Q1 2013 Production Report & IMS

25 April 2013

KAZAKHMYS PLC PRODUCTION REPORT FOR THE FIRST QUARTER ENDED 31 MARCH 2013 AND INTERIM MANAGEMENT STATEMENT

l Copper cathode output of 73 kt

§ On track to meet annual production target of between 285 kt and 295 kt

§ Production assisted by uninterrupted ore output and processing

§ Extraction of ore increased by 3% and 17% compared to Q4 2012 and Q1 2012, respectively

l By-product output on track to meet annual production targets

§ Silver output of 3,361 koz, benefited from higher than anticipated grade and a release of work in progress

§ Gold production of 24 koz and zinc in concentrate production of 32 kt

l Kazakhmys Power

§ Net power generation by Ekibastuz GRES-1 of 3,681 GWh, down 7% compared to Q1 2012

§ Reflecting lower domestic demand impacted by warmer weather

§ Average realised tariff rose to 6.54 KZT/kWh in Q1 2013

l Interim Management Statement highlights

§ 75.6 kt of cathode equivalent sales assisted by higher production

§ Net debt in continuing operations of $956 million as at 31 March 2013

§ Reflecting continued investment in major growth projects

Oleg Novachuk, Chief Executive Officer, said: "We have enjoyed a positive start to the year benefitting from relatively mild weather and good demand for our major products. We are on track to meet our annual production targets and we continue to invest in our growth projects. Work has started on site at Aktogay, our second major project which was approved in December 2012. I look forward to providing further updates as we progress through the year."

For further information please contact:

REGISTERED OFFICE

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

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

It is the largest copper producer in Kazakhstan and one of the top worldwide with 16 operating mines, 10 concentrators and 2 copper smelters. Kazakhmys Mining's operations are fully integrated from mining ore through to the production of finished copper cathode and rod. Total copper cathode equivalent produced in 2012 from own ore was 292 kt. 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 2012, it produced 152 kt of zinc in concentrate. The Group is amongst the largest silver producers in the world with output of 12.6 Moz produced in 2012.

Kazakhmys Power has a 50% interest in the coal fired Ekibastuz GRES-1 plant, the largest in Kazakhstan. The plant is undergoing a modernisation programme to take current capacity of 3,000 MW to its nameplate capacity of 4,000 MW. Kazakhmys Power also operates the captive power stations which supply electricity to Kazakhmys Mining.

The Group is listed on the London Stock Exchange, the Kazakhstan Stock Exchange (KASE) and the Hong Kong Stock Exchange (HKSE). It had revenues from continuing operations of $3.4 billion in 2012 with Group EBITDA of $1.9 billion. The Group employs around 60,000 people, principally in Kazakhstan. The Group's strategic aim is to optimise its current operations, deliver its major growth projects and to participate in the development of the significant natural resource opportunities in Central Asia.

Copper Summary

1Includes copper cathode converted into rod.

Ore output of 9,914 kt in Q1 2013 was 3% above the previous quarter and 17% higher than Q1 2012, which was impacted by severe weather. Output in the Central Region benefited from higher output at Konyrat mine, which is ramping up production after its re-opening in June 2012.

The average copper grade in Q1 2013 was 0.98%, which is above the expected run rate for the full year. Grades are currently higher than previous quarters at several mines in the Zhezkazgan Region and at Akbastau mine in the Central Region.

Increased ore extraction combined with higher grade led to a 5% increase in metal in ore mined compared to Q4 2012. Copper in concentrate output rose 2% to 79.7 kt, slightly offset by the stockpiling of ore during the quarter.

Copper cathode production in Q1 2013 is 8% below the previous quarter, which benefited from a release of work in progress. Cathode output in Q1 2012 was impacted by the severe weather and repairs at the Balkhash smelter.

Other Metals Summary

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

2 Includes slimes from purchased concentrate.

Zinc (by-product)

The output of zinc in ore mined declined in Q1 2013 due to lower grade and output at Artemyevsky mine, lower grade at Yubileyno-Snegirikhinsky mine and a temporary suspension of mining at Abyz mine, due to ongoing stripping work. Despite the 15% decrease in zinc in metal mined, production of zinc in concentrate remained in line with Q1 2012, which was affected by several processing issues.

