Final Results

23 March 2011

Eurasian Natural Resources Corporation PLC

Announcement of 2010 Preliminary Results

Financial Highlights for 2010

·; Strong financial performance in the year, as a result of record production volumes and the recovery in the markets for our products.

·; Revenue up 72% to US$6,605 million. Like-for-like revenue up 62%.

·; Cost of sales up 46% to US$2,847 million, as a result of increased volumes and rising costs, as well as the inclusion of the Other Non-ferrous Division. Like-for-like costs rose 28%.

·; Underlying EBITDA up 118%, to US$3,194 million; Underlying EBITDA margin of 48%.

·; Earnings per share up 110%, to US 170 cents; including a one-off gain of US$298 million related to the BMBV acquisition and expensed acquisition-related costs of US$73 million.

·; An effective tax rate of 26.2%, including the impact of the above items.

·; Final dividend of US 18.0 cents per share; US 30.5 cents for the full year. Payout ratio of 18%.

·; Strong balance sheet maintained, with gross available funds of US$1,672 million; borrowings of US$1,632 million.

Business Highlights for 2010

·; Production of the Group's principal commodities, high carbon ferrochrome, iron ore, alumina, aluminium and coal all at record levels.

·; Progress on cost control initiatives and productivity gains, partially off-setting cost pressures.

·; Completion of Phase 2 of the aluminium smelter in May; construction of the new 440 ktpa high carbon ferrochrome plant at Aktobe underway.

·; Further acquisitions completed to enhance the Group's asset portfolio: additional copper and cobalt assets in the DRC and Zambia; and expansion of the iron ore asset base in Brazil.

Outlook for 2011

·; Capex programme increased to an estimated US$11.1 billion, with new amounts planned for Other Non-ferrous, Energy and Logistics Divisions.

·; In 2011 capex spend of approximately US$2.5 billion; further increase in financing requirements.

·; Strong growth in the developing economies expected to continue to underpin strong demand and pricing.

·; Production expected to be maintained at effectively full available capacity.

·; Cost growth to continue, in line with the industry experience, reflecting materials, labour, transportation and depreciation and finance expenses.

"The Group's strong performance in 2010 was built on the solid foundations of the businesses in Kazakhstan which delivered record production in the year. China's economic growth and our strategic location remained key, while we also saw recovery in our traditional markets. Maintaining and exploiting our advantaged cost position is also critical. We remain positive on the Group's prospects for 2011, although the control of costs growth and the development of our assets in Africa will be important issues for management, as will be the continued near-term risk of commodity market volatility. We made further progress with our growth strategy by establishing the foundations for growing businesses in Africa and Brazil, with major benefits to be realised in the years ahead."

Felix J Vulis, Chief Executive Officer

Eurasian Natural Resources Corporation PLC

Announcement of 2010 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 2010 and 31 December 2009:

For further information, please contact:

The information set out in this announcement relates to the twelve months ended 31 December 2010 and, unless otherwise stated, is compared to the corresponding period of 2009, the twelve months ended 31 December 2009. The Chief Executive Officer's Outlook statement includes an update for the period since 31 December 2010. 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 2010 and are prepared in 2010 or early 2011.

Eurasian Natural Resources Corporation PLC ('ENRC') will announce its 2010 Preliminary Results on Wednesday, 23 March 2011. 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 2010 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

2010 was another successful year for ENRC. We continued to execute our growth and diversification strategy, including significant acquisitions in Africa and Brazil. Our operations in Kazakhstan continued to perform strongly throughout the year with record levels of production and capacity utilisation which, along with improved markets and management's cost control measures, resulted in an increase in earnings per share of 110%.

The strength and focus of our management team has been critical for the implementation of our strategic plans. Kazakhstan has provided a stable platform on which to build the Group's wider ambitions, supported by the country's proximity to our main markets of Russia and China, its wealth of mineral resources and by the efforts of our employees. Our disciplined approach to acquisitions enabled us to make progress towards becoming a more diversified mining group. We believe that by extending our portfolio of commodities and products we are strengthening our business model.

The Group made significant progress in its diversification strategy during 2010, with material additions to the Group's scope in both central Africa and Brazil. These transactions hold considerable value potential, and balance the opportunities they offer with the demands that are placed on internal resources and the complexity of realising integration synergies. We place considerable emphasis on thorough financial and legal due diligence and risk assessment in order to ensure the optimal return for shareholders over the life of the projects.

We continued to invest in training and development and this helps ensure that our workforce is better able to meet the challenge of integrating and developing our suite of assets. The commitment of our employees, in Kazakhstan and elsewhere, was instrumental in enabling us to take advantage of improving global economic conditions to deliver good results. On behalf of the Board, I offer thanks to all our employees.

The continued extension of health and safety initiatives throughout the Group remained a key focus. Although we have seen a reduction in the number of fatalities, seven people lost their lives at work during 2010. Every fatality is investigated so that lessons are learned for the future. Our view remains that all fatalities can be avoided and are unacceptable.

Two new appointments were made to the Board in 2010. In January we announced the appointment of Professor Doctor Dieter Ameling as an independent non-executive Director and in August, Mr Jim Cochrane, already the Group's Head of Sales and Marketing, joined the Board and was promoted to Group Chief Commercial Officer.

In February 2011, Mr Felix J Vulis, our Chief Executive Officer, decided to step down for personal reasons. The Board fully understands his decision and is grateful for his commitment to serve until a new Chief Executive Officer is appointed in order to ensure a smooth management transition.

We are pleased to recommend to shareholders a final dividend of US 18.0 cents per ordinary share to be paid on 15 June 2011 to all shareholders on the register on 1 April 2011 making the full year dividend US 30.5 cents. Our dividend policy remains unchanged. Payment of the final dividend is subject to shareholder approval at the Annual General Meeting which will be held on Wednesday, 8 June 2011.

We believe that the global economic outlook is still improving and expect that 2011 will offer further opportunities for the Group to build on the success of 2010.

Dr Johannes Sittard

Chairman

chief executive OFFICER's statement

In 2010 the Group delivered a strong operating and financial performance, with production volumes at record levels. This performance was built on the robust core businesses of the Group in Kazakhstan, as well as the continued strength of the Chinese economy, the growth evident in emerging markets generally and greater stability in the developed economies.

The Group also continued to make significant strategic progress during the year. In Kazakhstan we focused on plans to enhance our existing asset base and increase investment in capacity. In May, Phase 2 of the aluminium smelter commenced operations on time and on budget. The progress that we have made in recent and ongoing capex projects - for example, the Aktobe ferroalloys expansion, Phase 2 of the aluminium smelter and the increasing power generation capacity - gives us continued confidence in the Group's prospects.

In addition, we continued to grow through acquisitions, notably expanding our presence in copper, cobalt and iron ore. Acquisitions during the year have enhanced our assets in Africa - primarily in the Democratic Republic of the Congo ('DRC'). We are undertaking an extensive exploration programme to scale up the level of resources and to prove the reserves base. Whilst we remain in the initial stages of the development of the DRC assets, the exploration programme has given us greater confidence in the scale of our ambitions. 2010 has also seen us complete the initial phase of integration of Central African Mining & Exploration Company Plc ('CAMEC') into the Group.

We made an investment in Northam Platinum to give us strategic optionality in a commodity which we believe has very good prospects. With this acquisition, along with our copper and cobalt assets, along with the potential coal and platinum projects, we expect Africa to be a more important geography in the future of the Group.

2010 also saw the Group enhance its presence in iron ore, with acquisitions in Brazil. The Group's Brazilian assets are all projects around the development of the Brazilian Government's East-West rail link to open up the Bahia region to economic development. These projects will provide the Group with entry to the world's 1 billion tonne seaborne iron ore trade and will enable us to offer products to new customers in the Asia-Pacific, Americas, Europe and Middle East regions. With the additional capacity offered by Brazil, along with the expansion in Kazakhstan, we have positioned the Group to emerge later in the decade as a leading global iron ore player and, as a result, this will shift the balance of our business.

The Group's management extends its thanks to all of its employees for their continued efforts in 2010 and for their loyalty and commitment.

In February of this year I made the decision to step down from the Group for personal reasons. I am pleased to have been associated with the Group for so many years, through the development of the business, with its emergence as a public company and to have had the opportunity to lead its expansion as Chief Executive Officer over the last two years.

