Glencore Xstrata Considers Bid for ENRC Kazakhstan Manganese Assets

An insider statement has been released disclosing Glencore Xstrata’s recent considerations concerning the acquisition of manganese assets from Eurasian Natural Resources Corporation, after the Kazakh miner moved into the private sector by its shareholders. Looking to expand its empire further, Glencore stands as the world’s leading integrated commodities producer and marketer to date.

Selling mainly manganese concentrate for steel manufacturing, the sale of ENRC’s Zhairem product could earn the company between $100 million and $200 million. In the third quarter of 2013 alone, the company produced over 181,000 tons of material since the findings were last reported on the London stock exchange. This deal would propel Glencore to enhance its acquisition of manganese assets from Vale, with its Baar branch (its Switzerland-based operation) standing as the fourth-largest mining company. The organization bought Vale’s European manganese assets for $160 million in 2012 and produced 191,000 tons of metal in the last year alone.

ENRC operates primarily in: Kazakhstan, China, Russia, Brazil and Africa 9the Democratic Republic of Congo, Zambia, Mozambique and South Africa). As of late, the organization has been making strides in the DRC market, particularly in copper and cobalt assets, which are some of the most distributed assets from First Quantum by the DRC Government. The company currently employs over 72,000 people, with 65,000 located within Kazakhstan.

Speculations about the deal are already circulating, and tensions are running high between industry executives: “However ENRC's performance of late has been disappointing to its shareholders and has reportedly been the scene of major boardroom rows over corporate governance leading to the departure of two key non-executive directors last week who had clashed with the company's major shareholders, Aleksander Maskevitch, Patokh Chodiev and Alijan Abramigove who hold 14.59% of the company each.  The Kazakh government owns 11.65% and would need to approve such a deal given its importance to the country's GDP and Kazakh miner, Kazakhmys, controls 26%,” reports Mineweb. 

Alexander Machkevitch, Patokh Chodiev and Alijan Ibragimov and the Kazakh government decided to take the London-based mining powerhouse private in November 2013, as the founders looked ahead to increase profitability for the 2014 fiscal year.

A report from the Sunday Times followed-up on the issue saying, “The Sunday Times reckons Mashkevitch, in particular, was seeking greater control.  He had originally wanted to be chairman, but was deemed ‘not fit and proper' to lead a U.K. quoted company at the time of ENRC's float and some recent bad publicity involving under-age prostitutes on a boat will not have improved matters in this respect.”

This three-man team raised approximately $1.6 billion to cushion the proposed deal, while the government contributed an additional 26 percent stake in the form of the ENRC shareholder, Kazakhmys Plc.

The selling of these assets would begin the process of debt closure for the organization, as the ENRC accrued a devastating debt of $6.1 billion as of last September, following a series of expensive acquisitions and project cost overruns.