REPORT ON PAYMENTS TO GOVERNMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

KAZ Minerals PLC (“KAZ Minerals” or “the Group”) today provides information in accordance with DTR4.3A and The Reports on Payments to Governments Regulations 2014 (the “Regulations”) in respect of payments made by the Group for the year ended 31 December 2019.

Payments to Governments

The table below represents the Group’s consolidated report on payments made to governments under the Regulations. The table includes all payments made in excess of £86,000 ($110,000) for activities related to the exploration, prospection, discovery, development and extraction of minerals by project, government type and country, rounded to the nearest thousand US Dollars. Where the payment relates to activities that are reportable under the Regulations, as well as to activities which are not reportable, the payment has been included in its entirety if it is not possible to disaggregate it.

For the year ended 31 December 2019, payments to governments under the Regulations amounted to $325.8 million.

US$’000	Corporate income tax	Mineral Extraction Tax and Royalties⁽¹⁾	Withholding tax	Signature bonus	Licence fee⁽²⁾	Infrastructure and social payments⁽³⁾	Total
KAZAKHSTAN
Artemyevsky – License	–	14,116	–	–	–	–	14,116
Irtyshsky – License	–	7,853	–	–	–	–	7,853
Orlovsky – License	–	17,676	–	–	–	–	17,676
Legal entity	16,582	–	–	–	–	3,618	20,200
Total East Region	16,582	39,645	–	–	–	3,618	59,845
Aktogay license and legal entity	30,245	90,115	9,847	–	1,011	11,887	143,105
Bozshakol license and legal entity	20,376	71,029	12,551	–	133	5,657	109,746
Koksay license and legal entity	–	–	–	–	–	–	–
Other legal entities	1,252	–	–	–	–	–	1,252
	68,455	200,789	22,398	–	1,144	21,162	313,948
RECIPIENT
State Revenue Committee	68,455	200,789	22,398	–	133	3,608	295,383
Local government	–	–	–	–	1,011	17,554	18,565
	68,455	200,789	22,398	–	1,144	21,162	313,948
KYRGYZSTAN
Bozymchak licence and legal entity	–	8,444	2,703	–	–	171	11,318
RECIPIENT
State Tax Administration (central government)	–	5,852	2,703	–	–	–	8,555
Local government	–	2,592	–	–	–	171	2,763
	–	8,444	2,703	–	–	171	11,318
RUSSIA
Baimskaya licence and legal entity	–	–	–	–	–	548	548
RECIPIENT
Federal Tax Service	–	–	–	–	–	–	–
Local government	–	–	–	–	–	548	548
	–	–	–	–	–	548	548
UNITED KINGDOM
Legal entity paid to HMRC	–	–	–	–	–	–	–

Total Payments to Governments	68,455	209,233	25,101	–	1,144	21,881	325,814

The Mineral Extraction Tax is payable in Kazakhstan on the value of the mineral resources extracted based on the average price of the minerals on the London Metal Exchange or at the London Bullion Market Association. Royalties are paid by Bozymchak on sold metal. Mineral Extraction Tax includes taxes paid on water extraction.
Payments made as required under subsoil use license.
Infrastructure and social payments represent payments made to bodies, associations, trusts, state-owned enterprises and other public interest groups located in the regions in which the Group operates. These payments include the transfer of assets at their book value, which the Group regards as social payments because they benefit the local communities.

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Baimskaya project update

KAZ Minerals today announces updated parameters for the Baimskaya Project, based on feasibility study work completed to date.

Work at the Baimskaya site in the second quarter has been limited due to measures taken to control the spread of the Covid-19 virus in the region. Prior to the disruption, equipment and materials were delivered to the site for the pioneer works scheduled to take place during the year. Activity is expected to resume in due course and the Group’s capital expenditure guidance of $150 million for 2020 remains in place.

Progress on the Bankable Feasibility Study has also been impacted by Covid-19 related issues with teams in Moscow and Vancouver required to work from home and restrictions on both domestic and international travel.

The Group and the Russian government are continuing to work together on the details of the power and transport infrastructure required for the operational phase of the project including potential take or pay agreements. Due to the additional time required to finalise the infrastructure plan for the Project, including Covid-19 related delays, the BFS is now expected to be completed by the end of 2020.

Based on the results of ongoing drilling campaigns and work completed on the BFS to date, some of the key parameters of the Baimskaya Project have changed since those announced at the time of acquisition:

drilling results indicate a potential increase in Mineral Resources which would lead to an extension of the mine life, previously guided at around 25 years;
reflecting the expectation of increased Mineral Resources and the latest available technology from equipment suppliers, project economics are optimised by increasing design capacity for the concentrator from 60 Mtpa to 70 Mtpa of ore processed;
the current construction plan for the processing plant will ramp up the two lines in consecutive phases around 12 to 18 months apart, reducing the peak funding requirement when compared to a simultaneous startup; and
the estimated capital budget for the Baimskaya project has increased to around $7 billion¹ following more detailed costings during the BFS work and due to the additional plant and equipment required to deliver increased ore volumes for the new concentrator design, including a larger mining fleet, maintenance facilities and site accommodation. Around 10% of the capital budget is expected to be incurred after production commences from the first line.

The timetable for construction remains around seven years. Further details on the project timetable, capital expenditure, production guidance and operating costs will be published upon completion of the BFS. Discussions will then be further progressed with potential lenders and the Group will also assess opportunities for partnering on the Project.

Oleg Novachuk, Chair, said “We are working to develop our execution strategy for the delivery of the Baimskaya copper project, one of the world’s largest undeveloped copper assets. Study work and drilling completed so far at Baimskaya indicates that a larger project will unlock the potential of the world class Peschanka deposit. We look forward to updating the market with the details of the Bankable Feasibility Study when it is completed later this year.”

¹ Capital budget is estimated in nominal terms based on 100% share of development capital expenditure, subject to confirmation in further study work.

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