Kazakhmys

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The history of copper giant, Kazakhmys PLC., which is known for its work throughout the world today, begins back at the Balkhash copper smelting complex in Kazakhstan, where the majority of its operations are still located.

Today Kazakhmys, whose interests lie in copper, gold, zinc, silver, power generation and petroleum, has the largest copper operation in Kazakhstan and one of the top ten worldwide. In 2009, the group produced 150 thousand tonnes of zinc in concentrate and 17 million tonnes of silver, shooting the company into the top ten silver producers in the world. Under its copper division alone, Kazakhmys has operating sites across Kazakhstan with 20 open pit and underground mines, 10 concentrators, a zinc plant and two smelting and refining complexes. Its copper reserves have sufficient resources to predict annual targets for the next 20 years.

The company’s main subsidiary group, Kazakhmys Corporation, is headquartered from Zhezkazgan, Kazakhstan, where in 1971 the company’s first smelting operations took place. Kazakhmys really began to take flight after listing on the London Stock Exchange (LSE) in 2005. The years that followed saw the company undertake a series of advantageous acquisitions including:

April 2007; Kazakhmys formed Kazakhmys Petroleum Division with the acquisition of Dostan Temir exploration field.
July 2007; Kazakhmys formed Kazakhmys Gold Division under the acquisition of Eurasia Gold.
October 2007; Kazakhmys acquired a 14.6 per cent stake in Eurasian Natural Resources PLC.
May 2008, when Kazakhmys acquired Ekibastuz Power Plant and Maikuben Coal Field.
July 2008; Kazakhmys acquired a further 7.7 per cent stake in ENRC PLC bringing total holding up to 22.24 per cent.
August 2008; Kazakhmys acquired further shares in ENRC PLC bringing total holding to 25.02 per cent.

These business choices represent the milestones achieved along Kazakhmys journey to become the copper powerhouse it is today. And the company shows no signs of slowing down. With a series of exciting recent announcements, observers are expecting more to come.

Sticking with diversity in the GFC

Since 2007, Kazakhmys has added three new divisions to its group as the company works towards its strategic goal to diversify and participate in the development of the significant natural resource opportunities in Central Asia. These divisions are Kazakhmys Petroleum, Kazakhmys Gold and Kazakhmys Power.

In addition, Kazakhmys acquired Mansfelder Kupfer & Messing (MKM), of Germany in 2004 which today produces a range of pre- and semi-finished copper and copper alloy products. In acquiring MKM, Kazakhmys’ diverse structure strengthened and the company was able to add another component of the copper industry chain to its in-house brand. From mining ore right through to the production of finished copper cathode and rod, Kazakhmys does it all.
“Our long term core strategy remains unchanged,” the company says in the wake of the global economic crisis.

“For 2009, our primary focus was on asset optimization, the aim is to conserve ensure the long-term growth and success of the group.”

As Kazakhmys emerges from these most difficult times, the company has stayed true to its long-standing commitment to diversification and involvement within Asia’s commodity boom. On October 19 of 2009, Kazakhmys announced it was in discussions with the China Development Bank Corporation and Joint Stock Company Sovereign Wealth Fund, Samruk-Kazyna, to put in place a major unsecured loan facility.  On December 30 of 2009, the company announced that it had secured up to US$2.7 billion of this loan for its growth projects.

This loan is planned for two of the most exciting projects in the Kazakhmys portfolio; two billion to fund the development of the Boschekul copper project and a US$100 million to fund the development of the Bozymchak gold/copper project.

“We are delighted to have reached an agreement with Samruk and the CDB that gives us flexible, long dated financing to deliver our major growth projects. The transaction demonstrates our strong regional relationships and ability to raise significant funding in a challenging global market environment,” Oleg Novachuk, CEO of Kazakhmys, told press.

“Bozymchak will now move into development, with first output in 2011, and the feasibility study for our major copper growth project at Boschekul will start in early 2010. Securing this funding is a major boost for copper production from Kazakhstan and will help to meet the growing demand of our customers in China,” the company said in a statement.

Over three months have passed since this exciting news broke and it appears that the relationship between Kazakhmys, the CDB and Samruk has continued to blossom.

Kazakhmys in Kazakhstan today

On December 10 of 2009, Kazakhmys announced that it planned to sell 50 per cent of its Ekibastuz GRES -1 power plant to the National Welfare Fund Samruk-Kazyna JSC for a total of US$681 million.

Ekibastuz is the largest coal fired power plant in Kazakhstan, with a current capacity of 2,500 mega watts which will reach its original nameplate capacity of 4,000 mega watts under this transaction. Both Kazakhmys and Samruk will invest around US$1 billion dollars in the plant over the next seven years, are assembling a joint advisory board and splitting up managerial roles between the companies. This transaction was completed on February 26, 2010.

On March 3, 2010, reports flooded in that Kazakhmys had surpassed market expectations on the LSE by producing 320,000 tonnes per annum of copper in 2009 compared with its target of 300,000 tonnes per annum. The company states that its 2010 target is now at 300,000 tonnes per annum. One driver in these heightened profits was the lower cash costs for each ounce of copper produced. It is unsurprising to see that Kazakhmys shares were the biggest rising on the FTSE in 2009. The company’s movements towards safeguarded investment in key projects and adhering to its goal for diversity and Asian market play, whilst remaining cautious in the fragile financial climate, have paid off well. As news continues to break of new deals, ventures and success, Kazakhmys is looking at another great year.

www.kazakhmys.com