(ShareCast News) - KAZ Minerals' shares gained on Monday after Canaccord Genuity upgraded the stock to 'buy' from 'hold' and lifted the target price to 475p from 155p.
Canaccord said it expects miner to see continued production growth through 2018 after the company's third quarter result showed increased output levels as the Bozshakol mine continued its commissioning.
In late October Kaz said third quarter production rose to 44,500 tonnes of copper cathode equivalent compared to 31,100 tonnes in the second quarter as Bozshakol and Aktogay oxide ramp up.
The group reiterated its 2016 guidance for 135,000-145,000 tonnes of copper cathode equivalent following 81,000 tonnes in 2015.
In December, KAZ also announced the commissioning of Aktogay, which Canaccord said came three to six months ahead of its forecasts.
"Despite our forecast for a strong year-on-year earnings before interest, tax, depreciation and amortisation (EBITDA) recovery in 2016, we are forecasting continued strength in 2017, when we forecast EBITDA to double year-on-year," according to Canaccord analysts.
"With our stronger copper price forecasts and also our continued production growth, we see 2017 as the second year where KAZ leads in EBITDA growth of all the copper companies we cover from London, but unlike 2016 we believe 2017 should include lower balance sheet risk."
The analysts also see 2018 as the first year of positive free cash flow and the first year of net debt reduction after completion of the Bozshakol and Aktogay projects in 2017. Canaccord believes free cash will further improve from 2019 as project capital expenditure beings to fall away after 2018.
The broker concluded that it has increased its target price on KAZ to reflect stronger production growth from Bozshakol and potentially Aktogay, higher copper prices and an improved cash generation profile.
"With over 20% potential upside to our target we upgrade to a 'buy' rating. While this upside is much more muted than KAZ equity gains in the past year, we still expect KAZ's growth story to continue into 2018."
Shares jumped 5.05% to 406.12p at 0938 GMT.