/KASE, September 5, 07/ - Company KAZAKHMYS PLC (London),
common shares of which are traded in Kazakhstan stock exchange's
(KASE) category "A" official list provided KASE with the press-release in
which the following is informed:
quotation begin
- The independent directors of the Board have approved the exercise of
Kazakhmys' option to acquire an 18.8 per cent. holding in ENRC.
Completion is subject to the receipt of approval from the Government of
Kazakhstan and the approval of the independent shareholders
ofKazakhmys at an EGM
- The investment will give Kazakhmys exposure to chrome, iron ore,
alumina, coal and additional power assets in Kazakhstan, delivering on
the Company's stated strategy of leveraging its competitive position
within Kazakhstan and the neighbouring countries to seek further
growth opportunities in natural resources.
- Estimated cost of exercising the option will be US$810 million, pursuant
to the terms of an option agreement
- The acquisition will be put to a vote of the independent shareholders of
Kazakhmys in due course
Kazakhmys PLC ("Kazakhmys" or the "Company") today announces the
proposed acquisition of a stake in Eurasian Natural Resources Corporation
PLC ("ENRC"), subject to Governmental and independent shareholder
approvals, from a vehicle wholly owned by the Chairman of Kazakhmys, Mr
Vladimir Kim.
The ENRC Group is a large diversified mining and natural resources group
with significant, high quality assets in Kazakhstan. The Independent
Directors consider the investment key to Kazakhmys' long-term strategy of
seeking to acquire interests in existing regional natural resources
businesses with attractive internal and external growth prospects and its
execution will bring significant benefits to Kazakhmys and its shareholders.
Commenting on the Acquisition, Oleg Novachuk, Chief Executive of
Kazakhmys said "The proposed acquisition of the interest in ENRC is an
integral part of our strategy to diversify Kazakhmys' portfolio by acquiring
other resource assets in Kazakhstan and the Central Asian region."
James Rutland, Senior Independent Non-executive Director of Kazakhmys
said, "The Independent Directors are unanimous in believing that this
transaction will create value for shareholders and consider that it will be in
the best interests of the shareholders as a whole to vote in favour of this
transaction."
Background
Kazakhmys notified the market on 14 March 2006 that it had been granted
an option (the "Option") to acquire a 25% stake in ENRC Kazakhstan
Holding B.V. ("EKH") by Mr Vladimir Kim. As stated in Kazakhmys' Annual
Report and Accounts published on 5 April 2007, the 25% stake in EKH
represented an 18.8% economic interest in ENRC, the holding company of
the ENRC Group and its operating assets. Following receipt of
Governmental approval, the final step of the restructuring will take place, so
that by exercising the Option, Kazakhmys, through a wholly owned
subsidiary, will become the direct owner of 3,756,725 shares in ENRC PLC,
the holding company of the ENRC Group, representing 18.8% of ENRC's
share capital.
In its announcement on 14 March 2006, Kazakhmys stated that the then
independent members of the Board of Kazakhmys had considered the
possibility of Kazakhmys itself acquiring the 25% stake in EKH but had
decided that this would not be appropriate due to, among other things, the
ongoing restructuring of the ENRC Group and the fact that EKH was not, in
the opinion of Kazakhmys, in a position to provide the type of due diligence
or warranty package which a listed company would expect.
The reorganisation of the ENRC Group is now substantially complete
following a significant restructuring as part of its own efforts to simplify its
group structure as ENRC management consider options for the strategic
direction of the business, including a possible initial public offering. In
addition, with the consent and co-operation of ENRC, a due diligence
exercise has been undertaken in respect of the ENRC Group with, among
other things, production and certain financial information in respect of ENRC
having been made available to Kazakhmys and site visits to ENRC's
operations in Kazakhstan have been undertaken by Kazakhmys'
management and technical advisers, IMC Consulting Ltd. The Independent
Directors believe that it is now in the best interests of the Shareholders as a
whole that Kazakhmys acquire the ENRC stake currently held by a vehicle
wholly owned by Mr Vladimir Kim. The Board consider the Acquisition to be
in the best interests of Kazakhmys and, having been so advised by
JPMorgan Cazenove and Merrill Lynch, to be fair and reasonable so far as
the shareholders of Kazakhmys as a whole are concerned. In providing
advice to the Board, JPMorgan Cazenove and Merrill Lynch have taken into
account the Directors' commercial assessments of the proposed acquisition.
In addition, Kazakhmys has received legal advice from Linklaters LLP,
advice on accounting for the Acquisition from Ernst & Young LLP, tax advice
from PricewaterhouseCoopers LLP and technical mining advice from IMC
Consulting Ltd.