Zinc in concentrate production was 18% below the previous quarter reflecting the lower level of zinc in ore mined and the impact of modernisation work at Nikolayevsky concentrator, where zinc rich ore from Artemyevsky is processed.

Silver (by-product)

Silver output was higher than the anticipated run rate for the full year, benefitting from higher volumes of silver bearing ore and higher grades.

Silver production of 3,361 koz was 20% above the corresponding quarter in 2012. There was a 10% increase in silver in ore mined and a 16% increase in processing volumes compared to that quarter.

Despite a higher volume of silver in ore mined, silver production was 8% below the previous quarter, due to lower volumes of material processed and movements in work in progress.

Gold (by-product)

Gold output was impacted by the suspension of mining at Abyz, due to ongoing stripping work which is expected to complete in Q3 2013. The gold grade also declined mainly due to the suspension of mining at Abyz. The previous quarters also benefited from a release of work in progress.

Kazakhmys Mining Review by Region

Ore extraction increased by 3% to 5,800 kt in Q1 2013 compared to the previous quarter and by 8% compared to Q1 2012, when the Region's output was affected by severe weather.

An upgrade to ore lifting equipment at South mine in December 2012 led to a 28% increase in mine ore output compared to the previous quarter. Output at West mine rose 16%, benefitting from reduced equipment downtime. This increase in ore extraction offset the reduction at the open cast North mine, where stripping work commenced at the Itauz pit, which is scheduled to be completed by Q3 2013.

The average copper grade is higher than the previous quarters, with higher grades across the majority of Zhezkazgan mines. Over the remainder of the year, the grade is expected to move closer to the grade achieved in 2012.

The output of copper in concentrate increased by 10% to 39.5 kt compared to the previous quarter, reflecting the increase in metal in ore mined.

Copper in concentrate production increased by 26% compared to Q1 2012 due to higher volumes of metal in ore mined, slightly offset by lower recovery rates.

Kazakhmys Mining Review by Region

Ore extraction in Q1 2013 increased by 4% compared to the previous quarter, mainly due to higher output at Nurkazgan and Konyrat mines, which grew by 13% and 18% respectively.

Konyrat mine is running below capacity, to avoid stockpiling ore while work is undertaken to increase processing capacity at the Balkhash concentrator, which processes ore from Konyrat. It is planned to complete the concentrator upgrade work by Q3 2013. Output at Nurkazgan mine was assisted by improved equipment availability. Major reconstruction of the main conveyor is planned during Q2 2013, which may reduce output over the next quarter, but should increase the mine's annual ore output to over 3,000 kt.

Output was suspended at Abyz mine, where stripping work commenced in January 2013, but output should resume in Q3 2013. It is expected that the annual ore output from Abyz will be similar to the previous year, but at a lower copper grade.

Ore extraction was 64% higher than Q1 2012, mainly due to the re-commissioning of Konyrat mine in June 2012 and a higher contribution from Akbastau mine.

The average copper grade of 0.80% was in line with the previous quarter, although lower than in Q1 2012. The outcome of the average grade for the Region is dominated by the level of output from the relatively low grade Konyrat mine (0.31%).

Production of copper in concentrate of 20.4 kt was in line with the previous quarter. Higher ore volumes led to a 2% increase in copper mined, which was offset by lower volumes of reprocessed waste material.

Kazakhmys Mining Review by Region

1Excludes concentrate processed by third parties.

Ore extraction of 1,071 kt was in line with the previous quarter, but 17% below Q1 2012 mainly due to the suspension of operations at Nikolayevsky mine in Q3 2012, where more challenging operating conditions rendered the mine uneconomic.

The suspension of Nikolayevsky mine, a relatively low grade mine, raised the average grade to 2.39%, higher than in Q1 2012. Grades were lower than Q4 2012, which benefited from temporary mining at higher grade sections at Orlovsky and Artemyevsky mines. There is also a gradual planned decline in grade at Yubileyno-Snegirikhinsky mine as it matures.