2010 PRODUCTION PERFORMANCE

In 2010 the Group achieved a record production performance, reflecting effective full available capacity of the Group's principal Kazakhstani businesses throughout 2010. Management's success was built on leveraging of low cost production, the Group's location and the retained workforce, in addition to a rebuild of sales volumes, notably for ferroalloys, in traditional markets as well as into China.

·; Ferroalloys: ore extraction amounted to a record 4.82 mt, whilst total gross ferrochrome production was 1.44 mt, of which 1.31 mt was high-carbon ferrochrome; total gross ferroalloys production rose to 1.86 mt. Through 2010 the Division's Kazakhstan operations were running at effectively full available capacity and exceeded the record volumes of 2007. Production recovered at Serov and Tuoli to effective full capacity at the end of 2010.

·; Iron Ore: ore extraction amounted to some 43.61 mt, ahead of the prior high of 40.22 mt in 2007. Saleable product amounted to 8.94 mt of concentrate and 8.02 mt of pellet.

·; Alumina and Aluminium: bauxite extraction reached a record 5.31 mt, exceeding the previous high in 2008. Alumina volumes rose to 1.64 mt as part of the expansion in alumina capacity. Aluminium production was at its full capacity run rate (250 ktpa) from May and totalled 227 kt for the year.

·; Other Non-ferrous: total production of copper cathode and sludge was 20.27 kt whilst that of cobalt contained reached 9.65 kt in both metal and concentrate, in line with the plan.

·; Energy: coal extraction reached a record 20.10 mt, exceeding the previous high of 2009. Power generation reached 13,711 GWh, again a new high, and reflected efforts to maximize available capacity in order to meet the Group's growing internal power requirements and to take advantage of the new electricity price regime. Internal power consumption reached 73.9% of total production.

2010 FINANCIAL PERFORMANCE

The Group's strong financial performance in 2010 was underpinned by a rapid response to the market's recovering appetite for commodities, its strategic location and its low cost position. These factors were partially offset by increased costs in relation to the build out of the Other Non-ferrous Division.

For the Group, margins rose as like-for-like revenue growth of 62% outstripped the increase in like-for-like total costs of 28%. Total revenue rose 72% to US$6,605 million, due to both higher prices and significantly higher sales volumes, including new sales of aluminium and copper and cobalt. Total costs growth reflected both higher volumes and rising unit costs, which was a feature for the industry as well as the Group in 2010, and the inclusion of the Other Non-ferrous Division. Underlying EBITDA rose 118% to US$3,194 million, with the Underlying EBITDA margin increasing to 48%. Earnings per share was ahead 110% to US 170 cents, including a one-off gain arising in relation to the accounting for the Brazilian acquisition (Bahia Minerals BV ('BMBV')) in September 2010 of US$298 million and acquisition related costs in general and administrative expenses of US$73 million. The Group's effective tax rate for the year is 26.2%, which included the impact of these two items.

The Group saw a substantial increase in operating cash flow during the year, rising to US$2,303 million (2009: US$1,209 million). At the year end the Group maintained a strong balance sheet position, with net debt of US$37 million, having secured additional funding from international banks, export credit agencies, the Chinese Development Bank and the Kazakhstan Sovereign Wealth Fund 'Samruk-Kazyna'.

HEALTH & SAFETY

Health and safety remains a key priority for the Group. In 2010 we undertook a number of major initiatives to raise engagement and compliance with health and safety standards. This was in response to the challenging environment of 2009 and our efforts to improve performance across the Group. We continued with the implementation of our safety management system, with improved reporting and with a rollout of our new Safety Culture Improvement Project across our businesses in Kazakhstan and Russia. The project will enable us to build an integrated organisational structure, provide managerial leadership and establish effective safety procedures and performance standards. We introduced new communications tools and an improved incentive system for line managers, raising the priority of health and safety, and undertook behavioural audits across all of the Divisions. A special site visit was conducted to the African operations and we developed a safety management system integration plan. Corporate safety standards and reporting procedures are being applied to all operations in Africa.

For the Group the number of fatalities in 2010 was 7 (2009: 12), with 3 out of 8 of the principal operations in Kazakhstan and Russia avoiding any fatalities in both 2010 and 2009. All deaths are regrettable to us and we express our condolences to the families involved. The number of work-related injuries (excluding the Other Non-ferrous Division) for 2010 was 45 (2009: 64). The Lost Time Injury Frequency Rate ('LTIFR') (excluding the Other Non-ferrous Division) was 0.41 (2009: 0.68) per one million hours worked. The Other Non-ferrous Division had zero fatalities, 52 injury cases and an LTIFR of 2.88. In 2011 the Group will integrate the reporting of health and safety statistics of the Other Non-ferrous Division into those of the Group as a whole. The Group remains focused on improving its delivery of health and safety based on the adoption, in 2008, of an aspiration of 'zero injuries'.

CAPITAL EXPENDITURE

For 2010 capital expenditure amounted to US$1,187 million (2009: US$1,147 million), approximately US$300 million below our initial expectations, due to the timing of certain investments and management's decision to revise the planned development and defer expenditure on a number of projects in Africa. Management prioritised a review of the assets of the Other Non-Ferrous Division to provide a better basis for determining the optimal capital expenditure for the development of the businesses.

Project highlights in 2010 included:

·; Ferroalloys - we signed supply agreements for capital equipment and machinery, as well as engineering, procurement and construction contracts. We are now progressing with the construction of four furnaces with 440 ktpa gross capacity at Aktobe.

·; Iron Ore - the completion in June of a metal casting plant and ongoing feasibility studies for the expansion of iron ore extraction and the development of new high quality concentrate, high quality pellet and Hot Briquetted Iron ('HBI') capacity.

·; Alumina and Aluminium - the completion of the 125 ktpa Phase 2 of the aluminium smelter in early May, the ongoing expansion of alumina production to 1.7 mtpa in 2011 and the initiation of construction of a 136 ktpa anode plant.

·; Energy - the commissioning of the new overburden stripping equipment in June; and

·; Other Non-ferrous - the commissioning of Phase 1 of the cobalt SX/EW plant, which started to produce its first copper.

At the start of 2011 management re-evaluated planned capital expenditure. The Group has added the purchase of wagons and trucks in the Logistics Division, re-assessed investments in the Other Non-ferrous Division which were increased to US$810 million and made additional changes to the Energy Division spend. We have also included the projected spend on the BML Project and MIBA. As a result, 'Execution' and 'Planning and Design' (both formerly 'In Progress') and 'Pre-feasibility' (formerly 'Under Review') capital expenditure totals US$11.1 billion.

Capital expenditure is expected to amount to about US$2.5 billion in 2011 (excluding BML), as we accelerate a number of the Group's key growth initiatives, in particular spend on the Aktobe smelter and in the Iron Ore, Other Non-ferrous and Logistic Divisions. 2011 includes US$0.6 billion for sustaining capital expenditure.

ACQUISITIONS

In 2010, the Group accelerated its growth strategy in our targeted commodities, The underlying aim is to build a portfolio of tier 1 assets, which are large scale and scalable, having extended mine lives and with the potential to be towards the lower end of the cost curve. Our recent activity has focused on Africa, which has an outstanding mineral resource base, where we have established an operational platform for copper and cobalt, and in Brazil, where we are looking to build a presence in the seaborne iron ore market and aspire to emerge as a major player. The Group's acquisition's strategy is unchanged and remains interested in its major core products, ferrochrome and iron ore, but will also consider looking at opportunities to enhance our recently acquired copper, cobalt and platinum assets, as well as the potential of thermal coal.

In April-May 2010 the Group completed the US$300 million acquisition of Enya Holdings BV ('Enya') which holds a 90% interest in Chambishi, a Zambian copper and cobalt producer. In May the Group purchased a 12.2% interest in Northam Platinum, a major platinum producer in South Africa and subsequent purchases increased the holding to 14.35%; the total consideration paid was US$345 million. In June the Group completed the US$75 million purchase of the outstanding 50% of the issued share capital of SMKK. SMKK has exploration permit assets contiguous to the Group's existing operations in the DRC. The acquisition of the outstanding 50% of SMKK allows the Group to reinforce its resource and production capacity in the DRC. In August the Group purchased 50.5% of Camrose Resources Limited and its subsidiaries ('Camrose') for US$175 million. The primary assets of the Camrose joint venture are high quality copper and cobalt exploitation licences located in the DRC.

