ENRC.L Regulatory News (ENRC)

8 August 2013

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

The text of this announcement will form part of the response document (the "Response Document") to be issued by ENRC in accordance with Rule 25 of the City Code on Takeovers and Mergers (the "Takeover Code"). It is anticipated that the Response Document will be issued on or around 14 August 2013 (but, in any event, will, save with the consent of the Panel on Takeovers and Mergers (the "Panel") be issued no later than 21 August 2013). Further information regarding the Board of ENRC's views on the effect of the Offer on ENRC's interests will be set out in the Response Document. ENRC shareholders should read the Response Document before taking any action in relation to the Offer.

Certain definitions and terms used but not otherwise defined in this announcement are set out in Appendix 1. The bases and sources for certain financial information contained in this announcement are set out in Appendix 2.

Response of the Independent Committee of the Board ofEurasian Natural Resources Corporation plc ("ENRC" or the "Company")to the Offer for ENRCby Eurasian Resources Group B.V. (the "Offeror")

Introduction

On 19 April 2013, Mr. Alexander Machkevitch, a founding shareholder of ENRC, announced that he was reviewing a number of potential opportunities which included the possibility of forming a consortium to make an offer for the Company. The announcement triggered an initial 28 day deadline being 5pm on 17 May 2013 (the "PUSU Deadline"), by which time Mr. Machkevitch or such consortium would need to either announce a firm intention to make an offer for ENRC in accordance with Rule 2.7 of the Takeover Code or announce that there was no intention to make an offer for ENRC.

Following the above announcement, the Board of ENRC formed a committee of independent non-executive directors (the "Independent Committee") to consider the terms and conditions of any proposal that might be forthcoming and the alternatives available to the Company, and to provide its views to the Company's independent shareholders.

Through correspondence on 13 and 16 May 2013, the Independent Committee received a conditional, indicative proposal (the "Initial Proposal") from a consortium consisting of Mr. Patokh Chodiev, Mr. Alijan Ibragimov, Mr. Alexander Machkevitch, the State Property and Privatisation Committee and Samruk-Kazyna (together, the "Consortium")[1], who, as at the date of the Offer Document, together held a majority of the issued ENRC Shares, representing approximately 53.9 per cent of the existing issued share capital of ENRC[2]. The Initial Proposal envisaged an offer comprising 175 pence per share in cash and 0.231 of an existing Kazakhmys Share for each ENRC Share not already held by the Consortium. At the time the Initial Proposal was presented, it referenced a Kazakhmys share price as at 13 May 2013 of 370 pence per share, which together with the 175 pence per share in cash represented a total price of 260 pence per ENRC Share.

The Consortium indicated that it had been working to formulate a proposal and its intention was to implement the potential offer by way of a Scheme of Arrangement under Part 26 of the Companies Act 2006 (a "Scheme"), rather than by contractual takeover offer[3]. The Consortium expressed its wish to secure a recommendation by the Independent Committee. However, in order to be in a position to make a formal Rule 2.7 offer, the Consortium still needed, among other things, to complete limited confirmatory due diligence and finalise its financing arrangements. Consequently, the Consortium sought the Independent Committee's assistance in obtaining an extension of 28 days to the PUSU Deadline.

Although the Independent Committee was of the opinion that the Initial Proposal materially undervalued ENRC, after careful consideration and consultation with a number of significant minority shareholders, including Kazakhmys, the Independent Committee requested the Panel to extend the PUSU Deadline by 17 days to 3 June 2013. This request was made so as to allow the Consortium sufficient time to submit a revised and formal proposal that would be capable of being recommended by the Independent Committee to ENRC's minority shareholders. Given the Consortium's desire for a recommendation and stated preference to implement the Initial Proposal by way of a Scheme, the Independent Committee stated, in no uncertain terms, its view that the Initial Proposal materially undervalued the Company and that it expected the Consortium to revert with an improved proposal.

