Steel giant ArcelorMittal on December 8 announced the divestment of its Kazakh steel and mining business to state-run direct investment fund Qazaqstan Investment Corporation (QIC).

Kazakhstan’s Industry Minister Kanat Sharlapayev, meanwhile, revealed that in coming days Kazakh business entrepreneur Andrey Lavrentyev, the board chairman of the Allur Group amalgamation of companies that includes SaryarkaAvtoProm and AgromashHolding, will in turn take control of the assets.

Pressure for ArcelorMittal to sell mounted after 45 people lost their lives in a fire incident in October at the company’s Kostenko coal mine in Karaganda region. The incident, triggered by a methane gas explosion, was the latest in a long line of fatal incidents at ArcelorMittal’s Kazakhstan operations to provoke public complaints over a lack of health and safety investment.

In the transaction, ArcelorMittal sold a 100% interest in ArcelorMittal Temirtau and ArcelorMittal Tubular Products Aktau (together called ArcelorMittal Temirtau, or AMT). The steelmaker secured $286mn for the sale and another $250mn as repayment of outstanding intra-group dues. It will also obtain a further $450m in sovereign-fund guaranteed payment as an intra-group loan repayment in four equal annual tranches.

ArcelorMittal said that the deal had a negative effect on its equity of nearly $800m. As of September 30, the company had valued the ArcelorMittal Temirtau assets at $1.8bn.  

Kazakhstan’s president, Kassym-Jomart Tokayev, ordered a halt on investment cooperation with ArcelorMittal after the Kostenko coal mine incident and confirmed that there was a preliminary agreement with the company regarding the nationalisation of the Kazakh business.

Previous incidents at ArcelorMittal mines in Kazakhstan included one in 2006 that led to the deaths of 41 miners.

Sharlapayev said that the government's involvement in the transaction played a key role in securing a reduced price for the assets, saying Luxembourg-headquartered ArcelorMittal initially proposed a price of $3.5bn. 

Once Lavrentyev seals the deal as the new owner of AMT, he will take on responsibility for repaying $700mn of debts owed to ArcelorMittal within four years.

Kazakhstan’s prosecutor's office has previously referred to making limited progress in recent times obtaining information from ArcelorMittal about measures taken to enhance safety protocols and prevent accidents at its operations in the country. This year, an inspection of the company's mines uncovered several safety violations.

ArcelorMittal noted that the sale was executed on an ‘as is’ basis, with QIC taking full control and accountability for ArcelorMittal Temirtau. The acquired operations will be rebranded.

The global steel producer has owned as well as operated the Kazakh steel plant and integrated iron-ore coal mines since 1995.

ArcelorMittal executive chairman Lakshmi Mittal and CEO Aditya Mittal said: “We would like to take this opportunity to thank the employees of ArcelorMittal Temirtau for everything they have contributed over the past 28 years.

“While the business faced some serious challenges, there were also many notable achievements, which should be a source of pride. ArcelorMittal Temirtau was a very valued part of ArcelorMittal, and we leave with respectful memories of Kazakhstan and all those who partnered with us.”