LONDON — The turnover continued Wednesday at Eurasian Natural Resources Corp., a Kazakh miner whose shares are listed in London and whose shareholders have been jittery about allegations of corruption and questionable practices.
The upheaval seems likely to underscore concerns by critics of the London Stock Exchange about some foreign companies that have been allowed to list their shares in London despite not fully meeting the criteria typically required.
Mehmet Dalman, a former investment banker, quit Wednesday as chairman of the company known as ENRC after a year in the job, saying he believed he had “achieved all that I can.” Mr. Dalman had been brought in to help improve transparency at the company, which two years ago hired a law firm for an internal investigation — a firm it recently fired.
The company has been accused of lacking enough independent directors on its board and is alleged to have been involved in buying assets in the Democratic Republic of Congo at below-market prices, raising questions about the propriety of those deals. In a statement on Wednesday, ENRC said it was “committed to a full and transparent investigation of its procedures and conduct.”
Mr. Dalman will be replaced by Gerhard Ammann, a nonexecutive director at the firm and a former chairman and chief executive of Deloitte, the advisory and accounting firm, in Switzerland.
The turmoil at ENRC, which has weighed on the price of its London-traded shares, is raising serious questions about listing rules for foreign companies. Under pressure to compete with stock exchanges in New York and Asia, London has accepted companies from abroad that sought a listing in Britain even if the amount of freely-traded shares was small and other listing requirements were barely met.
That push might now come back to haunt London. Shares in Bumi, the Indonesian coal miner that is traded in London, were suspended on Monday after its auditors raised doubts about the accuracy of accounts at a subsidiary. Other foreign companies whose London listings have raised questions include Evraz, a Russian steel maker part owned by the investor Roman Abramovich, and Polymetal, which has headquarters in Russia.
Weak corporate governance at foreign companies listed in Britain “is a real issue for the health of the U.K. market and doesn’t do anything for the standing and integrity of the London market,” said Ivor Pether, a fund manager at Royal London Asset Management.
As part of the FTSE 100 stock index, ENRC shares are held by many pension funds and other institutional investors that track the index.
ENRC first sold shares on the London Stock Exchange at the end of 2007, for a market value of £6.8 billion, or $10.4 billion. The shares, little changed on Wednesday, are now worth only about half.
The shares traded on the exchange represent just 18 percent of the company, less than the 25 percent usually required in Europe. Companies must ask British regulators for special permission to list shares with such a small portion of freely available shares, or free float. ENRC had received that permission.
Companies from Asia and the former Soviet Union have been eager to list their shares abroad to tap a larger group of investors. A listing in London also makes it easier to raise financing in the future by giving the company more legitimacy, and to pay for acquisitions with shares because they tend to be more frequently traded.
For London, companies from abroad have recently presented a rare area of growth in an otherwise rather sluggish market for share sales. Ed Clark, a spokesman for the London Stock Exchange, declined to comment.
In response to growing investor concern, Britain’s regulator, the Financial Conduct Authority, decided last year ago to start looking into tightening listing rules. The regulator is expected to put new rules on corporate governance requirements in place later this year. The F.C.A. is also specifically looking into the corporate governance practices of ENRC, said Chris Hamilton, a spokesman for the authority.
By then, ENRC’s shares might not even be publicly traded. Alexander Machkevitch, a Kazakh businessman and ENRC shareholder, said last week that he was considering teaming up with two other businessmen, Patokh Chodiev and Alijan Ibragimov, as well as the Kazakh government to bid for ENRC. The three men together own 44 percent of ENRC, and the Kazakh government holds an additional 12 percent.
ENRC was founded in 1994 when the businessmen acquired assets during the privatization of Kazakh state assets, following independence from the Soviet Union. Kazakhmys, the biggest copper producer of Kazakhstan and also listed in London, owns 26 percent of ENRC.
Pressure from anti-corruption campaigners and some investors about transparency and corporate governance started about three years ago when the company took control of copper and cobalt mines in the Democratic Republic of Congo. The concern from those critics was that ENRC had somehow obtained those properties at a price below their market value. Separately, ENRC faced allegations it siphoned off money from a business in Kazakhstan.
About a year ago, following some nudging from the Serious Fraud Office, ENRC hired the law firm Dechert to start two internal investigations into governance issues and business practices in Kazakhstan and Africa. But earlier this month, ENRC fired Dechert.
A flurry of further departures followed Dechert’s firing. Jim Cochrane resigned as chief commercial officer with immediate effect. Paul Judge and Dieter Ameling have said they will step down as directors at the company’s next annual general meeting in June. Company secretary Victoria Penrice; Tony McCarthy, head of human resources; and Stuart Nolan, in charge of reward programs, also left.
Article source: http://www.nytimes.com/2013/04/25/business/global/more-turnover-at-kazakh-miner-listed-in-london.html?partner=rss&emc=rss