Miner sees red over corruption probe leak
ENRC chairman Mehmet Dalman has bemoaned the ‘enormous damage’ done to the company by the leaking of confidential data about an internal corruption probe.
He spoke as the Kazakhstanfocused miner fell £364m into the red, reversing last year’s £1.8bn profit, after taking £1bn in writedowns and suffering an 18pc slump in revenue to £4.2bn due to low metal prices.
The result sent ENRC’s stock down 5.8p to 306.9p, just days after the firm was rocked by the surprise leak of an internal investigation into corruption.
Dalman said: ‘It makes me feel dreadful. I wish I knew who it was because I would certainly do something about it.
‘It’s very annoying we have to deal with these noise effects, when some of them are distorting the truth. If we knew who it was and what their motive was, I could do something about it.’
Finance director Zaure Zaurbekova, named in the probe over allegations the company passed lucrative contracts at inflated prices to her family members, declined to comment.
Dalman admitted persistent leaks about the investigation, which has seen ENRC hand over documents to the Serious Fraud Office, were not helping the firm to throw off the governance discount that has weighed on its share price. ENRC’s £1bn of writedowns were largely due to the impact of tumbling prices for commodities such as aluminium, ferroalloys and iron ore, as well as an ‘onerous contract’ with Russian aluminium giant Rusal.
And the charges might not be the end of the impairments, chief executive Felix Vulis warned.
‘Obviously the biggest impact is price fluctuation,’ he said.
‘To be frank, if prices are still volatile we might see something, but we have a pretty good feeling about our commodity portfolio and hopefully we’ll be able to avoid any writedowns in the future.’
Low metals prices, combined with extra spending to developing new sites in Africa and Brazil were also behind the decision to scrap ENRC’s final dividend, said finance chief Zaurbekova.
But she insisted that the interim dividend of 4.3p per share meant the firm had stayed within its guidance on shareholder windfalls, despite a drop from 17.9p per share last year.
ENRC is also exploring ways to increase its free float – the proportion of shares available for trading – from 18pc to 25pc, to meet new rules for blue- chip London-listed companies.
Dalman said ENRC could reach the target either by a rights issue, which City pundits say could be around £ 330m, or through the firm’s major shareholders releasing some of their holdings.
‘It’s all possible,’ he said. ‘We’re very committed to staying in the FTSE and we’re exploring both of those options.’
The miner would also use the proceeds of a fundraising effort to bring down its £3.4bn net debt, after promising that it would move to ‘reduce debt to a more sustainable level’.
Chastened by the disappointing results, ENRC said it would have a ‘sharper focus’ on capital expenditure, focusing on five core projects.
These include the Frontier Mine in the Democratic Republic of Congo, which has been the subject of controversy over allegations it was sold at an artifi- cially low price to middleman investor Dan Gertler. ENRC bought Gertler out in a £363m deal last year, sparking criticism from campaign groups who said the company was benefiting from assets sold at artificially low prices in an opaque process.
Dalman said buying out Gertler had been ‘essential to our aim of enhancing corporate governance’ because it would ‘ ensure enhanced accountability’. ENRC is part- owned by the Kazakh government and donated £42m to help the Central Asian country build an opera house, as well as giving £20m to social projects.