Chairman offers to take Kazakhstan’s Kaz Minerals private

Oleg Novachuk and Vladimir Kim, the current and past chairman of Kaz Minerals (LSE: KAZ), are proposing a buyout offer of the pure-play copper company.

Their company, Nova Resources, in which they own a 36.5% and 63.5% stake, respectively, already owns about 186 million shares of Kaz Minerals.

Nova Resources is offering to buy Kaz Minerals for £3 billion in cash at a price of 640 pence a share, which represents a 12.1% premium to Kaz Minerals’ closing share price on Oct. 27 of 570.8 pence, and a 24.9% premium to its closing price of 512.4 pence per share on Oct. 2.

An independent committee has recommended the deal to shareholders.

Kaz Minerals is the largest copper producer in Kazakhstan. It operates the Bozshakol and Aktogay open pit copper mines in Pavlodar and the East Region of Kazakhstan; three underground copper mines in the East Region; and the Bozymchak copper-gold mine in Kyrgyztan.

The Bozshakol and Aktogay open pit mines produced 110,000 tonnes and 146,000 tonnes copper, respectively, in 2019, and its three underground mines produced a total of 48,000 tonnes copper. Its Bozymchak mine churned out 7,000 tonnes copper along with 41,000 oz. gold in 2019.

In addition, Kaz Minerals owns the Baimskaya copper project in Chukotka, Russia, which it describes as “one of the world’s most significant undeveloped copper assets, with the potential to become a large scale, low cost, open pit copper mine.”

Baimskaya’s Peshanka deposit has a JORC-compliant resource of 9.5 million tonnes copper at an average grade of 0.43% copper and 16.5 million oz. gold at an average grade of 0.23 gram gold per tonne. A prefeasibility study estimated construction would cost about US$7 billion and that the initial mine life would be about 25 years. A bankable feasibility study is slated for completion by year-end.

The company acquired the Russian project in August 2018 for US$900 million in cash and shares.

In a press release announcing the buyout offer, the consortium said that there was “a strong strategic rationale for the acquisition,” given the company’s focus on developing and operating large scale, low-cost copper mines in Kazakhstan and the CIS region.

“Kaz Minerals’ decision to dedicate efforts to a capital intensive strategy focused on long-term growth remains the optimal long-term strategic path for Kaz Minerals,” it stated, but “recognizes this may be misaligned with the preference of many investors in the mining sector. Consequently, the members of the consortium have concluded that Kaz Minerals’ long term development of Baimskaya would be best undertaken away from public markets as a private company.”

Kim was appointed chairman of Kaz Minerals in 2005, and stepped down as chairman in 2013. He remains on the board as a non-executive director.

Novachuk was appointed chief executive in 2007 and chairman in 2018. Prior to joining the group in 2001, Novachuk was chairman of Kazprombank JSC.