Final Results

21 March 2012

Eurasian Natural Resources Corporation PLC

Announcement of 2011 Preliminary Results

Financial Highlights for 2011

·; Solid financial performance despite the challenging economic environment.

·; Revenue up 17% to US$7,705 million.

·; Cost of sales up 24% to US$3,517 million, as a result of rising unit costs across the Group and increased volumes in the Other Non-ferrous and Alumina and Aluminium Divisions.

·; Underlying EBITDA up 7% to US$3,413 million; Underlying EBITDA margin of 44%.

·; Earnings per share down 10% to US 153 cents due to the one-off gain of US$298 million in 2010. Excluding this one-off gain, EPS would show a 5% increase.

·; Final dividend of US 11 cents per share; US 27 cents for the full year. Payout ratio maintained at 18%.

·; Gross available funds of US$658 million; borrowings of US$1,594 million. US$3.7 billion of additional facilities obtained since start of 2011.

Business Highlights for 2011

·; Strong cash flow generation from assets in Kazakhstan; record sales volumes of high-carbon ferrochrome; Alumina and Aluminium and Energy Divisions produced at full available capacity.

·; Cost control and productivity enhancing initiatives kept unit costs for key products in line with expectations.

·; Record capital expenditure of US$1.9 billion; focus on development of key strategic projects, notably the new Aktobe ferroalloys plant, power unit 2 at EEC and the expansion of logistics capacity.

·; Good progress in Africa: significant increases in both copper and cobalt production; agreement reached with First Quantum Minerals ('FQM') and announced in January 2012 to acquire its DRC assets and settle all disputes.

Outlook for 2012

·; Record capital expenditure of US$2.7 billion planned for 2012; total project spend of US$10.9 billion.

·; Production expected to be at full available capacity across all Divisions; increased copper volumes expected.

·; Volatile market environment and pricing uncertainty to persist, but competitive advantage of low-cost position in Kazakhstan to be maintained.

·; Industry cost pressures to continue, reflecting materials, labour, logistics and finance expenses. Social spend to be maintained at approximately 2011 levels.

"2011 has been a year of considerable progress for ENRC. While delivering a sound operational and financial performance, the on-going development of assets across our portfolio has been a key focus of management. There is significant opportunity contained in our world-class international assets, and after having reached an agreement with First Quantum Minerals in early 2012 we are well positioned to become one of the world's major copper producers.

While working towards the fulfilment of this potential, we have not taken our focus from the strengths of our core portfolio in Kazakhstan. We achieved record sales volumes of high-carbon ferrochrome in 2011 and have continued investment across our Divisions to support future growth.

The market remains volatile, but we expect sustained good demand for our products and for ENRC to deliver a strong operational performance in 2012. Our low-cost production base coupled with diverse world-class assets leaves the Group well-placed going forward."

Felix J Vulis, Chief Executive Officer

Eurasian Natural Resources Corporation PLC

Announcement of 2011 Full Year Results (Unaudited)

Summary Group Financial Information (Unaudited):

Results of operations (Unaudited)

The following table sets out selected financial information of the Group's operations for the twelve months ended 31 December 2011 and 31 December 2010:

1 The management of the SABOT logistics business was transferred during 2011 to the Other Non-ferrous Division from the Logistics Division resulting in a restatement to 2010.

For further information, please contact:

The information set out in this announcement relates to the twelve months ended 31 December 2011 and, unless otherwise stated, is compared to the corresponding period of 2010, the twelve months ended 31 December 2010. The Chief Executive Officer's Outlook statement includes an update for the period since 31 December 2011. Where applicable in the document all references to 't' are to metric tonnes, to 'kt' are to thousand metric tonnes, and 'mt' to million metric tonnes unless otherwise stated. Unless stated otherwise, statements relating to market data contained in this announcement are based on external sources, for example research institutes and industry bodies, including: Bloomberg, CRU, Datastream, Fairfax IS, Heinz H Pariser, the IMF, CISA, Metals Bulletin, Tex Report, NBS, Beijing Axis Analysis and others, and are derived from actual and/or estimated data relating to 2011 and are prepared in 2011 or early 2012.

Eurasian Natural Resources Corporation PLC ('ENRC') will announce its 2011 Preliminary Results on Wednesday, 21 March 2012. There will be a presentation to investors and analysts, commencing at 09.30 (London time) in the Auditorium at Deutsche Bank, 75 London Wall, London, EC2N 2DB, United Kingdom. There will be a simultaneous webcast and audiocast on the ENRC website (www.enrc.com).

Forward-looking statements

This announcement includes statements that are, or may be deemed to be, 'forward-looking statements'. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms 'believes', 'estimates', 'plans', 'projects', 'anticipates', 'expects', 'intends', 'may', 'will', or 'should' or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include matters that are not historical facts or are statements regarding the Group's intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial condition, liquidity, prospects, growth, strategies, and the industries in which the Group operates. Forward-looking statements are based on current plans, estimates and projections, and therefore too much reliance should not be placed upon them. Such statements are subject to risks and uncertainties, most of which are difficult to predict and generally beyond the Group's control. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. The Group cautions you that forward-looking statements are not guarantees of future performance and that if risks and uncertainties materialise, or if the assumptions underlying any of these statements prove incorrect, the Group's actual results of operations, financial condition and liquidity and the development of the industry in which the Group operates may materially differ from those made in, or suggested by, the forward-looking statements contained in this announcement. In addition, even if the Group's results of operations, financial condition and liquidity and the development of the industry in which the Group operates are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in future periods. A number of factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in regulation, currency fluctuations, changes in business strategy, political and economic uncertainty. Subject to the requirements of the Prospectus Rules, the Disclosure and Transparency Rules and the Listing Rules or any applicable law or regulation, the Group expressly disclaims any obligation or undertaking publicly to review or confirm analysts expectations or estimates or to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any changes in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Nothing in this announcement should be construed as a profit forecast. The forward looking statements contained in this document speak only as at the date of this document.

Listing Rules

This 2011 Preliminary Results Announcement has been prepared to meet the requirements of the Listing Rules of the United Kingdom's Financial Services Authority ('FSA') to provide additional information to shareholders and should not be relied on for any other purpose or by any other party.

CHAIRMAN'S STATEMENT

It gives me great pleasure to be addressing you for the first time as Chairman of your company, at what is a time of significant opportunity for ENRC. I have been an Independent Director of ENRC since the IPO in 2007.

The Board appointed me as Chairman following the resignation of Dr Johannes Sittard in early February 2012. I would like to take this opportunity to thank him, on behalf of the Board, for his extensive and lasting contribution to the company, first as a CEO and then as Chairman. Your Company greatly benefited from his commitment, vision and clear strategic perspective. We wish him all the best in his future endeavours.

Against a turbulent economic backdrop and a volatile commodity pricing environment, ENRC performed solidly, owing to the underlying strengths of the Group, notably the quality of its tier one assets in Kazakhstan. These world-class assets remain the bedrock on which our expansion programme is based. Following significant acquisitions in preceding years, management focus in 2011 was very much on the development of assets in order to unlock value for our shareholders.

Progress in the development of our assets in Africa has reinforced the Group's confident view on the future of our business in the region. We are well positioned in Africa to progress our projects and increase production. Notably we have finalised the acquisition of some high quality copper assets in the DRC and completed a legal settlement with First Quantum. Through our assets in the DRC we are set to become a significant global copper producer over the next five years. The suite of our African assets in other commodities represents a solid platform for the company's future growth.

In line with international best practice, we have improved our reporting on fatalities to provide additional information to reflect on-site non-work related fatality cases, which includes contractors. We are rolling out best practice safety initiatives across the Group. We will continue to do all we can to improve the safety of our operations with the aim of achieving a zero-fatality result on a long-term basis.

ENRC is committed to fulfilling the highest standards of corporate responsibility and governance. We made significant important steps this year, notably completing our corporate governance review in September 2011. This established a stronger Board structure in line with UK corporate governance best practice, with a composition and expertise that will best support the Group through the next phase of its growth. However, this is not an area in which we can stand still. We have continued to review Board composition, mindful of the need to progressively refresh the Board, with a view to affording it with talented and dedicated directors exhibiting, amongst other qualifications, domain knowledge, long experience of best-in-class corporate governance practices, as well as corporate finance and strategy. It is our intention that the ENRC Board, representing your interests, maintains a clear value-focused strategy and exercises pronounced duty of care and oversight over the execution of such strategy by your management team. I will lead this effort and I will be in a position to report back to you on our progress in the not too distant future.

