It is reported that Eurasian Natural Resources Corporation PLC recently proposed to buy the 75% it doesn't already own of Kazakh thermal-coal producer Shubarkol Komir JSC for up to USD 600 million.

Mr Felix Vulis ENRC Chief Executive said the rationale of this transaction is absolutely clear: continue to maintain or try to acquire the asset that will maintain our low cost profile.

The purchase is expected to be neutral to earnings in the first financial year after closing and will increase ENRC profitability thereafter. Shubarkol produced six million tons of coal in 2010, or 5.4% of Kazakhstan total output. ENRC expects Shubarkol operations will increase ENRC production capacity to more than 25 million tons of coal a year.

Mr Vulis said that ENRC already uses about a million tons of Shubarkol high calorific coal to produce aluminum, iron ore and ferrochrome. Another 3 million to 3.5 million tons are currently sold to customers in Kazakhstan such as Kazakhmys PLC. The remaining coal will be exported.

He added that ENRC is also planning to use Shubarkol coal to produce a synthetic gas that could be used to substitute potentially more expensive heavy oil use.

In a bid to reassure the company minority shareholders, Mr Vulis said two fairness opinions were secured one from Credit Suisse on ENRC behalf and another from Lazard & Co on behalf of the company nonexecutive independent board members.

He said the deal is subject to approval from ENRC independent shareholders, who will vote on the acquisition on November 7. The company founding shareholders have exempted themselves from the vote.

The company in June launched a corporate-governance review after a boardroom spat concerning the founding shareholders' influence over the board spilled into the public arena. ENRC concluded in September following its review that it would remain committed to an independent board and retain its chief executive.

(Sourced from online.wsj.com)