Kazakhmys says split due 'soon' as copper output climbs 10 percent

* Agrees new debt facility

* Says is on track to hit annual output target (Adds details, quotes)

By Silvia Antonioli

LONDON, Oct 30 (Reuters) - Copper producer Kazakhmys said on Thursday its plan to hive off less profitable assets was on track and due to be completed "very soon", as the company reported a 10 percent increase in output for the first nine months of the year.

Like its peers, Kazakhmys (LSE: KAZ.L - news) is battling rising production costs and falling metal grades which together with weaker prices have squeezed margins.

Under its restructuring plan, which has won regulatory consent, Kazakhmys is transferring some of its older and less-profitable assets to a private company owned by two of its shareholders.

The plan is now expected to be complete "very soon", the company's head of investor relations Chris Bucknall said on Thursday. Previously the company had indicated it aimed to complete by the end of the year.

The London-listed Kazakh miner said on Thursday it had produced 59,000 tonnes of copper cathode equivalent in the first nine months from the assets it will retain. Output was helped by an upgrade of its Nikolayevsky concentrator.

The miner, which will be renamed Kaz Minerals after the split, said it was on track to achieve its full-year production target of 80,000-85,000 tonnes.

Kazakhmys has also announced an amendment to its pre-export finance debt facility. An existing $500 million facility will be replaced by a $334 million one that can potentially be extended.

The terms of the facility have also been made more flexible.

Among other changes, the final maturity and grace periods for the facility have been extended by a year and the net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) covenant has been suspended until Jul. 1 2016.

"The pre-export facility had been a concern for the market given the company has already acknowledged that it would breach the net debt/EBITDA covenant and the group's balance sheet was likely to be stretched even further given capex and the decline in the copper price," Nomura analysts said in a note.

"This replacement should settle any market concerns about any potential for a credit event."

The group's net debt has risen to $434 million at the end of September from $192 million at the end of June, as the company invested in its growth projects.

The Kazakh miner is aiming to become a lower cost producer that relies on open-pit mines for most of its production through development its Bozshakol, Aktogay and Koksay copper projects.

It aims to increase output to about 300,000 tonnes of copper equivalent by 2018 and around 350,000 a couple of years after.

Shares (Berlin: DI6.BE - news) in Kazakhmys were down 1.7 percent by 0835 GMT in line with the UK-listed mining sector. (Editing by Jason Neely and Clara Ferreira Marques)