Litigation matters


 

TIDMKZG 
 
RNS Number : 4287O 
KazakhGold Group Ltd 
29 June 2010 
 

                                                           FOR IMMEDIATE RELEASE 
 
29 June 2010 
 
KazakhGold Group Limited 
 
 
On 25 June 2010 KazakhGold Group Limited ("KazakhGold"); its wholly-owned 
subsidiary, KAZAKHALTYN MMC JSC ("Kazakhaltyn"); and Jenington International 
Inc., a wholly-owned subsidiary of OJSC Polyus Gold ("Jenington"); commenced 
proceedings in the High Court of Justice (Chancery Division) in London against 
five members of the Assaubayev family who were former directors of KazakhGold; 
Gold Lion Holdings Limited ("Gold Lion") and Hawkinson Capital Inc., 
("Hawkinson"). Gold Lion was, prior to completion of the Partial Offer by 
Jenington to acquire 50.1% of the issued share capital of KazakhGold in August 
2009, the principal shareholder of KazakhGold. The defendants include Kanat 
Assaubayev, who was Executive Chairman of KazakhGold until the completion of the 
Partial Offer, and Aidar Assaubayev, the former Executive Vice Chairman, who 
continued as a director until his appointment was terminated on 17 June 2010. 
In the proceedings, the claimants allege that the former director defendants, 
among other things, breached their fiduciary duties to, and service contracts 
with, KazakhGold by misappropriating funds intended for capital expenditures 
through sham contracts entered into by Kazakhaltyn.  The claimants also allege 
that the former director defendants deceived Jenington into making the Partial 
Offer by, among other things, misrepresenting production and sales revenue in 
2006-2008 and the amount of capital expenditures made by KazakhGold in 
KazakhGold's public disclosures and other disclosures relied upon by Jenington 
in making the Partial Offer. The claimants seek damages in excess of USD 200 
million in respect of the claims made by KazakhGold and Kazakhaltyn and damages 
in excess of USD 250 million in respect of the Jenington claims, as well as 
other remedies. In connection with these proceedings, KazakhGold, Kazakhaltyn 
and Jenington have obtained freezing orders in various jurisdictions against the 
assets of the defendants. 
In particular, the claims allege that the former director defendants caused 
KazakhGold to expend a substantial portion of the proceeds of the USD 200 
million Senior Notes offering received in 2006 not for capital improvements, 
exploration and development and for general corporate purposes in accordance 
with the publicly disclosed use of proceeds of the Senior Notes, but for the 
benefit of the defendants through causing Kazakhaltyn to enter into sham 
contracts solely to disguise the transfer of monies to third parties for no 
consideration. KazakhGold alleges that the false contracts were purportedly 
entered into with construction and exploration companies which were vehicles of 
the defendants or persons or entities associated with them for the purpose of 
diverting funds to their benefit. KazakhGold also alleges that USD 179.9 million 
was paid directly by Kazakhaltyn between 2007 and April 2009 under such sham 
contracts, and an additional USD 27.8 million of funds from Kazakhaltyn was paid 
in 2008 by a party affiliated with the defendants under sham contracts, 
including a substantial portion of the proceeds of a USD 8 million loan obtained 
by Kazakhaltyn in 2008. 
KazakhGold also alleges that the former director defendants and MAED, which had 
entered into contracts with KazakhGold for the completion of three new tailings 
re-treatment plants and a central elution plant, secretly agreed to a joint 
venture arrangement that entitled the defendants to 50% of the profits from 
certain of those contracts, which had an aggregate contract value of USD 69 
million. 
The Jenington claims allege that the former director defendants and Gold Lion 
fraudulently misrepresented KazakhGold Group's reported gold production and 
sales revenue information in 2006, 2007 and 2008 contained in its public 
disclosures and other disclosures relied upon by Jenington in making the Partial 
Offer, by, amongst other matters, improperly including fictitious sales to an 
entity in the United Arab Emirates. Jenington also alleges that the public and 
other disclosures relied upon by Jenington also were inaccurate because of the 
incorrect capital expenditure information described above. 
These proceedings have been brought following KazakhGold's investigation into 
the material errors identified in its financial statements for the year ended 31 
December 2008 which were previously announced and subsequent restatement of such 
financial statements.  These investigations continue. 
On 17 June 2010, Mr. Aidar Assaubayev was removed as a director of KazakhGold. 
The litigation is at a very early stage, and whilst KazakhGold is unable to 
predict its outcome, further information will be provided in due course. 
 
For further information, contact: 
 
Alexey V. Chernushkin, Director, CM and IR 
Evguenia V.Buydina, IR manager 
+44 (0) 208 528 1450 
+44 (0) 208 528 1020 
 ir@kazakhgold.com 
 
Anton A. Arens, PR Director 
+44 (0) 208 528 1450 
+44 (0) 208 528 1020 
 anton.arens@kazakhgold.com 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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