Vladimir Kim, the Related Party, has not taken part in the Board's
consideration of the Acquisition. In addition, none of Oleg Novachuk, David
Munro or Vladimir Ni has taken part in the Board's consideration of the
Acquisition as it was deemed appropriate that only the non-executive
directors of Kazakhmys, who are independent in relation to the Acquisition,
should consider the Acquisition.
"ENRC"
ENRC is a privately owned natural resources company with fully integrated
mining, processing, energy and transport operations in Kazakhstan. ENRC's
operations, spread throughout Kazakhstan, are principally comprised of
vertically integrated ferroalloy, iron ore and alumina businesses which
employ over 60,000 people and generated estimated revenues of
approximately US$3 billion in 2006. ENRC benefits from high operating
margins as its operations and growth profile are underpinned by relatively
low costs of production at the company's major operations and it has access
to a captive energy supply and in-house logistics and transportation
operation.
ENRC's operations are comprised of:
- Kazchrome, whose principal activities include the extraction and sale of
chrome ore as well as the production and supply of high quality
ferroalloys to steel-makers worldwide. It is one of the top three
ferrochrome producers in the CIS, based on volume of chrome (as of
2006) and is ranked in the lowest cost quartile amongst global
ferrochrome producers. Kazchrome is 98.30per cent. owned by ENRC;
- "SSGPO, which is a significant CIS iron ore producer with sizable
reserves estimated to be in the region of 1.5 billion tonnes which would
ensure a mine life of approximately 40 years. It is a low cost producer
which produces iron ore pellets and iron ore concentrates. SSGPO is
98.14 per cent. owned by ENRC;
- Aluminium of Kazakhstan, which is Kazakhstan's largest producer of
alumina and a substantial producer globally. Aluminium of Kazakhstan
also has its own bauxite reserve. Aluminium of Kazakhstan is 96.59 per
cent. owned by ENRC;
- Kazakhstan Aluminium Smelter, which is scheduled to start production
in late 2007 with an anticipated initial capacity of 60,000 tonnes of
aluminium per annum expected to increase to 250,000 tonnes by 2011.
The smelter will be 100 per cent. owned by ENRC
- EEC, which operates an open pit coal mine and is Kazakhstan's largest
electricity supplier, with a 2,155MW capacity, providing approximately
16 per cent. of the country's current installed capacity. EEC is 99.11 per
cent. owned by ENRC; and
- Other divisions including ENRC Logistics (100 per cent. owned by
ENRC, a transportation and logistics company); ENRC Marketing (100
per cent. owned by ENRC, the trading and marketing arm of ENRC)
and Zhairemskiy GOK (99.83 per cent. owned by ENRC, a producer of
manganese, ferromanganese and barite).
Acquisition Price, Financing and Financial Effects of the Acquisition
- The amount payable by Kazakhmys in respect of the Acquisition under
the terms of the Option, which were disclosed in the announcement of
14 March 2006, will be approximately US$810 million, assuming
completion within the expected timeframe.
- The cost is based on the initial purchase price of US$751 million paid
by Mr Kim to acquire the 25% stake in EKH (the "Original Acquisition"),
plus transaction and related costs, including a 10% margin of US$75.1
million reflecting the risk that Mr Kim took in making this investment on
his own account. Dividends and other capital distributions of
approximately $95 million received by Mr Kim in respect of his
shareholding in EKH since the date of the Original Acquisition have
been deducted.
The acquisition of the stake will be accounted for as an investment by
Kazakhmys and it is intended to be funded from existing cash resources of
Kazakhmys
EGM and Voting
Following receipt of Governmental approval and the subsequent completion
of the final step of the restructuring of the ENRC group in which it is
anticipated that Kazakhmys' interest will be directly held in ENRC PLC, a
circular will be distributed to shareholders and an Extraordinary General
Meeting of the Company will be convened. Only independent shareholders
of the Company shall be permitted to vote on the acquisition at the
Extraordinary General Meeting.
A further announcement will be made in due course when the shareholder
circular is dispatched to shareholders.
For further information please contact:
John Smelt, Head of Corporate Communication
Tel:+44 20 7901 7882
Mob: +44 787 964 2675
Sergei Stephantsov, Investor relations manager
Tel:+44 20 7901 7814
Robin Walker, Finsbury
Tel:+44 20 7251 3801
Quotation end
The given press-release of KAZAKHMYS PLC is available at
http://www.kase.kz/emitters/scan/kzms/gbkzms_reliz_040907.pdf
[2007-09-05]