On 31 May 2013, the Independent Committee received a further request from the Consortium for the Independent Committee's support in seeking the Panel's consent for a further extension of the PUSU Deadline in order to finalise their preparations and to obtain certain necessary approvals. Following further shareholder consultation and having obtained written assurances from the Consortium that the additional time was required to secure the necessary approvals to be in a position to make a formal offer for ENRC under Rule 2.7 of the Takeover Code by 24 June 2013, the Independent Committee sought a further extension from the Panel (to 24 June 2013).

In agreeing to support the extension, the Independent Committee took into consideration Relevant ENRC Shareholder requests for the opportunity to consider the merits of an offer from the Consortium. However, the Independent Committee informed the Consortium that it expected any offer, if made, to be on materially improved terms relative to the Initial Proposal. The Independent Committee reiterated, through the parties' respective financial advisers, its view to the Consortium that the Initial Proposal materially undervalued ENRC, which the Consortium's financial advisers confirmed they understood and would have regard to.

The purpose of this announcement is to set out the views of the Independent Committee in relation to the Offer. The text of this announcement will also form part of the Response Document to be issued by ENRC in accordance with Rule 25 of the Takeover Code. It is anticipated that the Response Document will be issued on or around 14 August 2013 (but, in any event, will, save with the consent of the Panel, be issued no later than 21 August 2013). Further information regarding the Board of ENRC's views on the effect of the Offer on ENRC's interests will be set out in the Response Document. ENRC shareholders should read the Response Document before taking any action in relation to the Offer.

The Offer

On 24 June 2013, the Offeror, a newly incorporated company formed at the direction of the Consortium announced the terms of an offer to be made by the Offeror to acquire all of the issued and to be issued share capital of ENRC (other than the c.53.9 per cent of issued ENRC Shares already held by the Offeror). The Offeror is wholly owned by a newly incorporated Luxembourg company, Eurasian Resources Group ("Holdco"). Of the shares in Holdco, the State Property and Privatisation Committee holds approximately 40 per cent, Mr. Alexander Machkevitch indirectly holds approximately 20.7 per cent, Mr. Alijan Ibragimov indirectly holds approximately 20.7 per cent and Mr. Patokh Chodiev indirectly holds approximately 18.6 per cent.

Under the terms of the Offer, Relevant ENRC Shareholders would receive US$2.65 in cash and 0.230 Kazakhmys Consideration Shares for each ENRC Share. The Offer values ENRC at 228.0 pence per ENRC Share based on the Closing Price of Kazakhmys on 7 August 2013 (being the latest practicable date prior to the release of this announcement). This represents:

• a discount of 28.8 per cent to the intra-day volume weighted average price of 320.1 pence per ENRC Share for the three months ended 18 April 2013 (being the last Business Day prior to the commencement of the Offer Period);

• a discount of 12.5 per cent to the intra-day volume weighted average price of 260.5 pence per ENRC Share for the one month ended 18 April 2013;

• a marginal discount to the Closing Price of 229.8 pence per ENRC Share on 18 April 2013; and

• a marginal increase to the Closing Price of 219.3 pence per ENRC Share on 7 August 2013 (being the latest practicable date prior to the release of this announcement).

The Independent Committee is disappointed that the Offer does not represent an improvement on the Initial Proposal and by the Consortium's apparent disregard of the Independent Committee's stated expectation of a materially increased Offer. Indeed, as a result of the decrease in the Kazakhmys share price, the final offer price is less than the Initial Proposal (228 pence vs. 260 pence originally proposed on 16 May 2013).

The Offeror has proceeded with a contractual takeover offer directly to Relevant ENRC Shareholders, rather than a Scheme supported by the Independent Committee (on the basis, the Independent Committee assumes, that the Offer would not be capable of being recommended by the Independent Committee).

Kazakhmys

Kazakhmys is the holding company of the Kazakhmys Group, whose principal activities are the production of copper and other metals as by-products, including gold, zinc and silver, and power generation. Kazakhmys Shares are listed in London, Hong Kong and Kazakhstan. For further details in relation to Kazakhmys, see page 12 of the Offer Document.