We are also continuing to ensure that our internal compliance controls are robust and we now have dedicated regional heads of compliance in Kazakhstan, Africa and Brazil. We will issue our first comprehensive Sustainability Report in 2012 detailing all of our activities in this area.

During 2011 we saw the departure of Mr Eduard Utepov, Mr Abdraman Yedilbayev, Sir Richard Sykes and Mr Ken Olisa. I thank them all for their commitment to the Company and for the contribution they have made. We also welcomed Mr Terence Wilkinson to the Board. Mr Wilkinson has a strong mining background with particular experience in Africa and, as an independent non-executive director, is already providing a strong contribution.

We are pleased to recommend to shareholders a final dividend of US 11 cents per ordinary share to be paid on 21 June 2012 to all shareholders on the register on 30 March 2012.

In my role as Chairman I will lead the Group's strategy which will be focused in 2012 on the development of our assets and unlocking their value. We anticipate a consistently strong operational performance across our diversified range of commodities in 2012 and, while the market remains volatile and the pricing environment uncertain, we have a compelling mix of a low-cost production base coupled with diverse world-class assets which leaves the Group well-placed going forward.

CHIEF EXECUTIVE OFFICER'S STATEMENT

ENRC has delivered a solid operational and financial performance in 2011. The competitive advantage of our low-cost operations has underpinned our growth as a leading natural resources group, allowing us to continue our commodity-led expansion strategy, through the diversification of our asset base and the development of our product portfolio.

The continued successful development of our strategic projects and expanding asset base has been a core focus for management in 2011. In Kazakhstan we have made good progress with our new Aktobe ferroalloys plant, with first production expected on schedule in the second half of 2013. We foresee that the highest demand growth in the industry over the next five years will come from speciality steels and foundries which require high quality high carbon ferrochrome. Due to the planned production growth in our Ferroalloys Division ENRC will be well-positioned to meet this increased demand.

In order to further enhance our integrated model and maintain our advantageous cost curve position within the region, progress has continued in the Energy Division with the completion of construction of a 325MW power unit at Aksu in Kazakhstan. Work has also begun on the reconstruction of an additional 325MW power unit. With rising transport costs in the CIS region we have made every effort to increase our self-sufficiency within the Logistics Division, acquiring an additional 2,517 wagons and 1,215 containers in 2011.

In the African copperbelt we have been focused on the development and consolidation of our world-class assets and we have seen significant increases in both copper and cobalt production in 2011.

A considerable amount of resource was spent in 2011 on resolving the dispute with First Quantum Minerals Ltd. ('FQM') regarding the licence for the Kolwezi Tailings project. The agreement reached with FQM in January 2012 and finalised in March has put a period of uncertainty behind us and allowed us to acquire FQM's processing plants at both Kolwezi and Frontier. We are now well-positioned to meet our strategic goal of becoming a significant global copper producer over the next five years. In Mozambique the feasibility study for Licence 871 in the Tete Province is set to complete in H1 2012. This is a substantial long-term growth opportunity, with the potential to strengthen our position in the energy sector and allow us to diversify into the coal export market.

Our operations in Brazil provide us with the opportunity to become one of the leading global iron ore players, providing us with entry to the seaborne iron ore market. During 2011 we have built a considerable presence in the region, with a 175-strong team of employees based in Salvador, Ilheus, Belo Horizonte, Caetite, Aritagua and Salinas. The location of the port has been moved to Aritagua so as to minimise its environmental impact and the focus in the latter part of 2011 was on resubmitting our application for the port Preliminary Licence. We are currently awaiting feedback on our submission.

In 2011 we initiated a major programme to better understand and improve the quality of our key Non-financial Performance Indicators and we have engaged PricewaterhouseCoopers LLP to provide assurance on selected indicators. Work is underway to present our first standalone Sustainable Development Report in 2012. Developing our non-financial reporting is a long-term undertaking and our intention is to deliver high quality data in line with global reporting practices and standards.

In October 2011 we announced our intention to exercise the Group's option to acquire the outstanding shares in Shubarkol Komir JSC ('Shubarkol') for a purchase price of US$600 million. The General Meeting to vote on this related-party transaction was subsequently adjourned in November. After considerable engagement with shareholders, we plan to reconvene a General Meeting for 2 April 2012 to vote on the acquisition. ENRC firmly believes that the acquisition of this high quality asset will enhance our position as one of Kazakhstan's leading coal producers and further our strategic aims in the region.

We are determined to deliver value to all of our shareholders. To this end, we will continue to look at all aspects of our business, including expansions, joint ventures and spin-offs.

On behalf of the Group's management I would like to take this opportunity to thank our employees for their hard work and efforts.

2011 PRODUCTION PERFORMANCE

The Group's key divisions, Ferroalloys and Iron Ore, were impacted during the year by unscheduled equipment repairs, while production at the Alumina and Aluminium and Energy Divisions reflected full available capacity. Copper and cobalt production at the Other Non-ferrous Division showed strong growth against the prior year, in line with our expansion plans for these assets.

·; Ferroalloys: ore extraction amounted to 4.59 mt (2010: 4.82 mt), whilst gross ferrochrome production was 1.37 mt (2010: 1.39 mt), of which 1.23 mt (2010: 1.26 mt) was high-carbon ferrochrome; total gross ferroalloys production was 1.77mt (2010: 1.80 mt). The modest reduction in production related to two separate fires at Aktobe, the emergency stoppage of furnace 63 at Aksu and the suspension of production at Tuoli due to market conditions. ENRC plans to divest of its share of Tuoli in 2012. All other operations have returned to effective full capacity.

·; Iron Ore: ore extraction amounted to 43.21 mt (2010: 43.61 mt). Saleable concentrate production was 8.46 mt (2010: 8.94 mt) and saleable pellet production was 7.65 mt (2010: 8.02 mt). Production was impacted primarily by temporary technical problems with the pelletisers, which are now back at effective full capacity.

·; Alumina and Aluminium: bauxite extraction reached a record 5.50 mt (2010: 5.31 mt). Production of both alumina and aluminium were also at record levels of 1.67 mt (2010: 1.64 mt) and 249 kt (2010: 227 kt) respectively.

·; Other Non-ferrous: total copper contained production was 29.61 kt (2010: 20.27 kt), whilst that of cobalt reached 11.42 kt (2010: 9.65 kt).

FINANCIAL PERFORMANCE

The Group continued to deliver a solid financial performance in 2011 in a challenging economic environment. Revenue rose 16.7% and Underlying EBITDA was up 6.9% reflecting higher sales volumes at the Other Non-ferrous and Alumina and Aluminium Divisions and higher commodity prices. However profitability was reduced due to increased cost pressures. The Group was able to maintain its low cost position compared to our peers despite increasing inflationary pressures on our input costs, primarily raw materials, energy and labour. Excluding the impact of the one-off gain arising on the acquisition of a joint venture in 2010, EPS increased by 4.6%. Basic EPS fell to 153 cents per share (2010: 170 cents per share) as a result of this gain in 2010. A more detailed discussion of the financial performance is contained in the Chief Financial Officer's review.

SAFETY

The total number of work-related injuries, including fatalities, to employees in 2011 was 63 (2010: no comparable data). The Group Lost Time Injury Frequency Rate ('LTIFR') for 2011 was 0.49 (0.45 in Kazakhstan and Russia; 0.72 in Africa). A Group LTIFR rate was not calculated in 2010 as numbers across the Group were not prepared on a comparable basis. As with fatalities, our LTIFR reporting currently adopts Kazakhstan classifications across the Group and reflects cultural conditions in Kazakhstan. This leads to a lower number of reported LTI cases compared to international practice. This remains an area of focus through our work with DuPont looking at safety culture and behaviours.

