IMS Conference Call Transcript

9 May 2013

Eurasian Natural Resources Corporation PLC

IMS Conference Call Transcript

The following transcript of the conference call accompanies the release of ENRC's Interim Management Statement and First Quarter Production Report.

Felix Vulis, CEO of ENRC stated:

"Good morning ladies and gentlemen and welcome to this morning's conference call regarding our Interim Management Statement and First Quarter Production Report.

My name is Felix Vulis and I am Chief Executive Officer of ENRC.

I am sure that there are a number of questions that you have regarding events over the past weeks and I would dearly like to be able to answer them each in turn. However, as you will all know we find ourselves in the unique position of being in both an offer period and in the process of an official SFO inquiry relating to a number of historical allegations.

As a company we are under strict guidance relating to any putative bid as well as legal restrictions in what we have been advised we can say by our legal teams headed up by Lord Goldsmith of Debevoise and Plimpton.

Based on calls into our investor relations and communications departments in recent weeks, we have therefore scripted a number of points which I hope will address those questions; but please forgive me for the reasons I stated earlier if we do not therefore open it up to an open Q&A.

I will in turn briefly look at points you may well have on the IMS, the SFO investigation, the possible bid and governance and management issues.

IMS

Firstly, let us look at production volumes for each of our Divisions, which with the exception of the Iron Ore Division and Shubarkol, have operated at close to or at full available capacity for Q1 2013.

In the Ferroalloys Division the decrease in production against the comparable period in 2012 was due mainly to planned maintenance works at one of our furnaces at the Aksu smelter. These are now complete. We expect total ferroalloy sales volumes for the year to be in line with our previous guidance of approximately 1.5 mtpa.

At the Iron Ore Division mining was impacted by extreme winter weather conditions in Kazakhstan. This was outside of the Group's control and unfortunately total saleable product was down 12% against Q1 2012. To give you some idea as to the severity of the conditions, temperatures were 46 degrees below freezing and wind speeds at their peak reached 19m/s, which caused rail wagons to be blown off their tracks. However, we did manage to partially mitigate weather-related stoppages and maintain sales to customers by selling down inventories. As per our previous guidance, we expect total iron ore sales volumes to be approximately 16mtpa.

I am pleased that the Alumina and Aluminium Division operated at full available capacity for Q1 2013, with alumina production having recovered after the technological and processing issues experienced during 2012.

The Other Non-ferrous Division showed significant growth in production volumes, with total saleable copper volumes increasing by 62%. This was due to increased capacity created at the copper SX/EW plant at Boss Mining, the commissioning of the DMS 2 plant at Comide and new copper production from Frontier. I am very pleased to announce that Frontier was fully commissioned in April, as planned, and will reach steady state production of 80-90ktpa by July of this year.

In the Energy Division coal extraction volumes at Vostochny were marginally below those in Q1 2012. Approximately 1.7mt of coal were extracted at Shubarkol, below the level of Q4 2012 due to a seasonal decrease in demand. Electricity generation was also slightly below Q1 2012.

Analysts and investors have commented on the difficulty of accurately modelling ENRC's Logistic's Division, based on the data previously provided in our production reports. We expect this Division to generate revenue of US$240 million and EBITDA of US$85 million during 2013.

SFO

A great deal has been written about the process recently launched by the SFO. Close followers will also know that this process has arisen following the responsible introduction of appropriate whistleblowing structures within the company and our decision to appoint an independent legal firm to manage the whistleblowing returns but also the self-reporting process under the relevant regulatory guidelines for a UK listed company. We are keen to get to the bottom of these allegations. We have accordingly instructed Lord Goldsmith of Debevoise & Plimpton, as well as Fulcrum Chambers LLP, to look afresh at the conclusions.

A lot of speculation over the past weeks has mixed issues, which were legitimately raised and resolved with our professional advisers as a condition of meeting regulatory requirements ahead of the 2007 IPO, with more recent issues which arose and in most cases have been satisfactorily resolved as part of the aforementioned whistleblowing structure.

