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Kaz ups Baimskaya cost as investors push back on takeover

Russian copper project now to cost around $8bn after Kaz Minerals gets less government backing than anticipated
November 19, 2020
  • Kazakh miner ups projected cost of new project by $1bn.
  • Cash takeover by chairman and major shareholder receives pushback.
IC TIP: Await documents at 641p

Kaz Minerals (KAZ) did say shareholders would not like the bill for its Russian mine, Baimskaya. The feasibility study has now been delayed and the company has announced that the cost of the project will be around $8bn (£6bn), instead of the $7bn previously forecast.

Kaz chairman, Oleg Novachuk, and major shareholder Vladimir Kim have teamed up to take the copper miner off the London Stock Exchange, telling investors last month that their “risk appetite may be misaligned” with the usual mining company shareholder. 

Now, Kaz says this risk is even higher than anticipated as Russia will not fully fund the gas power plant, port and roads that Baimskaya needs to get its copper and gold to buyers. 

Since the all-cash takeover offer was announced on 28 October, investors have pushed back on the idea that the deal is done and dusted. While Messrs Novachuk and Kim have a combined stake of 39 per cent, they will not be able to vote at the first of two meetings to decide the deal. Instead, it will require at least 75 per cent approval from the remaining shareholders to pass. According to the Financial Times, CFC Management – which holds a 3.6 per cent stake – has said the deal does not offer “fair value” for shareholders. 

The 640p a share offer represents a 12 per cent premium to Kaz’s closing price the day before it was announced. We initially said shareholders should accept this proposal given the upcoming expense from Baimskaya. But investor pushback could yet see the offer increased. Shareholders should therefore make as much noise as they can before a vote is held in December or January. Await documents.

Last IC View: Await documents, 626p, 28 Oct 2020