KAZ Minerals today announces an update on the Aktogay Expansion Project including a reduction in capital expenditure guidance for 2020.

Following a review of construction progress to date and the near-term impact of Covid-19 restrictions, the project remains on track for completion in 2021, as previously guided, but is now expected to commence production in late 2021. Measures taken to control the spread of Covid-19, both in Kazakhstan and internationally, have negatively impacted the supply chain, reduced the availability of local contractors and prevented vendor representatives from entering the country to support equipment installations.

After total spend on the project of $663 million to 31 December 2019, capital expenditure in 2020 is now forecast to be $300-350 million, which is lower than the previous guidance of $400 million. The balance of the unchanged $1.2 billion project budget will be incurred in 2021.

Oleg Novachuk, Chair, said: “Our first priority is to keep our employees and contractors safe during this difficult time. We are also working hard to meet the challenges posed by Covid-19 and to maintain progress at the Aktogay expansion project. Whilst we still expect to deliver the project within our guided timeframe, we now anticipate that production from the new Aktogay concentrator will commence towards the end of 2021 and capital expenditure in 2020 will be lower than previously indicated, at around $300-350 million.”

For further information please contact:

Notes to editors

KAZ Minerals is a high growth copper company focused on large scale, low cost, open pit mining in Kazakhstan, Russia and Kyrgyzstan. It operates the Aktogay and Bozshakol open pit copper mines in the East Region and Pavlodar region of Kazakhstan, three underground mines and associated concentrators in the East Region of Kazakhstan and the Bozymchak copper-gold mine in Kyrgyzstan. In 2019, total copper production was 311 kt with by-products of 201 koz of gold, 3,382 koz of silver and 38 kt of zinc in concentrate. The Group acquired the Baimskaya project in the Chukotka region of Russia in January 2019, one of the world’s most significant undeveloped copper assets, with the potential to become a large scale, low cost, open pit copper mine.

The Group’s new operations at Aktogay and Bozshakol have delivered industry leading production growth and transformed KAZ Minerals into a company dominated by world class, open pit copper mines.

Aktogay is a large scale, open pit mine similar to Bozshakol, with a remaining mine life of around 25 years (including the expansion project) at an average copper grade of 0.35% (oxide) and 0.33% (sulphide). Aktogay commenced production of copper cathode from oxide ore in December 2015 and copper in concentrate from sulphide ore in February 2017. The operating sulphide concentrator has an annual ore processing capacity of 25 million tonnes and the sulphide processing capacity will be doubled to 50 million tonnes with the addition of a second concentrator by the end of 2021. Aktogay is competitively positioned on the global cost curve and will produce an average of 100 kt of copper per year from sulphide ore until 2021, increasing to 170 kt per year from 2022 to 2027, after the second concentrator commences operations. Copper production from oxide ore will be in the region of 20 kt per annum until 2024.

Bozshakol is a first quartile asset on the global cost curve with an annual ore processing capacity of 30 million tonnes and a remaining mine life of c.40 years at an average copper grade of 0.36%. The mine and processing facilities commenced output in 2016 and will produce an average of 100 kt of copper cathode equivalent and 120 koz of gold in concentrate per year over the first 10 years of operations.

The Peschanka deposit within the Baimskaya licence area in Russia has JORC resources of 9.5 Mt of copper at an average grade of 0.43% and 16.5 Moz of gold at an average grade of 0.23 g/t. Average annual production over the first ten years of operations is expected to be 250 kt copper and 400 koz gold, or 330 kt Copper Equivalent Production, with a mine life of approximately 25 years and first quartile operating costs. The project is located in a region identified by the Russian Government as strategically important for economic development and will benefit from the construction of state-funded power and transport infrastructure and the provision of tax incentives. The estimated capital budget for construction is $5.5 billion. The parameters of the project were estimated on acquisition and will be confirmed on completion of the feasibility study. The Group expects the project to generate a significant NPV uplift and an attractive IRR at analyst consensus copper prices. The development of Baimskaya will enable the Group to continue its high growth trajectory, adding a large scale, long life asset to the Group’s portfolio.

