Morgan Stanley: MMG (01208) copper production and costs in the first quarter exceeded expectations, reaffirming a "holding" rating.

Morgan Stanley released a research report stating that MMG (01208) continues to improve its operations, with first quarter copper production and C1 costs both exceeding the bank's expectations. The bank reiterated its "overweight" rating with a target price of 11.2 Hong Kong dollars. The report pointed out that MMG achieved a 9% year-on-year increase in total copper production in the first quarter to 129,000 tons, with Las Bambas mine production increasing by 6% year-on-year to 101,000 tons. This outperformed the annual production guidance of 380,000 to 400,000 tons. Kinsevere mine's copper cathode production increased by 44% year-on-year due to the commissioning of the RGA project and improvement in power stability. In terms of costs, Las Bambas' C1 cost was lower than expected at $0.45 per pound, mainly due to a 29% and 36% year-on-year increase in by-product gold and silver production, as well as rising precious metal prices. Kinsevere, Dugald River, and Rosebery's C1 costs were also lower than the full-year guidance. The bank believes that the high diesel prices have limited impact on the production costs of the two open-pit mines, Las Bambas and Kinsevere, as there is currently about one month worth of diesel inventory. Kinsevere's grid power supply stability has significantly improved, with the power supply increasing from 16 megawatts to 32 megawatts, and the frequency of power outages decreasing by 60% year-on-year. In addition, the company's self-produced sulfuric acid can cover approximately 75% of Kinsevere's consumption, helping to mitigate the impact of the current high sulfuric acid prices.