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ENRC: Kazakh miner needs to show its mettle

ENRC floated in London last year on the promise that it would make transformational acquisitions globally. Its play for rival Kazakhmys has, however, proved abortive. So what next for ENRC and its frustrated shareholders? Elliot Wilson reports.

ENRC at market close in London
August 20, 2008:

Share price: 958 pence
Market capitalization: $22.98 billion
Net debt: $1.69 billion

IT HAS BEEN a strange few months for Kazakhstan’s largest listed metals and mining group, Eurasian Natural Resources (ENRC). In May, the London Stock Exchange-listed ferrochrome miner lodged a £7.05 billion bid for Kazakhmys, a smaller domestic rival. Kazakhmys, also listed on the LSE, not only balked but bit back. First, it got the Kazakh government in July to sell its 7.66% stake in ENRC in exchange for allowing the state to hold 15% of Kazakhmys – helping the latter increase its stake in ENRC to 22.25%. A month later, Kazakhmys then entered the open market, paying £400 million to raise its own stake in ENRC by three more percentage points, to a whisker over 25%. ENRC declined to raise its bid, meaning that any new tender for its rival would need to wait until November 2008 at the earliest. Rubbing salt into the wound, Kazakhmys, the country’s leading copper miner, also requested a seat on ENRC’s board. That proposal was haughtily rejected, with ENRC chairman Sir David Cooksey stating that as a competitor for resources in Kazakhstan, board representation by Kazakhmys was "not… in the interest of all shareholders".

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