Kazakhstan metals tycoon seeks two Hong Kong IPOs, as stock exchange looks to encourage overseas listings

MM Petroleum and Kazakh Steel, controlled by powerful Assaubayev family, have filed their listing applications
They would be the second and third non-Chinese issuers to list in Hong Kong in 2022, helping to push diversification goal

IPO

Georgina Lee

Published: 8:30am, 26 Jul 2022

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Two commodities firms controlled by the same Kazakhstan oil and mining tycoon have applied for listings in Hong Kong, boosting the stock exchange’s bid to diversify away from Chinese issuers.

Kazakh Steel and MM Petroleum, both controlled 73-year old metals magnate Kanat Assaubayev, filed their preliminary prospectuses in April and June respectively for their initial public offerings (IPOs).

They are among a tiny handful of foreign companies that have sought to raise funds on the city’s bourse this year.

One of the most powerful families in Kazakhstan, the Assaubayevs used to own KazakhGold, the country’s largest gold mining company. They sold it a decade ago.

The listing plans come at a time when exports from neighbouring Russia have been drastically reduced amid sanctions imposed by the US and some European countries in response to its invasion of Ukraine.

Metals tycoon Kanat Assaubayev. Photo: SCMP Pictures

If successful, the two companies will become just the second and third non-Chinese issuers to list in Hong Kong in 2022, helping to push forward Hong Kong Exchanges & Clearing’s goal to diversify new listing business.

Chinese issuers accounted for as much as 90 per cent of the funds raised in the first half of the year. In February, Italian yacht maker Ferretti raised HK$2 billion (US$250 million), becoming the first company from Italy to list in the city for 12 years.

“The shortage in oil supply due to output reduction from Russia should benefit any players who have already built pipelines connecting to other countries,” said Kirk Wong, global market and FX strategist at Everbright Securities in Hong Kong. Russia accounts for 11 per cent of the world’s crude oil production.

With reserves of 30 billion barrels as of 2020, Kazakhstan has the world’s 11th-largest crude oil reserves, accounting for around 1.9 per cent of the world’s total, according to Frost & Sullivan.

MM Petroleum has the exclusive rights to 14 oilfields in the Atyrau region, located in the north of the Caspian Sea. Five of them are under construction, while the remainder are either in test-production or are at an early appraisal stage.

The company plans to use the proceeds to bring the seven oilfields currently under appraisal into full development in the next couple of years, and to build new pipelines, according to its draft prospectus.

Assaubayev’s two sons, Aidar and Sanzhar, are chief executive and chief financial officer respectively, and both are controlling shareholders alongside their father.

The older son, 43-year old Aidar, is also the chief executive of London-listed gold miner AltynGold, which operates in Kazakhstan.

MM Petroleum has hired Southwest Securities as the sole sponsor of the deal.

The company’s average selling price for exports rose to US$65.3 a barrel in 2021 from US$47 in 2020. Its export sales are priced with reference to the Brent crude oil benchmark. Fitch forecasts the Brent crude price will average US$85 a barrel in 2023, down from an average of US$105 a barrel this year.

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In 2020 and 2021, the company’s net losses were US$3.1 million and US$8.3 million respectively.

Also controlled by the Assaubayev family, Kazakh Steel is engaged in iron ore exploration at a project in western Kazakhstan.

The company aims to bring the central part of the iron ore project, with about 337 million tonnes available for extraction, into commercial production in 2026. Its Hong Kong IPO is intended to fund the US$485.6 million total investment needed.

For the whole of 2021, Kazakh Steel made a net loss of US$1.2 million, wider than its loss of US$185,000 the previous year, because the project was still in its exploration and development stage.

“We are still in an early stage of development and cannot guarantee that we will be able to generate revenue at a profit and grow our business as planned,” it said in the draft prospectus. TC Capital is the sole sponsor for the deal.