Billionaire hires Credit Suisse to list 'cursed' Kazakhstan gold mine

After failure of deal to create a national champion, Robert Friedland sets sights on exploiting the high gold price to raise $200m
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The Independent Online


Robert Friedland, the Canadian billionaire, has appointed three banks led by Credit Suisse to organise a London and Toronto float for a Kazakhstan gold mine known in the City as "the curse" in London and Toronto.

The initial public offering valuing the Bakyrchik mine at $1bn-plus is welcome news for the Kazakh government following the failure on Friday of two of the country's biggest miners to agree a deal that would have created a national champion. The deal collapsed when Kazakhmys rejected a £7bn offer from fellow FTSE-100 miner Eurasian Natural Resources Corporation (ENRC), branding it "derisory".

Mr Friedland is determined to take advantage of the soaring gold price – nearing $900 (£461) an ounce last week – and his company, Ivanhoe Mines, wants to raise at least $200m by listing the east Kazakhstan mine in both Canada and the UK. This would represent 20 per cent of the company, diluting the shareholdings of Ivanhoe and its three Kazakh private sector partners.

Credit Suisse has been joined by Bank of Montreal and Canaccord Adams to organise the listing for the third quarter of this year. Mr Friedland had previously approached HSBC, CIBC World Markets and Morgan Stanley, but at least one of the banks was concerned by Bakyr-chik's long history of problems.

Mr Friedland has owned Bakyrchik, which is the main asset of a joint venture called Altynalmas, since 1996 when he risked $65m on its potential. Bakyrchik's nickname emerged as chemical difficulties caused Ivanhoe to struggle to extract the eight million to 14million ounces of gold reserves, which a source claimed would make it the largest gold mine to emerge from a former Soviet Union state.

However, a source close to the listing process said: "The high extraction costs have been made viable by the increase in the gold price. Also, developments in technology will allow Ivanhoe to extract the gold safely."

Mr Friedland also owns a neighbouring mine, known as Bolshevik, that the source said could be almost as big as Bakyrchik. The source added: "Robert has been rewarded for his perseverance, patience and the increase in the price of gold. We have targeted the third quarter to get it listed, but Bakyrchik will definitely float before the end of the year."

But a leading mining banker said Ivanhoe would have to prove the gold was of good quality, as it is encased by chemicals that can damage the precious metal. "Good luck getting it out – the problem is going to be the quality of the ore."

ENRC offered £15.50 a share for Kazakhmys ahead of this Friday's "put up or shut up" deadline imposed by the Takeover Panel. This was well below Kazakhmys' £17.86 close on Friday and UBS's £19 target price.

A source close to Kazakhmys said the tie-up was inevitable by 2013 as the company's copper, zinc and gold operations would fit with ENRC's chrome, iron ore and aluminium assets. How-ever, he said the timing was not right, despite the Kazakh government's wish for a deal to be completed, as ENRC and Kazakhmys were fighting over which would be the dominant partner.

The source added: "There's no doubt this will be one company within five years – the trend is for miners to have diversified portfolios and the government wants a national champion.

"The politics is, who ends up on top. ENRC was keeping face by putting in an offer. It wasn't a completely rational offer but it was important to put in a bid to keep the Kazakh president happy. But the offer did feel like a Borat-type move."

An ENRC source confirmed the bid was made only because the miner "felt compelled to do so", and the low price reflected the fact that it "couldn't get close" to the level Kazakhmys would have accepted.

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