KAZ Minerals considers Baimskoye deposit’s acquisition

Andrey KozhokaruFebruary 21, 2018

On February 16, KAZ Minerals reported that it is considering the acquisition of a majority stake in the Baimskoye gold and copper deposit.

Baimskoye is located in the Chukotka Russian Federation and has resources of 9.5mn tons of copper at an average grade of 0.43% and 16.5mn ounces of gold at an average grade of 0.23 g/t according to the JORC classification. The rights to the asset belong to GDK Baimskaya, which is owned by Roman Abramovich, who is a minority shareholder in Norilsk Nickel. Nornickel is also considering the development of the Baimskoye deposit.

Nornickel's management informed that the amount of required capital investments in the Baimskoye project could exceed 4bn USD. According to Bloomberg, referring to anonymous sources, Abramovich is in talks with KAZ Minerals to sell a majority stake in the deposit for 1bn USD in a cash and stock deal. The same source said that Abramovich is also in talks with Nornickel and the possible value of the transaction is at least 700mn USD.

Our opinion:

At the moment there is no sufficient information about potential project’s parameters to assess the medium-term financial effect of the acquisition. We think that without the specific parameters of the deal the news is neutral for KAZ Minerals shares. We note a considerable geographical distance of the project from current operations of the Company, which may carry additional risks. Given current optimistic expectations for the copper market, the acquisition of a perspective asset has a commercial sense, but the price paid will be the fundamental determinant in the assessment of the deal. We maintain Hold recommendation with 12M TP of 865GBp per share.