We have improved our reporting to provide additional information to reflect on-site non-work related fatalities, which includes contractors for 2011. This is a key step towards adoption of international best practice reporting on fatalities. We will continue to take steps to align our classification process to international standards. The on-site work and non-work related fatalities numbered 13 in 2011 (2010: no comparable information available). There were 6 work-related fatalities in 2011 (5 in Kazakhstan and Russia; 1 in Africa), while in 2010 there were 7 fatalities all in Kazakhstan and Russia. Every fatality is unacceptable to us and we express our condolences to the families involved. Our safety programmes will continue to focus on understanding causes and eliminating fatalities.

CAPITAL EXPENDITURE

In 2011 we made considerable progress with our capital expenditure programme, with record capital expenditure of US$1.9 billion (2010: US$1.2 billion), further developing our pipeline of high quality projects which underpin the Group's growth strategy. Strategic reviews and project re-evaluations have nevertheless resulted in some delays in the realisation of capital expenditure projects in the Other Non-ferrous and Iron Ore Divisions.

2011 was a successful year in which we completed the expansion of alumina production, the commissioning of Power Unit 2 - a 325MW turbine at Aksu and continued the expansion of our railway fleet. Key projects across the Group's Divisions include the following:

·; Ferroalloys: progression with the new Aktobe ferroalloys plant

·; Iron ore: development of mine expansion projects

·; Alumina and Aluminium: commissioning of the alumina expansion and on-going construction of the anode plant

·; Other Non-ferrous: further development and review of the copper expansion strategy

·; Energy: commissioning of Power Unit 2 and reconstruction of Power Unit 6 at Aksu

·; Logistics: railway fleet expansion in Kazakhstan

In 2012, capital expenditure is expected to amount to approximately US$2.7 billion of which US$0.8 billion relates to sustaining capital expenditure. The Group's total capital expenditure programme for its expansionary projects is US$10.9 billion.

ACQUISITIONS

In July 2011 the Group completed the acquisition of 100% of the ordinary shares of Dezita Investments Limited ('Dezita') for a total consideration of US$195 million. Dezita owns Exploitation Permit Number PE 1284 in the DRC, a potentially significant copper and cobalt resource. This asset is immediately adjacent to and contiguous with the permits held by the Group's Camrose joint venture and its purchase is consistent with the Group's strategy of consolidating resources in areas proximate to existing Group operations in the region.

In December 2011 ENRC completed the acquisition of Rubio Holdings Limited, which indirectly holds 74% of Amari Manganese (Pty) Ltd ('Amari'), for a total consideration of US$295 million. Amari's key asset is the Kongoni Manganese Project in the Kalahari Manganese Field in South Africa. This acquisition further strengthens our position in a commodity which we believe has very attractive long-term fundamentals.

In January 2012 the Group announced that it had reached a settlement with FQM to acquire its residual assets and settle all claims in relation to its DRC operations for a total consideration of US$1.25 billion. This deal subsequently completed in March 2012.

RISK AND COMPLIANCE

Through 2011 Senior Management and the Board have had a regular dialogue on key risks relating to the Company's strategic objectives. We know that some of the jurisdictions in which the Group operates pose particular and often heightened risks that need to be managed appropriately. We are open for dialogue with shareholders and other stakeholders to communicate our position openly and effectively.

The Group continues to enhance its approach to risk management and internal controls, and is committed to the further development of policies, processes and procedures.

The Group is acutely aware of its obligations regarding compliance with all applicable laws and regulations, as well as our corporate value for fair dealing. We now have 14 compliance officers across our operations. We have completed the first stage of ethics training, delivered online by an independent, internationally-recognised ethics training provider, and have trained hundreds of senior managers face-to-face. ENRC has also launched a whistleblowing hotline, independently administered by the same ethics training provider, which operates 24 hours a day, 365 days a year, in five languages. We have a robust investigations policy and we are now able to effectively and thoroughly investigate whistleblowing reports and other issues and take appropriate corrective action.

OUTLOOK

Although the volatility in global markets persists in 2012, particularly concerning the sovereign debt crisis in Europe, we remain confident in the outlook for our diversified mix of commodities due to sustained growth in emerging markets. Our operations are expected to perform at full available capacity in 2012 to meet this demand, with increased copper production in the Other Non-ferrous Division as we continue to grow volumes in the DRC. We expect that inflationary cost pressures will be evident across the Group again in 2012 but we will make every effort to continue to focus on cost saving initiatives to ensure that our relative low-cost position and competitive advantage is maintained.

Felix J Vulis

Chief Executive Officer

CHIEF FINANCIAL OFFICER'S REVIEW

The Group produced robust results for the year with Revenue and Underlying EBITDA showing solid growth despite challenging market conditions, rising by 16.7% and 6.9% respectively. Commodity prices have generally been favourable which has been a key driver of revenue growth. However our cost inputs have been under strong pressure resulting in some decline in margins.

Of the increase in our total operating costs, 36% resulted from macro-economic factors, primarily inflation and to a lesser extent the strengthening of the Kazakhstani tenge and the Russian rouble and MET growth (influenced by higher commodity prices). In order to mitigate these factors the Group has continued with a number of cost saving initiatives and optimisation programmes resulting in production process improvements, reduction of some consumption rates and increased fuel efficiency.

In addition, 28% of total operating cost increases (including depreciation) were driven by the expansion of our operations and exploration in the Other Non-ferrous Division. We also continued to support our local communities through social investment which has added a total of 10% to the Group's total operating cost increases (including a US$98 million payment to the Nazarbayev Fund in Kazakhstan to support the development of university education in the country).

The Group has continued its growth programme with its significant organic capital expenditure plans and these programmes will continue to be key projects for the Group in 2012 and beyond. Set out later in this review is a summary of our expenditure in the year and the total expected future cost of our capital expenditure projects.

In addition, the Group made two acquisitions during the year and subsequent to the balance sheet date completed the transaction with FQM as detailed in the Chief Executive's statement. We also intend to exercise our call option over Shubarkol and have reconvened a General Meeting to seek shareholder approval for this acquisition.

To ensure the Group has access to sufficient funding to finance the capital expenditure and acquisitions referred to above, we have secured additional liquidity from a number of sources. Three bank facilities were entered into during 2011 providing committed funding of US$1.7 billion. At the end of the year US$1.6 billion of this remained undrawn. Since the year-end we have signed an additional committed funding facility for a further US$2 billion. The existing US$3 billion Euro Medium Term Note programme signed in 2010 has not been utilised, although we continue to consider the programme as an integral part of our future funding strategy. Although the funding environment is a challenging one at present, with the Group's credit rating having recently been downgraded by both Standard & Poor's and Moody's, lenders' confidence in the underlying strength of ENRC is reflected in the Group's ability to raise US$3.7 billion of facilities since the beginning of 2011.

INCOME STATEMENT

Revenue

Revenue increased 16.7% in the year to US$7,705 million (2010: US$6,605 million), which reflected higher commodity prices for all of our key products (iron ore and coal prices reaching all-time highs) and stable market demand. US$948 million (86.2%) of revenue growth was attributable to higher prices, US$115 million (10.5%) due to higher sales volumes and US$37 million (3.4%) reflected an increase in sales of other goods and services. The Ferroalloys Division accounted for 39.9% of the Group's third party revenue, the Iron Ore Division 31.8% and the Alumina and Aluminium Division 14.6%.

Gross margin

Gross margin declined slightly during the year to 54.4% (2010: 56.9%) as strong inflationary pressures pushed up purchase prices for materials and services and also resulted in increased labour costs and electricity tariffs. Increased depreciation and amortisation and MET also had a negative influence on the Group's cost of sales. In order to manage the impact of these cost increases the Group continued to maintain strict cost control and introduced a number of cost saving programmes and productivity initiatives, resulting in unit costs growth for key products being in line with our expectations for the year.

Distribution costs

The increase in distribution costs was primarily due to a US$15 million rise in transportation costs as a result of increases in railway tariffs and longer delivery routes to more distant customers.

General and administrative costs

The most significant change in general and administrative expenses was an increase in sponsorship and social investment costs of US$93 million mainly as a result of the support to the Nazarbayev Fund. In addition we incurred increases to staff costs of US$37 million.