KAZ Minerals is listed on the London Stock Exchange and the Kazakhstan Stock Exchange and employs around 16,000 people, principally in Kazakhstan.

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FINANCIAL HIGHLIGHTS

• Revenues increased by 5% to $2,266 million (2018: $2,162 million) as higher production and sales offset lower copper prices
  • Full year copper sales volumes of 317 kt (2018: 296 kt) and gold sales of 225 koz (2018: 169 koz)
  • Average LME copper price in 2019 reduced by 8% to $6,000/t (2018: $6,526/t)
• EBITDA¹ of $1,355 million at an EBITDA margin of 60% (2018: $1,310 million)
  • Operating profit increased by 8% to $923 million (2018: $851 million)
• Industry leading net cash cost¹ of 77 USc/lb (2018: 85 USc/lb)
  • Gross cash costs¹ reduced to 140 USc/lb (2018: 144 USc/lb) driven by increased contribution from Aktogay and cost efficiencies at the East Region
  • Gold by-product revenues rose by 50% to $318 million (2018: $212 million) driven by 10% increase in production, 10% higher average LBMA gold price and the sale of inventory
  • Structural factors of economies of scale, competitive energy and transport costs, and low strip ratios continue to support the Group’s low cost position
• Net debt¹ $2,759 million (2018: $1,986 million)
  • 2019 investments include $436 million cash consideration for the Baimskaya acquisition and $718 million of expansionary capital expenditure (2018: $530 million)
  • Gross liquid funds¹ of $541 million at 31 December 2019 (2018: $1,467 million)
  • $1.0 billion of committed facilities undrawn as at 28 January 2020, following amendment of PXF
• Final dividend of 8 US cents per ordinary share recommended
  • Total 2019 dividend of 12 US cents per ordinary share, including the interim dividend of 4 US cents per ordinary share paid on 25 October 2019

OPERATIONAL HIGHLIGHTS

• Copper production² of 311 kt and gold production³ of 201 koz (+6% and +10% compared with 2018)
  • 2020 copper production² guided at 280-300 kt as grades are expected to decline at Aktogay while East Region output is limited by low grades and challenging geological conditions

POSITIONED FOR GROWTH

• Strong performance from producing assets supports investment in near and long term growth
  • Aktogay expansion on track for completion in 2021, $1.2 billion project budget unchanged
  • Baimskaya feasibility study ongoing, expected to be completed later in the first half of 2020

1  Alternative Performance Measures (“APMs”) are used to assess the performance of the Group and are not defined or specified under IFRS. For further information on APMs, including justification for their use, please refer to the APMs section on page 54.

2  Payable metal in concentrate and copper cathode from Aktogay oxide ore.

3  Payable metal in concentrate.

Andrew Southam, Chief Executive Officer, said: “In 2019 KAZ Minerals has continued to build on its operational track record, delivering further growth in copper production and maintaining its industry leading cost position. Our large scale operations in Kazakhstan achieved record levels of production and our proven, low cost asset base provides a strong platform for investment into value-accretive growth projects. The Aktogay expansion project is on budget and on track to commence production in 2021. We look forward to releasing further details of our plans for Baimskaya when the bankable feasibility study is completed.”

For further information please contact:

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NOTES TO EDITORS

KAZ Minerals PLC (“KAZ Minerals” or “the Group”) is a high growth copper company focused on large scale, low cost, open pit mining in Kazakhstan, Russia and Kyrgyzstan. It operates the Aktogay and Bozshakol open pit copper mines in the East Region and Pavlodar region of Kazakhstan, three underground mines and associated concentrators in the East Region of Kazakhstan and the Bozymchak copper-gold mine in Kyrgyzstan. In 2019, total copper production was 311 kt with by-products of 201 koz of gold, 3,382 koz of silver and 38 kt of zinc in concentrate. The Group acquired the Baimskaya project in the Chukotka region of Russia in January 2019, one of the world’s most significant undeveloped copper assets, with the potential to become a large scale, low cost, open pit copper mine.