I want to stress that ENRC is committed to a full and transparent investigation of both procedures and conduct and that we are co-operating fully in the reporting process with the SFO. But I'd also like to reiterate what Mehmet Dalman previously said to you in earlier meetings and that is that the Board is fundamentally aware of and accepts the extra scrutiny that the company faces, that as a result we have introduced compliance systems which work and we are confident that when all the noise and hyperbole is stripped away in the course of the investigation, we will be able to demonstrate that we have applied responsive and responsible procedures in pursuit of the objective to best serve the interests of the company and its stakeholders.

Possible Offer

When the announcement was made on 19th April by Mr Machkevitch that he 'is reviewing a number of potential opportunities which include the possibility of making an offer for ENRC', he was given a deadline by the Panel of 17th May to make a bid.

All we know now is what we knew then, that there can be no certainty that an offer will ultimately be made for ENRC, nor the terms on which any offer might be made.

That said, the management team is not being distracted by possible bid speculation and as officers of the company are concentrating on running ENRC in the best interests of all our shareholders.

Corporate Governance and management issues

I have also received several questions on the various management and board changes and I am pleased to take this opportunity to clarify our approach.

As a team, our aim is to strike an appropriate balance between optimising the management structure that runs the business day to day and ensuring that this meets the requirements of corporate governance best practice.

From a corporate governance perspective, the board is well served by a strong cadre of independent directors who continue to ensure that we meet our obligations to all stakeholders. Even with the announced departure of two non-executive directors and of course, the departure of our executive chairman, Mehmet Dalman, we have ample resources to manage the company and meet our obligations.

You will have noted that Jim Cochrane identified his strong management successors and both Malik and Mark are in the process of getting their feet under the table - I'm sure that those of you who have not yet had the chance to meet them will do so in the near future.

Our new Chairman, Gerhard Amman has taken over and is already active in identifying new non-executive candidates who can add real value to the Board.

Separately, you will have noted that we have appointed a special sub-committee of the board, staffed by independent non-executive directors, to review any bid should one materialise. I want to stress - again - that the management team continues to focus our energies on extracting maximum value from the excellent operational assets we have.

Finally, I'd like to say a little more about the heightened external scrutiny the company has faced in recent weeks. I believe it is completely appropriate that a company should be held to account by its stakeholders for its actions and conduct as a business.

As a large company, acting in interesting geographies, it would be surprising if ENRC did not attract opinion, both supportive and otherwise.

However, I would reiterate that the vast majority of external comment appears to focus on issues and processes which were resolved through pre-IPO checks and clearances. As a management team, we are confident that the vast majority of issues will be proved to have been satisfactorily investigated and where necessary dealt with internally. Obviously, we continue to cooperate fully with regulators across all our operational jurisdictions as required.

This completes what I am able to say in this IMS statement and I look forward to talking to you again as and when we have progress to report.

Should you have any further questions please do get in contact with our investor relations department.

Thank you for your attendance today."

- ENDS -

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About ENRC

ENRC is a leading diversified natural resources group, performing integrated mining, processing, energy, logistics and marketing operations. The operations comprise: the mining and processing of chrome, manganese and iron ore; the smelting of ferroalloys; the production of iron ore concentrate and pellet; the mining and processing of bauxite for the extraction of alumina and the production of aluminium; the production of copper and cobalt; coal extraction and electricity generation; and the transportation and sales of the Group's products. The Group's production assets are largely located in the Republic of Kazakhstan; other assets, notably the Other Non-ferrous Division, are mainly located in Africa; the Group also has iron ore assets in Brazil. In 2012 the Group's entities employed on average 78,484 (2011: 77,441) people. The Group currently sells the majority of its products to Russia, China, Japan, Western Europe and the United States. For the twelve months ended December 31 2012, the Group had revenue of US$6,320 million (2011: US$7,705 million) and profit attributable to equity holders of the Company of US$(804) million (2011: US$1,974 million). ENRC has six operating Divisions: Ferroalloys, Iron Ore, Alumina and Aluminium, Other Non-ferrous, Energy and Logistics. ENRC is a UK company with its registered office in London. ENRC's shares are quoted on the London Stock Exchange ('LSE') and the Kazakhstan Stock Exchange ('KASE'). For more information on ENRC visit the Group's website at www.enrc.com.