As at 5 August 2013, the shareholders in Kazakhmys included: (i) the Offeror, which held approximately 26.6[4] per cent of the existing voting share capital of Kazakhmys; and (ii) Vladimir Kim, Oleg Novachuk and Eduard Ogay, who are directors of Kazakhmys, and held approximately 28.5 per cent, 6.7 per cent and 0.7 per cent respectively of the existing voting share capital of Kazakhmys. The remaining shares in Kazakhmys are in public hands. The Kazakhmys Shares held by the Offeror will constitute the Kazakhmys Consideration Shares that will form part of the consideration payable to Relevant ENRC Shareholders under the terms of the Offer.

The Kazakhmys Group beneficially owns approximately 26 per cent of the existing issued share capital of ENRC. The Offeror obtained an irrevocable undertaking from the Kazakhmys Group (the "Kazakhmys Irrevocable") to accept the Offer in respect of such ENRC Shares conditional upon: (i) the granting of the Rule 9 Waiver by the Panel, and (ii) the passing of the Kazakhmys Resolutions at the Kazakhmys General Meeting. At the Kazakhmys General Meeting held on 2 August 2013, all Kazakhmys Resolutions were duly passed with the requisite majorities. The Rule 9 Waiver has also been granted by the Panel. Accordingly, the Kazakhmys Group is obliged to accept the Offer by the earlier of: (i) the fourth business day (as defined in the Takeover Code) after receipt of a written request by the Offeror to do so; and (ii) the 60th day after the date of the Offer Document (or such later time and date as may be agreed with the Panel to be the last time and date for fulfilment of the acceptance condition to the Offer). Upon the Kazakhmys Group validly accepting the Offer, the Offer will become unconditional as to acceptances (but will remain subject to the other conditions set out in the Offer Document).

Following receipt of the Initial Proposal, the Independent Committee and its advisers had several meetings with Kazakhmys at which it was made clear that the Independent Committee believed that the Initial Proposal materially undervalued ENRC. Whilst the board of Kazakhmys acknowledged that the Offer does not reflect the full fundamental value of ENRC, it nevertheless decided to support the Offer and has made a number of statements explaining its position including that:

·; the Offer may undervalue ENRC and its assets but after seeking to engage with the Consortium and its constituent members, Kazakhmys concluded that there is no prospect of obtaining improved terms;

·; it considers the prospects of realising greater value from ENRC in the short to medium term to be remote and the risks of further erosion in value to be considerable;

·; it believes the Offer is the best alternative open to Kazakhmys and other ENRC minority shareholders; and

·; the Offer provides Kazakhmys with an opportunity to end its association with ENRC and will increase the size of the free float in Kazakhmys to up to approximately 58 per cent of the voting share capital of Kazakhmys.

Independent Committee's views in relation to the Offer

1. The Independent Committee considers that the Offer materially undervalues ENRC. In providing its views on value, the Independent Committee has been so advised by Credit Suisse and Lazard, who have taken into account the commercial assessments of the Board of ENRC. For the purposes of providing their advice to the Independent Committee, each of Credit Suisse and Lazard has undertaken a separate valuation exercise for the Independent Committee in respect of ENRC, in doing so, each took into account: a variety of valuation methodologies customary for a company such as ENRC; detailed analysis and information produced and provided by ENRC; as well as commercial assessments of the Board of ENRC.

2. The Offeror has stated an intention to focus on ENRC's business in Kazakhstan and to undertake a strategic review of ENRC's international assets, which may ultimately lead to asset sales that could potentially generate additional value. The Independent Committee believes that, under certain circumstances, asset sales could potentially generate additional returns to shareholders of ENRC, the benefit of which is not reflected within the Offer and will not accrue to Relevant ENRC Shareholders who accept the Offer.

3. A significant proportion of the consideration offered to Relevant ENRC Shareholders in the Offer is comprised of Kazakhmys Consideration Shares, the value of which may increase or decrease. Relevant ENRC Shareholders should assess the value of the Kazakhmys Consideration Shares in accordance with their own individual investment requirements and objectives. Certain Relevant ENRC Shareholders may not wish to hold such shares.

