Mining groups battle to come out on top

mineral resources

Mining groups battle to come out on top

By SRI ⋅ July 2, 2008 ⋅

Kazakhstan is one of the best-endowed countries in the world for natural resources. As well as abundant reserves of oil and gas, the country is a major producer of uranium, copper, chromium, lead, zinc, manganese, coal, iron ore and gold, and is said to host 95 per cent of the periodic table of elements.

By Rebecca Bream (Financial Times)

The commodities boom of the past five years has boosted the country’s profile among mining executives and investors, as foreign companies have entered the country looking for ways to take advantage of its mineral wealth and Kazakh companies have come to the international markets for funding.

The rise of Kazakhstan as a mining nation has culminated in two of its mining companies – Kazakhmys and Eurasian Natural Resources – entering the UK’s FTSE 100 index of blue-chip companies.

Kazakhmys, which mines copper in central and eastern Kazakhstan, listed on the London Stock Exchange in October 2005 and has since branched out into gold, petroleum and power generation.

ENRC, which produces ferroalloys, aluminium, iron ore and power, listed in London in December 2007 and is also becoming more diversified.

This April, it paid $210m for a controlling interest in Serov, a Russia-based ferrochrome producer owned by Patokh Chodiev, Alijan Ibragimov and Alexander Machkevitch, ENRC’s three founders and owners of about 44 per cent of the group.

Another foreign acquisition followed in May, with ENRC paying $300m for a 50 per cent stake in Bahia Mineração Limitada, a Brazilian iron ore developer.

Johannes Sittard, chief executive of ENRC, has said that this expansion outside Kazakhstan would continue, with acquisitions in other Central Asian states and Mongolia looking particularly attractive.

The question in the London market is whether Kazakhmys and ENRC will themselves come together to form a Kazakh national champion with enough scale to compete with the world’s largest mining companies.