Exploration expenses

Exploration costs increased by US$57 million primarily relating to the Other Non-Ferrous division.

Net other operating expenses

Net other operating expenses increased US$14 million primarily as a result of foreign exchange losses.

Net finance costs

Net finance costs increased US$79 million as a result of increased interest expenses and foreign exchange losses. The increase in our interest expense was due to our increased levels of debt throughout the year.

Share of profits of Joint Ventures and Associates

The net share of profits of joint ventures and associates amounted to US$2 million (2010: US$13 million). This includes a US$14 million profit contribution from the Group's interest in Shubarkol, and losses of US$8 millon and US$4 million from our interests in Camrose Resources and Taurus Gold respectively mainly as a result of exploration and similar expenses in these early stage investments.

Taxation

The Group's income tax expense for the year ended 31 December 2011 was US$769 million (2010: US$780 million), an Effective Tax Rate ('ETR') of 27.9% (2010: 26.2%). The main drivers behind the ETR being higher than the 20% corporate income tax rate in the Republic of Kazakhstan, where the majority of the Group's operations are located, included Excess Profits Tax charges in Kazakhstan, which increased the ETR by 3.8 percentage points, and withholding taxes, mainly relating to the repatriation of dividends from Kazakhstan, which added 1.6 percentage points.

In future periods as the Group starts to develop its greenfield projects, we would expect the Group's ETR to increase as compared with its current level. This is mainly due to the significant expenditure which will be undertaken in jurisdictions where revenues are not yet being generated. The Group's ETR also remains sensitive to prices and market conditions.

BALANCE SHEET

The Group's net book value of property, plant and equipment at 31 December 2011 was US$9,891 million (2010 as restated: US$8,146 million), an increase of 21.4%. Goodwill and other intangibles at 31 December 2011 totalled US$1,410 million (2010: US$1,371 million), an increase of 2.8%.

An analysis of additions in the year arising from the Group's capital expenditure projects in 2011 is set out in the capital expenditure section below.

The Group also purchased Dezita (Copper/Cobalt) for US$195 million and Rubio (Manganese) for US$295 million during the year. The result of these transactions is an increase in property, plant and equipment (primarily mineral rights). Goodwill arose in respect of the Rubio transaction primarily as a result of the recognition of deferred tax under IFRS.

Subsequent to the year end the Group completed the acquisition of FQM's residual claims and assets in respect of the Kolwezi Tailings project, the Frontier and Lonshi mines and related exploration interests, all located in the Katanga Province of the DRC, for total consideration of US$1.25 billion. Further detail can be found in the Chief Executive's statement and note 19 of the preliminary announcement.

During the year, the Group completed the measurement period analysis of the businesses acquired in 2010, the result of which is the reallocation of certain assets and liabilities and a restatement, as required under IFRS, of the comparative balance sheet position. These results are further detailed in note 6 to the financial statements.

A summary of the Group's borrowings is set out in note 16 to the preliminary announcement with further commentary in the Funding and Liquidity section of this review.

The Group's return on capital employed was 23.2% (2010: 28.4%). The calculation of return on capital employed is set out in note 17 to the preliminary announcement. The decrease reflects the growth in capital employed and the increased percentage of early stage exploration projects.

CASHFLOW

Net cash generated from operating activities

The Group generated US$2,143 million from operating activities (2010: US$2,303 million). Working capital requirements increased during the year by US$410 million (US$300 million) primarily as a result of increases in inventories due to lower demand from Magnitogorsk Iron and Steel Works OJSC ('MMK') in Q4 2011, transport limitations in Kazakhstan and increases to raw material costs and also increases in trade receivables due to revised letters of credit payment terms with several of our ferroalloys customers in China.

Net cash used for investing activities

During the year the Group utilised a total of US$2,656 million for investing activities (2010: US$2,368 million). The primary use of these funds was for the acquisition of property, plant and equipment (2011: US$2,121 million, 2010: US$1,245 million) including the Dezita for US$195 million. In addition the Group utilised funds of US$281 million (2010: US$701 million) for the acquisition of subsidiaries, primarily in respect of Rubio (US$36 million), the final payment of US$120 million for the acquisition of MIBA and MPB as detailed in note 6 and a returnable deposit in relation to the 2012 FQM acquisition of US$125 million.

Net cash flow used for financing activities

The Group used cash resources of US$448 million (2010: US$826 million inflow) in its financing activities during the year ended 31 December 2011. This comprised: US$100 million drawn from unsecured term loan facilities, US$54 million drawn from various export credit facilities, less repayment of borrowings of US$154 million and cash outflows for dividends of US$448 million (2010: US$ 248 million).

FUNDING AND LIQUIDITY

During the year the Group did not utilise the US$3 billion Euro Medium Term Note programme signed in 2010 and as at 31 December 2011 there were no issues under the programme. The programme is still considered to be an integral part of the Group's future funding strategy.

The Group secured additional liquidity during the year with the signing of three bank facilities: an unsecured term loan facility for US$1 billion with Russian Commercial Bank (Cyprus) Limited (part of the VTB group), an unsecured senior US$500 million revolving credit facility supported by a group of international banks and an export credit facility in the amount of EUR-185 million (as detailed in note 16).

At the end of 2011 and 2010, the average maturity of outstanding debt was more than five years, and net gearing at 31 December 2011 was 8.2% (2010: 0.4%) (as detailed in note 17).

Since the year end, the Group has continued to raise additional facilities to support the continuing growth of the business (as detailed in note 19). On 1 February 2012, the Group entered into an unsecured five year US$2 billion facility with Sberbank of Russia which is available in quarterly tranches of $500 million during the first year of the agreement. On 16 February 2012, the Group signed an amendment to the existing revolving credit facility reducing the amount to US$467 million but extending the maturity until 2014.

CAPITAL EXPENDITURE

2011 Capital Expenditure

In 2011, the Group's capital expenditure amounted to US$1,921million (2010: US$1,187 million), an increase of US$734 million, or 62%.

The geographic split of capital expenditure in 2011 was Kazakhstan US$1,563 million, Africa US$238 million, Brazil US$82 million and Other US$38 million.

Capital Expenditure

Capital Expenditure Projects 

The estimated cost of the Group's main capital expenditure projects totals US$10.9 billion which is comprised of projects at execution, planning and design and pre-feasibility stages.

The Group classifies its projects under four categories:

·; Execution: full approval by the Board; ordering of equipment and construction in progress;

·; Planning and Design: initial approval by the Board for feasibility studies;

·; Pre-feasibility: projects at the stage of pre-feasibility study that have not been approved by the Board;

·; Deferred: previously identified projects that have been put on hold.

1 Previously as Expansion/replacement of ferroalloy smelting capacity (Aktobe) - 440 ktpa.

TBD - To be determined

DIVISIONAL OVERVIEW

Ferroalloys Division

The Ferroalloys Division primarily produces and sells ferrochrome, as well as other ferroalloys, for use as alloying products in the production of steel, whilst manganese and chrome ore are sold to third-party producers of ferroalloys as well as the chemical industry. ENRC is the largest ferrochrome producer in the world by chrome content and the lowest cost producer of high-carbon ferrochrome. The Ferroalloys Division is vertically integrated, having its own chrome ore and manganese ore mines feeding its ferroalloy production in Kazakhstan and Russia. In addition to its own ore, the Division also benefits from competitively priced electricity supplied by the Energy Division, as well as having a gas-fired power station at its Aktobe plant. ENRC plans to fully divest of its shares in Tuoli, its Chinese ferroalloy plant, during 2012.

Iron Ore Division

The Iron Ore Division consists of producing assets in the Republic of Kazakhstan and exploration and development assets in Brazil. In Kazakhstan the Iron Ore Division produces and sells iron ore concentrate and pellets primarily to steel producers and on the basis of full year 2011 data, is a material exporter of iron ore and in the lowest quartile of the global cost curve. Kazakhstan-based operations include iron ore mines, crushing, beneficiation and pelletising plants and a thermal power station. In Brazil, the Division is focused on the development of a high-quality iron ore deposit in the Caetite region in the State of Bahia, as well as two early stage exploration projects, both located in the State of Minas Gerais.