In September the Group completed the purchase of the outstanding 50% of the 'BML Project', an iron ore resource in Brazil, for a net cash consideration of US$670 million. In October the Group announced the purchase of MIBA and subscribed for 51% of MPB for up to US$304 million. MIBA and MPB own iron ore licences in Brazil proximate to the East-West rail link and the BML Project.

In January 2011 the Group announced the extension of a call option originally granted in February 2009 in conjunction with the acquisition of a 25% interest in Shubarkol, one of Kazakhstan's largest thermal coal producers. The call option gives ENRC the right to acquire the outstanding 75% of the ordinary shares of Shubarkol for a consideration of some US$600 million. The call option extension, which has been granted for nil consideration, extends the expiry date of the call option to 31 January 2012.

RISK

Through 2010 the Executive management and the Board had a regular dialogue with shareholders. These discussions included corporate governance and the business acquisition processes, as well as the perceived level of risk ascribed to ENRC. The Group is cognisant of shareholders' views. We are aware that some of the jurisdictions in which the Group operates pose particular and often heightened reputational issues that need to be managed appropriately. The Group continues to be open for dialogue with shareholders, and other stakeholders, to represent its position and resolve any such issues.

On 3 December 2010, Congo Mineral Developments Limited ('CMD'), a subsidiary of First Quantum Minerals Limited ('FQM'), served a claim for an estimated US$2 billion on four subsidiaries ('Highwinds Group') of Camrose Resources Limited, a joint venture company in which the Group holds 50.5% of the share capital, in relation to the Kolwezi tailings project. The Highwinds Group has applied to strike out the claim.

In 2010, the Group continued to enhance its approach to risk management and established a Group-wide Compliance function. The Group is continuing with the recruitment of additional high calibre individuals and the further development of policies, processes and procedures, in particular to support the acquisition and integration process, are underway.

INDUSTRY OVERVIEW

The stainless steel industry saw a significant recovery in 2010, with production for the year estimated at about 31.3 mt, up 21% from 25.9 mt in 2009. China remained both the largest and fastest growing producer of stainless steel with an estimated 11.4 mt in 2010, accounting for some 36% of total production. The speed of the recovery in global stainless steel volumes, coupled with low stockpiles at the beginning of 2010, tightened the ferrochrome market considerably and, as a result, the European benchmark price rose US 35 cents per pound (to US$1.36) in Q2 2010. The subsequent increase in ferroalloys production and a global slowdown in stainless steel output, created an oversupply going into H2 2010, which resulted in the benchmark falling US 6 cents in Q3 and, into Q1 2011, a further US 5 cents (to US$1.25). This has broadly followed the pattern of the spot price of ferrochrome in China, increasingly an industry bellwether. For the industry, capacity utilisation in 2010 amounted to 84.5%. Looking forward to 2011 pricing will depend to a large extent on Chinese demand, however, it will also be constrained by the still material spare capacity of the ferrochrome industry and the ability of China to increase production to meet domestic demand. Longer term, higher costs, particularly in South Africa, should support prices at higher levels, while supply constraints, also in South Africa, could provide further upside.

For iron ore, the improvement in the Russian steel industry in 2010 enabled us to sell higher volumes to our principal customer, Magnitogorsk Iron and Steel Works ('MMK'), however, this was limited by the iron ore surplus that continued in Russia. Sales to MMK amounted to approximately 10.6 mt. Sales to China, which doubled in 2009 versus 2008, made up some of the shortfall in volumes to MMK, and remained broadly steady in 2010 at 5.6 mt. There were some additional sales to Arcelor Mittal in Kazakhstan. The greatest opportunity for us to develop sales in the future is the ongoing industrialisation of our traditional markets in North West China, along with the access that will be offered by the new China Gateway rail link due to be fully operational in 2012. The market for higher value added products is another opportunity for the Group, hence the project to build HBI capacity. A. Platts-based pricing formula has been agreed with MMK and will be valid until the end of 2012. Overall we expect China's continued increase in steel production and its strong demand for iron ore to keep the market tight and support strong pricing in the medium term.

OUTLOOK

The longer term outlook for the Group's main commodities and its main markets of China, other Asia Pacific countries and Russia, remains very positive as these commodity intensive economies continue to grow. GDP growth in China appears well supported at the level of 7%-9% per annum, while the prospect for robust growth remains for emerging markets more generally. Furthermore, supply constraints, underpinned by a range of different factors, continue to affect our main commodities and support prices in the short-term. Positive signs are also emerging in the United States and some European economies. Nonetheless there are some risks for the immediate future as China seeks to control and redirect its growth, with ongoing uncertainties in certain European economies and as Governments around the world seek to rein back on the stimulus packages introduced in response to the recent financial crisis and ameliorate inflationary pressures. Together these increase the likelihood of near term volatility in both the prices and growth trajectories of our commodities. Nonetheless, we remain confident of robust demand continuing for our products.

In 2011 the Group will continue to seek to maximise its production potential. However, notwithstanding some limited upside in ferroalloys, iron ore and alumina and aluminium, as well as the continued building of copper and cobalt production, the capacity growth of the Group will be limited until its large capital expenditure projects start coming on line in 2013.

2011 will require the Group to maintain an intense focus on costs. Cost inflation is affecting the whole industry, but we will continue to focus on efficiency improvement initiatives. Costs growth is across materials, transportation, fuel and other inputs, as well as logistics costs, and all are expected to show significant growth in 2011; Kazakhstan labour costs will rise in line with inflation. We also expect some limited appreciation of the Kazakhstani tenge ('KZT') against the US dollar during the course of 2011 and are working with an average exchange rate forecast in the range of KZT142 to KZT144. The further development of our African assets will also be a factor impacting costs in 2011.

The Group's strategy remains focused on growing long-life, scalable and low production cost assets to deliver value for our shareholders. Following the acquisitions of last year to develop the Group's commodities and geographic asset base, management will be focused in 2011 on proving the new assets, firming up development plans and implementing the capital expenditure programme. Capex will require a strong management focus and in 2011 we will expect to deliver progress on the Aktobe ferroalloys programme, our iron ore investments, and in copper and cobalt in Africa. We are ready to initiate progress in Brazil as soon as the port licence is approved. We will not forego the potential of further acquisitions as an important route for further growth, particularly those filling out our portfolio and in line with our strategy.

With our strong balance sheet, the scalable asset base, the low cost potential of our asset suite and strategic locations, we are well positioned to enhance shareholder value over the longer term.

Felix J Vulis

Chief Executive Officer

chief financiaL officer's review 

2010 has been a year of strategic progress for the Group, continuing to integrate acquisitions, while maintaining our organic growth programme. The Group has numerous and significant growth projects ahead of it, which will require further substantial investment. The combination of strong operational cash generation, our robust balance sheet and our ability to attract a broad range of funding providers gives us confidence that we are able to source the substantial funding necessary to meet our growth objectives. The Group's cash balance at 31 December 2010 of US$1,595 million (2009: US$830 million) and a recently signed unsecured senior US$500 million corporate revolving credit facility gives us further confidence in our liquidity position.

The Group produced strong financial results in 2010 with all of the Divisions showing growth in revenue and Underlying EBITDA. Increased revenue was driven by both higher production and prices in all of our principal businesses. Despite increased costs the Group's Underlying EBITDA improved 118.5% to US$3,194 million (2009: US$1,462 million), with an improved margin of 48.4% (2009: 38.2%).

In relation to business combination transactions entered into during the year there have been two impacts on the results of the Group that arise from changes in IFRS requirements. Acquisition related costs of US$73 million have been expensed and, as detailed below, a gain related to the acquisition of control of BMBV of US$298 million. These amounts are excluded from Underlying EBITDA. As a result of the strong financial performance and these items, the Group's basic and diluted earnings per share increased to US 170 cents per share (2009: US 81 cents per share).

