RBC Capital starts 'fairly valued' Kaz Minerals at 'sector perform'

RBC Capital Markets initiated coverage of copper miner Kaz Minerals at 'sector perform' with a 590p price target, as it said the stock looks fairly valued.

RBC said that with strong copper production now largely delivered and ongoing commitments to capital spend reducing free cash flow, Kaz now looks fair value.

"The group's strategy from here is long dated growth that requires a bullish price outlook," RBC said, adding that it expects lower prices into the first half of next year, which should mean that investors will get a better entry point to shares.

RBC said Kaz management has undoubtedly done an "excellent" job in delivering two large mine builds in recent years, driving an impressive compound annual growth rate in copper production.

However, growth from here should be lower and the ongoing capex spend at the Aktogay mine flows through to relatively muted free cash flow and a dividend yield of just 1.6%, lower than both EMEA peers and the diversified miners, it said.

"Apart from moves in copper we think Kaz shares may fall into a holding pattern whilst investors see when (if?) the group's next greenfield 'mega-project' Baimskaya in Russia is sanctioned, we think likely in late 2019."

At 1235 GMT, the shares were down 2.4% to 528p.