Output of copper in concentrate compared to the previous quarters largely reflects the changes in metal in ore mined and processed. Processing capacity at the Nikolayevsky concentrator is restricted whilst it is undergoing modernisation to increase capacity and recovery rates. It is expected that this modernisation programme will be completed by Q3 2012.

Kazakhmys Power Review

1Results shown are for 100% of the business.

2Electricity generated and sold to customers less internal consumption and transformer losses in the power station.

3The 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.

4External sales only. The weighted average tariff for electricity sold also includes an additional transmission fee on a small proportion of sales.

Ekibastuz GRES-1

Net power generated at Ekibastuz GRES-1 of 3,681 GWh was 7% below the corresponding period in 2012 and the previous quarter. Domestic demand in Q1 2013 was impacted by a relatively warm winter season, with overall power consumption in Kazakhstan declining by 5% in Q1 2013 compared to Q1 2012.

A decrease in domestic sales in Q1 2013 of 738 GWh compared to Q1 2012, was partially offset by an increase in sales to Russia of 459 GWh. Domestic sales were also impacted by temporary limitations on the North-South transmission line and lower industrial demand from within Kazakhstan.

The weighted average realised tariff for electricity at Ekibastuz GRES-1 increased by 19% and 6% compared to Q1 2012 and Q4 2012, respectively. This increase reflects the rise in the ceiling tariff approved by the Ministry of Industry and New Technologies to 7.30 KZT/kWh from 1 January 2013. The 2012 ceiling tariff only applied from 1 April 2012, with Q1 2012 using the ceiling tariff set in 2011. The weighted average realised tariff is 10% below the ceiling tariff due to sales of electricity to Russia, which represented 16% of total sales in Q1 2013.

Net dependable capacity increased by 309 MW in Q1 2013 to 2,564 MW compared to Q1 2012. The increase was due to the commissioning of Unit 8 during Q4 2012.

Kazakhmys Power Review

Captive power stations

Net power generated at the captive stations in Q1 2013 was in line with the corresponding period in 2012. Net power generated in Q1 2013 increased by 5% compared to the previous quarter due to the completion of repair work at the Karaganda power station in November 2012 and the start of the heating season.

Internal sales in Q1 2013 are similar to both comparative periods in 2012. The 12% increase in external sales compared to the previous quarter reflects the seasonal increase in demand and is broadly in line with external sales for Q1 2012.

The weighted average realised tariff for external sales increased to 5.10 KZT/kWh, reflecting the new ceiling tariff approved by the Ministry of Industry and New Technologies of 5.10 KZT/kWh. As with Ekibastuz GRES-1, the ceiling tariff for Q1 2012 was maintained at the same level as the ceiling tariff for 2011.

Interim Management Statement

There were no material events and transactions in the period covered by this Interim Management Statement that were not disclosed as post balance sheet events in the Group's 2012 Annual Report and Accounts.

Sales volumes

The following table sets out the sales volumes of the major products produced by Kazakhmys Mining:

1 Gold sales include volumes from by-products and gold doré from the Central Mukur and Mizek mines

Total copper product sales volumes in Q1 2013 were 14 kt above the comparative period in 2012. The increase in copper sales volumes was due to an increase in copper cathode production volumes of 8 kt and a release of finished goods inventory in Q1 2013 of 3 kt compared to a build-up of 3 kt of inventory in Q1 2012. Copper rod production and sales remain below capacity as comparatively more favourable terms were obtained for sales of copper cathode. 

In the first three months of 2013 sales of zinc in concentrate were broadly consistent with the prior year period with similar production levels in both periods.

Silver sales volumes in Q1 2013 were in line with the comparative period in 2012 as the higher production volumes in the first three months of 2013 were partially offset by a small build-up of inventory during the quarter.

Gold sales volumes in the first three months of 2013 were below the prior year period which included the sale of 69 koz of gold bar inventory built up in the second half of 2011 due to the export restriction placed on sales of gold bar by the Government of Kazakhstan. Gold sales in Q1 2013 were also impacted by lower production volumes and a build-up of gold finished goods inventory due to the timing of shipments to the National Bank of Kazakhstan.