Revenue

In 2010 the Group achieved a record level of high-carbon ferrochrome and iron ore sales volumes. In addition, iron ore prices reached record levels during the year. Revenue increased 72.4%, or US$2,774 million, to US$6,605 million (2009: US$3,831 million), which reflected the continued recovery of commodity prices and market demand. Of this increase in revenue, US$1,812 million, or 65.3%, was due to higher prices, US$591 million (21.3%) due to higher sales volumes, and US$371 million (13.4%) due to the inclusion of the Other Non-ferrous Division. The Ferroalloys Division accounted for 45.2% of Group revenue, the Iron Ore Division 28.4% and the Alumina and Aluminium Division 13.7%.

Gross margin

The gross margin improved significantly during the year to 56.9% (2009: 49.2%). This was due to significant increases in the selling price achieved for our products, partially offset by increased raw materials costs and taxes, such as Mineral Extraction Tax ('MET'). Total MET for the year was US$278 million (2009: US$166 million). The Group mitigated some of these cost increases by improvements in labour productivity rates and improved efficiency in certain raw materials and electricity consumption rates. The Group's focus will remain on cost control as the pressures on our production unit costs are likely to be sustained.

Distribution costs

The increase in distribution costs was primarily due to a US$81 million rise in transportation costs, as a result of higher sales volumes and an increase in Kazakhstani railway tariffs of approximately 14%. Agency and commission fees and other distribution costs increased US$13 million and US$25 million respectively. The Other Non-ferrous Division added US$13 million to the total increase in distribution costs.

General and administrative costs

The most significant changes in general and administrative expenses were non tax deductible costs of US$73 million in respect of acquisition related costs which, under the revised IFRS 3 'Business combinations', can no longer be capitalised for the year ended 31 December 2010. There was no requirement to restate the prior year in this respect.

In addition, staff costs increased US$45 million, of which US$20 million related to the Other Non-ferrous Division. The Other Non-ferrous Division added further costs of US$29 million to the increased total of general and administrative expenses.

Other operating (expenses)/income

In 2009 the Group recorded a one-off foreign exchange gain of US$210 million, resulting from the devaluation of the Kazakhstani tenge against the US dollar. There were no similar exchange related items arising in 2010.

Gain related to the acquisition of BMBV

Included within the income statement for the year is a one-off non-taxable gain resulting from the acquisition of BMBV of US$298 million. This gain arose as a result of the requirement under IFRS to fair value the Group's existing interest in the business at the date of acquisition and to report any gain or loss in the income statement.

Net finance costs

The finance income and costs for 2009 included a one-off foreign exchange gain of US$104 million and a loss of US$75 million respectively, resulting from the devaluation of the Kazakhstani tenge against the US dollar. There were no similar exchange related items arising in 2010.

Share of profits from Joint Ventures and Associates

The net share of profits of joint ventures and associates amounted to US$13 million (2009: US$31 million). This includes a US$11 million profit contribution from the Group's 25% interest in Shubarkol, US$4 million from the BMBV joint venture (for the period before it became a subsidiary, with effect from 21 September 2010) and a US$2 million loss from Camrose.

Taxation

In November 2010, the Republic of Kazakhstan extended indefinitely the applicable 20% rate of Corporate Income Tax and the current applicable rates of MET.

The Group's income tax expense for the year ended 31 December 2010 was US$780 million (2009: US$377 million), an Effective Tax Rate ('ETR') of 26.2% (2009: 26.2%).

The ETR included: the impact of the US$298 million fair value gain on acquisition of Bahia Minerals BV reducing the rate by 2 percentage points; US$73 million of non tax-deductible acquisition costs which increased the rate by 0.5 percentage points; and the revaluation of deferred tax balances due to changes in the applicable Corporate Income Tax rate in Kazakhstan which resulted in a deferred tax charge of US$48 million, increasing the ETR by 1.6 percentage points.

The Group's ETR remains sensitive to market conditions and high commodity prices. The Group's income tax expense of US$780 million included a US$148 million Excess Profits Tax ('EPT') charge, accounting for an increase in the ETR for the year of 5 percentage points.

During the year the Group suffered US$26 million of withholding taxes, mainly relating to the repatriation of dividends from Kazakhstan which added 0.9 percentage points to the ETR.

Exchange rates

In 2010 the average Kazakhstani tenge to US dollar exchange rate was 147.36 (2009: 147.50).

BALANCE SHEET

The Group's net book value of property, plant and equipment at 31 December 2010 was US$8,186 million (2009: US$5,480 million), an increase of 49.4%. Goodwill at 31 December 2010 totalled US$1,368 million (2009: US$579 million), an increase of 136.3%.

The Group made a number of acquisitions during the year. The result of these acquisitions has been significant increases in property, plant and equipment including mineral rights from the acquisition of BMBV and of MIBA and MPB and the Chambishi smelter (which was acquired through the acquisition of Enya Holdings BV).

Goodwill arose on the acquisition of Chambishi primarily because of the strong strategic location of the assets within the copper and cobalt belt of Zambia. Chambishi is well placed to take advantage of the potential growth in the copper and cobalt mining activity within the region. The acquisition complements the Group's strategy of expansion in the copper and cobalt business. Goodwill arose from the other acquisitions primarily as a result of the recognition of deferred tax under IFRS.

In addition, the Group also completed the measurement period following the acquisition of the CAMEC group of businesses in 2009. The result of the finalisation of this work 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 of the preliminary announcement. There was no material impact on the income statement for 2009 or 2010 on the completion of this exercise.

A detailed analysis of additions in the year arising from the Group's capital expenditure projects is set out in the Capital Expenditure section of this report.

The Group also acquired a 14.35% interest in Northam Platinum Limited, which is held within other financial assets.

Deferred tax liabilities increased to US$1,176 million (2009 US$455 million) as a result of the acquisitions detailed above and the requirement under IFRS to recognise a deferred tax liability in respect of fair value adjustments.

A summary of the Group's borrowings is set out in note 17 of this announcement with further commentary in the Funding and Liquidity section of this review.

The Group's return on capital employed was 28.3% (2009: 13.8%). The calculation of return on capital employed is set out in note 18 of this announcement.

CASHFLOW

The following table provides a summarised cash flow statement for the years ended 31 December 2010 and 31 December 2009:

Net cash generated from operating activities

The Group generated cash of US$2,303 million (2009: US$1,209 million) from operating activities, an increase of US$1,094 million.

Increased commodity prices and a recovery in demand were the main drivers of the rise in gross profit and increased cash inflows in 2010 versus 2009. Working capital increases totalled US$305 million.

Net cash used for investing activities

Net cash used in investing activities reflected the Group's on going growth strategy. Purchase of property, plant and equipment totalled US$1,245 million. Payments made in respect of the acquisitions of subsidiaries and joint ventures totalled US$764 million. Further detail regarding these acquisitions can be found in note 6 and note 15 to the Preliminary Results announcement.

Net cash flow generated from/(used for) financing activities

The Group generated cash resources of US$826 million from its financing activities during the year ended 31 December 2010. This was primarily; a US$400 million loan borrowed from the Development Bank of Kazakhstan under a 15 year facility agreement; a structured trade finance facility for US$500m based on the iron ore offtake contract with MMK; US$500 million borrowed from JSC Sovereign Wealth Fund 'Samruk-Kazyna' under a 10 year facility agreement; net of repayment of borrowings of US$360 million and cash outflows for dividends of US$238 million.

FUNDING AND LIQUIDITY

During the year the Group continued to diversify its sources of funding and signed a US$3 billion Euro Medium Term Note ('EMTN') programme which is a key element of our funding strategy to ensure that the Group has flexibility to meet the commitments of its significant capital expenditure programmes. This programme will be used to take advantage of opportunistic funding in the capital markets. As at 31 December, there were no issues under the programme.

The Group continued to raise debt in its traditional markets and expanded the range of lenders to include the JSC Sovereign Wealth Fund 'Samruk-Kazyna' and the Development Bank of Kazakhstan.

On 18 March 2011, the Group signed an unsecured senior US$500 million Revolving Credit Facility which will significantly enhance the Group's headroom and provide liquidity to the Group's business operations. Part of the Group's strategy is to forge strong relationships with key banking partners to support the growth of the business.

The average maturity date on outstanding debt facilities is currently greater than five years. Net gearing at year end was 0.4% (2009: (5.5)%). The calculation of gearing can be found in note 18.

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, Russia and China. 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.