Alumina and Aluminium Division

The Alumina and Aluminium Division produces and sells alumina to aluminium producers, and also produces and sells the Group's own aluminium. ENRC believes, based on full year 2011 data, that the Alumina and Aluminium Division is the world's ninth largest supplier of traded alumina by volume and is at the lower end of the global industry cost curve for alumina and aluminium. The Alumina and Aluminium Division's vertically integrated operations include: bauxite mines, a limestone mine, an alumina refinery, an aluminium smelter and a power station.

Energy Division

The Energy Division is one of the largest electricity providers in the Republic of Kazakhstan, accounting for approximately 16.3% of the country's recorded electricity production in 2011 (2010: 16.6%). Taking into account all of the energy generation facilities of ENRC, including SSGPO, the alumina refinery (Aluminium of Kazakhstan ('AOK')) and the Aktobe ferroalloys smelter ('Kazchrome'), the Group's share of Kazakhstan's energy supply was 22.5% in 2011 (2010: 22.6%). The Energy Division provides a cost-effective energy supply to the Group's other principal Kazakhstani operating divisions, with internal consumption of 71.5% (2010: 73.9%) of the electricity produced in 2011, as well as producing a surplus for sales to third parties in Kazakhstan.

Other Non-ferrous Division

The Other Non-ferrous Division operates principally in the Democratic Republic of the Congo ('DRC'), where it mines copper and cobalt and processes the ore through Boss Mining Sprl ('Boss'), a subsidiary of ENRC, with the State-owned La Générale des Carrières et des Mines ('Gécamines') as a minority (30%) partner. ENRC also owns 50.5% of Camrose Resources Limited, whose primary assets, held through its subsidiaries, includes interests in five copper and cobalt exploitation licences situated in the DRC. In Q1 2012, ENRC acquired additional processing capacity at Kolwezi and at the Frontier mine. The Chambishi smelter, acquired in April 2010 and located in Zambia, processes material mined in the DRC at Boss. The Other Non-ferrous Division's copper and cobalt operations include open cast mines, crushing, beneficiation, concentrator plants and an electro-winning facility in the DRC and the Chambishi copper and cobalt smelter in Zambia. In addition, the Other Non-ferrous Division includes a number of development prospects: Mozambique - coal; Mali - bauxite; Zimbabwe - platinum; and South Africa - fluorspar, coal and manganese. The Group's African logistics and trucking business, SABOT, operates in Central and Southern Africa.

Logistics Division

The Logistics Division provides transportation and logistics services to the Group's principal Kazakhstani operating Divisions, as well as to third parties. The Division's operations include freight forwarding, wagon repair services, railway construction and repair services and trucking. The availability of these services within the Group mitigates many of the risks associated with the supply of raw materials and delivery of products to customers. In addition, the Division operates a railway transfer and reloading terminal on the Kazakhstan/China border, facilitating the Group's access to the Chinese market.

OPERATING AND FINANCIAL REVIEW

Ferroalloys Division

1 Unit costs: Cost of sales divided by sales volumes.

2 Ferroalloys production analysis has been revised to exclude foundry ferrochrome metal from production volumes, with 2010 volumes restated.

Production

In 2011, the Ferroalloys Division produced: 3,567 kt of saleable chrome ore (2010: 3,574 kt); 1,009 kt of saleable manganese ore concentrate (2010: 996 kt); and 1,766 kt of ferroalloys (2010: 1,803 kt), including 1,226 kt (2010: 1,258 kt) of its primary product, high-carbon ferrochrome. In 2011 226 kt (2010: 216 kt) of ferroalloys were consumed internally.

Sales and Pricing

Excess capacity at the end of 2010 resulted in a US 5 cent drop in the European ferrochrome benchmark price in Q1 2011, to US$1.25 per pound of chrome. However, the better than expected demand in the first quarter from all steel segments and as a result a reduction in stocks as well as continued cost pressures in the Republic of South Africa led to a US 10 cent increase in Q2 2011. Key market features going into Q3 2011 included concerns over nickel pricing, excess stainless capacity in China and the sovereign debt crisis in Europe. These features in conjunction with strong ferrochrome production levels globally meant that prices going into the traditionally weaker third quarter declined by US 15 cents, to US$1.20 per pound of chrome. With no positive signs of recovery at the end of Q3, prices remained unchanged for Q4 2011. Ferrochrome market conditions continued to weaken through the fourth quarter in line with the weakening of the global economy.

In H1 2011, the demand for medium- and low-carbon ferrochrome increased due to associated strong demand in the engineering, alloy and specialty steel sectors, with prices increasing by between US 30 to 40 cents per pound of chrome. In H2 the demand slowed and prices correspondingly declined as the general economic mood became increasingly negative over the Eurozone crisis. By the end of the year prices had decreased by approximately US 30 cents from their peak in April-May.

The price of chrome ore showed a 13% increase during H1 2011, reflecting improvements in the ferrochrome market. However during H2 2011 these gains were relinquished as demand slowed. China is the largest consumer of chrome ore and through H2 there was a large build-up of stock at Chinese ports as the fall in demand resulted in the price of chrome ore declining almost 35% from its peak earlier in the year.

The year began with high stock levels of manganese alloys and ores and despite an initial encouraging start, prices soon declined as carbon steel production was slower than expected in China and margins at western steel mills came under pressure. The decline in ore prices due to high stock levels fed through to subsequent lower pricing for manganese alloys as the year progressed.

In 2011, the geographical mix of sales saw marked declines to China, South Korea and the Far East compared to last year. These were offset by a marked increase in the proportion of sales to Japan and a more modest increase in the share of sales to western markets. Sales to all other regions were broadly similar to the previous year.

Results for the year

The Ferroalloys Division contributed US$1,169 million, or 34.2%, of the Group's Underlying EBITDA in 2011 (2010: US$1,403 million; 43.9%); a decrease of US$234 million as the Division faced both considerable inflationary pressure and challenging market conditions.

The Ferroalloys Division achieved another record level of ferroalloys sales of 1,542kt, improving previous year sales by 0.9%, which compensated for weaker sales of chrome ore (11.5% down year-on-year). High-carbon ferrochrome volumes increased 0.3%, whilst other ferrochrome products experienced more substantial growth rates against 2010 levels.

Total revenue for the Division increased US$88 million (2.9%), of which US$71 million was due to higher commodity prices, US$13 million reflected higher sales volumes and US$4 million was added from increased sales of goods and services to other Group Divisions. High-carbon ferrochrome sales contributed US$45 million (US$32 million due to higher prices and US$13 million due to higher sales volumes), or 51.1%, of the increase in the Division's revenue. A continuing shift of sales towards Western European, Japanese and North American markets, which were more favourable in terms of prices, also positively impacted revenue.

The decline in gross margin was due to the cost pressures being experienced with unit cost of sales for ferroalloys 17% above that of 2010. 

A US$247 million increase in cost of sales comprised a US$245 million increase in unit cost of sales and US$2 million cost growth from higher sales volumes. The main factors affecting the unit cost of sales growth were higher input material prices, particularly for reductants and fuel along with increased electricity tariffs and wage rates. 

Within these increases in cost of sales depreciation and amortisation increased by US$10 million. MET totalled US$173 million (2010: US$172 million) for the year.

The US$35 million increase in distribution costs was mainly attributable to increased transportation costs as a result of increased railway tariffs and the higher volumes of sales to more distant customers such as North America, Japan and Western Europe, instead of China.

General and administrative expenses increased US$60 million primarily as a result of additional social investments (primarily in respect of the Group's contributions to the Nazarbayev fund), depreciation and amortisation and staff costs.

Capital Expenditure

The construction of the New Aktobe Ferroalloy Plant is the key investment project within the Ferroalloys Division, which underpins the Group's growth strategy in ferroalloys. Four Direct Current (DC) furnaces with capacity of 440 ktpa are being built. In 2011 the project progressed significantly, with the completion of the pits and foundations for all four furnaces, the installation of air pipes for all of the furnaces and the construction of the furnace covers. The commissioning date and total cost of this project remain unchanged at H2 2013 and US$750 million respectively.

