Fitch affirms KazakhGold

Fitch Ratings said it affirmed KazakhGold Group Ltd.'s foreign-currency issuer default rating and $200 million senior notes due 2013 at B.

The outlook is stable.

The affirmation follows the company's announcement that it plans to acquire from Oxus Gold plc a 100% interest in Norox Mining Co. Ltd.; the remaining 50% in Romaltyne Ltd., KazakhGold's joint venture with Oxus; and some exploration assets in Turkey currently owned by Oxus subsidiary Marakand Minerals Ltd. The total consideration for the acquisitions is about $150 million.

Although the cost of the acquisitions is material, Fitch believes that the purchases are unlikely to have a negative impact on the company's credit profile due to its equity-funded nature. KazakhGold plans to finance the acquisitions through an additional share issue of up to 3,541,666 new shares to Oxus, or 7% of the enlarged share capital.

The agency said it believes that the assets to be acquired are complementary to KazakhGold's core business and operations, but the financial viability of the acquisitions remains to be determined because some of the assets are not yet in operation. In addition, the announcement represents a divergence from KazakhGold's previously stated strategy of organic growth.

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