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Aug. 2, 2018, 5:48 a.m. EDT

KAZ Mineral shares fall on Russian copper deal

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By Adam Clark

Shares in KAZ Minerals PLC (KAZ.LN) fell Thursday after the company said it will buy the Baimskaya copper project in Russia for $900 million from Aristus Holdings Ltd., a company partly owned by Russian billionaires Roman Abramovich and Alexander Abramov.

KAZ said it will pay an initial $675 million for a 75% stake in Baimskaya, located in the Chukotka region in the far east of Russia. The first payment will consist of $436 million in cash, and 22.3 million new KAZ shares, valued at $239 million.

Deferred consideration of $225 million in cash or shares for the remaining 25% interest will be paid either on the achievement of commercial production, or March 31, 2029, according to KAZ.

KAZ said Baimskaya is one of the world's most significant undeveloped copper assets, with resources of 9.5 million tons of copper, and 16.5 million ounces of gold. The company forecasts average annual production of 250,000 copper tons and 400,000 gold ounces over the first ten years of operations.

The capital expenditure required to develop the mine is estimated at $5.5 billion said KAZ, which said it will finalize the development strategy and financing during a feasibility study. KAZ said Aristus won't contribute to the development spending, but has a "strong incentive" to assist the delivery of the project due to the deferred consideration. Mr. Abramov, one of Aristus's owners, is chairman of London-listed steel producer Evraz PLC (EVR.LN).

Shares at 0805 GMT were down 111.20 pence, or 14%, at 708.60 pence.

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