Russian billionaire Roman Abramovich is among the sellers of a copper project in Baimskaya, Russia, that Kaz Minerals said on Thursday it has agreed to buy for $900 million, in a bold move into a country many international investors shun.
Kaz Minerals, which until now has focused on low-cost copper production in Kazakhstan, said Baimskaya was one of the world’s most significant undeveloped copper prospects.
The payment will be a mixture of cash and shares and comprises an initial $675 million for a 75 percent stake and a deferred payment of $225 million for the remaining 25 percent once the deal is completed.
The seller is named as Aristus Holdings Ltd, a company owned and controlled by a consortium of investors including Roman Abramovich, owner of England’s Chelsea soccer club.
Kaz Minerals Chairman Oleg Novachuk said the acquisition marked “the next stage of the transformation of Kaz”.
“The development of this new project in Russia will enable the group to continue its industry-leading growth, delivering both value and volume as the copper market is forecast to enter a period of significant supply deficit,” he said in a statement.
Kaz Minerals said Baimskaya had the potential to become a large-scale, low-cost, open-pit copper mine.
Once onstream, which should be in around 2026, Kaz Minerals’ Russian acquisition will bring the company’s output to an estimated 500,000 tonnes of copper per year.
Baimskaya holds 9.5 million tonnes of copper and 16.5 million ounces of gold. It is expected to yield average annual production over the first 10 years of operations of 250,000 of copper and 400,000 tonnes of gold, with a mine life of about 25 years.
Miners are especially keen for new copper projects to meet expected demand for the conductor used in electric vehicles and grids, but many have ruled out Russia as too politically complicated.
Kaz Minerals shares were trading around 15 percent lower by 0845 GMT.
Its share price had rallied as metals markets recovered from the commodity price crash of 2015-16, but this year those gains have melted away, sapped by trade tensions and concerns about demand from China, the world’s biggest commodity user.
Kaz Minerals said its experience in Kazakhstan made it confident the deal would be a success.
Novachuk told Reuters the harsh climate conditions of developing low-cost, open-pit mining in Kazakhstan, often using Russian workers, was perfect preparation for working in Russia’s far east.
John Mann, a spokesman for an Abramovich investment vehicle, said Kaz Minerals was “well-placed to take this project to the next level”.
In June, London’s high court dealt a blow to Abramovich when it found he did not have the right to sell shares in Norilsk Nickel.
Source: Reuters
