Kazakhmys set to take out Eurasia Gold

In a transaction worth about $288 million, London-listed Kazakhmys (KAZ-L) has offered to take over Eurasia Gold (EGX-T).

Kazakhmys is offering 85 per share for Eurasia, which controls a portfolio of producing and development-stage assets in Central Asia. The takeover is a friendly one, with Eurasia’s chairman, Kumar Mukashev, and companies under his control, locking up 79% of Eurasia’s shares to Kazakhmys. Kazakhmys has committed to taking up shares tendered to the offer as long as it gets 75%, so the deal with Mukashev makes or breaks the takeover.

The offer is also conditional on regulatory approval and on there being no material adverse changes to Eurasia Gold.

Eurasia Gold produced 45,000 oz. gold in 2006, from its Mukur and Miyaly open pit and heap leach operations, both near Semipalatinsk, Kazakhstan, and the Mizek pit, in east-central Kazakhstan. It acquired Kazakh gold company Charaltyn from the Mukashev interests in May 2006, giving Mukashev control of the company.

Eurasia’s most recent acquisition was a purchase of the Bozymchak gold-copper deposit in Kyrgyzstan and the Akjilga silver deposit in Tajikistan from the Mukashev interests in March. Eurasia issued Mukashev’s companies 169 million shares, valuing the deposits at US$168 million.

Bozymchak has a measured and indicated resource of 13.7 million tonnes grading 1.5 grams gold, 0.81% copper and 9.5 grams silver per tonne. Near Jalalabad, it is subject to an exploration licence valid until the end of 2008, and a development licence over the central part of the deposit is in place until early September 2008. Akjilga, in the Pamir range in Tajikistan, does not have a usable resource calculation, but consists of an 84-sq.-km land package in two areas.

Eurasia earned US$917,000 on revenues of US$27.4 million in 2006, down from US$1.6 million earned on US$15.8 million revenue in 2005. Cash production costs were US$322 per oz. for the year, up from US$214 in 2005.

Kazakhmys has 19 mines and two smelter-refinery complexes in Kazakhstan, and a downstream copper-products plant in Germany. It earned US$1.4 billion on revenues of US$5 billion in 2006, versus 2005 earnings of US$550 million on revenues of US$2.6 billion.