London-listed miners receive price boost from Kazakh devaluation

* Tenge devaluation sends Kazakhmys 25 percent higher

* Miners benefit from lower domestic costs

* Ukraine and Russia exposed stocks also benefit

By Alistair Smout and Silvia Antonioli

LONDON, Feb 11 (Reuters) - London-listed miners received a boost on Tuesday after the Kazakhstan central bank said it would let its currency devalue, pushing up shares of commodity stocks with operations in the region by as much as 25 percent.

Kazakhstan said it would let the tenge currency devalue by 19 percent to around 185 per dollar from its central band, in a bid to prevent large-scale speculation on the forex market after a slide in other emerging market currencies. News Search ID:nL5N0LG07F

While weakness in emerging markets has cut 5.5 percent off world shares .MIWD00000PUS , miners in those markets that sell to developed economies can benefit from depreciations in their currencies as it cuts their local costs. News Search ID:nL5N0LD0O8

As a result, the move to devalue the tenge sent shares in FTSE 250 .FTMC member Kazakhmys KAZ.L up 25 percent.

Kazakhmys has around 60 percent of its cost base in Kazakh tenge, and analysts at Citi said a 20 percent devaluation in the currency could almost double its EBITDA earnings to $626 million.

All of Kazakhmys' production is sold in dollars, or dollar equivalents if sold within Kazakhstan, the company said. Kazakhmys also said it exported nearly all the production, meaning it is set to benefit from the improved competitiveness from a weaker exchange rate.

The loss-making copper business could be transformed from a "free cash drain to roughly break even", JP Morgan Cazenove said, although it also noted the medium term risk of higher inflation.

In 2009, Kazakhmys shares rose 474 percent, buoyed by a strengthening copper price and a devaluation in February of that year.

But inflation then quickened to 7.8 percent in 2010 from 6.2 percent the year before. Kazakhmys shares are down 85 percent since early 2010.

"We did see in 2009 a similar devaluation, and the stock reacted in a similar way to today," said Alon Olsha, analyst at Macquarie.

"But... fast forward 12 months and inflation in the country had increased fairly significantly."

Kazakhstan will not revise its official forecast for inflation of 6 to 8 percent in 2014, despite the central bank's decision, the finance minister said on Tuesday. News Search ID:nL5N0LG1F8

Even if the relief does prove short-lived, it is well timed, as Kazakhstan focused miners with London listings have struggled in recent years.

Kazakhmys fell out of the blue chip FTSE 100 .FTSE last year, and Eurasian National Resources Corporation ENRC.L was taken private after a controversial period in Britain.

"Based on recent conversations with investors, a devaluation was really seen as one of the remaining potential positive catalysts that could turn momentum around for KAZ," analysts at Nomura said in a note.

While Kazakhmys is the only pure Kazakh miner left in London, the tenge devaluation has had reverberations around the British listed mining sector, with Ukrainian-focused Ferrexpo

FXPO.L up 6.3 percent as the hyrvnia also suffered.

News Search ID:nL5N0LG16I

Polymetal POLYP.L rose 3.5 percent, with the Russian miner that has operations in Kazakhstan also benefiting from a weakening rouble.

(Writing by Alistair Smout; Editing by Hugh Lawson)

((alistair.smout@thomsonreuters.com)(+44 207 542 7064)(Reuters Messaging: alistair.smout.thomsonreuters.com@reuters.net))

Keywords: KAZAKH MINERS