Kazakhmys Closer To Finding Solution For ENRC Stake

03/01/2012| 12:50pm US/Eastern

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- Kazakhmys closer than a year ago to finding a solution for its 26% ENRC stake

- Kazakhmys willing to consider ENRC asset sale, swap; Stake valued at $3.7 Bln

- Kazakhmys also still interested in selling MKM division and purchasing other assets

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By Alex MacDonald

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Kazakhmys PLC (>> Kazakhmys plc), Kazakhstan's biggest copper producer, is closer to finding a solution for its 26% equity stake in Eurasian Natural Resources Corp PLC (>> Eurasian Natural Resources Corporation) although valuation remains a stumbling block, said Kazakhmys' chief executive Thursday.

"I feel that now we are closer than last year" in terms of finding a solution extract value from the company's stake in ENRC, Oleg Novachuk told journalists on a call.

The main challenges in unlocking that value have to do with the world economy and its impact on ENRC's valuation, he said.

"The value of the stake is not what we think is right," he said, adding that concerns about a Chinese economic growth slowdown combined with an ailing European economy have taken a toll on the equity markets.

He said Kazakhmys would consider all its options as it seeks to find a way to unlock more value from its ENRC stake, which was valued at $3.7 billion as of Wednesday.

"If any opportunity arises, including [an asset] swap, we will definitely consider" it, he said, adding that he wouldn't rule out an asset sale.

Kazakhmys has held a 26% stake in Kazakhstan-focused natural resource company ENRC since October 2008 and has been on the prowl for a way to extract more value from its equity investment for more than three years.

ENRC produces a different set of products than Kazakhmys, namely iron ore, aluminum and ferrochrome. Kazakhmys produces copper, gold, petroleum and electricity.

Separately, Kazakhmys reaffirmed that it is still interested in selling its German copper processing business since it considers the unit to be a non-core asset.

MKM achieved record underlying financial results in 2011 and saw a dividend payment of EUR10 million to Kazakhmys, Novachuk said. Nevertheless, copper demand is seen to be stronger in fast-growing developing economies such as China.

In 2012, Kazakhmys plans to sell 80% of its copper cathode to China instead of splitting it equally between China and Europe as it traditionally did.

Novachuk said the company is also actively looking for mergers and acquisitions within the region where it operates but declined to provide any specific comment on whether it might be interested in U.K.-listed Frontier Mining Ltd. (>> Frontier Mining Ltd.), a Kazakhstan-focused copper and gold company.

-By Alex MacDonald, Dow Jones Newswires; +44 (0)20 7842 9328; alex.macdonald@dowjones.com

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