The Group’s new operations at Aktogay and Bozshakol have delivered industry leading production growth and transformed KAZ Minerals into a company dominated by world class, open pit copper mines.

Aktogay is a large scale, open pit mine similar to Bozshakol, with a remaining mine life of around 25 years (including the expansion project) at an average copper grade of 0.35% (oxide) and 0.33% (sulphide). Aktogay commenced production of copper cathode from oxide ore in December 2015 and copper in concentrate from sulphide ore in February 2017. The operating sulphide concentrator has an annual ore processing capacity of 25 million tonnes and the sulphide processing capacity will be doubled to 50 million tonnes with the addition of a second concentrator by the end of 2021. Aktogay is competitively positioned on the global cost curve and will produce an average of 100 kt of copper per year from sulphide ore until 2021, increasing to 170 kt per year from 2022 to 2027, after the second concentrator commences operations. Copper production from oxide ore will be in the region of 20 kt per annum until 2024.

Bozshakol is a first quartile asset on the global cost curve with an annual ore processing capacity of 30 million tonnes and a remaining mine life of c.40 years at an average copper grade of 0.36%. The mine and processing facilities commenced output in 2016 and will produce an average of 100 kt of copper cathode equivalent and 120 koz of gold in concentrate per year over the first 10 years of operations.

The Peschanka deposit within the Baimskaya licence area in Russia has JORC resources of 9.5 Mt of copper at an average grade of 0.43% and 16.5 Moz of gold at an average grade of 0.23 g/t. Average annual production over the first ten years of operations is expected to be 250 kt copper and 400 koz gold, or 330 kt Copper Equivalent Production, with a mine life of approximately 25 years and first quartile operating costs. The project is located in a region identified by the Russian Government as strategically important for economic development and will benefit from the construction of state-funded power and transport infrastructure and the provision of tax incentives. The estimated capital budget for construction is $5.5 billion. The parameters of the project will be confirmed on completion of the feasibility study. The Group expects the project to generate a significant NPV uplift and an attractive IRR at analyst consensus copper prices. The development of Baimskaya will enable the Group to continue its high growth trajectory, adding a large scale, long life asset to the Group’s portfolio.

KAZ Minerals is listed on the London Stock Exchange and the Kazakhstan Stock Exchange and employs around 16,000 people, principally in Kazakhstan.

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KAZ Minerals PLC (“KAZ Minerals” or “the Group”) announces that it has completed an amendment and extension of its pre-export finance loan facility which includes an increase in facility commitments to $1.0 billion, an extension of the loan tenor and a reduction in the margin pricing (the “New PXF”).

The increase of the facility amount to $1.0 billion reflects strong support from the market and the New PXF was significantly over subscribed during syndication. The New PXF represents a net increase of $700 million above the $300 million outstanding under the existing facility and the Group expects to fully draw the facility by the end of February 2020.

The New PXF incorporates a number of other enhancements compared with the previous facility, including:

       i.    an extension to the maturity profile by 3.5 years, from June 2021 until December 2024;

       ii.    two annual extension options, exercisable on the first and second anniversary dates of signing, which, if exercised, would extend final maturity of the facility to December 2025 or December 2026 respectively (the “Extension Options”);

       iii.   a revised repayment profile with monthly principal repayments commencing in January 2021 and continuing over a four-year period until December 2024, or over a six-year period to December 2026 if the Extension Options are exercised;

       iv.    a balloon repayment of one-third of the facility amount ($333 million) if final maturity occurs in December 2024, or to be amortised during 2025 and 2026 if the Extension Options are exercised;

        v.     a reduced interest margin set initially at 2.50% above US dollar LIBOR (previously set at 3.00% under the existing PXF facility). The margin is variable during the life of the facility ranging between 2.25% and 3.50% above US dollar LIBOR, depending on the ratio of net debt to EBITDA, to be tested semi-annually; and

       vi.    increased headroom under financial covenants.