Iron Ore Division

The Iron Ore Division consists of the Sokolov-Sarbai Mining Production Association ('SSGPO') in the Republic of Kazakhstan, as well as Bahia Minerals BV ('BMBV'), Mineração Minas Bahia SA ('MIBA') and a 51% interest in Mineração Peixe Bravo SA ('MPB') in Brazil. SSGPO produces and sells iron ore concentrate and pellets primarily to steel producers. On the basis of 2010 data SSGPO is believed to be a material exporter of iron ore and in the lowest quarter of the cost curve. The Iron Ore Division's operations in Kazakhstan include iron ore mines, crushing, beneficiation and pelletising plants and a thermal power station. BMBV is focused on the development of a high-quality iron ore deposit in the Caetite region in the State of Bahia, while MIBA and MPB are 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 2010 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. The smelter allows the Alumina and Aluminium Division to process its own alumina into aluminium and Phase 2 of the smelter, with a total annual capacity of 250 kt, came online in May 2010.

Energy Division

The Energy Division is one of the largest electricity providers in the Republic of Kazakhstan, accounting for approximately 16.6% of the country's recorded electricity production in 2010 (2009: 17.2%). 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 22.6% in 2010 (2009: 23.5%). The Energy Division provides a cost-effective energy supply to the Group's principal Kazakhstani operating divisions, with internal consumption of 73.9% (2009: 60.8%) of energy produced, 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 DRC, where it mines copper and cobalt and processes the ore through Boss Mining Sprl, 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, include interests in five copper and cobalt exploitation licences situated in the DRC. The Chambishi smelter, acquired in February 2010 and located in Zambia, processes material mined in the DRC. 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.

Logistics Division

The Logistics Division provides transportation and logistics services to the Group's principal Kazakhstani and African operating Divisions, as well as to third parties. The Division's operations include freight forwarding, wagon repair services and railway construction and repair services. 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. The Group's African logistics business, SABOT, operates in Central and Southern Africa and was purchased as part of the CAMEC acquisition. SABOT was transferred into the Logistics Division, from the Other Non-ferrous Division, in H2 2010.

OPERATING AND FINANCIAL REVIEW

Ferroalloys Division

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

Production

In 2010, the Ferroalloys Division produced: 3,574 kt of saleable chrome ore (2009: 3,398 kt); 996 kt of saleable manganese ore concentrate (2009: 904 kt); and 1,855 kt of ferroalloys (2009: 1,446 kt), including 1,306 kt (2009: 1,073 kt) of its primary product, high-carbon ferrochrome. In 2010 272 kt (2009: 226 kt) of ferroalloys were consumed internally. For the year ended 31 December 2010, the Ferroalloys Division had revenue of US$2,996 million (2009: US$1,874 million), which represented 45.4% (2009: 48.9%) of the Group's consolidated revenue.

Sales and Pricing

After a late 2009 slowdown, a result of de-stocking, 2010 saw a strong start as stock holders replenished inventory and global economic optimism improved. In Q1 2010, stainless steel production rose to its highest ever quarterly level of almost 8 million tonnes. This was driven by increased production from emerging economies, notably China and India, whilst developed economies continued to struggle to get back to pre-crisis levels. With increased demand for engineering and alloy steels, in addition to stainless steel, and with scrap availability in Q1 2010 remaining limited due to adverse weather conditions, the supply of ferrochrome tightened. The price outlook during this period was also supported by the South African rand strengthening against the US dollar and the almost 25% increase in electricity costs imposed by Eskom, South Africa's power provider, impacting the country's industrial production cost base.

This then resulted in a 35 cent increase in the benchmark price for Q2 2010 to US$1.36 per pound of chrome, taking chrome prices back above levels last seen in Q1 2008. The market responded to these strong fundamentals with additional production, creating oversupply going into the traditionally quieter period of Q3 2010 as steel producers reduced their own production after a record breaking H1. As a result the benchmark declined to US$1.30 in Q3 2010. The re-emergence of global economic uncertainties, reflecting European sovereign debt concerns and Chinese monetary policy tightening raised questions over the sustainability of the growth in these economies. This caused the price of ferrochrome to remain stable for the remainder of the year accompanying weaker global steel production.

Demand for medium- and low-carbon ferrochrome (refined products) improved progressively during H1 2010 as the outlook in the engineering, alloy and specialty steel sectors improved, with prices increasing by between US$0.10 and US$0.15 per pound against the start of the period. As with the stainless steel sector, the weaker fundamentals in H2 2010 impacted these other sectors as steel production declined and the market was impacted by excess capacity. Chrome ore demand similarly increased, particularly in China, with prices rising strongly on the back of good demand from alloy converters and chemical producers. Demand for both these products remained strong but weakened marginally in line with the H2 2010 slowdown as weaker sentiment in China caused a decline in ferrochrome prices.

Prices for manganese alloys, which are primarily used in the production of carbon steel for the construction and automotive sectors, also improved, with silico-manganese attaining levels in excess of US$1,500 per tonne during Q2 2010. This improvement also led to a progressive upward trend for manganese ore, in terms of both demand and price, as converters bought increased volumes to cover alloy demand from the steel sector. Prices as with the aforementioned products declined in H2 on the back of the weaker market sentiment.

Results for the year

The Ferroalloys Division remained the largest contributor to the Group's Underlying EBITDA. The Division contributed US$1,403 million, or 43.9%, of the Group's Underlying EBITDA in 2010 (2009: US$707 million; 48.3%); the increase was US$696 million, or 40.2% of the growth in the Group's Underlying EBITDA.

In 2010 the Division's performance benefitted significantly from a strong recovery in both prices and volumes. All of the Division's products increased sales volumes and prices year-on-year and ferroalloys sales were at their highest level in the Group's history. Total ferroalloys and chrome ore sales volumes increased 17.1% and 8.6% respectively. High-carbon ferrochrome volumes increased 14.8% versus 2009, while other ferrochrome products experienced more substantial growth rates against comparable 2009 levels, of up to 50%. Ferroalloys Division revenue increased US$1,122 million, or 59.9%, of which US$751 million (66.9%) was due to higher commodity prices and US$362 million (32.3%) reflected higher sales volumes. High-carbon ferrochrome sales contributed US$710 million (US$550 million due to higher prices and US$160 million due to higher sales volumes), or 63.3%, of the increase in the Division's revenue. The shift of sales towards Western European and Japanese markets, which were more favourable in terms of prices, and proportionally away from China, also positively impacted revenue.

A US$208 million increase in cost of sales resulted from increased sales volumes and US$106 million from an increase in cash costs per unit. Depreciation and amortisation increased cost of sales by US$20 million. In total, MET of US$172 million (2009: US$113 million) led to a US$59 million, increase in cost of sales. Unit cost of sales for ferroalloys was 26.7% above that of 2009 due to higher MET, which followed from an increase in the chrome ore price due to prices of certain input materials and electricity.

A US$86 million increase in distribution costs was mainly attributable to higher sales volumes and increased railway tariffs, resulting in an increase in transportation costs. In addition, more products were shipped to the Group's traditional and more distant markets of North America, Japan and Western Europe, instead of China.

General and administrative expenses increased US$13 million, largely due to higher staff costs.

Net other operating expense amounted to US$8 million, principally due to foreign exchange losses. For 2009 net other operating income reflected the one-off effect of the Kazakhstani tenge devaluation against the US dollar.

Iron Ore Division

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

Production

In 2010, the Iron Ore Division mined a record 43,614 kt of iron ore (2009: 36,604 kt). This was processed into 17,702 kt of primary iron ore concentrate (2009: 15,197 kt), of which 8,583 kt (2009: 8,857 kt) was sold with the balance used to produce 8,017 kt (2009: 6,182 kt) of pellet. For the year ended 31 December 2010, the Iron Ore Division had revenue of US$1,876 million (2009: US$1,093 million), which represented 28.4% (2009: 28.5%) of the Group's consolidated revenue.

Sales and Pricing

There were two major developments in the iron ore market in 2010. There was a dramatic recovery in prices, whilst the traditional benchmark system of pricing was replaced by a more spot oriented methodology based on Platts published iron ore prices. During H2 2010, while the Platts system was under development, sales to MMK in Russia, the Group's principal iron ore customer, were made on the basis of a quarterly negotiated price.

