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Kazakhstan Plans IPO of World’s Largest Uranium Miner

ASTANA, Kazakhstan—Kazakhstan plans to sell at least 25% of the world’s largest uranium miner this year, the centerpiece of an effort to open up the economy of the former Soviet republic sandwiched between China and Russia.

The government has hired Wall Street banks, including JPMorgan Chase & Co., to offer shares in state-owned KazAtomProm in London or Hong Kong, the head of the mining firm’s holding company, Akhmetzhan Esimov, said in an interview.

The privatization of KazAtom, which supplies about 40% of global uranium demand from the frigid Central Asian steppe, would be a major milestone for the economy of this landlocked country of 18 million people where the desire for political control has often trumped the need for private investment. It would also be closely watched in neighboring China, which will need more uranium to support the world’s fastest-growing nuclear power industry.

“We want our companies to go public,” said Mr. Esimov. “This is a priority.”

The privatization of KazAtom would also shake up the concentrated uranium industry, potentially altering the market’s status quo of prioritizing prices over output levels, said Justin Chan, a mining analyst at Numis Securities in London. “The strategic outlook of private shareholders may not always align with the state,” he said.

Kazakhstan, which became independent from the Soviet Union in 1991, has since been ruled by the former Communist apparatchik Nursultan Nazarbayev, who has maintained a close alliance with Russia. In recent years, Mr. Nazarbayev has also sought closer ties with China to exploit its economic growth and provide a geopolitical counterweight to the Kremlin.

The Kazakh government has touted KazAtom’s privatization for years, but delayed it repeatedly because of poor market conditions or energy security concerns. Mr. Nazarbayev decided in April to list the miner in the second half of this year, Mr. Esimov said. The ministers of economy and finance have confirmed the IPO’s schedule and details in separate interviews on the sidelines of Astana’s annual economic summit.

“This has received final approval,” said Mr. Esimov, who runs Kazakh state holding company Samruk Kazyna, which owns KazAtom. “Everyone in the elite understands this has to be done” to make the country more competitive.

Mr. Esimov said he traveled to China this month to follow-up on strong interest in the KazAtom IPO from the country’s investors. Next week he will present the privatization plans to investors in Russia.

Kazakh officials have been coy about estimating the value of the sale, saying the exact timing and size has yet to be decided. But based on KazAtom’s last financial figures and the premium paid by investors on the country’s other recently privatized companies, a 25% stake in the uranium producer could be worth about $3.5 billion, making it one of the biggest industrial IPOs this year. This would represent 13% of the country’s entire budget for this year.

JPMorgan declined to comment on its involvement in the IPO.

Officials hope the listing of KazAtom, the country’s second-biggest conglomerate employing 27,000 people, will be the opening salvo of the biggest wave of privatization in the former Soviet Union since the 1990s. This year the government also plans to sell stakes in national airline Air Astana and phone operator KazakhTelecom, four top Astana officials said separately. Up to sixty other big state companies will follow suit by 2021, including the nation’s biggest firm, oil producer KazMunayGas, the officials added.

Kazakhstan’s economic liberalization plans buck a trend of growing protectionism from the U.S. to Russia.

“We don’t believe that protectionism is good,” said Economy Minister Timur Suleimenov. “You can’t shield yourself from the world.”

Still, Kazakhstan’s privatization drive faces many hurdles. One issue has been Mr. Nazarbayev’s insistence that big state companies are first listed on the yet-to-launch Astana Stock Exchange to boost local capital markets, before selling shares abroad. In private, many officials are skeptical that the stock market—set to launch in July—will have liquidity to support big companies like KazAtom, let alone a share of $38 billion behemoth KazMunayGas.

Some in Kazakhstan are also concerned that selling strategic industries like uranium to Chinese or other foreign investors would reduce Kazakhstan’s diplomatic bargaining power in the region.

Source: The Wall Street Journal