Usmanov Said to Be Looking At Copper

Kazakhmys.comKazakhmys' market capitalization stood at $13.7 billion at Monday's close. It ended the day in London up 12 percent.
The creation of a new metals conglomerate based in the country took a new turn Monday with reports that Kazakhmys, the world's 10th-largest copper producer, was in merger discussions with Russia's Metalloinvest.

The deal was being structured in the form of a reverse takeover and would see Metalloinvest's Alisher Usmanov emerge with a controlling stake in the enlarged business, which would then be relisted on the London Stock Exchange, the Financial Times Alphaville web site reported on Monday.

The company resulting from the deal would have a capitalization of $38 billion to $43 billion, analysts said. Metalloinvest, which is half-owned by Usmanov, has already said it was looking to merge with Norilsk Nickel to create a world-class metals giant.

Shares in Kazakhmys, 15 percent of which are held by the Kazakh government, climbed as high as 13.4 percent on the London Stock Exchange on the news and ended the day at 12 percent above their opening price.

Because Kazakhmys is a publicly traded company, the merger offers Metalloinvest, Russia's largest iron ore producer, an alternative option for raising additional capital to the IPO Usmanov has been planning for the fall.

The prospective merger would enable Metalloinvest to develop more efficiently the eastern Siberian Udokan copper field, one of the world's biggest, for which it has filed a bid in an auction that is to be decided in September. Kazakhmys, which has said it had the necessary capital and technologies to develop the field, was shut out of the auction when it was closed to foreign bidders.

The field is estimated to hold 20 million tons of copper reserves, and Oleg Deripaska's Basic Element, another bidder in the auction, could be looking at the field as an asset in the struggle for Norilsk, the country's biggest mining firm.

Analysts warned Monday, though, that Metalloinvest would not be able to gain control over the merged company, as the Kazakh government had its own plans for Kazakhmys and was wary of foreign investors.

Neither of the parties was providing details on the talks Monday. Kazakhmys issued a statement saying "it was in very preliminary discussions about a possible combination of its business with a third party."

"The merger with Kazakhmys offers no synergies for Metalloinvest," said Vladimir Zhukov, a metals analyst at Lehman Brothers, which was handling the prospective merger, FT Alphaville reported.

"But Metalloinvest might be looking at a longer-term, as this might help it realize its merger plans with Norilsk without holding an IPO," Zhukov said.

Kazakhmys' market capitalization stood at $13.7 billion at Monday's close. Alfa-bank analyst Maxim Semenovykh estimated the capitalization for Metalloinvest, which is not publicly traded, at $25 billion to $30 billion.

Kazakhmys had earlier been in talks with Eurasian Natural Resources Corporation, one of the world's largest producers of ferrochrome, but could not reach agreement on a price. The Kazakh government had stated publicly that it was looking to merge the companies.