An agreement has now been reached with MMK to use a formula based on the Platts published price to govern the long term contract. This formula will be valid from Q2 2011 until the end of 2012.

Sales to China, the Group's other major customer base, were also made on a quarterly negotiated basis. In 2010 sales volumes to China were slightly lower than that for 2009, approximately 5.6 mt (2009: 6.3 mt).

Overall, our product mix also improved, with 48% of iron ore sales being pellet compared to only 41% in 2009.

In the medium term, we expect high prices to be maintained as demand for iron ore continues to grow and new production struggles to keep pace with demand.

Results for the year

The Iron Ore Division had the highest Underlying EBITDA margin of 60.4% in 2010, an improvement from 44.4% in 2009. The Division contributed US$1,133 million, or 35.5%, to the Group's Underlying EBITDA (2009: US$485 million; 33.2%).

In 2010 the Iron Ore Division experienced record levels of sales volumes and prices. In 2010, volumes were 9.5% higher than 2009 and 15.3% higher than 2008, with prices 58.6% and 9.9% higher respectively. In addition, higher priced iron ore pellet represented 48.3% of the sales mix, a marked improvement from the previous year (2009: 41.2%).

During the year revenue rose US$783 million, or 71.6%. US$659 million of this was attributable to increased sales prices and US$124 million due to higher volumes. Higher priced pellet contributed US$518 million of the Division's revenue growth (US$371 million due to higher prices and US$147 million due to higher sales volumes). The rise in concentrate prices increased the Division's revenue by US$289 million, offset by a US$16 million decrease due to lower sales volumes.

A US$47 million, increase in cost of sales resulted from increased sales volumes and US$48 million, from the increase in cash costs per unit. Depreciation and amortisation increased cost of sales US$10 million. In total, MET of US$93 million (2009: US$43 million) led to a US$50 million increase in cost of sales. The unit cost of sales for iron ore was 20.0% higher than in 2009, due to higher MET, which resulted from higher prices and increased mined volumes as well as enhancedprices of input materials, gas and electricity and higher wage rates.

A US$6 million increase in distribution costs resulted from higher sales volumes and railway tariffs. This increase was partially offset by almost twice as much product being shipped to Russia, which has lower tariffs in comparison with rail transportation to China.

General and administrative expenses rose US$21 million, including an US$11 million increase in staff costs.

Net other operating expense was US$12 million. For 2009 net other operating income reflected the one-off effect of the Kazakhstani tenge devaluation against the US dollar.

The Alumina and Aluminium Division

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

Production

In 2010, the Alumina and Aluminium Division mined 5,310 kt of bauxite (2009: 5,130 kt) and produced 1,640 kt of alumina (2009: 1,608 kt) and 227 kt (2009: 127 kt) of aluminium. For the twelve months ended 31 December 2010, the Alumina and Aluminium Division had revenue of US$926 million (2009: US$565 million), representing 14.0% (2009: 14.7%) of the Group's consolidated revenue.

Sales and Pricing

London Metal Exchange ('LME') aluminium prices were volatile during the year with a peak of US$2,461 per tonne recorded on 31 December 2010 and a low of US$1,829 per tonne in early June. Consumption of primary aluminium in 2010 was driven by a strong rebound in orders for semi-finished aluminium products in its key markets, mainly transportation, building and construction. In 2010 aluminium premiums, an indicator of the metal's physical availability rose significantly across the world. This was primarily driven by high levels of aluminium inventory being tied up in financing deals and thus unavailable for immediate consumption.

In 2010 the Group shipped 1,176 kt (2009: 1,352 kt) of alumina to United Company RUSAL ('RUSAL') under a long-term supply contract to supply a minimum of 1.2 mtpa. The contract expires at the end of 2016. The pricing under this contract is linked as a percentage of the LME price of primary aluminium. In 2010 RUSAL, the Division's largest single customer, accounted for 42.3% (2009: 55.6%) 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 or 'KAS'). On 1 May 2010, KAS started up its Phase 2 production line, increasing total Aluminium production capacity to 250 ktpa.

The Group shipped 222 kt (2009: 125 kt) of primary aluminium in 2010, of which 50 kt (2009: 31 kt) was delivered to customers located in Russia. Sales of the remainder of the aluminium were by way of a distribution agreement with Glencore International, which represented 39.8% (2009: 26.8%) of the Division's revenue in 2010. The LME spot price serves as the basis for the pricing of all of our aluminium contracts. The Division's average sales price for aluminium in 2010 was US$2,178 per tonne (2009: US$1,605 per tonne).

Alumina and Aluminium Division

Results for the year

The Alumina and Aluminium Division delivered excellent results in 2010. The Division had third-party revenue of US$906 million, 60.9% higher than 2009. The Division contributed US$267 million, or 8.4%, to the Group's Underlying EBITDA (2009: US$78 million; 5.3%).

Third-party revenue increased US$343 million, due to the significant increase in the LME aluminium price, as well as higher sales volumes. Higher prices increased revenue US$227 million whilst additional aluminium sales volumes contributed US$156 million. The latter led to a decline in alumina third-party sales volumes, reducing revenue by US$40 million. Increased aluminium production resulted from the smelter operating at its full capacity commencing in Q2 2010; aluminium sales volumes were 77.6% higher than in 2009.

Higher sales increased the cost of sales US$113 million. Higher unit cash costs increased cost of sales US$26 million, whilst depreciation and amortisation rose US$25 million. Unit cost of sales for alumina was up 19.8%, to US$236 per tonne and for aluminium 24.3% to US$1,660 per tonne, mainly due to higher prices of certain input materials, such as anodes and mazut, as well as increased depreciation.

Distribution costs grew US$16 million, or 44.4%, to US$52 million (2009: US$36 million), mainly reflecting higher sales volumes and, consequently, increased transportation costs.

General and administrative expenses increased US$8 million, or 21.6%, to US$45 million (2009: US$37 million), due to higher wage rates.

Other Non-ferrous Division

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

Overview

ENRC acquired Central African Mining and Exploration Company Plc ('CAMEC') on 9 November 2009, the first in a number of steps aimed at establishing and building a presence as a major copper and cobalt producer. This was followed by the acquisition of Chambishi Metals ('Chambishi'), located in Zambia in April 2010; the acquisition of the remaining 50% of Societe Miniere de Kabolela et de Kipese Sprl ('SMKK') in June 2010; Congo Cobalt Corporation Sprl ('CCC'), a DRC based mining contracting company, effective 1 July 2010; and, lastly, the formation of the Camrose joint venture, through the acquisition of a 50.5% interest in Camrose Resources Limited, in August 2010.

Integration commenced focusing on exploration, resource delineation, mine planning, operational efficiency, processing methodologies and recoveries.

Exploration

During 2010, an extensive drilling programme was undertaken, totalling 103,200 metres with assaying, to confirm and increase the confidence levels of the previously delineated historic and inferred resources of Boss Mining ('Boss') and SMKK. The results of this programme are being compiled and will be completed in Q1 2011 to form the basis for the Proven and Probable mining reserve statements. Drilling on Camrose's Comide Property at Mashitu and Safwe North deposits commenced in November 2010, with the intent of increasing the confidence levels in the two deposits in preparation for an accelerated mining and processing plan. Two drills are currently operating on this property. This concession is being explored to provide additional oxide copper material for the Luita processing facility.

Mining

A more formal mine planning system was implemented aimed at optimizing the metal extraction and introducing good mining practices over the life of mine. Mining of the Disele South pit was terminated during the year as it reached the end of its economic life. This was replaced with ore mined from SMKK's Kabolela North deposit, which commenced in September. A total of 2.5 mt of ore was mined during the year from Mukondo, Disele and Kabolela North, with an average stripping ratio of 13.6:1 (Waste to Ore).

Production: Copper

The review of operational efficiencies and increased focus on heap leach resulted in an increase in production to effective full capacity in the DRC. Record production of 20.3 kt copper was achieved, compared to the 2.8 kt from date of acquisition to 31 December 2009, with overall recovery at 58.8%. This represented a 105.1% increase in production volumes over the 2009 calendar year (being 9.9 kt for the equivalent 12-month period, including the period prior to acquisition by ENRC).

