Nova Resources lifts offer for Kaz Minerals to 780p a share

The consortium bidding to take London-listed copper miner Kaz Minerals private has increased its buyout offer to 780p a share as it seeks to win over minority shareholders. 

Nova Resources, which is fronted by Kaz chairman Oleg Novachuk and billionaire metals tycoon Vladimir Kim, made a 640p cash offer in October for the 61 per cent of the company they did not already own.

However, the bid was rejected by some of the Kazak-focused company’s minority shareholders, who said it did not reflect the miner’s fair value and growth potential. 

The company’s shares have been trading above the offer price for the past couple of months as the price of copper has soared to its highest level in seven years. They rose to 797p on Thursday as some investors bet the offer would have to be increased to meet a 75 per cent acceptance threshold.

Mr Novachuk said the increased £3.7bn offer, which has been recommended by an independent board committee, was a chance for shareholders to realise in cash “the value of their investment at a compelling valuation”.

“The major reason we want to take this company off-market is because as a public company we do not have enough entrepreneurial flexibility to run this kind of risk,” he said, referring to Baimskaya, an $8bn Russian copper deposit the company is looking to develop. 

However, it is not clear that the improved bid will be any more palatable to minority shareholders. RWC Partners said this week that a bid of 1,000p a share would be more acceptable to minority shareholders.

“As we forecast that Kaz Minerals will generate more than $5.5bn of ebitda over the next three years, it is our opinion that the £7.80 per share offer price still materially undervalues the company,” RWC Partners said in a statement on Thursday. “Therefore, based on current circumstances, we do not believe this latest offer price represents good value for minority shareholders.

Mr Novachuk said he did not know how RWC had arrived at that figure. “I honestly don’t see that,” he said.

Asked if the offer, which has not been declared final, would be raised Mr Kim said: “We have already offered the compelling price to our shareholders. We believe this price should be accepted by the majority.”

There are two important milestones for the Nova Resources bid. To delist the company they will need to obtain undertakings to accept from 75 per cent of shareholders. And at 90 per cent they can squeeze out remaining shareholders, forcing them to surrender their shares.

Nova has already secured irrevocable undertakings from 50 per cent of shareholders.

Kaz Minerals was trading close to £10 two years before the company announced plans to buy a huge copper deposit in the east of Russia from Chelsea Football Club owner Roman Abramovich and partners for close to $1bn.

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Baimskaya is regarded by some minority investors as one of the mining industry’s most exciting underdeveloped copper prospects even though its estimated capital expenditure has increased to roughly $8bn. 

As the world shifts to cleaner forms of power an increasing amount of copper will be needed to wire the electrification of the global economy.

Analysts at Barclays said that while the revised offer came close to matching the share price performance of Antofagasta, another London-listed copper miner, it fell short of others.

“Shareholders are in our view more focused on what the share price could be if the business were managed in the interests of shareholder value maximisation, for example by selling Baimskaya to Nova Resources and turning Kaz into a significantly free cash flow generative yield stock without Russian risk.”