Funding risk at KAZ Minerals very limited even in bearish copper price scenario, Credit Suisse says

Analysts at Credit Suisse reaffirmed their 'Outperform' recommendation and 630.0p target price for Kaz Minerals say that funding risks for the copper miner were now "very limited" even under 'bearish' copper price assumptions.

The analysts said the company's successful re-financing of its pre-export debt finance (PXF) facility "will give more breathing room and should squash any further fears around funding".

Nevertheless, in their opinion that refinancing was unrequired.

The maturity of the new PXF was extended by two-and-a-half years until June 2021, with principal payments deferred until July 2018 and the interest rate set at a variable three to four-and-a-half percentage points above US dollar LIBOR.

Also, as long as the company net debt-to-EBITDA ratio remained above 3.5 it would have to abide by certain restrictions on spending and investing outside of its existing mines.

Furthermore, following two years of worries about operation and funding shortfalls, Bozshakol had reached commercial production and was generating cash-flow even as Aktogay ramped up at an even quicker rate.

Credit Suisse's target price for Kaz was based on a mix of EBITDA and price-to-earnings multiples, combined with an estimate of net present value.

On a more cautious note, the broker admitted that "operational risk will continue while the projects ramp up. Copper prices and currency (KZT) are the key risks and sensitivities."