Iron Ore Division

1 Unit costs: Cost of sales divided by sales volumes.

Production

In 2011, the Iron Ore Division mined 43,212 kt of iron ore (2010: 43,614 kt). This was processed into 17,636 kt of primary iron ore concentrate (2010: 17,702 kt), with saleable concentrate production of 8,459 kt (2010: 8,937 kt). The balance was used to produce 7,648 kt (2010: 8,017 kt) of pellet.

Sales and Pricing

Although the annual total crude steel production during 2011 increased by 6.8% compared to 2010, global steel production declined in H2 2011. During H2 2011 the industry capacity utilisation rate fell below 80% (H1 2011: 82%). Spot iron ore prices fell dramatically during September and October 2011, decreasing approximately 35% and subsequently hovering in a narrow range of US$130-140 per dry metric tonne through to the year-end. Any slowdown in steel production generally has the additional effect of reducing the demand for pellet relative to concentrate, as a focus on throughput is replaced by an emphasis on low cost raw materials. This trend has been evident in the CIS since the end of Q2 2011.

In 2011 The Magnitogorsk Iron and Steel Works OJSC ('MMK') accounted for 63.4% (2010: 63.6%) of the Iron Ore Division's revenue and 10.1 million tonnes of saleable product. The MMK contractual price was determined based on Platts publications on a quarterly basis from February 2011 up to December 2011. In December 2011 the quarterly pricing mechanism was reviewed to reflect monthly conditions and a 15% discount is to be applied for 2012 against the formula used in 2011. In Q4 2011, 421 kt of iron ore concentrate was sold to Mechel and Evraz after MMK sharply decreased demand from September 2011.

Iron Ore Division

Summary income statement

Results for the year

In 2011, the Iron Ore Division contributed 44.1%, or US$1,505 million (2010: US$1,133 million; 35.5%) of the Group's Underlying EBITDA. Underlying EBITDA margin also continued to improve reaching 61.4% (2010: 60.4%). 

Revenue rose by US$576 million, or 30.7%, primarily as a result of high prices for iron ore which reached an all-time high in the first half of the year. Selling prices increased 37% compared to 2010 giving additional revenue of US$655 million. By contrast, weaker sales volumes reduced the Iron Ore Division's total revenue by US$84 million. The 4.4% decline in volumes sold reflected decreased sales to Chinese customers and the lower demand from MMK. The sales mix did not change significantly with higher priced iron ore pellet representing 48.1% of the total iron ore sales (2010: 48.3%), contributing US$299 million to the Division's revenue growth (US$349 million received owing to favourable prices was partially offset by US$50 million decrease as a result of lower sales volumes). An increase in concentrate prices added US$303 million to the Division's revenue, offset by a US$34 million decrease due to decline in sales volumes.

The Division's gross margin increased to 72.7% (2010: 68.5%) underpinned by the strong selling price performance although the Division also experienced pressure on unit costs which increased 18.4% compared to 2010. 

A US$101 million increase in cost of sales resulted from higher unit cost of sales, which was partially offset by a US$23 million decrease in costs resulted from lower sales volumes. The unit cost of sales growth was in line with our expectations resulting from higher prices of input materials, fuel, electricity, higher wage rates and higher MET.

Depreciation and amortisation increased cost of sales by US$12 million. In total, a higher MET of US$114 million (2010: US$93 million) was incurred in the year resulting from higher realised prices.

A US$27 million increase in distribution costs resulted from higher railway tariffs. This increase was partially offset by proportionally more products being shipped to Russia and Kazakhstan, which had lower tariffs in comparison with rail transportation to China.

General and administrative expenses increased by US$112 million, including increases of US$73 million in social investments (primarily in respect of the Group's contributions to the Nazarbayev fund), US$15 million in staff costs and US$11 million in professional services (primarily relating to the BMSA project).

Capital Expenditure

The expansion strategy of the Iron Ore Division in Kazakhstan includes an increase in ore mining volumes, as well as expanding the product portfolio with three new products: high quality concentrate, high quality pellets and hot briquetted iron ('HBI'). This will increase total saleable volumes to approximately 23 mtpa.

·; Mine expansion: work has commenced to secure the required ore feed for the expansionary projects. The estimated cost is US$825 million of which 45% will be spent by the end of 2014. The remaining amount will be spent by 2030 in order to support our growth strategy;

·; Concentrator expansion - 7 mtpa high grade concentrate: In 2011 we completed certain preparation works including the laying of foundations, the ore supply tunnel, the "diaphragm wall" and framing installation;

·; Pelletiser expansion: the addition of 5 mtpa of high quality pellet. Performance specifications have been reviewed and an engineering study will commence shortly;

·; HBI Plant: development of 1.8 mtpa of HBI. The plant site has been prepared and is ready for civil works to commence;

·; BMSA: In order to enter the seaborne iron ore market, ENRC is currently developing the BMSA project in Brazil. The Installation Licence for the mine has been granted by the Instituto do Meio Ambiente ('IMA'), which will allow ENRC to begin construction of the iron ore mine and beneficiation plant at Caetite. This will have a target production of 19.5 mtpa. The Preliminary Licence for the port has been delayed, owing to a change in proposed location from Ponta da Tulha to Aritagua due to environmental reasons. The Preliminary Licence will outline the environmental constraints for the receipt of the Installation Licence at the port. Upon receipt of the Installation Licence, we will then proceed with the construction of the port, with receipt of the port Operational Licence from the Environmental agency and first operation expected in 2015.

Alumina and Aluminium Division

1 Unit costs: Cost of sales divided by sales volumes.

Production

In 2011, the Alumina and Aluminium Division mined 5,495 kt of bauxite (2010: 5,310 kt) and produced 1,670 kt of alumina (2010: 1,640 kt) and 249 kt (2010: 227 kt) of aluminium.

Sales and Pricing

The London Metal Exchange ('LME') aluminium price drives pricing of the Group's alumina and aluminium. The LME aluminium price in 2011 showed high volatility with a prevailing downward trend for most of the year except for Q1. A high of US$2,772 per tonne was recorded in late April 2011 and a low of US$1,945 per tonne in late December. Primary aluminium is used to make aluminium semi-finished products, like sheet and plate, extrusions, forgings, and castings. Demand for these products was strong in all key applications - transportation, packaging, building and construction - and across all geographical markets, in the first half of 2011. The second half of the year showed a marked slowdown in demand, particularly in Russia, an important market for the Group's aluminium.

In 2011 the Group delivered 1,170 kt (2010: 1,176 kt) of alumina to United Company RUSAL ('RUSAL') under a long-term contract with a minimum delivery volume of 1,164 ktpa. This contract expires at the end of 2016. The pricing under this contract is linked as a percentage to the LME price of primary aluminium. In 2011 RUSAL, the Division's single largest customer, accounted for 38.1% (2010: 42.3%) of the Division's sales revenue. The balance of the alumina production is consumed by the Group in its own aluminium smelter, Kazakhstan Aluminium Smelter ('KAS').

In 2011 the Group shipped 251 kt (2010: 222 kt) of primary aluminium. The 13.1% increase in volumes reflects KAS in 2011 having produced at 100% of its design capacity for the first full calendar year. Deliveries to Russia in 2011 accounted for 104 kt (2010: 50 kt) of the total aluminium sales volume. The remainder of the aluminium was sold to Glencore, by way of a distribution agreement, to customers in Asia and Europe, which represented 28.7% (2010: 39.8%) of the Division's revenue in 2011.

Alumina and Aluminium Division

Results for the year

The Alumina and Aluminium Division continued to deliver strong results benefiting from favourable prices and additional aluminium sales. The Division contributed US$332 million, or 9.7%, to the Group's Underlying EBITDA (2010: US$267 million; 8.4%).

The Division's revenue increased US$219 million or 23.7% compared to 2010. Higher prices increased revenue by US$153 million whilst additional aluminium sales volumes contributed US$64 million and sales of other goods and services added US$2 million.

The Division's gross margin was stable although this was influenced by higher revenue off-set by alumina unit costs increasing by 22.9%.

Cost of sales increased US$150 million with the rise in unit costs amounting to US$109 million and higher sales volumes adding US$41 million. Unit cost of sales increases were mainly due to higher prices of certain input materials such as fuel, coal and soda ash, as well as increased depreciation, wage rates and electricity tariffs. 

