Kazakh Kazakhmys agree to sell its share in ENRC at offered price

Azerbaijan, Baku, June 24 / Trend E. Kosolapova/

Kazakhstan's Metallurgical Corporation Kazakhmys PLC made a statement on firm intention of Eurasian Natural Resources Corporation (ENRC) to sell its shares per $2.65 in cash plus 0.23 Kazakhmys shares each, the company reported on Monday.

"The Board of Kazakhmys believes that the Offer may undervalue ENRC and its assets but after seeking to engage with the ENRC Consortium and its constituent members, has concluded that there is no prospect of obtaining improved terms," the company said.

Moreover, the Board considers the prospects of realising greater value from ENRC in the short to medium term to be remote and the risks of further erosion in value to be considerable. The Board believes the Offer is the best alternative open to Kazakhmys and other ENRC minority shareholders.

The Eurasian Resources announced the offer on behalf of the ENRC Consortium comprising Mr Machkevitch, Mr Ibragimov, Mr Chodiev and the Government of Kazakhstan.

Based on the terms of the Offer, Kazakhmys will receive approximately $887 million in cash and 77,041,147 Kazakhmys shares, which will substantially strengthen the group's financial position during the development phase of the Group's major copper growth projects in Bozshakol and Aktogay.

The offer provides the group with an opportunity to end its association with ENRC and will increase the size of the free float in the company to up to approximately 58 percent of the voting share capital of the company as a result of Kazakh Government or Eurasian Resources, as the case may be, no longer holding Kazakhmys Shares (or a much reduced stake in Kazakhmys), creating a majority free float and significantly enhancing liquidity in Kazakhmys shares.

If the offer does not proceed, Kazakhmys has a number of concerns about any ongoing investment in ENRC.

In particular, Kazakhmys noted that the significant issues currently surrounding ENRC including in relation to corporate governance concerns and the ongoing Serious Fraud Office investigation into certain
allegations involving ENRC.

Moreover, given the corporate governance issues at ENRC and the size of the ENRC Consortium's shareholding in ENRC, the risk that ENRC could be removed from the FTSE index for noncompliance with the 25 percent free float condition or that a breach of certain continuing obligations of ENRC could result in ENRC being the subject of sanctions including, inter alia, fines and/or the suspension or cancellation of its listing.
There is a risk that the group's investment in ENRC becomes illiquid, which would be to the detriment of Kazakhmys shareholders and the potential requirement for ENRC to raise additional funds given mining inflationary pressures, commodity price volatility and ENRC's debt servicing requirements.

"Consequently, Kazakhmys has acted to safeguard the offer for Kazakhmys shareholders, and the other ENRC minority shareholders, by giving an irrevocable undertaking to accept the offer in respect of its entire shareholding in ENRC. The group's acceptance of the offer is subject to the approval of independent Kazakhmys shareholders, giving shareholders the ultimate decision on whether to accept the offer," the company said.

Kazakhmys PLC is a leading international natural resources group with significant interests in copper, gold, zinc, silver and power generation. It is the largest copper producer in Kazakhstan and one of the top worldwide with 16 operating mines,10 concentrators and 2 copper smelters. The company holds 26 percent shares in ENRC.

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