14 March 2006
14 March 2006
Kazakhmys PLC - Option Agreement
Kazakhmys Plc today announces that a vehicle wholly owned by its Executive
Chairman, Mr Vladimir Kim, has agreed to acquire a 25% stake in ENRC Kazakhstan
Holding B.V. ("EKH"), the holding company for certain assets of the Eurasia
Natural Resources group's metals and mining business, which primarily operate in
Kazakhstan producing, in particular, chrome, iron ore and alumina.
Mr Kim will remain as Executive Chairman of Kazakhmys Plc and will have no role
in the management of EKH. He has the right to appoint one member to its Board
and has certain minority shareholder rights.
The independent members of the Board of Kazakhmys Plc have considered the
possibility of Kazakhmys Plc acquiring a stake in EKH. However, EKH is an
unlisted company which is in the process of a significant restructuring and not
in a position to provide the type of due diligence or warranty package which a
listed company would expect. Until the restructuring is completed, the
independent members of the Board of Kazakhmys Plc, after careful consideration,
have formed the view that that making an investment in EKH would not be
appropriate or in the best interests of Kazakhmys Plc's shareholders.
Accordingly, under the terms of Mr Kim's service contract, the independent
members of the Board of Kazakhmys Plc have given permission to Mr Kim to acquire
this stake through his own company on the basis that Kazakhmys Plc is given the
benefit of a call option in respect of Mr Kim's shareholding in EKH. The terms
of the call option allow Kazakhmys Plc, at its absolute discretion, from 1
January 2007 to and until 31 December 2007, to call for Mr Kim's interest in EKH
to be transferred to Kazakhmys Plc for a consideration representing 100% of the
initial investment of US$ 751 million plus a 10% margin (reflecting the risk of
the initial investment) and the actual financing and transaction costs incurred
by Mr Kim. This is provided that, as required by the Listing Rules, this
consideration and the terms of the option are determined by an independent
adviser to be fair and reasonable so far as the remaining shareholders of
Kazakhmys Plc are concerned. Mr Kim is not permitted to dispose of his interest
in EKH before 1 January 2008 without the consent of Kazakhmys Plc. Should
Kazakhmys Plc exercise the call option, then it will of course comply with all
class tests and related party rules relevant to Kazakhmys Plc. Any such decision
would be taken by an independent committee of the Board.
Notwithstanding the above, Mr Kim continues to remain bound by all of the terms
of his employment contract with Kazakhmys Plc and, in particular, the
obligations in that contract not to compete, directly or indirectly, with
The independent members of Kazakhmys Plc's Board consider that entering into
this call option agreement is in the strategic interests of Kazakhmys Plc.
It is envisaged that Mr Kim will finance his acquisition through a new debt
facility and he has agreed to pledge part of his shareholding in Kazakhmys Plc
as security. In this context, Kazakhmys Plc has been informed by JPMorgan
Cazenove and Credit Suisse (the "Banks") that, pursuant to lock-up arrangements
entered into in connection with Kazakhmys Plc's IPO (the "Undertakings"), Mr Kim
has received from the Banks, in response to his formal request, consent to such
security being granted over shares in Kazakhmys Plc ultimately owned by him.
Consent has been granted only in respect of such shares as necessary to enable
the financing of the Acquisition, including any margin calls that may arise, and
the Undertakings shall otherwise remain in full force and effect up to, and
including, 7 October 2006 for those Kazakhmys Plc shares ultimately owned by Mr
Kim from time to time, to the extent that the same are not subject to any such
The Board of Kazakhmys Plc will keep shareholders informed of developments.
For further information please contact:
Jinsoo Yang, Head of IR Tel: +44 20 8636 7900
Sergei Stephantsov, Deputy Head of
Morgan Bone Tel: +44 20 7251 3801
Notes to Editors
Kazakhmys PLC's principal business is the mining, processing, smelting, refining
and sale of copper and copper products, including copper cathode and copper rod,
which is carried on by the Group's main subsidiary LLC Kazakhmys Corporation.
Based on 2004 production, the Group is the 10th largest producer of copper
cathode and mined copper in the world. The Group's operations are vertically
integrated. The Group operates 17 open pit and underground mines and two
smelting and refining complexes in the Republic of Kazakhstan. The Group also
owns significant rail infrastructure in Kazakhstan and MKM, a copper products
fabrication company in Germany.
This information is provided by RNS
The company news service from the London Stock Exchange