Depreciation and amortisation added US$9 million to these cost increases. MET totalled US$15 million (2010: US$13 million).

Distribution costs increased US$3 million, or 5.8%, to US$55 million (2010: US$52 million), mainly reflecting higher sales volumes.

General and administrative expenses increased 18.2% to US$52 million (2010: US$44 million) primarily due to higher staff costs.

Capital Expenditure

The expansion of alumina production project was commissioned in July 2011.

Completion of a 136 ktpa anode plant will allow ENRC to produce high quality anodes, reduce our dependence on third party suppliers and provide sufficient volumes for the Group's increased aluminium production capacity. In 2011 the framing for the anode smelting case and the kiln lining were both completed. Start up and adjustment works have begun at the supporting facilities. The commissioning date and total estimated cost are both unchanged at H2 2012 and US$240 million respectively.

 Other Non-Ferrous Division

1 Production numbers for saleable copper and cobalt refers to tonnes of contained metal. Contained metal consists of total units, whether in metal form or metal units contained in concentrate and sludge, net of internal consumption.

2 Prices and unit cost for 2010 were restated in order to reflect the revised methodology of unit cost as detailed below:

·; Prices do not include by-products in order to reflect the revised methodology of unit cost.

·; The methodology for calculation of unit costs for copper and cobalt was revised with a view to standardising reporting across the diversified range of production units of the Other Non-ferrous Division and to apply market best practice to benchmark the Group's performance versus its peers. Unit cost of copper: Cost of sales for copper less cobalt concentrate by-product credits at Luita divided by copper metal sales volumes. Unit cost of cobalt: Cost of sales for cobalt metal less copper by-product credits at Chambishi divided by cobalt metal sales volumes. 

Overview

Integration of ENRC's copperbelt assets continues to be focused on exploration, resource delineation, mine planning, operational efficiency, processing methodologies and recoveries. Emphasis has currently been placed on expanding copper production capacity through the Boss Mining copper oxide expansion project and the development of the Camrose Mashitu operation. 

Exploration

In the DRC, the extensive drilling programme continued through 2011 with the completion of an additional 136,130 metres, (2010: 103,200 metres). Since the acquisition of CAMEC Plc drilling at Boss Mining has totalled 239,330 metres. The Boss Mining technical team is currently analysing this data. In conjunction with our joint venture partner, the drilling programme continued at Camrose in 2011, with 28,340 metres completed on the Mashitu deposits and 3,760 metres completed on the Kii and Kalukundi deposits. Camrose aims to define Probable Reserves during 2012 to accelerate development of these assets.

In South Africa, there are two separate exploration programmes underway focusing on manganese and fluorspar. The Kongoni Manganese Project is located in the Kalahari Manganese Field ('KMF') and comprises primarily the mineral rights to Kongoni 311, which were acquired in December 2011 (acquisition of Rubio Holdings Limited). The KMF has historical total Indicated and Inferred Resources amounting to 147 mt at 35.7% Mn and 5.9% Fe. Further exploration is in progress, with the objective of completing a bankable feasibility study in H2 2012. The fluorspar project is situated in the North West province of South Africa and was acquired as part of CAMEC Plc in 2009. The current drilling programme is focussed on proving the substantial shallow open cast resources to indicated category.

Drilling in Mozambique on the Group's coal licences on the north shore of Cahora Bassa (Licences 869 and 870) commenced during the year. Material coal was discovered in minable blocks on these licences and a JORC-compliant statement will be completed in Q2 2012. The feasibility study on Project Estima (Licence 871) is due for completion Q2 2012.

Mining

Copper was sourced mainly from Kabolela North mine at an average strip ratio of 3.2 bank cubic metres ('BCM') of waste per tonne of ore, while Mukondo Mountain continued to supply cobalt ore at a strip ratio of 10 BCM of waste per tonne of ore. A total of 1.06 million tonnes of cobalt ore was mined from Mukondo while copper from Kabolela North amounted to 1.45 million tonnes with the balance sourced from Mukondo. During 2011 pre stripping commenced at Kabolela South for mining in 2012.

Production: Copper

Production volumes increased by 48.7% at Boss Mining's heap leach operations, compared with 2010, due to higher capacity from additional heaps as well as additional electrowinning capacity from three extra tankhouses. The sixth tankhouse was commissioned in December 2011. Lower copper mining volumes were offset by an increased mining grade of 3.0% (2010: 2.3%).

Production: Cobalt

At Boss Mining, cobalt production increased during 2011 due to a higher mined grade of 1.39% (2010: 1.29%). Cobalt concentrate produced at Boss Mining increased by 9% against the comparable period. Cobalt volumes at Chambishi increased by 49%, however 2010 reflected only 9 months of full production.

Sales and Pricing: Copper

Despite price declines over the course of 2011, the average full year price for copper as traded on the LME was the best on record and 17% higher than in 2010. This was due to concerns regarding copper supply, causing a strong price rally in H1 2011. After spending most of the first nine months of 2011 trading within a US$9,000 to US$10,000 per tonne range, the LME copper price collapsed in October to a low of US$6,635 per tonne, as a result of the debt crisis in Europe, destocking and credit tightening in China and a faltering US economic recovery. The copper price recovered in late 2011, rebounding to end the year at US$7,554 per tonne.

Contracts are typically negotiated annually, fixing a premium, discount or 'Refining Charge' (for varying quality and delivery locations) alongside the period of which the LME price is fixed. During H1 2011 premiums for higher grade copper and discounts for lower grades were well below 2011 annual contract terms due to a slowdown in physical spot purchases given the record price levels. During Q3 and in particular Q4, low consumer stocks and lower LME prices attracted buyers back to the market. Coupled with reduced scrap availability and major mine-supply disruption, premiums increased notably and Refining Charges to treat lower grade cathode reduced significantly.

Sales and Pricing: Cobalt

The cobalt metal price stood at US$17.75 per pound at the start of 2011, peaking at US$18.30 per pound in early March 2011 and reaching a low of US$13.45 per pound at the close of December 2011. The average for the year was US$16.00 per pound. The decrease in price in 2011 was mainly due to oversupply of material and slowing demand from China.

Other Non-ferrous Division

1 The management of the SABOT logistics business was transferred during 2011 to the Other Non-ferrous Division from the Logistics Division resulting in a restatement to 2010.

Results for the year

The Other Non-ferrous Division contributed US$74 million, or 2.2%, to the Group's Underlying EBITDA (2010: US$67 million; 2.1%). In 2011, the primary revenue and Underlying EBITDA generating businesses of the Division continued to be the copper and cobalt operations in the DRC and Zambia.

The Division's revenue increased by US$175 million which was mainly attributable to higher cobalt and copper sales volumes contributing US$68 million and US$62 million respectively with favourable metal prices contributing a further US$30 million. Sales of other goods and services contributed (primarily SABOT's transport services) an additional US$15 million. 

The Divisions gross margin percentage fell to 16.9% from 20.1% primarily as a result of increased cost of sales. The increase in cost of sales was predominately due to the increase in production volumes and higher non-cash depreciation and amortisation charges of US$55 million of which $25 million is attributable to mineral rights.

Although the overall unit cost of copper increased to $5,123/t (2010:$25/t), the unit cost (excluding depreciation, amortisation and by-product credits) decreased by $593/t in 2011. The increase in the overall copper unit cost was attributable to an increase in non-cash cost of $1,043/t coupled with a significant decrease in cobalt concentrate by-product credit on a per tonne basis. Cobalt unit costs decreased by $5,467/t due to the division achieving economies of scale and improving operational efficiencies at the Chambishi plant. Unit cost (excluding depreciation, amortisation and by-product credits) decreased by $5,631/t.

Distribution costs increased primarily as a consequence of the higher sales volumes.

General and administrative expenses increased US$17 million, or 27.4%, to US$79 million (US$62 million in 2010). This increase is primarily due to the provision for the impairment of trade receivables (US$11million) and increases in staff costs as a result of recruiting additional technical professionals to strengthen the management team of the rapidly expanding business.

