14th Mar 2006 07:02
Kazakhmys PLC14 March 2006 14 March 2006 Kazakhmys PLC - Option Agreement Kazakhmys Plc today announces that a vehicle wholly owned by its ExecutiveChairman, Mr Vladimir Kim, has agreed to acquire a 25% stake in ENRC KazakhstanHolding B.V. ("EKH"), the holding company for certain assets of the EurasiaNatural Resources group's metals and mining business, which primarily operate inKazakhstan producing, in particular, chrome, iron ore and alumina. Mr Kim will remain as Executive Chairman of Kazakhmys Plc and will have no rolein the management of EKH. He has the right to appoint one member to its Boardand has certain minority shareholder rights. The independent members of the Board of Kazakhmys Plc have considered thepossibility of Kazakhmys Plc acquiring a stake in EKH. However, EKH is anunlisted company which is in the process of a significant restructuring and notin a position to provide the type of due diligence or warranty package which alisted company would expect. Until the restructuring is completed, theindependent members of the Board of Kazakhmys Plc, after careful consideration,have formed the view that that making an investment in EKH would not beappropriate or in the best interests of Kazakhmys Plc's shareholders. Accordingly, under the terms of Mr Kim's service contract, the independentmembers of the Board of Kazakhmys Plc have given permission to Mr Kim to acquirethis stake through his own company on the basis that Kazakhmys Plc is given thebenefit of a call option in respect of Mr Kim's shareholding in EKH. The termsof the call option allow Kazakhmys Plc, at its absolute discretion, from 1January 2007 to and until 31 December 2007, to call for Mr Kim's interest in EKHto be transferred to Kazakhmys Plc for a consideration representing 100% of theinitial investment of US$ 751 million plus a 10% margin (reflecting the risk ofthe initial investment) and the actual financing and transaction costs incurredby Mr Kim. This is provided that, as required by the Listing Rules, thisconsideration and the terms of the option are determined by an independentadviser to be fair and reasonable so far as the remaining shareholders ofKazakhmys Plc are concerned. Mr Kim is not permitted to dispose of his interestin EKH before 1 January 2008 without the consent of Kazakhmys Plc. ShouldKazakhmys Plc exercise the call option, then it will of course comply with allclass tests and related party rules relevant to Kazakhmys Plc. Any such decisionwould be taken by an independent committee of the Board. Notwithstanding the above, Mr Kim continues to remain bound by all of the termsof his employment contract with Kazakhmys Plc and, in particular, theobligations in that contract not to compete, directly or indirectly, withKazakhmys Plc. The independent members of Kazakhmys Plc's Board consider that entering intothis call option agreement is in the strategic interests of Kazakhmys Plc. It is envisaged that Mr Kim will finance his acquisition through a new debtfacility and he has agreed to pledge part of his shareholding in Kazakhmys Plcas security. In this context, Kazakhmys Plc has been informed by JPMorganCazenove and Credit Suisse (the "Banks") that, pursuant to lock-up arrangementsentered into in connection with Kazakhmys Plc's IPO (the "Undertakings"), Mr Kimhas received from the Banks, in response to his formal request, consent to suchsecurity being granted over shares in Kazakhmys Plc ultimately owned by him.Consent has been granted only in respect of such shares as necessary to enablethe financing of the Acquisition, including any margin calls that may arise, andthe Undertakings shall otherwise remain in full force and effect up to, andincluding, 7 October 2006 for those Kazakhmys Plc shares ultimately owned by MrKim from time to time, to the extent that the same are not subject to any suchsecurity. The Board of Kazakhmys Plc will keep shareholders informed of developments. For further information please contact: Jinsoo Yang, Head of IR Tel: +44 20 8636 7900Sergei Stephantsov, Deputy Head ofIRKazakhmys PLC Morgan Bone Tel: +44 20 7251 3801Robin WalkerFinsbury Notes to Editors Kazakhmys PLC's principal business is the mining, processing, smelting, refiningand sale of copper and copper products, including copper cathode and copper rod,which is carried on by the Group's main subsidiary LLC Kazakhmys Corporation.Based on 2004 production, the Group is the 10th largest producer of coppercathode and mined copper in the world. The Group's operations are verticallyintegrated. The Group operates 17 open pit and underground mines and twosmelting and refining complexes in the Republic of Kazakhstan. The Group alsoowns significant rail infrastructure in Kazakhstan and MKM, a copper productsfabrication company in Germany. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
KAZ.L