/Fitch Ratings, March 13, 07 / - Fitch Ratings has affirmed today the ratings of KazakhGold Group Limited ('KazakhGold'), a Kazakhstan-based gold producer, at foreign currency Issuer Default rating ("IDR") of 'B' with a Stable Outlook and USD200m Senior Notes Issue, maturity date 6 November 2013, of 'B'.

The affirmation follows the company's announcement that it plans to acquire certain assets of Oxus Gold PLC ('Oxus'). These include a 100% interest in Norox Mining Company Limited, which, via its 66.67% holding in the Talas Gold Mining Company, owns a gold processing plant at the site of Jerooy gold mine in Talas, Kyrgyzstan; the remaining 50% in its joint venture with Oxus - Romaltyn Limited, Romania; and some exploration assets in Turkey, currently owned by Oxus' 86%-owned subsidiary, Marakand Minerals Limited. The acquisitions are subject to various conditions including due diligence, regulatory approvals and signing of a legally binding agreement.

Although the cost of the acquisitions, with a total consideration of about USD150m, is material, Fitch believes that it is unlikely to have a negative impact on the company's credit profile due to its equity-funded nature. KazakhGold plans to finance the acquisitions through an additional share issue of up to 3,541,666 new shares to Oxus, or 7% of the enlarged share capital. In addition, KazakhGold has agreed to pay USD80m in cash for Jerooy gold mine, in installments, which is conditional upon receipt of the license for the Jerooy deposit. The installments will be paid from cash flows generated by the deposit once the license is granted and the deposit is put into operation. Thus the agreement to pay USD80m in cash should not affect KazakhGold's cash position.

Fitch believes that the assets to be acquired are complementary to KazakhGold's core business and operations. However, the financial viability of the acquisitions remains to be determined since some of the assets are not yet in operation, which implies execution risk. In addition, the announcement represents a divergence from KazakhGold's previously stated strategy of organic growth. A shift in strategic approach to focus more on acquisitions, especially if debt-funded, could put pressure on KazakhGold's ratings going forward.

KazakhGold is a Kazakhstan-based gold producer that is undertaking a major expansion and modernisation programme at its three operating gold mines. The company carried out an IPO on the LSE in late 2005 and placed a bond issue of USD200m in late 2006. The proceeds are planned for expansion capex programme.

Contact: Angelina Valavina, Moscow, Tel: +7 495 956 7075;
Oguz Bardak, Istanbul, Tel: +90 212 279 1065.

Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364;
Alla Izmailova, Moscow, Tel: +7 495 956 9903

[2007-03-14]