Join our community of smart investors

Kaz Minerals' biggest shareholder taking it private at £3bn

Chairman Oleg Novachuk says capital intensive period coming up ‘misaligned’ with investor preference
October 28, 2020

Kaz Minerals (KAZ) is being pulled off the London Stock Exchange by its chairman and major shareholder, who say investors won’t appreciate the coming years of high capital spending.

IC TIP: Await documents at 626p

Top shareholder Vladimir Kim, who holds 31.6 per cent, owns the majority of the private Dutch company Nova Resources making the bid. The 640p cash offer is a 12 per cent premium on Tuesday’s closing price and a 25 per cent premium on the price on 2 October, the day the board backed the offer. The miner’s share price was up 4 per cent year-to-date before the takeover offer was announced. 

The company, listed in London since 2005, has around 45 per cent backing for the takeover so far. This figure also includes directors and several shareholders not part of the Kim consortium.  

Kaz is in the midst of finding funding for the massive Baimskaya project in Russia, which it bought in 2018 for $900m (£694m). The purchase itself triggered a major selloff and there are still major questions of how Kaz would fund the $7bn project. 

Chairman and former chief executive Oleg Novachuk, who is partnering with Mr Kim to take over Kaz, said London investors may not have enjoyed the “risk appetite” offered by the Baimskaya build. 

“We remain confident that the execution of a higher risk, capital intensive strategy remains the optimal long term path for Kaz Minerals, but we recognise that our risk appetite may be misaligned with the preference of many investors in the mining sector,” he said. 

Kaz’s share price climbed 10 per cent to 626p on the news. 

Liberum analyst Ben Davis said that the Baimskaya project would be tough to get going, given the need for a port and power plant to be built by the Russian government and the hefty financing needs. “Without a joint venture partner...the pain of financing Baimskaya would be pretty difficult for equity holders,” he said. The Baimskaya feasibility study is expected by the end of the year. 

Kaz shareholders will vote on the takeover at a court meeting in December or January, with 75 per cent support needed. The Kim group won’t be able to vote, although its stake will count in a separate company meeting. We would accept the offer given the expense coming up from Baimskaya.