The bank syndicate has increased from 12 to 19 lenders.  The Mandated Lead Arrangers are Deutsche Bank AG, ING Bank NV, Société Générale, ABN AMRO Bank NV, Bank of China Limited, Crédit Agricole Corporate and Investment Bank, Credit Suisse AG, ICBC London, Natixis and PJSC «SOVCOMBANK». Other lenders in the facility are Bank of Montreal, DZ Bank AG, Intesa SanPaolo S.P.A., Mizuho Bank, Sumitomo Mitsui Banking Corporation, HSBC Bank PLC, KFW Ipex-Bank GMBH, Raiffeisen Bank International AG and Citibank N.A.

Deutsche Bank AG continues as the facility agent and ING Bank is the security trustee.

John Hadfield, Chief Financial Officer, said: “The signing of this facility provides additional financial flexibility for the Group and demonstrates ongoing support from our lenders. We are pleased to have expanded the banking group and improved the terms of the facility.”

For further information please contact:

Notes to editors

KAZ Minerals PLC (“KAZ Minerals” or “the Group”) is a high growth copper company focused on large scale, low cost, open pit mining in Kazakhstan, Russia and Kyrgyzstan. It operates the Bozshakol and Aktogay open pit copper mine in the Pavlodar and East Region of Kazakhstan, three underground mines and associated concentrators in the East Region of Kazakhstan and the Bozymchak copper-gold mine in Kyrgyzstan. In 2018, total copper production was 295 kt with by-products of 50 kt of zinc in concentrate, 183 koz of gold and 3,511 koz of silver. In January 2019, the Group acquired the Baimskaya project in the Chukotka region of Russia, one of the world’s most significant undeveloped copper assets with the potential to become a large scale, low cost, open pit copper mine.

The Group’s new operations at Bozshakol and Aktogay have delivered industry leading production growth and transformed KAZ Minerals into a company dominated by world class, open pit copper mines.

Bozshakol is a first quartile asset on the global cost curve with an annual ore processing capacity of 30 million tonnes and a remaining mine life of c.40 years at an average copper grade of 0.37%. The mine and processing facilities commenced output in 2016 and will produce an average of 100 kt of copper cathode equivalent and 120 koz of gold in concentrate per year over the first 10 years of operations.

Aktogay is a large scale, open pit mine similar to Bozshakol, with a remaining mine life of around 25 years (including the expansion project) at an average copper grade of 0.36% (oxide) and 0.33% (sulphide). Aktogay commenced production of copper cathode from oxide ore in December 2015 and copper in concentrate from sulphide ore in February 2017. The operating sulphide concentrator has an annual ore processing capacity of 25 million tonnes and the sulphide processing capacity will be doubled to 50 million tonnes with the addition of a second concentrator by the end of 2021. Aktogay is competitively positioned on the global cost curve and will produce an average of 100 kt of copper per year from sulphide ore until 2021, increasing to 170 kt per year from 2022 to 2027, after the second concentrator commences operations. Copper production from oxide ore will be in the region of 20 kt per annum until 2024.

The Peschanka deposit within the Baimskaya licence area in Russia has JORC resources of 9.5 Mt of copper at an average grade of 0.43% and 16.5 Moz of gold at an average grade of 0.23 g/t. Average annual production over the first ten years of operations is expected to be 250 kt copper and 400 koz gold, or 330 kt Copper Equivalent Production, with a mine life of approximately 25 years and first quartile operating costs. The project is located in a region identified by the Russian Government as strategically important for economic development and will benefit from the construction of state-funded power and transport infrastructure and the provision of tax incentives. The estimated capital budget for construction is $5.5 billion and the project is currently at feasibility study stage. The Group expects the project to generate a significant NPV uplift and an attractive IRR at analyst consensus copper prices. The development of Baimskaya will enable the Group to continue its high growth trajectory, adding a large scale, long life asset to the Group’s portfolio.

