Kaz, which is listed on the stock market in London, said the decision to introduce a floating exchange rate in Kazakhstan announced on Thursday could bring further benefits if the currency weakens further.

The company, which pays its bills in the local tenge currency but makes revenues in U.S. dollars, reduced its full-year forecasts for production costs to 260-280 U.S. dollar cents per pound from 280-300 cents earlier.

Those adjustments were based on a tenge rate of 170-198 per dollar, the miner said. The currency weakened to 257.20 per dollar on Thursday in response to the policy shift.

"We are not able to tell you any level we should expect, it's a free float exchange rate.(Tenge weakness) will help us because about 60 percent of our costs are in tenge," Chief Executive Oleg Novachuk told journalists in a conference call.

Kaz shares were up 18 percent as of 0915 GMT, outperforming a 1.35 percent rise in the FTSE 350 mining index.

"We attribute this reaction to expectations that some of the cost benefits of a currency depreciation would be retained by the company," Morgan Stanley analysts said in a note.

"However, we maintain that cost benefits of a weaker currency are typically eroded by an increase in underlying inflation."

EARNINGS FALL

The lower cost forecasts are a relief as the company said its first-half earnings more than halved following a drop in copper prices and that it would not pay an interim dividend.

Earnings before interest, tax, depreciation and amortisation (EBITDA), excluding special items, fell 55 percent to $88 million in the six months to the end of June.

Prices of copper are at six-year lows, weighed down by a slowdown in China, one of the world's biggest consumers of metals and other raw materials.

"I am very bullish on copper. We are in close connection with our customers, our end users and we understand where the Chinese demand is. We know how many projects will be delivered in a year's time. We believe demand for copper will not decline significantly in the medium term," Novachuk said.

The miner said the commissioning of its Bozshakol project in northern Kazakhstan, initially expected in the fourth quarter of this year, was now expected in the first quarter of 2016, following a fire there this month.

Kaz began a restructuring of it business last year, in response to lower copper prices and shrinking margins. It hived off some of its oldest and least-profitable assets to a private company owned by two of its shareholders to focus on lower-cost, open-pit mines and growth projects.

(Editing by Pravin Char and Keith Weir)

By Olivia Kumwenda-Mtambo