Interim Management Statement

Commodity prices

The following table sets out the average realised prices for the Group's major products:

The following table sets out the average LME/LBMA prices:

Realised prices will differ from the average LME/LBMA prices during the same period, principally because of the uneven timing of sales over the period. Premiums or discounts to metal exchange prices, negotiated with customers, will also impact realised average prices. The LME copper price was $8,085 per tonne at 1 January 2013 and declined to $7,583 per tonne by 31 March 2013.

As noted in the Kazakhmys Power Review, the weighted average realised tariff for Ekibastuz GRES-1 during Q1 2013 of 6.54 KZT/kWh was above the weighted average realised tariff in Q1 2012 as the domestic ceiling tariff for Ekibastuz GRES-1 set by the Government of Kazakhstan was increased to 7.30 KZT/KWh from 1 January 2013. In Q1 2012, the domestic ceiling tariff was 5.60 KZT/KWh before being raised to 6.50 KZT/KWh for the remainder of 2012.

Commodity hedging

At 31 March 2013, there were no commodity hedges in place other than copper hedges at MKM in the normal course of its business.

Exchange rates

The KZT/$ exchange rate at 31 March 2013 was KZT/$ 150.84 compared to KZT/$ 147.77 at 31 March 2012. The average exchange rate for Q1 2013 was KZT/$ 150.66, compared to an average rate of KZT/$ 148.14 for Q1 2012.

Interim Management Statement

Except as described in this statement, there has been no significant change in the financial position of the Group since 31 December 2012.

Net debt for continuing subsidiary businesses

Net debt for the Group's continuing subsidiary businesses increased to $956 million at 31 March 2013 from $707 million as at 31 December 2012 as the Group continued to develop the Aktogay and Bozshakol projects. Operating cash flows during the period included a VAT refund of $87 million related to 2012, offset by income tax and mineral extraction tax payments of $119 million and the bi-annual interest payment of $61 million under the China Development Bank/Samruk-Kazyna finance facility for $2.7 billion.

At 31 March 2013, gross debt was $2,941 million, an increase of $473 million from the position at 31 December 2012, following an additional $200 million to fully draw down the China Development Bank/Samruk-Kazyna finance facility, a $250 million draw down under the Group's pre-export finance facility for $1.0 billion signed in December 2012 and the first $56 million draw down under the China Development Bank facility for the Aktogay project of $1.5 billion.

In January 2013, the Group made the first principal repayment, amounting to $14 million, of the China Development Bank/Samruk-Kazyna finance facility. Of the outstanding gross debt balance as at 31 March 2013, $2,653 million related to the China Development Bank/Samruk-Kazyna finance facility, $56 million related to the China Development Bank facility for the Aktogay project and $232 million to the pre-export finance facility.

Total cash and cash equivalents and current investments for the Group rose from $1,761 million at 31 December 2012 to $1,985 million at 31 March 2013, mainly due to the draw down of the Group's debt facilities, partially offset by the funding of the Group's major projects through the development stage. Of these total funds, $1,591 million is reserved for the development of the Group's projects under the relevant finance facilities.

Net debt for MKM

Net debt for the Group's discontinued subsidiary business, MKM, was $151 million at 31 March 2013, a $30 million increase from the $121 million at 31 December 2012, arising from increased working capital requirements.

Net debt/funds of Ekibastuz GRES-1

The net debt of the Group's subsidiaries exclude the net debt/funds of the equity accounted joint venture investment in Ekibastuz GRES-1. Ekibastuz GRES-1 moved from a net funds position, on a 100% basis at 31 December 2012, of $10 million to a net debt position of $22 million as at 31 March 2013. Strong operating cash flows were offset by capital expenditure on the power plant's ongoing rehabilitation programme, in particular the refurbishment of Units 1 and 2.

Holding in ENRC PLC

The Group's holding of 334,824,860 shares in ENRC PLC had a market value of $1,252 million, based on a share price of 246 pence as at 31 March 2013, compared to a value of $1,546 million as at 31 December 2012 when the ENRC PLC share price was 284 pence.

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.

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

Kazakhmys Mining Production Appendix

1 Includes slimes from purchased concentrate.