4. As the cash portion of the consideration will be denominated in US dollars, Relevant ENRC Shareholders will be subject to movements in the US dollar / GBP sterling exchange rate.

Nevertheless, there may be reasons for Relevant ENRC Shareholders to seriously consider the Offer despite the Offer materially undervaluing ENRC. These are outlined below:

1. As the Kazakhmys Group is now obliged to accept the Offer in accordance with the terms of the Kazakhmys Irrevocable, subject to satisfaction or waiver of the remaining conditions to the Offer, the Offeror will hold over 75 per cent of the voting rights in ENRC and will, therefore, exercise effective control over ENRC (including the ability to block special and ordinary resolutions, for example to pay dividends, and to propose and pass resolutions to dismiss and/or appoint directors to the Board of ENRC).

2. The Offeror has stated that ENRC's trading on the London Stock Exchange's market for listed securities and listing on the Official List (together "ENRC's Listing") will be cancelled after the Offer becomes or is declared unconditional in all respects and the Offeror has obtained 75 per cent of the voting rights of ENRC.  If ENRC's Listing is cancelled, Relevant ENRC Shareholders who have not accepted the Offer will own shares in an unlisted company and, as minority shareholders, would not be afforded the same level of protection as was afforded to them whilst ENRC remained a listed public company. Consequently, the liquidity, marketability and value of the ENRC Shares could be adversely affected and Relevant ENRC Shareholders' ability to dispose of their ENRC Shares is likely to be materially reduced.

3. If the Offer is accepted by more than 90 per cent of the Relevant ENRC Shareholders, the outstanding minority shareholders would usually expect, pursuant to the provisions of Part 28 of the Companies Act 2006, to have their ENRC Shares compulsorily acquired by the Offeror or be able to require the Offeror to acquire their ENRC Shares on the same terms as the Offer. The Offeror has indicated in the Offer Document that the compulsory acquisition procedure is not available on the basis of the terms of the Offer. Accordingly, minority shareholders who wish to dispose of their ENRC Shares and receive the consideration provided for under the Offer, must accept the Offer before it closes for acceptance.

4. The Independent Committee has explored the possibility of generating viable alternatives to the Offer that would realise additional value for ENRC Shareholders, including a sale of the ENRC group as a whole and sales of certain assets. However, no viable alternatives have been identified. Further, such alternative transactions would almost certainly require the approval of a majority of shareholders of ENRC and there is no certainty that the Consortium (which, through the Offeror and Holdco, holds the majority of the ENRC Shares) would support any such proposal even if it were to be recommended by the Board of ENRC.

5. Although the Offeror has not stated that the Offer is final, the Independent Committee believes there is no prospect of persuading the Offeror to improve the terms of the Offer.

Other considerations

ENRC is subject to on-going investigations by the Serious Fraud Office into allegations of fraud, bribery and corruption in connection with its businesses in Kazakhstan and Africa. ENRC is assisting and cooperating fully with the Serious Fraud Office and is committed to a full and transparent investigation of ENRC's procedures and conduct. The related negative media coverage, negative perception by the general public, industry and regulators, high staff turnover and risk that the Company might be subject to fines, has, among other things, had and is likely to continue to have an adverse effect on the value of ENRC Shares in the near and medium term.

The current level of borrowing within the ENRC group, and the future repayment dates of certain maturing debt facilities could put limitations on the Company's liquidity and ability to raise additional indebtedness. ENRC's credit ratings were recently downgraded to B with Standard & Poor's and B1 with Moody's, with both ratings on a negative outlook. Such credit ratings may restrict ENRC's access to future sources of debt and raise its cost of capital, which consequently could limit the Company's ability to meet its investment and refinancing requirements in order to realise the full potential value of its assets.

Conclusion

The Independent Committee believes that the Offer materially undervalues ENRC and is, therefore, not capable of recommendation by the Independent Committee based on its value. In providing its views, the Independent Committee has been so advised by Credit Suisse and Lazard who have taken into account the commercial assessments of the Board of ENRC.

