Production Summary

28 July 2011

Kazakhmys PLC Production Summary for Six Months and the Second Quarter Ended 30 June 2011

l Copper cathode production from own concentrate of 153 kt

§ In line with annual target of 300 kt

§ Ore output and copper in concentrate production recovered in Q2

§ Improved equipment availability following maintenance work in Q1 2011

§ Seasonal weather improvements

l By-product output on track to meet full year targets

§ Zinc in concentrate output of 76 kt in the first half of 2011

§ Re-commissioning of precious metals refinery allowing sharp recovery in output with processing of material stockpiled in Q1

§ Silver output increased 90% in Q2 to 4.4 Moz

§ Gold output increased 90% in Q2 to 36.6 koz

l Continued strong demand for power from domestic and export markets

§ Increase of 19% in net power generated in the first half of 2011 to 6,395 GWh

§ Average realised tariff rose 18% to 5.36 KZT/kWh in the first half of 2011

Oleg Novachuk, Chief Executive Officer, said: "This has been a solid second quarter and we remain on track to meet all our targets for the year. There were some seasonal and production issues at the start of the year, but as anticipated these have all been recovered across copper and our by-products. The power business continues to see strong demand reflecting sound economic conditions in our end markets."

For further information please contact:

REGISTERED OFFICE

6th Floor, Cardinal Place, 100 Victoria Street, London SW1E 5JL.

The presentation of this document has changed from previous quarters, reflecting the ongoing Group restructuring and optimisation programme. There is now a single Mining Division, which contains the assets formerly divided between Kazakhmys Copper and the Kazakhmys Gold. The new Mining Division consists of 3 geographic regions: Zhezkazgan, East and Central. Central Region was formed from the merger of Balkhash Complex and Karaganda Region.

The captive power facilities no longer form part of the Copper business and are managed by a single management team along with Ekibastuz GRES-1. All of the power facilities are reported together within the Power Division.

The two smelting and refining units at Zhezkazgan and Balkhash are no longer part of the regional mining structure, but are managed as part of a single metallurgical department within the Mining Division and are reported together.

Kazakhmys PLC is a leading international natural resources group with significant interests in copper, gold, zinc, silver, power generation and petroleum.

It is the largest copper producer in Kazakhstan and one of the top worldwide with 17 operating mines, 10 concentrators and 2 copper smelters. Kazakhmys Mining operations are fully integrated from mining ore through to the production of finished copper cathode and rod. Total copper cathode equivalent produced in 2010 from own ore was 303 thousand tonnes. Production is backed by a captive power supply and significant rail infrastructure.

Kazakhmys Mining produces significant volumes of other metals, including zinc, silver and gold. In 2010, it produced 167 thousand tonnes of zinc in concentrate. The Group is in the top ten largest silver producers in the world (14 million ounces produced in 2010).

Kazakhmys Power has a 50% interest in the coal fired Ekibastuz GRES-1 plant, the largest in Kazakhstan with a nameplate capacity of 4,000 MW. The Group manages over 20% of Kazakhstan's power generation.

The Group is part of the FTSE-100 index of companies listed on the London Stock Exchange and is also listed on the Kazakhstan Stock Exchange (KASE) and Hong Kong Exchange. It had revenues of $3.2 billion in 2010 with Group EBITDA (excluding special items) of $2.8 billion. The Group employs some 61,000 people, principally in Kazakhstan. The Group's strategic aim is to optimise its current operations, deliver its major growth projects and to diversify and participate in the development of the significant natural resource opportunities in Central Asia.

Copper Summary

1Includes copper sold in concentrate and cathode converted into rod.

Ore extraction of 16,537 kt in the first half of 2011 was 2% above the corresponding period in 2010, driven by an increase in output from the Zhezkazgan Region. Ore extraction rose in Q2 2011 across all regions with output of 8,642 kt, 9% above Q1 2011. The performance in Q2 2011 benefited from improved weather conditions and equipment availability.

