To be fair, we think the think the deal makes sense. The purchase of Shubarkol will give ENRC access to the cheap coal it needs for its three key divisions: ferroalloys, alumninium, and iron ore. Nor was the valuation particularly rich. Collins Stewart puts it at 54 cents per tonne of resource and $2.60 per tonne of reserves. Recent deals, done since the commodities bubble popped, have been done at around $3.25 per tonne of reserve.
So a good deal at a good price, but the share price goes south. That suggests that ENRC’s latest boardroom revamp has failed to fully reassure investors. The firm still needs to do more to narrow the corporate governance discount (see chart right) that blights the shares.