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Kazakhstan: Russian gold loses shine for Kazakh authorities

Plan for global gold firm in jeopardy; Kazakh authorities seek greater control over oil assets

Just weeks before the planned creation of a new gold company on the London Stock Exchange this month, the authorities in Kazakhstan’s capital, Astana, threw a spanner in the works with the announcement of an investigation into the activities of the former management of KazakhGold and the cancellation of a planned share sale.

The news came just weeks before LSE-listed KazakhGold was supposed to finalize a reverse takeover – whereby KazakhGold with a market capitalization of about $300 million would have taken over its Russian parent company Polyus Gold, which is valued at least 30 times higher – in mid-August to create a $10.8 billion group and the largest pure gold miner on the London bourse.

The background to the move is seen as dissatisfaction with the price at which Polyus Gold acquired its stake, following the Kazakh government’s decision to waive its pre-emptive right to buy up shares. Originally, in December 2008, Polyus Gold valued a 50.1% stake in KazakhGold at $746 million, but by the time the terms were finally agreed in August 2009 in the wake of the global economic slowdown, the value of the transaction was pitched at just $269 million.

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