Kazakhmys to Cut Debt by 76% With Cash From ENRC Stake Sale

Kazakhmys Plc’s debt will drop by 76 percent after a proposed takeover of Eurasian Natural Resources Corp. in which it holds 26 percent, according to an executive.

Net debt will decline to $283 million after the takeover by the Kazakh government and ENRC’s founding shareholders, from $1.16 billion on May 31, Chief Financial Officer Andrew Southam said in presentation slides posted today on Kazakhmys’s website. Kazakhmys shareholders will vote Aug. 2 on the planned takeover.

Alexander Machkevitch, Patokh Chodiev and Alijan Ibragimov, seeking to take ENRC private, offered $2.65 in cash and 0.23 of Kazakhmys stock for each share. Kazakhmys backed the plan, which the bidders said June 24 was equivalent to 234.3 pence a share and valued ENRC at 3.04 billion pounds ($4.6 billion).

Kazakhmys will get a net $875 million in cash and about 77 million of its own shares, Chairman Simon Heale said in the presentation. The free float will rise to about 58 percent from about 37 percent as the company will cancel the stock. Kazakhmys declined 3.6 percent today to close at 245.9 pence in London.

In addition, Kazakhstan’s largest copper producer suspended its Satpayev concentrator last month and is reviewing Zhezkazgan and “several mine sections,” Executive Director Eduard Ogay said in the presentation. Copper production was “supported despite reducing high-cost output” while the Nikolayevsky concentrator upgrade is due to be completed this year, he said.

Kazakhmys is targeting 500,000 metric tons of copper output a year by 2017 after construction of the Bozshakol and Aktogay mines is complete. The company sees 285,000 to 295,000 tons this year after 294,000 tons in 2012. It plans to get 80 percent of its ore from open pit mines in 2018, from 25 percent this year, Chief Executive Officer Oleg Novachuk said in the presentation.

Output from Kazakhmys’s top five mines will increase to 80 percent of the total in 2018 from 50 percent this year, he said.