KAZ Minerals is listed on the London Stock Exchange and the Kazakhstan Stock Exchange and employs around 15,000 people, principally in Kazakhstan.

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NEW $100 MILLION CREDIT FACILITY

KAZ Minerals PLC (“KAZ Minerals” or “the Group”) announces the signing of a new term loan credit facility of up to $100 million (“Credit Facility”) with Caterpillar Financial Services (UK) Limited, a subsidiary of Caterpillar Financial Services Corporation (“Cat Financial”) and Caterpillar Inc. (“Caterpillar”). Caterpillar is a major supplier of mining equipment to the Group’s Bozshakol and Aktogay mines in Kazakhstan.

The interest margin and financial covenants on the Credit Facility are comparable with the Group’s existing pre-export finance facility. The Credit Facility is comprised of two sub-facilities of $40 million and $60 million secured against existing and new Caterpillar equipment, which will be drawn between December 2019 and March 2021. Quarterly repayments for both sub-facilities will commence in December 2020, with final maturities in December 2023 and March 2026.

John Hadfield, Chief Financial Officer, said “This new credit facility with Caterpillar provides additional liquidity and broadens our debt portfolio as we progress the construction of the Aktogay expansion project in Kazakhstan, which is due to commence production in 2021.”

For further information please contact:

Notes to editors

KAZ Minerals PLC (“KAZ Minerals” or “the Group”) is a high growth copper company focused on large scale, low cost, open pit mining in Kazakhstan, Russia and Kyrgyzstan. It operates the Bozshakol and Aktogay open pit copper mines in the Pavlodar and East Region of Kazakhstan, three underground mines and associated concentrators in the East Region of Kazakhstan and the Bozymchak copper-gold mine in Kyrgyzstan. In 2018, total copper production was 295 kt with by-products of 50 kt of zinc in concentrate, 183 koz of gold and 3,511 koz of silver. In January 2019, the Group acquired the Baimskaya project in the Chukotka region of Russia, one of the world’s most significant undeveloped copper assets with the potential to become a large scale, low cost, open pit copper mine.

The Group’s new operations at Bozshakol and Aktogay have delivered industry leading production growth and transformed KAZ Minerals into a company dominated by world class, open pit copper mines.

Bozshakol is a first quartile asset on the global cost curve with an annual ore processing capacity of 30 million tonnes and a remaining mine life of 38 years at an average copper grade of 0.37%. The mine and processing facilities commenced output in 2016 and will produce an average of 100 kt of copper cathode equivalent and 120 koz of gold in concentrate per year over the first 10 years of operations.

Aktogay is a large scale, open pit mine similar to Bozshakol, with a remaining mine life of 27 years (including the expansion project) at an average copper grade of 0.36% (oxide) and 0.33% (sulphide). Aktogay commenced production of copper cathode from oxide ore in December 2015 and copper in concentrate from sulphide ore in February 2017. The operating sulphide concentrator has an annual ore processing capacity of 25 million tonnes and the sulphide processing capacity will be doubled to 50 million tonnes with the addition of a second concentrator by the end of 2021. Aktogay is competitively positioned on the global cost curve and will produce an average of 100 kt of copper per year from sulphide ore until 2021, increasing to 170 kt per year from 2022 to 2027, after the second concentrator commences operations. Copper production from oxide ore will be in the region of 20 kt per annum until 2024.

The Peschanka deposit within the Baimskaya licence area in Russia has JORC resources of 9.5 Mt of copper at an average grade of 0.43% and 16.5 Moz of gold at an average grade of 0.23 g/t. Average annual production over the first ten years of operations is expected to be 250 kt copper and 400 koz gold, or 330 kt Copper Equivalent Production, with a mine life of approximately 25 years and first quartile operating costs. The project is located in a region identified by the Russian Government as strategically important for economic development and will benefit from the construction of state-funded power and transport infrastructure and the provision of tax incentives. The estimated capital budget for construction is $5.5 billion and the project is currently at feasibility study stage. The Group expects the project to generate a significant NPV uplift and an attractive IRR at analyst consensus copper prices. The development of Baimskaya will enable the Group to continue its high growth trajectory, adding a large-scale, long-life asset to the Group’s portfolio.

