Kazakhmys has option on chairman's stake in EKH

/INTERFAX, London, March 14, 06/ - Kazakhmys Plc said on Tuesday it had an option to buy a 25 percent stake in ENRC Kazakhstan Holding BV (EKH) next year, putting the Kazakh miner on track to acquire its first major non- copper assets. London-listed Kazakhmys said it had considered buying a stake in EKH but had allowed its chairman, Vladimir Kim, to buy the stake for $751 million on condition it got a call option. The move was welcomed by analysts and investors. Kazakhmys shares, which were listed in London in October at 540 pence, set a 982 pence record high before falling back to be 2.0 percent higher at 935 pence by 1230 GMT to value the company at 4.37 billion pounds ($7.6 billion). EKH is the holding company for certain assets of Eurasia Natural Resources group's metals and mining business, which primarily operate in Kazakhstan producing mainly chrome, iron ore and alumina, Kazakhmys said in a statement. Kazakhmys said its option, exercisable any time in 2007, allowed it to buy its chairman's stake in EKH for the $751 million being paid by Kim plus "a 10 percent margin (reflecting the risk of the initial investment) and the actual financing and transaction costs incurred by Kim". "The transactions provide Kazakhmys with potential to turn itself from a pure play copper company into a major diversified miner likely to generate much higher (returns) through the cycle cashflows," Cazenove said in a note. Kazakhmys said it had decided against buying a stake in EKH because it "is an unlisted company which is in the process of a significant restructuring and not in a position to provide the type of due diligence or warranty package which a listed company would expect". As a result, Kim was allowed to strike a deal. Kim will finance his acquisition through a new debt facility and will use some of his Kazakhmys shares as security. He will remain Kazakhmys's executive chairman and will have no role in the management of EKH, Kazakhmys said. Credit Suisse said Kim was shouldering the risk for Kazakhmys. "We think the option is worth between 100 pence and 140 pence per (Kazakhmys) share of additional value, even before we consider the growth potential in these assets, assuming the option is exercised," it said. Kazakhmys trades on a multiple of 10.1 times forecast 2006 earnings, versus an average multiple of 13.4 for London-listed miners, according to Reuters Estimates. [2006-03-14]