1.93 million. In March this year, Kazakhmys cancelled its final dividend payment, and in August the company decided not to pay an interim dividend, justifying the action as an effort to preserve cash and reduce debt.

The Ekibastuz power station is the largest power station in Kazakhstan and has a current capacity of 2,250 megawatts (MW), although it has the potential to increase to 4,000 MW. The plant supplies power to the Kazakhmys copper projects, and Kazakhmys has stated that it may look at selling more of its remaining 75% stake, as the company only requires 25% of the output for these projects.

The funds from the loan will be used to enable Kazakhmys to move on the Boschekul copper project in the northeast of Kazakhstan and the Aktogay copper project in the eastern region of the country. Both projects are considered to be major copper growth projects by the company, and both already have some work done, although both only have pre-feasibility studies completed for the first half of this year.

The Boschekul project is likely to be the first of the two projects to be completed, with Kazakhmys expecting the first ore to be produced in 2012. The deposit is estimated to contain 400 million tons of ore, which is expected to yield about 2.2 million tons of copper. The estimated ore production capacity of the complex is expected to be about 20 million to 25 million tons of ore each year.

The Aktogay deposit contains both copper oxide and copper sulphide ore, and the pre-feasibility stage was completed for the sulphide project in the first half of this year, while the feasibility study for the oxide project was completed in late 2008. Both results are under investigation and are being assessed before the company moves on to the feasibility stage for the overall project.

Kazakhmys believes that the copper market will recover from the softening in demand experienced in 2008 and return to a supply shortage; thus, the company is keen to get the Boschekul and Aktogay projects moving. Both deposits are close to China, which was a major customer during the first half of 2009.

However, the International Copper Study Group (ICSG), in a forecast for 2009-10 released this month, expects the refined copper market to show a surplus of about 370,000 tons in 2009, while 2010 is expected to show an even higher surplus of about 540,000 tons. The report also expects global copper mine production to rise 2.9% to 15.8 million tons in 2009, with initial projections for 2010 placing copper mine production slightly higher at 16.9 million tons.

The ICSG forecasts a decline in worldwide copper usage of 1.6% in 2009, a figure that would be substantially higher if not for an apparent growth in copper usage in China. Some experts believe that this apparent growth in China can be put down to additions to unreported government stock and commercial inventories. On removing the estimates for China, there is a more pessimistic forecasted decline of as much as 12% for 2009.

According to the ICSG, a revival in copper usage is expected in 2010, but this may not be as high as hoped, largely as a result of lower industrial demand and partial reductions of unreported inventories in China. The net result is likely to be a global decrease in usage of about 0.7%. Although the forecast for 2011 is dependent upon global recovery, the ICSG expects the overall results to be more closely balanced due to an increase in demand and a moderation in production.

View Project Report - 092900045

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.