KAZ Minerals is listed on the London Stock Exchange and the Kazakhstan Stock Exchange and employs around 15,000 people, principally in Kazakhstan.

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KAZ Minerals plc half-yearly report for the period ended 3o june 2019

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Financial highlights

• Revenues of $1,052 million (H1 2018: $1,098 million)
  • Production-driven 3% increase in copper sales volumes, offset by 11% lower LME copper price
• EBITDA¹ of $620 million representing a 59% margin (H1 2018: $690 million, 63% margin)
• Operating profit of $410 million (H1 2018: $464 million)
• Industry leading first quartile net cash cost¹ of 80 USc/lb (H1 2018: 82 USc/lb)

Operational highlights

• Copper production² increased by 6% to 147.6 kt (H1 2018: 139.6 kt)
• Aktogay achieved record first half production of 74.1 kt (H1 2018: 60.5 kt)
• On track to achieve full year guidance for main products of copper and gold

Financial position 

• Net debt¹ increased to $2,560 million at 30 June 2019 (31 December 2018: $1,986 million)
  • $436 million cash consideration paid for acquisition of Baimskaya copper project in H1 2019
  • $332 million invested into growth projects, principally the Aktogay expansion
• Borrowings of $3,299 million at 30 June 2019 (31 December 2018: $3,453 million)
• Gross liquid funds¹ of $739 million at 30 June 2019 (31 December 2018: $1,467 million)
  • $480 million to be drawn in 2019-20 under new $600 million DBK facility for Aktogay expansion project
• Interim dividend of 4.0 US cents per share declared

growth projects  

• Completed the acquisition of the Baimskaya copper project in Russia, a globally significant deposit, on 22 January 2019
  • Feasibility study on track to be completed in H1 2020
  • Government funded road and power infrastructure progressed in period
  • Capital expenditure guidance for 2019 increased to $150 million, including $80 million approved for pioneer works and on-site infrastructure in second half of 2019
• Aktogay expansion project on schedule and on budget ($1.2 billion)
• Concentrator and crusher structural works underway, new mining equipment commencing operations
• Capital expenditure timing rephased, 2019 guidance now $500 million

Outlook

• Short term copper market outlook more cautious due to continuing trade pressures and China slowdown concerns, but long term outlook remains robust
• Full year copper production guidance maintained at c. 300 kt
• Low cost asset base creates strong platform for growth

1. Alternative Performance Measures (“APMs”) are used to assess the performance of the Group and are not defined or specified under IFRS. For further information on APMs, including justification for their use, please refer to APMs section on page 49 of the full report.
2. Payable metal in concentrate and copper cathode from Aktogay oxide ore.

Andrew Southam, Chief Executive Officer, said:

“KAZ Minerals recorded EBITDA of $620 million in the first half of 2019, delivering increased production and maintaining the Group’s industry leading low cost position. The Group’s near and long term growth projects at Aktogay and Baimskaya are both on track, with the primary crusher, sulphide concentrator and mining fleet upgrade progressing well at Aktogay and pioneer works at Baimskaya approved to commence in the second half of 2019.”

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COMPLETION OF KOKSAY PROJECT INVESTMENT BY NFC

KAZ Minerals PLC (“KAZ Minerals” or the “Group”) confirms that the transaction announced on 8 June 2018 with China Nonferrous Metal Industry’s Foreign Engineering and Construction Company Ltd (“NFC”) has completed. Accordingly, NFC has invested $70 million for a 19.4% stake in the Group’s Koksay project.

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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 2018.

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 ($114,000) 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 2018, payments to governments under the Regulations amounted to $314.5 million.

