12 Jul 2010 08:51
FOR IMMEDIATE RELEASE
12 July 2010
KazakhGold Group Limited
Kazakhstan Regulatory Actions
As previously announced, KazakhGold Group Limited ("KazakhGold" or the "Company") and Jenington International Inc. ("Jenington"), a subsidiary of OJSC Polyus Gold ("Polyus Gold"), have commenced legal proceedings against five members of the Assaubayev family who were former directors of KazakhGold, Gold Lion Holdings Limited (the company holding the Assaubayev family interests) and Hawkinson Capital Inc., alleging, among other things, that the former director defendants misappropriated funds intended for capital expenditures through sham contracts entered into by KazakhGold's operating subsidiary. The claimants also allege that the former director defendants misrepresented production and sales revenue in 2006-2008 and the amount of capital expenditures made by KazakhGold in KazakhGold's public disclosures and other disclosures relied upon by Jenington in making the Partial Offer. Details of the allegations made by the Company and Jenington have been provided to the relevant authorities in Kazakhstan.
Following these steps, KazakhGold's subsidiaries in Kazakhstan have now received a letter from the Ministry of Industry and New Technologies of the Republic of Kazakhstan indicating that the prior decisions of the competent authorities in Kazakhstan relating to the waivers of the state's pre-emptive right to acquire KazakhGold securities had been annulled. The decision appears to be based on the waiver obtained by the former directors of KazakhGold for the partial offer by Jenington, which was completed in August 2009, but also covers the waiver subsequently obtained in June 2010 for the proposed business combination between Polyus Gold and KazakhGold announced on 30 June 2010 and the US$ 100 million equity placing completed by KazakhGold on 1 July 2010. The letter requests information on the value of the share acquisition transactions from KazakhGold. KazakhGold intends to provide all available information requested by the Kazakhstan Government.
Commenting on the regulatory actions, Evgeny Ivanov, Chairman of the Board of Directors and Chief Executive Officer of KazakhGold and General Director of Polyus Gold, said, "We note that the decision of the Kazakh authorities to review the actions taken by the former directors of KazakhGold follows commencement of the proceedings by KazakhGold against them, which we have duly informed the Kazakh authorities of. We welcome the readiness of the relevant Kazakhstan authorities and ministries to investigate the activities of former management. We believe that prompt resolution of these matters in accordance with applicable laws will enhance Kazakhstan's status as an attractive country for foreign investment, as well as help KazakhGold achieve its goal of reaching an annual production of 500 thousand troy ounces of gold by 2016. KazakhGold is committed to reinvesting any funds recovered by it in these proceedings in gold production and exploration activities in Kazakhstan. In addition, KazakhGold intends to repay the Kazakh Government (through funds provided by Polyus Gold, if required) for VAT that it believes had been improperly reimbursed in connection with the sham contacts identified by it. These VAT repayments, which have previously been reflected in the Company's unaudited restated financial statements for the year ended 2008 contained in its audited 2009 financial statements, are expected to amount to approximately $25 million. The Company also intends to seek reimbursement of its damages from the defendants."
Enquiries:
Alexey V. Chernushkin, Director, CM and IR
Evguenia V.Buydina, IR manager
+44 (0) 208 528 1450
+44 (0) 208 528 1020
ir@kazakhgold.com
Anton A. Arens, PR Director
+44 (0) 208 528 1450
+44 (0) 208 528 1020
anton.arens@kazakhgold.com