Posts Tagged ‘governance’

Glencore denies acquisition after ENRC board meltdown

June 14, 2011 Comments off

“Commodities trader Glencore (LSE:GLEN.L – News) is not considering a bid for embattled miner ENRC, its chief executive said, dismissing reports of a takeover after it disappointed the market with its maiden first-quarter results. Shares in the world’s largest diversified commodity trader dropped 2 percent as weaker-than-expected results from its metals and mining trading unit held back its operating profit.
Kazakh miner ENRC, with a free float of less than 20 percent, has long been seen as a potential target for Glencore. Industry sources say Glencore could be tempted by its undervalued assets and a heavy fall in the shares as a result of a boardroom spat over its leadership that has seen the departure of two independent directors.
‘Glencore monitors a wide range of opportunities in the sector and will continue to do so,’ Chief Executive Ivan Glasenberg told reporters following the company’s results. ‘However, we can confirm that although we talk to a lot of people in the sector, we are not actively considering a bid for ENRC,’ he added.”

Source: Reuters, June 14 2011


  • Following a review of ENRC’s governance structure various independent directors and the general counsel have either left or have not been reelected by the majority shareholders. The leaving directors claim that the company is run authocratically and the owners are not willing to open up control.
  • Glencore was rumoured to be interested in launching a takeover for ENRC, which suffers from a depressed shareprice. However, Mr. Glasenberg (Glencore CEO) said the company wasn’t holding any discussions to purchase ENRC when announcing Glencores 1st quarter results.


  • A potential acquisition of ENRC by Glencore would only have chance of success if the founders are willing to sell their shares. The Kazakh government is unlikely to sell its stake in the company and the total share of ownership of the 18% free-float and the Kazakhmys share would not enable Glencore to excercise control.
  • Many analysts are trying to figure out which large mining company will be Glencore’s major acquisition target. As long as not further equity is raised the company will be able to make an acquisition up to a value of some $30-40bln. The target should mainly be complementary to Xstrata’s global operations, as it is likely that management of the owned and controlled operations is centralized in the coming years.

©2011 | Wilfred Visser |

ENRC tensions grow as two directors dismissed

June 9, 2011 Comments off

“Private feuding within Eurasian Natural Resources Corporation, the Kazakh miner, spilled out into the open on Wednesday as investors in the tightly held company overwhelmingly voted against the re-election of Sir Richard Sykes, the senior independent director, and fellow board member Ken Olisa.

The public dismissal of the two directors highlights the deepening tensions within the FTSE 100 miner. It has been dogged by corporate governance concerns since it floated in 2007. Speculation about boardroom battles has intensified since the group announced controversial acquisitions in central Africa last year, most notably the purchase of mining assets in the Democratic Republic of Congo that the Congo government had recently expropriated from a Canadian mining company.

In particular it will focus attention on the position of foreign companies that list in London and rely on City grandees to give comfort to shareholders. The presence of boardroom heavy-hitters was especially valuable to ENRC during last year’s controversy over acquisitions in Africa, most notably the purchase of mining assets in the Democratic Republic of Congo that the government had recently expropriated from a Canadian mining company.”

Source: Financial Times, June 8 2011


  • ENRC was formed in 2006 by consolidation of assets privatized in the mid ’90s. The founders are Alexander Mashkevitch, Alijan Ibragimov, and Patokh Chodiev; each still holding 14.6% of the shares, with the Kazakh government holding 11.7% and Kazakhmys 26%. Because Kazakmys abstained from voting the founders and government held at least 75% of the voting shares.
  • Current CEO Felix Vulis announced his departure in February, and the founders are rumored to want to replace several other executives and board members. The dismissal of the directors has tipped the weight of the board to the founder’s side, giving them significant power.


  • Unless the dismissal of the independent directors came as a surprise to the persons in question the fact that they did not make a quiet move out of the board should be understood as a means to draw the attention to the governance issues of the miner. It appears that the founders and the Kazakh government want to strengthen their control over the company, even though it has mainly been expanding internationally in the past years.
  • The debates in the board about the acquisition of the projects in Congo including the Kolwezi asset, formerly owned by First Quantum, indicates a cultural difference between the Kazakh hardliners and the more western independent directors with more eye for corporate social responsibility. With various other Eastern companies listing on western stock markets this will be an issue that will surface more often in the future as many development projects are undertaken in politically unstable areas.

©2011 | Wilfred Visser |