ENRC shareholders who anticipate greater value in the ENRC Shares whilst recognising and being willing to accept the risks associated with remaining as an investor in an unlisted company controlled by the Consortium may wish to remain as shareholders in ENRC. However, given the risks and uncertainties outlined above, the Independent Committee has concluded that Relevant ENRC Shareholders should seriously consider the Offer despite the Independent Committee's firm view that it materially undervalues ENRC.

Other Matters

The following Non-Executive Directors and members of the Independent Committee of ENRC: Mohsen Khalil, Gerhard Ammann, Terence Wilkinson, Richard Burrows and Roderick Thomson intend to resign as ENRC Directors upon the Offer becoming wholly unconditional in all respects and subsequently closing.

Gerhard Ammann, who beneficially holds 22,222 ENRC Shares representing 0.002 per cent of ENRC's issued ordinary share capital, intends to accept the Offer in light of the circumstances set out above. No other members of the Independent Committee hold ENRC Shares.

Further information regarding the Board of ENRC's views on the effect of the Offer and the Offeror's plans will be set out in the Response Document.

For further information please contact:

Carole Cable / Jonathan Glass / Pip Green

Brunswick Group

+44 (0)20 7404 5959

Mark Echlin / Stuart Upcraft / Joe Hannon / Lewis Burnett

Credit Suisse Securities (Europe) Limited

+44 (0)20 7888 8888

Spiro Youakim / Chris Seherr-Thoss / Eugene Schreider

Lazard & Co., Limited

+44 (0)20 7187 2000

Important Information

This announcement has been released by the Company on behalf of the Independent Committee. It is for information purposes only, and is not intended to and does not constitute, or form part of, an offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction.

If you are in any doubt about the Offer or the contents of this announcement or what action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser duly authorised under the Financial Services and Markets Act 2000 if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser in the relevant jurisdiction.

The Independent Committee Directors each accept responsibility for the information contained in this announcement, save that the sole responsibility accepted by the Independent Committee Directors in respect of the information relating to the Consortium, the Bidco Group, the Kazakhmys Group, and any connected persons of and any persons acting in concert with any of the foregoing (which has been compiled from public sources), has been to ensure that such information has been correctly compiled from published sources and is fairly reproduced and presented. Subject as aforesaid, to the best of the knowledge and belief of the Independent Committee Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information. The Independent Committee Directors accept responsibility accordingly.

Credit Suisse Securities (Europe) Limited, which is authorised and regulated in the UK by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting exclusively as financial adviser to the Independent Committee and no one else in connection with the matters described in this announcement, and will not be responsible for anyone other than the Independent Committee for providing the protections afforded to clients of Credit Suisse Securities (Europe) Limited nor for providing advice in relation to the matters referred to in this announcement. Neither Credit Suisse Securities (Europe) Limited nor any of its subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Credit Suisse Securities (Europe) Limited in connection with this announcement, any statement contained herein or otherwise.

Lazard & Co., Limited, which is authorised and regulated in the UK by the Financial Conduct Authority in the United Kingdom, is acting exclusively as financial adviser to the Independent Committee and no one else in connection with the matters described in this announcement, and will not be responsible for anyone other than the Independent Committee for providing the protections afforded to clients of Lazard & Co., Limited nor for providing advice in relation to the matters referred to in this announcement. Neither Lazard & Co., Limited nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard & Co., Limited in connection with this announcement, any statement contained herein or otherwise.

Overseas Shareholders

The distribution of this announcement into jurisdictions other than the United Kingdom may be restricted by law and therefore persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws of such jurisdictions.

Forward Looking Statements

This announcement (including information incorporated by reference in this announcement), oral statements made regarding the Offer and other information published by ENRC contain statements that are or may be forward-looking with respect to the financial condition and/or results of operations and businesses of ENRC. These statements can be identified by the use of forward-looking terminology such as "believe", "expects", "project", "estimated", "forecast", "should", "plan", "may" or the negative of any of these, or other variations thereof, or comparable terminology indicating expectations or beliefs concerning future events. These forward-looking statements include risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors which could or may cause actual results or developments to differ materially from those expressed or implied by such forward-looking statements. Save as required by applicable law, neither the Company nor any other person assumes any obligation to update these forward-looking statements or to notify any person of any such update.