Production: Cobalt

Production of cobalt contained grew throughout the first three quarters, peaking in October 2010. A total of 9.6 kt cobalt contained was produced during the year. Boss produced 8.3 kt of cobalt concentrate, compared to 6.7 kt in the 2009 calendar year (1.2 kt of which were included in ENRC's results).

The leaching, purification and electro winning process at Chambishi was restarted and ramped up to achieve record monthly production of 437 t cobalt metal in October. Total production at Chambishi amounted to 3.3 kt of cobalt metal.

Sales and Pricing: Copper

The copper price was extremely volatile during 2010 as the market grappled with a number of economic concerns. During 2010 the LME cash-sellers price ranged from US$6,091 to US$9,740 per tonne, setting a new record high at the year end.

Contracts are negotiated annually or on a quarterly basis, fixing a premium or discount alongside the period of which a reference exchange price (such as the LME) is used. The LME warehouses hold the largest available source of copper stock. During 2010 this stock trended downwards, reducing by over one third until the last two months of the year when it increased slightly as record prices increased physical deliveries.

Sales and Pricing: Cobalt

In the past prices and volumes for cobalt concentrate were negotiated on an annual basis, however, more recently it became advantageous to negotiate terms over shorter periods or on a spot basis. Agreements are predominantly based on a formula linked to Metal Bulletin's cobalt metal quotations and in most cases the seller is also paid for copper content.

The cobalt metal price stood at US$19.75 per pound at the start of January 2010, with the price rising through January. It reached its highest level of the year, US$21.75 per pound, in late January. This was largely supported by speculative buying from China in advance of the introduction of cobalt metal on the LME pricing platform. After reaching its peak in January, the cobalt metal price declined through to the end of March to US$17.25 per pound. The cobalt price experienced a subsequent period of volatility over the next five months, eventually settling at a price of US$16.25 per pound in mid-August. There was a rally in the cobalt market in Q3 2010 and the price rose to US$19.25 per pound in late September. There was a subsequent correction in the price as it fell back to US$16.25 per pound by the year end. The average Metal Bulletin 2010 cobalt price was US$17.93 per pound.

Mozambique Coal

An exploration programme on the company's coal licences on the North Shore of Cahora Bassa commenced during the year. A new camp was established with the associated building of facilities required to service such a remote site. Progress was made in mapping and surveying the licenses. Drilling commenced but was affected by delays in commissioning the contractors as well as inclement weather. As a direct result of this drilling activity our in-house inferred resource estimate (non-JORC compliant) was increased by 1.35 billion tonnes.

A feasibility study has been commissioned on Licence 871. This licence has a JORC compliant resource of 1.03 billion tonnes. The feasibility study is targeted to be completed during 2011.

Other Non-ferrous Division

The Other Non-ferrous Division existed with effect from November 2009 following the completion of the acquisition of CAMEC Plc and was included for only 2 months of 2009.

Results for 2009 have been restated to reflect the transfer of the SABOT business to the Logistics Division as detailed in note 4, which was effected in H2 2010.

Results for the year

The Other Non-ferrous Division contributed US$60 million, or 1.9%, to the Group's Underlying EBITDA. In 2010, the primary revenue and Underlying EBITDA generating businesses of the Division were the copper and cobalt operations in the DRC and Zambia.

Higher cobalt and copper sales volumes contributed respectively US$245 million and US$114 million to the Division's revenue. The results were impacted by the favourable pricing of both cobalt and copper.

Cost of sales was adversely impacted by the US$25 million amortisation of acquired mineral rights. Unit costs of cobalt and copper have and are expected to continue to improve through the increase in production achieving economies of scale, cost synergies achieved by integrating the acquired businesses as well as improving operational efficiencies.

The Division's exploration costs, which are part of general and administrative expenses, totalled US$16 million for 2010. The exploration programme focused on the Division's coal, platinum and fluorite deposits as well as greenfield cobalt and copper areas of interest.

Energy Division

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

Production

In 2010 the Energy Division produced 13,711 GWh (2009: 13,478 GWh), of which 73.9% (2009: 60.8%) was used internally within the Group. The share of internal consumption increased, due to the start up of Phase 2 of the aluminium smelter and significantly increased demand from the Ferroalloys and Iron Ore Divisions. Coal production was broadly flat at 20,102 kt (2009: 20,059 kt). In addition to sales of surplus electricity, the Energy Division also sold 6,964 kt of coal to third parties (2009: 7,280 kt), which represented 34.6% of total coal mined (2009: 36.3%), reflecting reduced demand due to lower economic activity.

Sales and Pricing - Coal

Strong demand from the industrial and power sectors impacted coal output in the Republic of Kazakhstan, which increased 12% in 2010. The Energy Division's total sales of coal to third parties nevertheless fell 4.3% in 2010, due to growth in the Group's internal consumption. In the Republic of Kazakhstan, ENRC sold 3.0 million tonnes of coal to third parties (2009: 3.0 million tonnes) at an average sales price of KZT934 (US$6.34) per tonne (2009: KZT850 (US$5.76) per tonne), an increase of 9.9% in local currency terms. Russian utilities increased their 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. However, the Energy Division sold 3.9 million tonnes of coal to Russia (2009: 4.3 million tonnes), reflecting its own increased consumption.

Sales and Pricing - Electricity

Improvements in economic conditions and industrial demand saw electricity demand recover in 2010. Total electricity consumption in Kazakhstan grew 7.4% to 83.8 billion kWh; electricity generation increased 4.9% to 82.3 billion kWh. Energy Division sales of electricity to third parties fell 40.5% in 2010 due to increased internal consumption by the Group. The average sales price to third parties in local currency increased 58.5% to KZT4.67 (US 3.17 cents) per kWh (2009: KZT2.95 (US 2.00 cents) per kWh. The Government of Kazakhstan has imposed caps on annual price increases for domestic sales until 2015.

Energy Division

Results for the year

The results of the Energy Division were significantly impacted by higher sales prices, especially for electricity, which were in line with the State regulated annual price cap increases in the Republic of Kazakhstan. The Division contributed US$308 million, or 9.6%, to Group's Underlying EBITDA (2009: US$213 million; 14.6%).

The Energy Division's third party revenue increased US$4 million, or 2.0%, to US$200 million (2009: US$196 million). Higher prices increased total revenue by US$46 million, whilst lower electricity sales volumes reduced revenue by US$42 million. The Division's sales to other Group entities increased US$136 million, or 66.0%, to US$342 million (2009: US$206 million), resulting from the ramp up in production in other Divisions, including the launch of Phase 2 of the aluminium smelter.

Cost of sales increased US$39 million, or 25.7%, to US$191 million (2009: US$152 million) mainly due to a rise in materials costs and an increase resulting from higher taxes, as well as higher ecological payments, health and safety expenses and training costs.

Distribution costs increased US$6 million, or 11.5%, to US$58 million (2009: US$52 million), due to increased transportation costs.

General and administrative expenses increased US$12 million, or 60.0%, to US$32 million (2009: US$20 million), principally due to additional sponsorship during the year.

Logistics Division

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

Sales and pricing

For the year ended 31 December 2010, the Logistics Division transported 61,104 kt of goods (2009: 58,181 kt), of which 89.4% (2009: 89.8%) was intra-Group. Increased transportation volumes for the year reflected a recovery in production in the key commodities; iron ore, chrome ore and ferroalloys.

Logistics Division

Results for the year

The results for 2009 have been restated to reflect the transfer of the SABOT business to Logistics as detailed in note 4.

The results of the Logistics Division reflected higher sales volumes. The Division contributed US$75 million, or 2.3%, to the Group's Underlying EBITDA (2009: US$40 million, 2.7%). The inclusion of the Zimbabwean-based transportation business, SABOT, which supports copper and cobalt sales, added US$6 million to the Division's EBITDA.

The Division's third-party revenue increased US$151 million, or 225.4%, to US$218 million (2009: US$67 million). This was primarily due to US$66 million of revenue from participation as a contractor in the China Gateway project; US$40 million of additional revenue from increased repairs of railway track and US$71 million of revenue from inclusion of SABOT.

Sales to other Group Divisions increased US$30 million, or 28.8%, to US$134 million (2009: US$104 million).

Cost of sales increased US$140 million, or 116.7%, to US$260 million (2009: US$120 million) driven by the same factors which led to the increase in third-party revenue.

