Analyst Daniel Mayor, in a note, moved his 12-month price target to 600p from 800p due to the shifting risk-vs-reward proposition (current price: 558.4p).
Changes to the mine’s infrastructure plan – for an LNG plant for power and a new 400 kilometre road – provide advantages, but will increase costs from prior estimates, Mayor noted.
UBS highlights that the project’s capex rises to US$7bn from US$5.5bn, and, at the same time noted delay to the project’s feasibility study, due before the end of this year.
“We continue to see long-term value in KAZ and are attracted to its low-cost position, robust operational & project development track record and transformational long-term growth through the Baimskaya project,” the analyst said.
“We have previously highlighted that Baimskaya is a high-risk project, but in our view potential changes in infrastructure for Baimskaya further increase the risk.”
Mayor, meanwhile, said that the project and KAZ could benefit from having a partner onboard.
“In our view bringing in a partner (assuming reasonable valuation) would materially improve the KAZ investment case; Baimskaya would still drive material volume growth (10yrs ~75% @ 80% ownership), but create a more attractive balance of medium-term growth & near-term FCF/ deleveraging,” he added.