Eurasian Natural Resources Corp., the London-listed metals and power company that today posted a surprise full-year loss, is in talks with its five main owners on selling new shares to expand its free float and raise cash.
The producer with operations in Kazakhstan and Africa plans to raise the float to 25 percent, a new minimum for companies in the benchmark U.K. stock index, from 18.4 percent now, Chief Executive Officer Felix Vulis said in an interview.
“We started to approach our five major shareholders,” he said. “We are just at the beginning of the process so it’s very early to comment” on whether they are in favour, Vulis said.
ENRC fell 1.9 percent to 306.9 pence in London trading, the lowest level since Jan. 8, after the comments and those of Chief Financial Officer Zaure Zaurbekova, who said the company may add to $1.5 billion in impairment charges.
FTSE International Ltd. will raise the minimum free float for companies in the benchmark FTSE 100 index to 25 percent in 2014 after investor concerns that major shareholders of resource companies were dominating minorities. ENRC’s three founders each own 14.6 percent of the company, with Kazakhmys Plc holding another 26 percent and the Kazakh government 12 percent.
“Issuing new shares is a good option to raise funds but it’s mainly for our commitment to stay as a FTSE 100 company,” CFO Zaurbekova said today in an interview.
The funds will help compensate for impairment charges and a surge in debt levels after a slump in the value of acquisitions.
Debt expanded fivefold to $5.14 billion in 2012, ENRC said.
The company reported a surprise net loss of $804 million for 2012 after profit of $1.97 billion a year earlier because of the higher-than-anticipated write down of $1.5 billion in the year. ENRC also decided against paying a dividend, while sales slid 18 percent to $6.32 billion, it said today in a statement.
“Impairment is very sensitive to prices,” Zaurbekova said in the interview. “The aluminum smelter in Kazakhstan is sensitive to the prices and there’s a possible impairment there. We have also done some assessment on African assets and it’s possible there as well but mostly it depends on market prices.”
Ferroalloys slid 9.8 percent in 2012 to $1,597 a metric ton from a year earlier, ENRC said. Iron ore for immediate delivery at the Chinese port of Tianjin, a benchmark, averaged $128.30 a ton last year, from $167.59, according to The Steel Index Ltd.
ENRC wrote down $608 million on the value of the aluminum unit in Kazakhstan in 2012, according to its statement. It also booked a charge of $240 million from its Boss copper and cobalt mine in the Democratic Republic of Congo, and $96 million from Chambishi, the Zambian copper and cobalt smelter bought in 2010.
The company wrote down $120 million on its 13.5 percent in Johannesburg-listed Northam Platinum Ltd. and reported a $328 million charge related to an “onerous contract” with United Co. Rusal, the world’s largest aluminum producer.
“There is scope for more write downs in the future in our view,” Nomura International Plc wrote in a note, describing the results for last year as “broadly disappointing.” Liberum Capital Ltd. analysts said in a note that total charges were higher than their “rough expectations” of $1 billion.
ENRC, which produces iron ore, ferroalloys, aluminum and power in Kazakhstan and copper and cobalt in Africa, is seeking to boost copper output in Africa to 200,000 tons in next five years, Vulis said. At the same time it’s cutting planned capital spending to $1.75 billion this year from $2.3 billion in 2012.
“Although volatility around pricing will continue, we expect strong demand for our products,” Vulis said.
ENRC’s three founding shareholders are Alexander Machkevitch, Alijan Ibragimov and Patokh Chodiev.