1. 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.
2. Payments made as required under subsoil use licence.
3. 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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KAZ Minerals PLC (“KAZ Minerals” or “the Group”) announces that it has signed a $600 million credit facility with the Development Bank of Kazakhstan JSC (“DBK”). The new DBK facility will provide financing for the Group’s Aktogay expansion project, which is currently in construction and will double the processing capacity of the Aktogay mine. The project was approved by the Board in December 2017 and is scheduled to be completed by the end of 2021.

The facility is expected to be drawn in 2019 and 2020 and extends for a term of 15 years until final maturity in 2034. The loan is repayable in instalments with the first repayment due three years after the date of first drawing, followed by semi-annual repayments in May and November of each year from November 2022 until the final repayment in 2034. The first drawing under the loan is expected during the third quarter of 2019.

The facility bears an interest rate of US dollar LIBOR + 3.90% and contains a financial covenant which is the same as the Group’s existing facilities with DBK and the China Development Bank based on a ratio of total liabilities to total assets. 

John Hadfield, Chief Financial Officer, said: “The new $600 million debt facility with DBK provides funding for the second sulphide concentrator at Aktogay, where construction is progressing well and is on track to deliver near-term copper production growth from 2021. The Aktogay expansion is a low risk, brownfield development that is expected to increase cash flow and establish a stronger platform to deliver the Baimskaya copper project in the Chukotka region of Russia. KAZ Minerals has an industry leading pipeline of value-accretive projects which will sustain production growth over the next decade, when the copper market is forecast to enter a period of significant supply deficit.”

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KAZ Minerals plc audited results for the year ended 31 December 2018

Financial highlights

• Revenues increase by 12% to $2,162 million compared to Gross Revenues of $1,938 million in 2017, supported by increased copper production¹ and improved copper prices
  • 2018 full year copper sales volumes of 296 kt (2017: 256 kt)
• EBITDA of $1,310 million at a margin of 61% (2017 Gross EBITDA: $1,235 million)
  • Operating profit increased by 19% to $851 million (2017: $715 million)
• First quartile net cash cost of 85 USc/lb (2017: 66 USc/lb), amongst the lowest of any pure-play copper miner
  • Gross cash costs of 144 USc/lb, 4% higher than 2017 (138 USc/lb)
  • Structural factors continue to support cost position, including low strip ratios, energy efficiency, favourable water and transport costs, automation and the use of modern, large scale equipment
  • Increase in net cash cost position compared to 2017 mainly due to higher volumes from Aktogay, where by-product output is minimal
• Free Cash Flow of $585 million (2017: $452 million)
  • Cash flow from operations of $673 million, lower than $752 million in 2017 due to receipt of $232 million of non-current VAT refunds in the prior year
• Net debt $1,986 million (2017: $2,056 million)
  • Gross borrowings of $3,453 million (2017: $3,877 million) and Gross Liquid Funds³ of $1,467 million (2017: $1,821 million)
  • Reduction in net debt driven by higher free cash flow despite expansionary capital expenditure of $530 million during the year
  • Approximately $130 million of sustaining and expansionary capital expenditure guided for 2018 carried over into 2019
  • $386 million of initial $436 million cash consideration for Baimskaya acquisition paid in January 2019
• Final dividend of 6.0 US cents per ordinary share recommended, which together with the interim dividend of 6.0 US cents per ordinary share paid on 3 October 2018, brings the total dividend for 2018 to 12.0 US cents per ordinary share

Operational highlights

• Copper production¹ increased by 14% and gold production² by 3% compared to 2017
  • Copper production¹ of 295 kt at upper end of guidance range of 270-300 kt, gold² and silver² above guidance
  • 2019 copper production¹ expected to be in the region of 300 kt, as continued growth at Bozshakol and Aktogay offsets lower forecast output from East Region

Near and long term growth in copper

• The Group has established a pipeline of value-accretive growth projects
  • Aktogay expansion project underway to deliver low risk brownfield growth with first production from 2021
  • Completed acquisition of the Baimskaya licence area in January 2019, one of the top ten largest undeveloped copper resources in the world, for $900 million in cash and shares

1. Payable metal in concentrate and copper cathode from Aktogay oxide ore.
2. Payable metal in concentrate.
3. Alternative Performance Measures (APMs) are used to assess the performance of the Group and are not defined or specified under IFRS. For further information on APMs, including justification for their use, please refer to the APMs section on page 54.

