Kazakhmys wants ENRC talks as profits fall

By Eric Onstad

LONDON (Reuters) - Kazakh miner Kazakhmys (KAZ.L) posted a 21 percent fall in first-half profit on Thursday, hitting its shares, and said it wanted talks with rival ENRC (ENRC.L) 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 .FTNMX1770.

"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.

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