To the Board of Directors, Kaz Minerals PLC

January 8, 2021

3:00 pm

Dear Board of Directors,

As significant investors in Kaz Minerals, RWC Partners requests that the Board of Directors either accelerate or look to terminate the already lengthy take-over process by Nova Resources in order to protect the interests of minority shareholders. We believe it would be more beneficial for all shareholders if the company were able to focus on being one of the world’s lowest cost, publicly-listed copper miners rather than continuing along the current path of investor discord.

At the time of the offer, Nova Resources’ bid not only significantly undervalued Kaz Minerals’ existing assets but also attributed zero value to its growth projects. It allowed no way for minority investors to participate in the future production growth that has already been funded with cash that could have otherwise been returned to shareholders.

Since the initial announcement of the offer from NOVA Resources, the copper price has increased from $3.06/lb to $3.70/lb and the market values of other listed copper miners have increased by between 50-120%. Copper’s long-term demand prospects continue to grow as the global need to de-carbonise intensifies. Future supply from projects such as Baimskaya will be sorely needed to satisfy this demand growth.

With this in mind, it seems inconceivable that minority shareholders will tender their shares from the current shareprice over £7.00 into the offer price of £6.40. As such, NOVA Resources should recognise that they will be unable to de-list the company and should immediately begin to harmonise relations with minority shareholders and focus on growing the company as a listed entity.

Considering that the process has already been ongoing for more than three months, to the benefit of none other than the offeror, we would therefore call upon the board of directors either to bring forward the vote or terminate the existing take-over process.

Yours sincerely,

Emerging and Frontier Markets team

RWC Partners

Updated comment

3rd February 2021

RWC notes from the Bloomberg news article on 02/02/2021 that Nova Resources is considering an increase in its offer price for KAZ Minerals up to 750 pence per share following discussions with some of the company’s ‘biggest independent shareholders”. RWC can confirm that to date we have had no engagement from Nova Resources or its advisers on this suggested revised price and we continue to believe that the current share price of 750 pence materially undervalues the company. The current offer is far below the 1000 pence level where the stock was trading prior to the announcement of the Baimskaya acquisition and which would be more acceptable for minority shareholders. Given our position has previously been communicated both to the Board and to Nova Resources and their advisors, we find the lack of engagement on this issue surprising and would welcome a discussion with them on this matter.

Updated comment

4th February 2021

RWC notes and appreciates the Board’s and Nova’s efforts to raise the bid price from £6.40 to £7.80. However, as we forecast that Kaz Minerals will generate more than $5.5bln of EBITDA over the next 3 years, it is our opinion that a $5bln (£7.80 per share) offer price still materially undervalues the company. Therefore, based on current circumstances, we do not believe this latest offer price represents good value for minority shareholders. RWC can confirm that to date we have had no engagement from Nova Resources or its advisers on this suggested revised price. The current offer is far below the 1000 pence level where the stock was trading prior to the announcement of the Baimskaya acquisition and which would be more acceptable for minority shareholders. Given our position has previously been communicated both to the Board and to Nova Resources and their advisors, we find the lack of engagement on this issue surprising and would welcome a discussion with them on this matter.
The statements and opinions expressed in this article are those of the author as of the date of publication, and do not necessarily represent the view of RWC Partners Limited. Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested. This article does not constitute investment advice and the names shown above are for illustrative purposes only and should not be construed as a recommendation or advice to buy or sell any security. No investment strategy or risk management technique can guarantee returns or eliminate risks in any market environment.
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