Andrew Southam, Chief Executive Officer, said:

“KAZ Minerals increased copper production by 14% and delivered a net cash cost of just 85 USc/lb in 2018, maintaining the Group’s position in the first quartile of the industry cash cost curve. We also progressed our high growth strategy, commencing work on the expansion of Aktogay and securing a new world class project through the acquisition of Baimskaya in Russia. Our proven asset base is generating strong cash flows, enabling the Group to invest in significant growth in copper production in both the near and long term, through value-accretive greenfield and brownfield projects. Over this period, the outlook for the copper price remains positive as supply from existing mines is set to decline, whilst demand from both traditional and new markets is forecast to continue to grow.”

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KAZ MINERALS PLC HALF-YEARLY REPORT FOR THE PERIOD ENDED 30 JUNE 2018

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FINANCIAL HIGHLIGHTS

• Revenues of $1,098 million (H1 2017: Gross Revenues¹ of $837 million, revenues of $721 million)
• Increase in revenues supported by 22% copper sales volume growth and a 20% higher average LME copper price
• EBITDA¹ of $690 million representing a 63% margin (H1 2017: Gross EBITDA¹ of $505 million, EBITDA¹ $429 million)
• Operating profit of $464 million (H1 2017: $291 million)
• Group gross cash cost¹ of 145 USc/lb, in line with H1 2017 (144 USc/lb)
• Industry leading first quartile net cash cost¹ of 82 USc/lb (H1 2017: 64 USc/lb)

OPERATIONAL HIGHLIGHTS

• Aktogay sulphide concentrator achieved design throughput capacity
• Copper production increased by 18% to 140 kt (H1 2017: 118 kt 

FINANCIAL POSITION

• Net debt¹ of $2,052 million at 30 June 2018, $250 million deferred from 2016 paid to Aktogay contractor in H1 2018 and commenced investment in Aktogay expansion
• Gearing level reduced, net debt to EBITDA ratio of 1.4x
• Borrowings of $3,705 million and cash and cash equivalents of $1,653 million
• Interim dividend of 6.0 US cents per share declared, marking the successful delivery of the Bozshakol and Aktogay projects

GROWTH PROJECTS

• Announced the acquisition of the Baimskaya copper project in Russia on 2 August 2018, a globally significant copper deposit. Transaction completion expected in first half of 2019, subject to regulatory approvals
• Aktogay expansion project launched in December 2017 with engineering, contracting and earthworks progressing well

OUTLOOK

• Full year copper production guidance maintained at 270-300 kt and by-product targets unchanged
• Cost guidance unchanged, as strong unit cost performance expected to continue in second half
• Medium term copper market outlook remains positive, as supply from existing mines declines and demand from both traditional and new sectors continues to grow

1. These metrics are non-IFRS measures that the Directors use internally to assess the financial performance of the Group, which are also relevant to users of the financial information. See glossary for definitions. 
2. Includes operations during the period prior to commercial production for the first half of 2017.
3. Reconciliation to operating profit provided in note 4(a)(i) in the financial information. 
4. Reconciliation of EPS based on Underlying Profit provided in note 7 in the financial information.
5. Reconciliation of Free Cash Flow provided on page 20.

KAZ Minerals has delivered strong financial results in the first half of the year due to the ramp up of volumes at Aktogay, higher commodity prices and continued low unit production costs. Following the successful delivery of the Bozshakol and Aktogay projects, the Group now has a portfolio of large scale, low cost operations which provides strong cash generation and has enabled the rapid de-gearing of the balance sheet. Accordingly, the Board has declared an interim dividend of 6.0 US cents per share.

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