Profit Forecast and Rounding

Nothing contained in this announcement shall be deemed to be or is intended to be a forecast, projection or estimate of the future financial performance of the ENRC group unless otherwise stated.

Certain figures included in this announcement have been subjected to rounding adjustments.

Website

A copy of this announcement is and will be available free of charge, subject to certain restrictions relating to persons in any jurisdiction where release, publication or distribution of this announcement would constitute a violation of the securities law of such jurisdiction, for inspection on ENRC's website at www.enrc.com while the Offer remains open for acceptance.

Further Information

For further details of the bases of calculation and sources of information of the numbers set out in this announcement please refer to the section entitled "Sources of information and bases of calculation" in Appendix 2 of this announcement.

Appendix 1

Definitions

The following definitions apply throughout this announcement unless the context otherwise requires:

All times referred to are London time unless otherwise stated.

All references to "GBP", "pence", "sterling" or "£" are to the lawful currency of the United Kingdom.

All references to "US dollar", "USD", "US$" or "$" are to the lawful currency of the United States.

All references to statutory provision or law or to any order or regulation shall be construed as a reference to that provision, law, order or regulation as extended, modified, replaced or re-enacted from time to time and all statutory instruments, regulations and orders from time to time made thereunder or deriving validity therefrom.

Appendix 2

Sources of information and bases of calculation

Unless otherwise stated in this announcement:

·; the fully diluted share capital of ENRC is 1,296,744,760 ENRC Shares and is based on the existing issued share capital of ENRC of 1,287,750,000 ENRC Shares and 8,994,760 ENRC Shares subject to options and awards under the ENRC Deferred Share Plan and ENRC Long Term Incentive Plan, in each case as at 5 August 2013, being the latest practicable date prior to the publication of the formal Offer document dated 7 August 2013;

·; the number of Kazakhmys Consideration Shares to which Relevant ENRC Shareholders are entitled under the Offer, expressed as 0.230 Kazakhmys Consideration Shares for each ENRC Share, has been rounded for presentational purposes, and should be construed as being 0.230093868923753 Kazakhmys Consideration Shares for each ENRC Share, calculated on the basis of 139,162,843 Kazakhmys Shares held by the Offeror divided by 604,809,001 ENRC Shares (based on the figure stated in the Offeror's Rule 2.7 Announcement of a firm intention to make a formal Offer for ENRC, dated 24 June 2013);

·; the existing voting share capital of Kazakhmys is based on 523,718,350 Kazakhmys Shares in issue (excluding treasury shares) as at 5 August 2013, being the latest practicable date prior to the publication of the formal Offer document dated 7 August 2013;

·; the International Securities Identification Number for ENRC Shares is GB00B29BCK10;

·; ENRC and Kazakhmys share prices have been derived from the Daily Official List and represent the Closing Prices on the relevant date;

·; The Offer value of 228.0 pence per ENRC Share is calculated as the summation of $2.65 payable in cash, converted to GBP using the USD / GBP exchange rate of 1.5503 and 0.230 Kazakhmys Consideration Shares at the Kazakhmys Closing Price of 247.9 pence on 7 August 2013 (being the latest practicable date prior to this announcement);

·; The GBP to USD exchange rate is the closing USD / GBP on 7 August 2013 as quoted by Bloomberg (function: GBPUSD CMPL Curncy);

·; References to volume-weighted average prices are derived from data provided by FactSet;

·; References to a percentage of ENRC Shares are based on the number of ENRC Shares in issue as set out above; and

·; Information relating to the Consortium, the Bidco Group, the Kazakhmys Group, and any connected persons of and any persons acting in concert with any of the foregoing (including shareholding data in relation thereto) has been extracted from the Offer Document or other published sources.

Calculation of Offer value

The calculation of the value of the Offer, as at market close on 7 August 2013, is derived below: