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Kazakhmys PLC (KAZ)

  Print      Mail a friend       Annual reports

Tuesday 19 September, 2006

Kazakhmys PLC

Interim Results - Part 1

Kazakhmys PLC
19 September 2006




                                  Kazakhmys PLC

                    Results for six months ended 30 June 2006

Financial highlights

o    Revenues up by 90% to $2,279.8  million  following  an 82%  increase in the
     average LME copper price for the period

o    EBITDA  excluding  special  items  for the  period  up by 124% to  $1,081.3
     million

o    Profit before taxation,  finance items and negative  goodwill up by 174% to
     $984.5 million

o    EPS based on Underlying Profit up by 124% to $1.32 per share

o    Average  realised  copper  price up 88% from $3,458 per tonne to $6,510 per
     tonne,  representing a 7% premium over the average LME copper price for the
     period

o    Free Cash Flow(3) up by 316% to $622.3  million,  despite  adverse  working
     capital movements of $197.0 million mainly within MKM

o    Interim  dividend  declared  of 12.8 US cents per share in  respect of 2006
     earnings

Key business developments

o    Expansionary  and new project capital  expenditure up 91% to $95.4 million,
     representing investment for organic growth

o    Completion of the  Zhaman-Aybat  mine in the first quarter of 2006 ahead of
     schedule

o    Accelerating scoping study on the Boschekul mine with preparation scheduled
     to commence later this year

o    Strengthening  of the Board with the appointment of David Munro as Strategy
     Director and Philip Aiken as non-executive director

o    YK Cha to stand down as Chief  Executive  with effect from 31 December 2006
     after over ten years'  service with the Group and  continuing  as a Special
     Adviser to the Board

Financial highlights for six months ended 30 June 2006

------------------------------------------------------------------------------------------------------------------------
                                                                         Six months        Six months
$ million, unless stated                                                   ended 30     ended 30 June           % change
                                                                          June 2006              2005
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

Revenues                                                                    2,279.8            1,202.1              90%
Earnings:
    EBITDA excluding special items (1)                                      1,081.3              482.8             124%
    Profit before taxation, finance items and negative goodwill               984.5              359.5             174%
    Underlying Profit (3)                                                     619.3              236.7             162%
EPS:
    Basic and diluted ($)                                                      1.35               0.56             141%
    Based on Underlying Profit (2) ($)                                         1.32               0.59             124%
Free Cash Flow ((3))                                                          622.3              149.5             316%
ROCE (3) (%)                                                                   27.7%              17.1%             62%
Cash cost of copper after by-product credits ((3)) ($/tonne)                  563.1              869.4             (35%)
------------------------------------------------------------------------------------------------------------------------


Kazakhmys' Executive Chairman Vladimir Kim commented:

"Our strong 2006  earnings at the half year have already  exceeded the full year
2005  earnings  following a period of  particularly  buoyant  commodity  prices.
Despite the operational  difficulties  experienced at the beginning of the year,
these results  demonstrate the resilience of our business.  The interim dividend
of 12.8 US cents per share  reflects  our  confidence  in the  business  and the
continued  strength  in  copper  prices.  We are  also  confident  that  the new
appointments to the Board will strengthen the leadership of Kazakhmys as we seek
to build a  world-class  metals and  mining  company.  Finally,  I would like to
express my gratitude to YK Cha,  our Chief  Executive,  who has decided to stand
down at the end of this  year in order to spend  more time in his  native  Korea
although  we are  pleased  that he will  continue  as a Special  Adviser  to the
Board."

(1)  Reconciliation of EBITDA excluding special items to profit before taxation,
     finance  items and  negative  goodwill is found in Note 4(a) to the interim
     consolidated financial statements.

(2)  Reconciliation  of EPS based on Underlying  Profit to basic and diluted EPS
     is found in Note 9 to the interim consolidated financial statements.

(3)  Refer to the Glossary on page 44 for the  definition of these key financial
     indicators.






CHAIRMAN'S STATEMENT

I am pleased to present  Kazakhmys PLC's half year financial results for the six
months ended 30 June 2006.

The first six months of 2006 saw us achieve  strong  growth in both revenues and
profits, as we reaped the benefit of particularly  attractive  commodity prices.
Revenues rose by 90% to $2,279.8 million,  and pre-tax profits increased by 166%
to $955.9  million.  Our Earnings per share based on  Underlying  Profit for the
half year was higher than the 2005 full year figure.

We delivered this impressive  performance  despite adverse weather conditions in
the first two months of 2006.  Overall,  our copper cathode  production from own
concentrate  increased  slightly  compared  to the same  period in 2005.  Copper
cathode  production  volumes  improved  in the  second  quarter,  rising  by 11%
compared to the first quarter as weather conditions  improved.  Our total copper
production  of 187.9  thousand  tonnes  was down 6% from the first half of 2005,
primarily due to lower volumes of copper produced from purchased concentrate and
through tolling arrangements as a result of the Group's aim to reduce volumes of
purchased concentrate.

Output of  by-products  such as zinc and gold rose,  in part,  due to the higher
contribution  from the Abyz and  Artemyevskoe  mines  that  produce  ores with a
higher by-product  content. In the first six months of 2006, our zinc production
volume  increased  by 17%  from  29 to 34  thousand  tonnes  and  our  own  gold
production increased by 15% from 47 to 54 thousand ounces.

We continue to see significant potential in terms of investment opportunities in
Kazakhstan, which offers an environment of both political stability and economic
growth.  We are actively  screening for  opportunistic  acquisitions  that offer
benefits to our  shareholders.  Our healthy  balance  sheet and robust Free Cash
Flow of $622.3  million  for the first six  months of 2006  place us in a strong
position to achieve these goals.

We remain committed to our strategy of exploiting organic growth  opportunities.
The feasibility  studies on our Aktogay project  continue as we consider further
the mining  methodology  and  processing  technologies.  We expect to report the
outcome of our  feasibility  studies  on this  project in the next six to twelve
months.  We are also launching,  ahead of plan, a scoping study on the Boschekul
project located  approximately 200 kilometres  north-east of Astana, the capital
of Kazakhstan.  The annual production from the Boschekul project is estimated to
be 20 million tonnes of ore.

Our commitment to organic growth through new projects and expansions at existing
operations is highlighted by a 91% increase in expansionary  capital expenditure
from  $50.0  million  in  the  first  half  of  2005  to  $95.4  million  in the
corresponding  period of 2006.  Significant  sums  invested  during  the  period
include the  Zhaman-Aybat  mine, the acid plant at the Balkhash  complex and the
expansions at our Karagaily and Nurkazgan concentrators.

The interim  dividend of 12.8 US cents per share  announced  today  reflects our
confidence in the business, whilst taking account of growth opportunities.

We are in advanced stages of seeking regulatory approval for a secondary listing
on the  Kazakhstan  stock  exchange,  an  objective  we  declared at the time of
Listing.  This  development  will  allow  Kazakhstan  investors  to  participate
directly in the  continued  growth of  Kazakhmys  and we expect this will make a
meaningful  contribution  to the development of  Kazakhstan's  capital  markets.
Admission to the Kazakhstan  stock exchange is expected to take place by the end
of the year.

I would  also  like to  report  several  changes  in our  management  structure.
Firstly,  I would like to pay particular  tribute to YK Cha who will be standing
down as Chief Executive with effect from 31 December 2006. Mr Cha has decided to
spend more time in his native Korea pursuing other  business  opportunities.  Mr
Cha has been a key  member  of our  management  team  since  the  mid-1990s.  He
instigated a strong sales and marketing strategy, developing a keen insight into
the Chinese market and built deep relationships  with Chinese  end-users,  which
made a significant contribution to Kazakhmys' success in sales and marketing. He
also  played  a  significant  role  in  the  preparation  and  execution  of our
successful  London  Listing last year and has made a great  contribution  to the
transformation of Kazakhmys PLC into a FTSE 100 company. Kazakhmys will continue
to benefit from Mr Cha's experience as he will serve as a Special Adviser to the
Board after the end of the year.

One of our  non-executive  directors,  David  Munro,  has  agreed  to  join  our
executive  management team as Strategy Director with effect from 1 October 2006.
David brings a wealth of mining and strategic development  experience and we are
confident  that his  knowledge  and skills  will be  important  in  shaping  our
business going forward.

In line with our previous commitment, I am pleased to announce that Philip Aiken
has agreed to join the  Kazakhmys  PLC Board with effect  from 1 November  2006.
There is no doubt  that  Philip's  35 years of  industry  experience,  including
several  senior roles at BHP Billiton,  will be invaluable to the Board.  Philip
will join the  Audit,  Remuneration  and HSE  committees.  In  addition,  we are
looking to further deepen the Board's range and experience by appointing another
independent non-executive director in due course.

Looking forward,  we believe the commodity price environment will continue to be
favourable  for the  mining  community.  Supply  fundamentals  remain  tight  as
uncertainty  remains over production from a number of geographic regions. We see
copper prices staying above long-term  historical  averages for the remainder of
the year and into 2007. Over the full year, we continue to expect copper cathode
production volumes to be moderately higher compared to 2005.

In conclusion,  I would like to thank all our employees who  contributed so much
to  Kazakhmys'  strong  performance  in the  first  half of 2006 in spite of the
challenging  operating environment at the start of the year. Their dedication is
an invaluable element in delivering on our commitments in the future.







REVIEW OF OPERATIONS


Highlights

o    Extracted  ore  volumes   slightly   increased   despite   adverse  weather
     conditions, with marginally improved grades

o    Copper cathode  produced from our own concentrate  increased from the first
     to second quarter of 2006, totalling 169 thousand tonnes for the six months
     compared to 167 thousand tonnes in the corresponding period of 2005

o    Copper cathode  production from purchased  concentrate was 32% lower,  down
     from 25.6 to 17.5  thousand  tonnes in line with the Group's plan to reduce
     purchased concentrate volumes

o    Output of  by-products  such as zinc,  gold and silver rose,  in particular
     zinc which increased by 18% compared to the corresponding period of 2005

Copper

In the first half of 2006, the Group  extracted  20,127  thousand  tonnes of ore
with  an  average  copper  grade  of  1.10%,  an  increase  from  1.03%  of  the
corresponding period of 2005.

Copper  cathode  production  over the first half of the year was 187.9  thousand
tonnes, a 6% decrease compared to the same period of 2005. This is primarily due
to lower  volumes of copper  produced  from  purchased  concentrate  and through
tolling  arrangements  as a result  of the  Group's  plan to reduce  volumes  of
purchased concentrate.

In the first quarter of 2006, copper cathode  production fell by 7%, compared to
the same period of 2005, to 89.1 thousand tonnes due to the disruptions early in
2006 when  temperatures in some parts of Kazakhstan  remained below minus 40(0)C
for nearly two weeks.  Production  volumes have improved in the second  quarter,
and we produced 98.8 thousand tonnes of copper cathode, an 11% increase compared
to the first quarter.

In the first half of 2006,  copper cathode  produced from purchased  concentrate
fell by 32% compared to the same period of 2005,  in line with our aim to reduce
copper  cathode  production  volumes  from  purchased   concentrate.   Purchased
concentrate will be gradually  substituted by increasing the  contribution  from
the recently  commissioned  Abyz,  Kosmurun and Nurkazgan  mines. To accommodate
increasing ore volumes from these mines,  concentrator capacity at the Karagaily
plant has been  upgraded,  increasing  capacity by 50% to 1.5 million tonnes per
year.

Copper rod production  increased  significantly  from 5.9 thousand tonnes in the
first  half of 2005 to 14.3  thousand  tonnes in the same  period of 2006 due to
more favourable market conditions.

