EXPERT INTERVIEW: Kazakhstan government to retain influence on KAZAKHMYS PLC

/IRBIS, Alima Kopbaeva, Dinara Mukasheva, July 24, 2008/ -July 14, 2008 information that KAZAKHMYS PLC conducts negotiations with Metalloinvest (Alisher Usmanov) on possible merger was published in Financial Times with reference to unknown sources. However, at the beginning of July, the deal on exchange the stake of Kazakhstan government in в Eurasian Natural Resources Corporation PLC (ENRC) on KAZAKHMYS PLC shares was closed. In this relation, the question on retaining the stake of Kazakhstan government in KAZAKHMYS PLC capital and further prospects of increasing Kazakhstan authorities` influence on company's activity became acute for domestic market. Analysts` opinions, participated in expert interview of IAFM IRBIS concerning this question spit up. One group considers that Kazakhstan government one way or another will try to defend their interests in KAZAKHMYS PLC. "Considering government's intention to be involved in mineral resources industry and also growing strategic meaning of subsoil usage for economy, any possible potential deal (including possible merger of Kazakhmys and Metalloinvest) are unlikely to pass without government participation" - Leyla Kulbaeva thinks, the first analyst on mineral resources industry of Visor Capital JSC. The same opinion Stanislav Chuev has, analyst on mining and smelting industry of Subsidiary organization of joint stock company BTA Bank BTA Securities JSC, who thinks that anxieties on decreasing of government's participation in ore mining company are baseless, as KAZAKHMYS PLC Board announced that all serious decisions will be taken only with main shareholders` approval: "We consider that possibility of this deal closing is little and government will manage to retain the status of principal shareholder in company's capital. Muhit Amirbekov, the Chairman of Board of Centras Securities JSC also thinks that Kazakhstan government will retain the influence right on the mentioned company. However, other analysts consider that deal of KAZAKHMYS PLC and Metalloinvest is outside the frames of two companies` merger. The thing is about creation of world leader in ore mining industry - in case of merger there will be the company, possessing 22% stake in authorized capital of ENRC; besides, there were many speculations on merger of Matalloinvest and NorNikel. And in this case it will be hard for government to defend its interests. Financial analyst of Asia Broker Service JSC Shakhnazar Tleuliev thinks that in case of KAZAKHMYS PLC and Alisher Usmanov`s company merger, government won't use the option right in compliance with Law "On subsoil assets and subsoil usage" of block for sale: "Our opinion that merger will be "reverse" - i.e. public Kazakhmys will merge nonpublic Metalloinvest with further transferring of huge block of shares to Russian investors. In this case, as there will be no any purchase to foreign investors, Kazakhmys is not obliged to offer government to purchase its block of shares. Thus, Law won't be broken". Reference July 11 general shareholders` meeting of KAZAKHMYS PLC confirmed the offer on purchasing from Kazakhstan government 7.66% stake in Eurasian Natural Resources Corporation PLC (ENRC) in exchange for 80,286 050 common shares issue of the company for the government, which will make 15% stake in increased shareholder equity of KAZAKHMYS PLC. Thus, the company will posses 22.24% of ENRC`s authorized capital and Kazakhstan government - 15% stake in KAZAKHMYS PLC. July 14 KAZAKHMYS PLC officially admitted that continue to examine the wide circle of possibilities and also that it is on the early stage of discu- ssion on possible merger with other company, which can both lead and not lead to certain offers. "As negotiations are at the early stage, now there is no any certainty on terms and deal's structure and also prospects of agreement achievement between parties" - is said in KAZAKHMYS PLC report. Besides, July 15 KAZAKHMYS PLC informed additionally that now it doesn't examine any combinations, which can be classified as reverse merger according to Rules of Great Britain Listing Office. Information is presented within the frames of weekly expert interview on acute questions of Kazakhstan and international stock market development, made by IAFM IRBIS. Analysts of Asia Broker Service JSC, Subsidiary organization of joint stock company BTA Bank BTA Securities JSC, VISOR Capital JSC and Centras Securities JSC participated in interview. IAFM IRBIS expresses its gratitude for partici- pation in this project. For detailed information please contact us Tel.: (727) 237 53 41 [2008-07-24]