ENRC shares a 'no-go' over governance

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City analysts warned that the Eurasian Natural Resources Corporation (ENRC) had become a "no-go" for investors worried about corporate governance issues yesterday as the Kazakh miner sought to reassure the market by saying that its widely-watched boardroom review was "well under way".

The group said the results of a three-month review, announced in June alongside the departure of four non-executive directors, including the City grandee Sir Richard Sykes, would be out in mid-September.

ENRC also expressed confidence that the exercise would result in a "properly constituted board, which will encompass the interests of all stakeholders".

But Collins Stewart analysts said: "Given the recent issues this seems to be a highly optimistic statement and is likely to be sceptically received by investors." The broker also highlighted the fact that, among the big mining companies, ENRC's shares were the second cheapest, behind those issued by the controversial Indian miner Vedanta Resources – a state of affairs that its analysts said was set to persist as the Kazakh group had become a "no-go stock for many investors due to corporate governance issues".

The business, which is about 44 per cent owned by its three Kazakh founders, Alexander Mashkevitch, Alijan Ibragimov and Patokh Chodiev, has seen its share price fall by more than 35 per cent since the beginning of this year.

Yesterday, as it posted a 33 per cent increase in underlying earnings before interest tax, depreciation and amortisation, its chief executive Felix Vulis attempted to reassure investors by promising an independent board.

"We are on target and some time in mid-September we will come out with the full review and the full results of the review," he said. "[We are] committed to a full independent board, I can assure you of that."

The issue burst out into the open in June, when Sir Richard Sykes, the company's senior independent director, and non-executive director Ken Olisa were voted out, while two other directors – Abdraman Yedilbayev and Eduard Utepov – decided against seeking re-election.

In a valedictory letter to the board, Mr Olisa said the company's "chronic failure to meet the governance standards expected of a FTSE 100 company" had been "laid bare" by an Institute of Chartered Secretaries and Administrators review – but that no action had been taken. He added that he had raised the view that ENRC faced a choice between a governance model where the founding shareholders "take a big step back and let the board of ENRC govern the company independently, or they should take a big step forward and play a hands-on role in the strategic and operational detail of the business". "Neither is the right answer per se, but a hybrid is definitely the wrong one," he said.

Mr Olisa also claimed that the decision to vote him and Sir Richard off the board at the annual meeting in June was in "absolute contravention of assurances" given the week before, characterising the action "more Soviet than City".

Earlier, speculation – denied by Mr Olisa and Sir Richard – had centred on possible board-level disagreements over ENRC's decision last year to buy a stake in Camrose, which owns the permit to run the Kolwezi project in the Democratic Republic of Congo.

First Quantum, the previous owner of the permit, had had its licence revoked by Government, and is currently seeking compensation over the move.

Last month, a British Virgin Islands court reserved judgment on an application by ENRC units to strike out a $2bn (£1.2bn) claim by First Quantum.