By Eric Onstad
LONDON (Reuters UK) - Kazakh miner Kazakhmys (KAZ) posted a 21 percent fall in first-half profit on Thursday, hitting its shares, and said it wanted talks with rival ENRC (ENRC) about possible synergies.
The group said basic and diluted EPS for the first six months of the year declined to $1.34 (73 pence) from $1.70 last year, below the average forecast from three analysts of $1.42.
Kazakhmys shares, which have shed 35 percent so far this year, slid 3.9 percent to 1,287 pence by 9:30 a.m., lagging a 0.9 percent fall in the mining index .
"Kazakhmys reported a weak headline result ... however, it does remain a relatively inexpensive entry point in to what we believe is a positive outlook for copper," Merrill Lynch said in a research note, repeating its "neutral" rating.
The group repeated its expectation that copper output in 2008 would at least equal production from last year, which implies that the second half would be stronger than the first, analysts said.
The second half would also be helped since the firm will include profits from its 25-percent holding in ENRC after it boosted its holding over the 20-percent accounting threshold.
Kazakhmys, ENRC's biggest shareholder, said the stake was worth $3.36 billion (1.82 billion pounds) or 628 pence a share, more than half of Kazakhmys' share price.
SYNERGIES?
Kazakhmys, the world's 10th-biggest copper producer, said it would still pursue talks with ENRC over possible deals that could result in synergies despite being cold-shouldered so far.
ENRC reiterated last week that it would not offer a board seat to Kazakhmys because they were both competing for deposits in the same region.
But Chief Executive Oleg Novachuk told a conference call that working together could benefit both sides.
"Taking into account that our cooperation could bring some synergy to both companies, I think we have good ground to build constructive dialogue with them... during discussion we can achieve some agreements and compromises."
He said the firm was continuing to look for acquisition opportunities, but declined to give any further information about preliminary merger talks with an unnamed party it announced on July 14.
At the time, Kazakhmys said discussions were at a very early stage and it was unclear if a transaction would take place.
Sources close to the discussions told Reuters that the suitor was Russia's Metalloinvest, which was seeking a tie-up to gain access to a London listing.
Kazakhmys said it had seen strong demand despite a global credit crisis and related economic downturn.
"The uncertainty in global financial markets does not reflect demand from customers, which has remained consistently robust," Novachuk said in a statement.
The firm said on July 30 that first-half copper cathode output fell 9 percent to 174,300 tonnes, mainly due to severe winter weather in the first quarter.
(Reporting by Eric Onstad, editing by Will Waterman/Andrew Callus)
