Kazakhstan to swap ENRC shares for Kazakhmys stake

mineral resources

Kazakhstan to swap ENRC shares for Kazakhmys stake

By SRI ⋅ June 11, 2008 ⋅

Kazakhstan agreed to acquire a 1.31 billion-pound ($2.57 billion) stake in Kazakhmys Plc, the country’s largest copper producer, in return for part of its interest in Eurasian Natural Resources Corp.

The transaction may be a prelude to a combination of Kazakhmys and ENRC in a state-controlled mining group that could compete with Australia’s BHP Billiton Ltd, the world’s largest mining company. In February, President Nursultan Nazarbayev said the government should boost the competitiveness of the country’s metals industry.

“We believe the long-term combination of the two companies is favored by the government and makes sense for minority shareholders,” said Amos Fletcher, an analyst at JPMorgan Cazenove Ltd. in London, which is an adviser to Kazakhmys. “This transaction to some extent suggests the government is backing Kazakhmys to bring this about,” he wrote today in a note.

Kazakhmys will issue 80.3 million new shares, giving the government a 15 percent stake, it said today in a statement. The London-based copper company will get 98.6 million shares of ENRC, taking its stake in the ferroalloy producer to 22 percent.

By Nariman Gizitdinov and Brett Foley (Bloomberg)