The average copper grade over the first half of 2011 was 1.01%, compared to 1.14% in the corresponding period in 2010. This decline was principally due to lower grades across the Zhezkazgan region.

The higher ore output was offset by the lower copper grade such that in the first half of 2011 there was a 9% reduction in metal in ore mined, compared to the first half of 2010. This decrease led to a corresponding reduction in copper in concentrate output. During both periods, the output of copper in concentrate included the reprocessing of waste material from the Balkhash furnaces and converters. 

In Q2 2011, copper in concentrate output increased by 13% to 80.9 kt, compared to Q1 2011, benefiting from both higher ore volumes and copper grades compared to Q1 2011.

Copper cathode equivalent production from own concentrate in the first half of 2011 decreased by just 7% to 153.0 kt, compared to 164.3 kt in the corresponding period in 2010. The decrease reflects the lower production of concentrate, partly offset by a greater contribution from a release of work in progress in the first half of 2011 compared to the corresponding period in 2010.

In Q2 2011, copper cathode production increased by 6% from the previous quarter to 78.9 kt. The increase in copper in concentrate output of 13% in Q2 2011 is not fully reflected in the movement in cathode production because of a significant release of work in progress in Q1 2011.

Production of copper rod in the first half of 2011 was in line with the guidance given at the beginning of the year and reflects continuing strong demand from Chinese customers.

Other Metals Summary

1 Includes a small volume of by-product production from the former Kazakhmys Gold mines: Central Mukur and Mizek.

2Includes slimes from purchased concentrate.

Zinc (by-product)

There was a 12% decrease of zinc metal in mined ore in the first half of 2011 compared to the corresponding period in 2010, principally due to lower grades in the East Region. Zinc in concentrate production declined however, by just 7% as lower ore output was partially offset by the timing of receipts of material processed by a third party.

Zinc in concentrate production in Q2 2011 increased by 9% compared to the previous quarter as a 21% increase in the extraction of zinc bearing ore offset the decline in grade.

Silver (by-product)

Production of silver in the first half of 2011, at 6,773 koz, was in line with the comparative period in 2010. Lower grades led to a 7% reduction in the overall volume of silver in mined ore, but this was offset by a release of work in progress over the period.

As previously reported, the precious metals refinery at Balkhash underwent repair work during Q1 2011, leading to a build up of work in progress over the period. The completion of the repair work at the end of February 2011 allowed the processing of this stockpiled material, leading to a significant rise in the production of silver in Q2 2011.

Gold (by-product)

The production of gold in concentrate increased by 2% in the first half of 2011, compared to the corresponding period, as lower volumes of gold bearing ore were offset by the processing of stockpiled ore at the start of the year.

Gold output, however, was 10% lower in the first half of 2011, at 55.9 koz, due to changes in levels of work in progress.

Other Metals Summary

Gold output in Q2 2011 rose to 36.6 koz from 19.3 koz in the previous quarter. This increase was due to the re-commissioning of the precious metals refinery at Balkhash, mentioned above, and an increase in the extraction of gold bearing ore from Abyz.

Gold (primary production)

Gold (primary production) relates to the output from mines previously included within Kazakhmys Gold.

Output decreased in the first half of 2011 by 14% compared to the corresponding period in 2010, due to the continuing reduction in the quantity of gold mined and processed from Мukur and Mizek mines, as they move towards the end of their operational lives. The ore body at Mizek has been depleted with ore extraction ceasing in November 2010, although the processing of previously extracted ore continued during the first half of 2011.

The increase in gold output in Q2 2011, relative to the previous quarter, was due to warmer weather, which assists the leaching process.

Kazakhmys Mining Review by Region

Ore extraction of 11,603 kt in the first half of 2011 was 3% ahead of the comparative period. There was a 753 kt increase in output from North mine which was undergoing stripping work in Q1 2010. Output at Annensky mine was 1,360 kt, down from 1,713 kt in the first half of 2010, and is likely to remain constrained in the foreseeable future by several technical issues.

