LONDON Dec 9 Kazakhmys is selling its
stake in Kazakhstan's largest power station for $1.3 billion,
the copper miner said on Monday, boosting its finances as it
also told investors that its Bozshakol mine would cost almost a
fifth more than planned.
As well as a copper miner, Kazakhmys has been a major power
supplier in Kazakhstan - accounting for over 20 percent of the
country's power supply - but it has refocused on its core copper
mining business in recent years, selling its stake in rival ENRC
to the company's founders in October.
It said on Monday that Kazakhstan's sovereign wealth fund,
Samruk-Kazyna, had agreed to buy the 50 percent stake in mammoth
power station Ekibastuz GRES-1 that it does not already own -
almost a year after talks over a sale were first disclosed.
Press reports in February said the Ekibastuz deal could be
struck for $1.6 billion, but analysts have since quoted a
valuation of closer to $1 billion-$1.2 billion. Samruk bought
the first 50 percent of the asset from Kazakhmys in 2009.
The deal also includes 100 percent of Kazhydro, a company
established to develop hydropower plants in Kazakhstan.
Kazakhmys said in Monday's statement that the deal's net
proceeds of about $1.25 billion would substantially strengthen
its financial position during the development phase of its major
copper growth projects, Bozshakol and Aktogay - key to turning
the miner into a lower cost producer that will get the bulk of
production from open-pit mines.
But it also announced the budget at $1.9 billion Bozshakol
had been raised by $350 million - the latest cost overrun in a
mining industry that has frequently spent above planned amounts
on growth projects, particularly mines built from scratch.
Kazakhmys, which has been running a cost review to cut back
unnecessary spending, did not specify a reason for the budget
overrun, but said it had appointed Non Ferrous China as a second
principal contractor at Bozshakol. It said the development would
keep it on track to begin production at the mine in 2015.
"We have been carrying the Ekibastuz asset at around $1
billion, so the sale value will be ... accretive," analysts at
Nomura said in a morning note.
"However the capex overrun at Bozshakol makes this pretty
much a wash, net-net, on net present value."
Shares in the miner were down 1.6 percent at 0900 GMT,
lagging a 0.8 percent drop in the UK-listed sector.