Posts Tagged ‘Kazakhstan’

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 |

Russia’s ARMZ Buys Mantra for $1.15 Billion

December 16, 2010 Comments off

“Russia’s ARMZ Uranium Holding Co. agreed to acquire Australia’s Mantra Resources Ltd. for about 1.16 billion Australian dollars (US$1.15 billion) in its ongoing bid to acquire low-cost sources of uranium for its parent company, State Atomic Energy Corp., Russia’s largest utility.

At the same time, ARMZ entered an option agreement to flip Mantra to Vancouver-based Uranium One Inc., for the same price it paid. ARMZ agreed to acquire a 51% stake in Uranium One earlier this year, establishing Uranium One as ARMZ’s platform to acquire additional uranium sources for State Atomic Energy. “

Source: Wall Street Journal, December 15 2010


  • Canadian miner Uranium One is controlled by ARMZ, which in turn is controlled by State Atomic Energy (or Rosatom), the Russian utility that controls 17% of the world’s nuclear fuel production.
  • Uranium One operates 3 mines in Kazakhstan, with an additional development project in the country, and various exploration projects and an In Situ Leach mine in the United States.


  • Rosatom is attempting to secure access to uranium ore as global demand is expected to increase strongly over the next decade. The company is smartly using Uranium One, with its proven mining and processing experience, as a vehicle to produce.
  • Depending on the success of international climate change conventions and the approach to small-scale nuclear energy in these conventions the exploration of uranium deposits might experience a surge. However, as uranium deposits typically have a very different geological composition than gold deposits it will not be easy for the many small gold exploration companies to switch to uranium.

©2010 | Wilfred Visser |

Kazakhmys chairman offloads $1.3bn stake

October 11, 2010 Comments off

“Vladimir Kim, chairman of Kazakhmys, has sold an 11 per cent stake in the London-listed Kazakh copper miner for $1.3bn in a transaction that could pave the way for the company’s secondary listing in Hong Kong.

Mr Kim, who led the privatisation of Kazakhstan’s biggest copper-mining complex before floating it in 2005, sold 58.9m Kazakhmys shares to Samruk-Kazyna, the Kazakh national investment company.

The sale is a transfer that injects no further liquidity into Kazakhmys’s closely held shareholder base. However, Mr Kim revealed that he would “make available” up to 21.4m shares, representing 4 per cent of Kazakhmys equity, for a Hong Kong listing. Mr Kim still owned 28 per cent of Kazakhmys after the sale, Kazakhmys said in a statement. He remains the company’s chairman and largest single shareholder.”

Source: Financial Times, October 5 2010


  • Kazakhmys, a $2.4bln revenue copper, zinc, silver, gold producer, and ENRC (Eurasian Natural Resources Company), a $3.8bln revenue iron ore, aluminium and energy producer, are Kazakhstan’s largest mineral producers. Both companies are listed on the London Stock Exchange, but are largely owned by early investors and the Kazakh government. Furthermore, Kazakhmys holds 22% of the shares of ENRC.
  • Kazakhmys is planning to list on the Hong Kong Exchange with an additional 4%, worth approx. $0.5bln, to be closer to the main consumer market of copper. Mr. Kim still owns 28% of the shares.


  • Mr. Kim was born in 1961 and has collected a $3.7bln fortune by developing Kazakhmys into the main copper producer in the area. It is stated his divestment of part of the ownership of Kazakhmys should help him to diversify his investment portfolio, which might imply that he is interested in buying a significant stake of another resources company in the region for which he sees opportunities to grow.

©2010 | Wilfred Visser |

Severstal plans London gold listing

September 23, 2010 Comments off

“Severstal, the Russian steel company, is preparing to list its gold division in London this year in a deal expected to value the business at about $4bn, several people close to the company have confirmed.
Severstal – majority owned by Alexei Mordashov, a close ally of Vladimir Putin, Russia’s prime minister – plans to retain a stake of 65-70 per cent in the new company.

Nomura analysts this week valued Severstal’s gold division at $3.6bn. One banker involved in the transaction said the valuation was likely to hit $4bn or possibly $5bn as details about the assets and the company’s growth plans were disclosed to the market.”

Source: Financial Times, September 21, 2010


  • Severstal has invested heavily in expanding the gold business through M&A and organic growth in the last years, growing into the second largest Russian gold miner (behind Polyus Gold) at 670 thousand ounces annual output.
  • Over 50% of the total exploration expenses in the mining industry are for gold exploration. This surge in exploration has resulted in a long list of deposits that might be developed profitably across the world.


  • Severstal is developing projects in Burkina Faso, Guinea and Kazakhstan. The money raised with the IPO may be used to fund these developments, raising the output of the company. However, a major part of the money might be used by the steel division of the company to improve operating performance in steel making, which has been a loss making activity in 2009.
  • The spin-off of the gold division is a logical move of the company at the current demand for gold, which has driven gold prices to stable levels above $1000. Up to a few years ago, most gold mines were using long term gold prices of $300 in the feasibility analysis of mining projects. However, projects are started now that require prices above $600 to be feasible. The Financial Times provides a good overview of the development of gold prices in an interactive graph.

©2010 | Wilfred Visser |

Rio Tinto signs agreement on mining in Kazakhstan

June 30, 2010 Comments off

“Global miner Rio Tinto signed an agreement on Wednesday with Kazakh state company Tau-Ken Samruk on joint prospecting and mining in the Central Asian state.

Rio Tinto said in June it would be forced to look at investing outside Australia if Canberra pushes ahead with a 40 percent tax on so-called super profits.

Tau-Ken Samruk is the metals and mining arm of Kazakh state investment company Samruk-Kazyna. The chairman of Tau-Ken Samruk, Bolat Svyatov, said the project would produce copper, gold, bauxites, iron ore and other metals.

The Kazakh side would supply rights and permissions, while Rio Tinto will contribute technology to the joint venture created on a parity basis, Tau-Ken Samruk said.”

Source: Reuters, June 30 2010


  • The new joint venture is not working on any specific projects yet, but the deal does open doors for Rio to increase activities in Central Asia.
  • Kazakhstan has many good mineral deposits and a rather stable government. However, transportation costs are high, as all transport to the demand regions (Russia & China) has to be done by train.


  • Rio will have to strongly manage any production activities that will be undertaken by the JV. Managing operating costs has certainly not been the strength of the Kazakh companies so far. As Rio wants to improve operating margin, they will have to do more than just provide technology to ensure low cost production.
  • The Kazakh deal can be seen as part of Rio’s attempts to increase exploration efforts targeting copper and iron ore.

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