Kazakh miner Eurasian Natural Resources Corporation (ENRC) came under fire for failing to reassure the City following a corporate governance spat that has seen a number of British directors voted off the board.
ENRC, which is listed on the London stock exchange, reported a surge in half yearly profits but gave little away about a corporate governance review that has been going on since June. "They got through the analyst briefing without saying anything about how the review was going, which was a bit of a disgrace," said Cailey Barker, of broker Numis.
Gavin Wood, of Arbuthnot Securities said: "More clarity wouldn't have gone amiss; corporate governance worries are a large reason why ENRC's shares trade at a 20% discount to its rivals."
There was uproar two months ago when the company's majority Kazakh shareholders, including three founding oligarchs, refused to endorse the re-election of senior independent director, Sir Richard Sykes, a former boss of GlaxoSmithKline. Ken Olisa also departed.
Investors accused the Kazakh founders of meddling in the company's day-to-day operations as rumours swirled that Sykes had been forced out after querying the independence of chairman Johannes Sittard, who has close links with the Kazakhs. Sykes and other UK directors are also thought to have clashed with chief executive Felix Vulis for failing to reduce the company's dependence on its operations in Kazakhstan. Vulis said he would step down last February, but would serve his notice of 12 months. Wood said: "This board must be restructured. We need more independent non-execs, and investors need to know which directors are acting for the Kazakh shareholders."
ENRC is 82%-owned by Kazakh interests, including a Kazakh state holding of 11.6%. After Sykes left, he told the Sunday Telegraph that ENRC's listing at 540p a share in 2007 was "a mistake".
The company has been at the centre of another controversy after it bought a mine in the Democratic Republic of Congo which had been seized by the Congolese government from First Quantum Minerals. Standard Life protested at the time. FQM is taking legal action against ENRC.
On Wednesday ENRC confirmed it had agreed a plan for a corporate governance review concerned with board leadership, composition and accountability. The company said: "We are confident the outcome of the review will be a properly constituted board, which will encompass the interests of all stakeholders." It expects the review to conclude by mid-September."
Operationally, ENRC reported good progress with revenues up over 30% at $4bn (£2.41bn) and profits ahead by 32% at $1.2bn. But the company, which is the world's biggest producer of ferrochrome, used for making stainless steel, warned of the possibility of volatile commodity prices over the next few months, and a 20% increase in costs, due to wage inflation and capital investment in Brazil and Africa.
Vulis said: "ENRC continued its strong financial and operational performance in the first half of 2011. Building on solid foundations in Kazakhstan, we are strategically well located to benefit from China's continued economic growth."
The iron ore division was the star performer in the first half, being the largest single underlying profit contributor, at 43% of the group's total.