Kazakhs eye stake in copper producer

Kazakhs eye stake in copper producer

By Isabel Gorst in Moscow and Rebecca Bream in London

Published: March 25 2008 19:45 | Last updated: March 25 2008 19:45

The government of Kazakhstan is considering swapping mining assets for a stake in London-listed Kazakhmys, its biggest copper producer, in a move that would increase the Central Asian country’s control over its lucrative metals and mining industry.

A decree signed by Karim Massimov, Kazakhstan’s prime minister, early this month instructed the Ministry of Finance to consider buying a stake of up to 15 per cent in Kazakhmys.

The company welcomed the news and confirmed it had been “in preliminary discussions with the government on a variety of options”, including swapping a minority stake in Kazakhmys for state-owned oil and mining assets.

A person close to Kazakhmys said the group would be willing to issue new shares in return for assets, or for the Kazakh government to buy existing shares in the market.

“We are happy as long as the government does it in a free market way, and buys the shares at market value,” the person said.

The person said the news was not necessarily a prelude to a state-backed combination of Kazakhmys and Eurasian Natural Resources Corporation, the London-listed Kazakh mining company in which the Kazakh government owns a 20 per cent stake.

This month, ENRC said it had held “an informal dialogue” with Kazakhmys about merging with or buying the group. Kazakhmys main assets are its huge copper mines, but the company has diversified into gold, coal and electricity production. The group’s chairman and chief executive own 53 per cent of its equity.

Sources in Astana said that if the government bought a stake in Kazakhmys, the shares could be included within a new, state-owned company the Kazakh government planned to create to manage the country’s vast metals and mining assets. Yet, the Kazakhmys shares will not form the foundation of the new entity.

Plans to create the holding company have gathered momentum since February when Nursultan Nazarbayev, Kazakhstan’s authoritarian president, called for the government to exert more control over the metals and mining industry in his annual address to the nation.

The holding is intended to gather Kazakhstan’s scattered metals and mining assets under the roof of one state-controlled group.

Government sources said it would be “logical” to include government’s equity in Kazakhmys and ENRC.