Hello. Welcome to Company Focus. My name is Aamer Nawid, Research Analyst at Fat Prophets.

Today I'm going to be taking a look at diversified miner Eurasian Natural Resources Corporation, or ENRC. I'm going to be taking a look at the latest goings on at the company and highlighting why I think looks like pretty decent value at the moment.

ENRC, one of Kazakhstan's largest mining companies. It's a massive producer of ferroalloys, of iron ore, of aluminium. It had a pretty weak summer, as you can see here from the chart. Fears over export duties finding their way to cross the metals in Kazakhstan have basically made investors a little bit nervous as to the impact on long-term earnings. If you, say, compare its share price performance with that Rio Tinto, you can see here the performance highlights the sheer underperformance of ENRC. Rio, of course, has had its own tax issues. Maybe a small degree of the disparity between the two reflects that. Export duties are potentially more damaging to productivity than say a profit based resources tax.

Having said all that, rhetoric towards the export duties has eased somewhat and I was expecting ENRC to go on a bit of a move forward but mining companies are never dull. If it's not one thing it's the other. Along have come First Quantum Minerals and slapped a lawsuit on ENRC pertaining to their purchase of Camrose Resources, a privately held investment vehicle which basically has five copper and cobalt mining permits in the Democratic Republic of Congo, or DRC.

Now on the face of it, the Camrose move looks like a good one. There is a lot of M&A going on in the mining space right now. It's probably cheaper and a lot less risky to buy existing companies or existing producing assets rather than create new ones.

The chart here shows the price of copper. It's recovering and should, I suppose, growth in the East overpower weakness in the West, copper prices will continued and these Camrose assets will be highly earnings accretive, in my view, for ENRC.

The controversy though centres around the Kolwezi Tailings licenses. Now these were removed by the DRC from First Quantum back in August 2009. First Quantum were obviously livid. They spent a lot in developing these assets, not least the $700m on the actual plant facility. So they've been at loggerheads with the DRC ever since.

Now, First Quantum's woes were compounded, if you like, when they saw ENRC come ahead and purchase these assets which they thought were off limits as they were subject to international arbitration at the time.

Eurasian has said they've going to vigorously defend their position. They believe First Quantum is barking up the wrong tree entirely. I mean certainly the chart here prefers Quantum. As you can see, they've had a tough 2010 so far and this could quite feasibly get tougher. It's all about who was doing what when. I'm no lawyer, but it's looking as though it's looking pretty favourable for ENRC at this stage.

Now complete contrast is ENRC's other move in the Bahia region of Brazil. What they've done is they've purchased the outstanding 15 per cent of the Bahia Minerals Company that they didn't own. They basically bought out Zamin Resources for $670m and they've taken full ownership of a project which is massive iron ore resources and is due to start production in 2013.

Both acquisitions, or both moves, Bahia and Camrose, are completely different but they underscore one factor that management at ENRC are unrelenting in their pursuit to ramp up output while the commodity bull market is firmly in place.

Management have basically outlined a $5.9bn capital expenditure programme. They've also said that this is not the end of the acquisitions. They've got the cash to do it. Gearing is very comfortable. Interest cover is very high. Last time of asking they had $700m in the bank.

I think investors are going to be a little bit nervous about ENRC as legal proceedings get underway, but as history tells us, from such uncertain situations opportunities often present themselves.

Okay, the perils of operating in Africa are there for all to see and the Kazakhstan export duty situation is not completely extinguished, but from my view, I'm looking at a robust financial position, a strong management team as well as a burgeoning geographic reach as all factors which are going to drive ENRC forward. Margins are healthy and if India, China, Latin America continue to consume commodities at the rate that they are, I think we could really see ENRC continue to drive forward.

I wouldn't be surprised if investors started concentrating on these factors rather than say litigation issues and the shares which are trading on pretty undemanding valuation metrics embark on a protracted move forward.

Thanks for watching. Make sure you tune in again next week.