CAPITAL EXPENDITURE

In 2010, the Group's capital expenditure amounted to US$1,187 million (2009: US$1,147 million), excluding changes in capitalised asset retirement cost estimates and borrowing costs. For the full year 2010, total capital expenditure was lower than planned US$1.5 billion. This reduction reflected a revision of the expansion strategy in the Other Non-ferrous Division and project updates in the Ferroalloy, Iron Ore and Alumina and Aluminium Divisions.

Capital expenditure is designated as either 'expansionary' or 'sustaining'.

'Expansionary' capital expenditure refers to investments made to drive future growth through increasing production capacities, and may include the construction or purchase of property, plant and equipment or the upgrade or expansion of existing facilities.

'Sustaining' capital expenditure refers to investments designed to keep existing operations running at their current levels and may include major cyclical capital repairs or the replacement of existing property, plant and equipment.

The table below shows the Group's capital expenditure in 2010:

The Group's major projects are detailed in the tables on the following page. The Group anticipates that securing the necessary financing is a requirement for delivering its capital expenditure programme.

The Group reclassified its projects under four categories, with its 'In Progress' projects split between 'Execution' and 'Planning and Design'.

1. Execution: Board full approval, ordering of equipment and construction in progress;

2. Planning and Design: Board initial approval for feasibility studies;

3. Pre-feasibility: projects at the stage of pre-feasibility study that have not been Board approved; or

4. Deferred: identified projects that have been put on hold.

(1) Completion of construction.

(2) Approximately 270 ktpa of ferroalloy smelting capacity may be retired after the new capacity is operational.

(3) Previously, this project and the following one were shown as one project at US$190 million estimated cost.

The Group's capital expenditure programme totals US$11.1 billion, comprised of expansionary projects which are in 'Execution', 'Planning and Design' and 'Pre-feasibility' stages and allocated by Divisions as follows: 

The major contributors to the increase in the Group's capital expenditure programme as compared to the 2010 are greenfield projects in Africa and Brazil.

For the full year 2011, total capital expenditure is expected to be approximately US$2.5 billion, including expansionary capital expenditure of around US$1.9 billion and sustaining capital expenditure of around US$0.6 billion.

Ferroalloys

The investment programme of the Ferroalloys Division includes the construction of four new Direct Current ('DC') furnaces at the Aktobe plant with 440 ktpa of capacity. The feasibility study for the project was completed some time ago and the plant is currently under construction, whilst the Environmental Impact Assessment Programme that was developed received favourable review from the Ministry of Environment of the Republic of Kazakhstan. Supply agreements for capital equipment and machinery, as well as engineering, procurement and construction contracts have been signed. The total project cost is approximately US$750 million, with completion planned for 2013.

Iron Ore

After favourable feasibility studies and the overall improved conditions in the steel industry, the Iron Ore Division is working on the following projects:

·; Expansion of the ore base including the enlargement and reconstruction of deposits at Kachar and Rudny sites as well as the development of a new deposit at Sorsk. The commissioning date has been postponed to 2015 to reflect recent updates of the mining expansion strategy. The estimated expenditure for the mine expansion is US$720 million.

·; The construction of a high quality concentrate plant with total capacity of 7 mtpa by 2014 at an estimated total cost US$440 million. High quality concentrate will be used as raw material for production of high quality pellet and for direct sales to customers. In 2010, preparation works took place and project documentation has been submitted to the Government authority. We are awaiting permission for the first stage of construction works.

·; The construction of a 3 mtpa high quality pelletiser plant and an HBI plant with a capacity of 1.8 mtpa by 2014. The total project cost is estimated to be US$920 million.

These projects will allow the Division to expand its product base, offering three new products - high quality concentrate, high quality pellet and HBI - increasing total saleable output to approximately 23 mtpa by 2015.

In addition, at the end of 2010 the Iron Ore Division was expanded by inclusion of Bahia Mineração's ('BAMIN') which operates the Pedra de Ferro Project ('the BML Project'), at a current estimated total capital expenditure programme of about US$2.1 billion.

In 2010 the project was at the planning stage, awaiting the environmental licenses required to commence construction. BAMIN has already obtained the Installation License for the Mine from IMA, giving the company permission to start the construction of the iron ore mine and beneficiation plant at Caetité, with potential annual capacity of 19.5 mt of concentrate. BAMIN is awaiting the issue of the Preliminary License regarding the Port Terminal by IBAMA, which if granted, will approve the location and design of the project. Operations are expected to start in 2013.

Alumina and Aluminium Division

The main projects for the Division are:

·; The construction of a 136 ktpa anode plant, which is in execution and due for completion in 2012, at a total estimated cost US$240 million. The plant's planned capacity was reduced from 150 ktpa and the completion date was delayed from 2011 due to updates in the engineering data. This plant will allow the Group to be independent of third-party suppliers and will provide sufficient anodes for the increased Phase 2 aluminium production capacity.

·; Expansion of alumina production to 1.7 mtpa to support the expanded aluminium production capacity of the Group. This investment will allow the Division to maintain existing sales to customers and provide sufficient alumina for internal consumption.

Other Non-ferrous Division

The US$810 million capital expenditure programme of the Division has been revised and updated from previous estimates and consists principally of a number of expansion projects that are planned over the next five years to significantly increase capacity. The following projects were approved:

·; Expansion of copper (oxide) production. Phases 1 and 2 of the expansion project to increase leaching and electro-winning capacity of the Luita plant to 50 ktpa of copper has commenced. The total current project cost is estimated at US$280 million. The project cost increased some US$130 million against the previously estimated cost reflecting a tank leach upgrade and inclusion of an acid plant construction at Luita. A further phase to increase capacity up to 70 ktpa is currently at the planning and design stage.

·; Oxide cobalt SX/EW plant. Construction of the cobalt solvent extraction and electro-winning (SX/EW) plant was completed and Phase 1 has been commissioned. Phase 2 is scheduled to be commissioned during the Q2 2011. The cobalt SX/EW plant has a planned capacity of 3 ktpa of cobalt metal and 4.4 ktpa of copper grade A cathode equivalent derived as a by-product. The total estimated cost of the project decreased US$7 million to US$30 million mainly due to change of the initial expansion strategy.

·; Expansion of copper (sulphide) production. A 90 ktpa contained copper sulphide/oxide concentrate plant (60 ktpa sulphide and 30 ktpa oxide) was estimated at a cost of US$370 million, which is higher than the previous estimate due to construction of a new concentrator at Kakanda, which will start in Q2 2011.

·; Chambishi copper SX/EWplant. Construction of a new SX/EW plant at Chambishi commenced at a total projected cost of US$80 million, a slight decrease from the previously announced US$85 million. It is scheduled to be completed in 2012 increasing capacity to 55 ktpa and raising the metal grade to grade A equivalent.

·; Estimated exploration cost of US$50 million, related to the exploration programme at Boss Mining. The decrease from the previous reported US$115 million was due to the reclassification of total exploration cost between expensed and capitalised. Expenditure in respect of greenfield sites is expensed until the completion of a feasibility study, after which time expenditure is capitalised. Brownfield exploration costs are capitalised.

Energy Division

The main projects for the Division are:

·; Construction of a new power unit 2 at Aksu, with an investment of approximately US$250 million. An increase in the project cost of US$20 million reflects updates in detailed engineering data. The main construction works took place during the year with planned completion in early 2011;

·; Reconstruction of power unit 6 at Aksu, upgrading its capacity to 325 MW, at an estimated cost of US$265 million, is planned to be completed at the beginning of 2013. An increase in the project cost of some US$35 million, reflects updates in the engineering data. It is intended to achieve savings on fuel consumption, whilst environmental emissions will be reduced by the implementation of up-to-date filters; and

·; Construction of two 600 MW power units and a 5 mtpa coal mine expansion are Under Review.

Logistics Division

In 2010, 150 open-top wagons, 285containers and 3 platforms were acquired and received, while further 450 open-top wagons ordered in 2010 are expected to be delivered in Q1 2011.

In 2011, to fulfill the requirements of the railway fleet, the Division is planning to purchase an additional 2,600 open-top wagons, 1,000 railway containers, and 600 platform wagons.

CONSOLIDATED INCOME STATEMENT (Unaudited)