ENRC warns shareholders of more questions on Congo

LONDON, April 30 Tue Apr 30, 2013 6:05pm EDT

LONDON, April 30 (Reuters) - UK authorities are investigating whether Kazakh miner ENRC breached Britain's rules for listed companies, specifically with acquisitions made in the Democratic Republic of Congo and a 2012 sale in Kazakhstan, it said in its annual report released on Tuesday.

London-listed ENRC is already facing a formal corruption probe led by Britain's Serious Fraud Office - announced last week - following internal investigations and whistleblower allegations concerning both Kazakhstan and assets in Africa.

ENRC listed in London in 2007, but has become a cautionary tale for London investors, prompting calls for listing rules to be revised as its shares languish at close to their lowest point since 2008 - hit by a cooling global economy, corruption probes, long-running questions over governance and bitter boardroom battles.

PIRC, the shareholder advisory firm, said on Tuesday that ENRC and embattled coal mining rival Bumi Plc, which has also fed the debate over listing rules, should have "raised more red flags than a May Day parade in North Korea".

ENRC also said in its annual report that it had separately been contacted by the UK Listing Authority (UKLA) last April over compliance with rules on disclosure, and rules on deals with related parties - deals linked to company insiders or key shareholders.

The UKLA, it said, had ordered a "diagnostic review" of its acquisitions in Congo, including a 2010 acquisition that handed it control of copper mines held by rival First Quantum Minerals Ltd until they were seized by the Congolese government.

ENRC was first questioned by the SFO, a separate authority, on that deal in the summer of 2011, and it said on Tuesday that that meeting was followed by its internal investigations.

ENRC's internal probe into Congo is ongoing, while a second, on Kazakhstan, has been completed and handed to the SFO.

The company also said in the annual report that it had been notified of an inquiry by the UKLA into the sale of railway line repair company Zhol Zhondeushi last year to Prime Residential County LLP, a company connected to the family of one of the miner's co-founders.

A company spokesman said on Tuesday that the sale of Zhol Zhondeushi was in line with its strategy of "disposing of the group's unprofitable and non-core assets", adding the transaction valuation was provided by an independent audit firm.

He declined to comment further.

"The UKLA has not presently referred these matters to an enforcement team," ENRC said in the report. But it added the diagnostic review's conclusions and those of the UK listing authority on the company's wider compliance with listing rules "may result in enforcement action against the company".

ENRC's three founders said earlier this month they were considering a buyout of minority shareholders in the group, taking the opportunity to buy shares at their lowest level since 2008 and sidestepping new rules for UK-listed companies which will require more shares to be available for sale.

Currently, ENRC has a freefloat of 18 percent. The remaining shares are held by the founders, the Kazakh government and rival miner Kazakhmys Plc.

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