There was a 632 kt increase in output at West mine in the first half of 2011, compared to the first half of 2010. As previously reported, West, East and South mines are closely linked and since West mine restarted operations in Q2 2010, activities have been transferred back from East and South mines, so that the combined output from all three mines in the first of half of 2011 is in line with the comparative period.

Ore extraction in Q2 2011 in the Zhezkazgan Region increased by 4% compared to Q1 2011. The main increases were seen at Stepnoy and Zhomart mines, where output increased by 12% and 7%, respectively, following maintenance work on mining equipment.

The average copper grade in the first half of 2011 decreased to 0.75%, reflecting the maturing mine profile in Zhezkazgan. There was a slight increase in grade in Q2 2011 compared to the previous quarter, due to the mining of richer seams at Zhomart and Annensky mines. 

The output of copper in concentrate in the first half of 2011 decreased by 12% to 75.9 kt compared to the first half of 2010, as the increase in ore extraction was offset by lower grades.

Copper in concentrate production in Q2 2010 increased by 11% to 39.9 kt compared to the previous quarter, benefiting from higher grades and a growth in ore output.

Kazakhmys Mining Review by Region

Central Region is a combination of the assets previously included in the Karaganda Region and Balkhash Complex. The two regions were brought together as part of the ongoing Group restructuring and optimisation plan.

Ore extraction of 2,630 kt in the first half of 2011 was in line with the comparative period. Repair work on the conveyor at Nurkazgan mine was completed in Q1 2011 and improved the transportation of ore, thereby raising ore output to 760 kt in Q2 2011. This increase offset the lower extraction volumes at Sayak mine, which as reported in Q1 2011, was impacted by severe cold weather.

Ore output in Q2 2011 rose by 29% compared to Q1 2011, reflecting the increase at Nurkazgan mine, mentioned above, and at Abyz mine. Mining operations at Abyz were fully resumed during Q2 2011 and production is expected to continue alongside the planned stripping work in the second half of 2011.

The average copper grade in the first half of 2011 decreased to 0.94% from 1.14% in the first half of 2010, due to lower grades and higher output at Nurkazgan mine and a decline in grade at Sayak and Abyz mines, where operations moved to less mineral rich areas.

Lower grades combined with steady ore output during the first half of 2011 led to an 18% decrease in metal in ore. The production of copper in concentrate of 29.5 kt, was 13% below the comparative period in 2010, as lower mined output was slightly offset by the processing of stockpiled ore and waste material from the Balkhash furnaces and converters.

The production of copper in concentrate increased by 17% in Q2 2011 compared to the previous quarter. This increase was due to the 29% rise in ore extraction, which offset the slightly lower grade.

Kazakhmys Mining Review by Region

1Excludes concentrate processed by third parties.

Ore extraction in the first half of 2011 was in line with the comparative period. Decreased production from Artemyevsky mine was offset by higher output at Nikolayevsky and Irtyshsky mines. Output at Artemyevsky mine was restricted during the cold weather in Q1 2011, which affected the backfill equipment, but output recovered in Q2 2011. Ore extraction volumes at Nikolayevsky mine were higher during the first half of 2011, as a result of extended spring flooding in Q2 2010.

Ore extraction grew in Q2 2011 to 1,234 kt, an increase of 15% on the previous quarter, during which output was restricted by equipment repairs and severe weather.

The average copper grade achieved in the first half of 2011 was 2.41%, compared to 2.56% achieved in the comparative period. Lower grades at Yubileyno-Snegirikhinsky, Irtyshsky and Nikolayevsky mines were only partly offset by an increased grade at Artemyevsky.

Copper in concentrate production during the first half of 2011 was 3% below the comparative period, mainly due to the decline in grade. Work is continuing at Nikolayevsky concentrator to improve the recovery rate and enable the plant to process higher quantities of complex poly-metallic ore from Artemyevsky mine.

The 13% improvement in production of copper in concentrate in Q2 2011 compared to Q1 2011 was due to a higher volume of mined metal in ore, as both ore extraction and grade increased.