The increase in exploration cost of US$54 million is a result of the division focusing on the delineation of greenfield copper and cobalt deposits to increase current resources. Exploration activities also continued in the Division's coal and fluorite deposits. 

Net other operating income increased to US$12 million primarily relating to gains arising from the lower than provisioned settlement of a legal dispute at Chambishi and the transfer of exploration interest to the Taurus joint venture.

The results for 2010 have been restated to reflect the transfer of the SABOT business from the Logistics Division as detailed in note 4.

Capital Expenditure

In order to fully utilise synergies arising from the late 2011 and 2012 acquisitions in Africa, the Group is undertaking a review of its growth strategy for the Other Non-ferrous Division. As this continues, the Group may consider a number of necessary amendments to the previously announced investment programme. 

·; Expansion of copper (oxide) production: Phases 1 and 2 of the expansion project have been completed. Leaching and electrowinning capacity has increased at Luita with the addition of five heap leach pads and three new tankhouses, increasing production to 40 ktpa of copper. The total current project cost is estimated at US$150 million, a reduction from the US$280 million previously reported due to the removal of the acid plant from the project scope (US$60 million); the reduction of the Luita Expansion Phase 1 scope, with five heap leach pads planned instead of ten and three tankhouses planned instead of five (reduced throughput); and the exclusion of new crusher circuit (not required due to the reduced throughput). A further phase to increase capacity up to approximately 50 ktpa is currently being assessed.

·; Expansion of copper (sulphide) production: The construction of a 70 ktpa contained copper sulphide/oxide flotation concentrate plant (30 ktpa sulphide and 40 ktpa oxide) is being considered at an estimated cost of US$465 million with anticipated completion in 2013.

·; Chambishi copper plant (LME grade A): Construction of a new solvent extraction and electrowinning (SX/EW) plant at Chambishi is scheduled to be completed in 2012 and will increase capacity to 55 ktpa from the existing 24 ktpa of grade B copper cathode. The project entails installing two new copper solvent extraction circuits as well as modifying and upgrading the existing electrowinning tankhouse to produce grade A copper cathode product. The total projected cost is US$80 million.

·; Oxide cobalt SX/EW plant: Construction of the cobalt SX/EW plant was partially completed and Phase 1 (copper solvent extraction) has been commissioned. Phase 2 was suspended pending a review of the economic viability of the project.

Energy Division

1 Unit costs: Cost of sales divided by sales volumes.

Production

In 2011, the Energy Division produced 13,993 GWh (2010: 13,711 GWh), of which 71.5% (2010: 73.9%) was used by other Divisions internally within the Group. Coal extraction was broadly flat at 20,110 kt (2010: 20,102 kt). In addition to sales of surplus electricity, the Energy Division also sold 6,260 kt of coal to third parties (2010: 6,964 kt), which represented 31.1% of total coal mined (2010: 34.6%).

Sales and Pricing: Coal

Strong demand from the industrial and power sectors resulted in coal output in Kazakhstan increasing 4.5% in 2011. The Energy Division's total sales of coal to third parties nevertheless fell 10.1% in 2011, due to growth in the Group's internal consumption. In Kazakhstan, ENRC sold 2.1 million tonnes of coal to third parties (2010: 3.0 million tonnes), at an average sales price of KZT1,155 (US$7.9) per tonne (2010: KZT934 (US$6.3) per tonne), an increase of 23.7% in local currency terms. The 0.9 million tonne reduction in coal sales reflected the decision to divert some coal sales to higher margin Russian customers. Russian utilities increased their steam coal imports from Kazakhstan, which was prompted by a rise in electricity generation in Russia in response to the improving economy and a rise in industrial demand. The Energy Division sold 4.2 million tonnes of coal to Russia (2010: 3.9 million tonnes) at an average sales price of US$28.4 per tonne (2010: US$24.9 per tonne).

Sales and Pricing: Electricity

Total electricity generation in Kazakhstan grew 3.7% to 85.8 billion kWh (2010: 82.7 billion kWh). Energy Division sales of electricity to third parties increased 14.7% in 2011. The average sales price to third parties in local currency increased 19.9% to KZT5.6 (US 3.82 cents) per kWh (2010: KZT4.67 (US 3.17 cents) per kWh. This increase was in line with the State regulated tariff price cap increase set in Kazakhstan.

Energy Division

Results for the year

The results of the Energy Division were significantly affected by higher sales prices, including electricity which were in line with the State regulated annual price cap increases in Kazakhstan. The Division contributed US$360 million, or 10.5%, to the Group's Underlying EBITDA (2010: US$308 million; 9.6%).

The Energy Division's third party revenue increased 24.0% to US$248 million (2010: US$200 million) reflecting a shift towards third party sales of electricity as a result of reduced demand from the Ferroalloys and the Iron Ore Divisions. Higher prices increased total revenue by US$35 million and higher sales volumes by US$13 million. The Division's sales to other Group entities increased US$28 million, or 8.2%, to US$370 million (2010: US$342 million), as a result of increased electricity consumption for aluminium production (the launch of Phase 2 of the aluminium smelter) and increased demand for coal from the Alumina and Aluminium, Iron Ore and Ferroalloys Divisions.

The Division's gross margin fell to 62.9% from 64.8% primarily as a result of increased unit costs.

Cost of sales increased 19.9%, to US$229 million (2010: US$191 million) driven by increased sales volumes of electricity (US$2 million), depreciation and amortisation (US$15 million) and higher unit costs of sales added US$21 million. The main factors leading to the increase in depreciation were the commissioning of Power Unit 2 at Aksu and the replacement of equipment.

The unit cost increase was affected by a rise in purchase prices for materials and spare parts, particularly for explosives and fuel along with higher material consumption at coal mining operations due to increased stripping volumes. In addition, increased wage rates and higher ecological payments also affected the unit cost of sales growth.

Distribution costs increased 15.5% to US$67 million (2010: US$58 million), due to increases in transportation tariffs and more volumes of coal were shipped to more distant Russian customers (compared to Kazakhstan customers).

General and administrative expenses reduced US$7 million, or 21.9%, to US$25 million (2010: US$32 million), principally due to lower sponsorship and donations during the year.

Capital Expenditure

The new Power Unit 2 at Aksu, with a capacity of 325 MW, was commissioned in June 2011.

In April 2011 Power Unit 6 was taken offline for reconstruction and in H2 2011 the power unit was completely disassembled. Foundation works for the turbine have been completed and construction and installation works are advancing due to the early delivery of equipment. The commissioning date for this project remains unchanged and it is expected to be delivered in 2013 at a total estimated cost of US$265 million.

Logistics Division

1Data includes all internal and third-party rail transportation.

2Data applies to Transsystema only.

3Unit costs: Cost of sales divided by sales volumes.

1 The management of the SABOT logistics business was transferred during 2011 to the Other Non-ferrous Division from the Logistics Division resulting in a restatement to 2010.

Results for the year

The Division contributed US$95 million, or 2.8%, to the Group's Underlying EBITDA in 2011

(2010: US$68 million, 2.1%).

The Division's third party revenue increased slightly to US$149 million, or 0.7%, (2010: US$148 million). Sales to other Group Divisions increased US$78 million, or 67.8%, to US$193 million (2010: US$115 million) due to providing wagons rented from third parties to transport ferroalloys and aluminium.

Cost of sales increased US$44 million, or 23.9%, to US$228 million (2010: US$184 million) mainly driven by increased costs of wagon rental due to a shortage of availability.

General and administrative expenses went up 88.0% to US$47 million (2010: US$25 million), principally due to an expense relating to the valuation at fair value less cost to sell of assets held for sale.

The results for 2010 have been restated to reflect the transfer of the SABOT business to the Other Non-ferrous Division as detailed in note 4.

Capital Expenditure

The Logistics Division plans to expand its railway fleet to improve the self-sufficiency of the Group in the transport of its own materials. ENRC's railway fleet has expanded significantly in 2011, with the purchase of 2,517 wagons and 1,215 containers. In 2012 it is envisaged that the Group will purchase approximately 2,330 additional wagons.

CONSOLIDATED INCOME STATEMENT (Unaudited)

The above Consolidated Income Statement should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

Consolidated Balance Sheet (Unaudited)