Kazakhmys Power Review

1 Electricity generated and sold to customers less internal consumption and transformer losses in the power station.

2The net dependable capacity is the maximum capacity a unit can sustain over a specified period modified for seasonal limitations and reduced by the capacity required for station service and auxiliaries.

3External sales only.

Ekibastuz GRES-1

On 26 February 2010, the Group completed the disposal of 50% of Ekibastuz GRES-1 to Samruk with the Group retaining a 50% non-controlling interest. The results shown above are for 100% of the business.

Net power generated at Ekibastuz GRES-1 in the first half of 2011 was 19% higher compared to the corresponding period of 2010. The increase in output was driven by 873 GWh of additional sales to Russia, as in 2010 sales to Russia commenced only from June. Growth in demand from within Kazakhstan in the first half of 2011 led to an increase in domestic sales of 149 GWh.

In Q2 2011 net power generated decreased by 20%, compared to the previous quarter. This decrease was mainly due to standard seasonal factors and the commencement of annual maintenance. There was also a decrease in generation due to the availability of low cost power from the hydro-electric plants in East Kazakhstan during April and May 2011.

The domestic ceiling tariff set for 2011 by the Government of Kazakhstan is 5.60 KZT/kWh, compared to 4.68 KZT/kWh in 2010. The weighted average tariff for electricity sold by Ekibastuz GRES-1 in the first half of 2011 was 5.36 KZT/kWh, an increase of 18% compared to the comparative period. This increase reflects the strong level of demand and is slightly below the ceiling tariff for Kazakhstan, as 14% of net electricity generated was sold to Russia at a lower tariff.

Net dependable capacity achieved during the first half of 2011 was 39 MW above the comparative period in 2010 due to the commissioning of an electrostatic precipitator at Unit 5 (25 MW) and the installation of some more efficient equipment at Unit 6 (10 MW).

Kazakhmys Power Review

Captive power stations

Net power generated at the captive power stations during the first half of 2011 was in line with the corresponding period in 2010. However, there was a movement between internal and external sales volumes in the comparative periods. Internal sales of power decreased as the East Region of Kazakhmys Mining purchased a greater volume of its power from nearby third party power stations, as this saved external transmissions costs, allowing the power station at Karaganda to sell more power externally with a higher profitability.

There were reductions in generation and sales in Q2 2011 compared to the previous quarter, reflecting seasonal changes in demand and lower power requirements at some processing units which underwent maintenance.

The weighted average tariff for electricity sold to external customers in the first half of 2011 increased by 30% to 3.50 KZT/kWh compared to 2.70 KZT/kWh in the comparative period. This compares to a ceiling tariff for 2011 of 4.10 KZT/kWh set by the Government of Kazakhstan. The ceiling tariff for the captive power plants differs from Ekibastuz GRES-1 due to the smaller scale of their modernisation programmes.

Additional information on captive power stations

The captive power stations were previously part of Kazakhmys Copper, but as part of the Group's restructuring and optimisation programme, the captive power stations and Ekibastuz GRES-1 have been brought together under a single management team.

The captive power stations include three coal-fired power and heating plants at Karaganda, Balkhash and Zhezkazgan and a heating plant (heat generation only) in Satpayev. There are 18 turbines and 38 boilers in operation between the three power plants and the heating plant. The plants have a combined installed electricity generation capacity of 1,025 MW.

All three captive power stations utilise coal, supplied by the Group's Borly coal mine. In 2010 this coal mine produced approximately 8.1 Mt of coal, approximately 90% of which was used by the Group's captive power stations.

Kazakhmys Mining Production Appendix

Kazakhmys Mining Production Appendix

Kazakhmys Mining Production Appendix

Kazakhmys Mining Production Appendix

Kazakhmys Mining Production Appendix

Kazakhmys Mining Production Appendix

1 Includes slimes from purchased concentrate.

Kazakhmys Mining Production Appendix

1 Includes slimes from purchased concentrate.