At the Zhezkazgan complex,  extracted ore volumes were marginally higher with 2%
growth in the first  half of 2006  compared  to the first  half of 2005.  Copper
cathode production volumes were adversely affected by the scheduled  maintenance
shutdown of the Zhezkazgan copper smelter.

Although  extracted  ore volumes at the Balkhash  complex were down in the first
six  months  of 2006  compared  to the first six  months  of 2005,  both  copper
concentrate  and copper  cathode  production  were up due to higher ore  grades.
Compared to the first half of 2005, copper concentrate production increased from
91.8 thousand  tonnes to 133.0  thousand  tonnes and copper  cathode  production
excluding tolling rose from 75.2 thousand tonnes to 81.2 thousand tonnes.
 
East Region  mines  performed  well,  with higher  copper  grades from  recently
completed  mines  generating an increase in copper  concentrate  production from
241.2 thousand  tonnes in the first half of 2005 to 259.5 thousand tonnes in the
first half of 2006.

Mines at the  recently  established  Karaganda  complex  performed  without  any
significant  business  interruptions,  and the ramp-up at the recently completed
Abyz,  Nurkazgan and Kosmurun  mines has  progressed  smoothly.  Ore  extraction
volumes increased significantly from 455 thousand tonnes in the first six months
of 2005 to 1,473 thousand tonnes in the same period of 2006. Copper  concentrate
production increased by 85% from 38.5 thousand tonnes to 71.2 thousand tonnes.


Zinc

The contribution  from zinc-rich ores from the  Artemyevskoe  mine increased the
average zinc grade in the first half of 2006 to 4% compared  with 3% in the same
period of 2005.  Zinc metal  production  in the first half of 2006 stood at 33.8
thousand tonnes in comparison to 28.7 thousand tonnes of the first half of 2005,
an 18% increase. The ramp-up at the zinc plant was slightly slower in the second
quarter of 2006 due to technical problems with the coolers,  which are currently
being rectified.

Precious Metals

In the first half of 2006, the Group  produced 10.7 million ounces of silver,  a
level  comparable to the same period for the prior year. Out of the 10.7 million
ounces of refined silver  produced,  only 32 thousand ounces were produced under
tolling arrangements.

The Group also produced 77.7 thousand  ounces of gold,  24% higher than the same
period in 2005. Out of the 77.7 thousand ounces of gold produced,  53.6 thousand
ounces were produced from our own  concentrate  (a 15% increase  compared to the
first half of 2005).  This increased  gold  production is the result of a larger
ore contribution  from the Abyz and Artemyevskoe  mines that produce ores with a
higher gold content. Gold production through tolling arrangements also increased
from 16 thousand  ounces for the first half of 2005 to 24 thousand ounces in the
corresponding period of 2006.

MKM

For the first half of 2006, MKM total  production  was 135.3 thousand  tonnes of
copper products. The wire products business unit, the main volume driver for the
period,  produced  82.4  thousand  tonnes,  a 39% increase  compared to the same
period of 2005. Out of the 82.4 thousand tonnes  produced,  wire rod represented
62.5  thousand  tonnes  and drawn wire 19.9  thousand  tonnes  compared  to 43.8
thousand tonnes and 15.4 thousand tonnes,  respectively,  for the same period of
2005.  Total flat products  manufactured  were  comparable to the  corresponding
period of 2005 and stood at 31.5 thousand tonnes, comprising 1.1 thousand tonnes
of pre-rolled  products,  7.7 thousand tonnes of sheets and 22.7 thousand tonnes
of strips.  MKM also produced  10.1  thousand  tonnes of tubes and 11.3 thousand
tonnes  of  bars  against  9.5  thousand   tonnes  and  10.8  thousand   tonnes,
respectively, in the same period of 2005.



 




FINANCIAL REVIEW

Basis of preparation

The  financial  information  set out on pages 14 to 35 has been  prepared  using
consistent  accounting  policies with those adopted in the financial  statements
for the year  ended 31  December  2005.  The Group  has  changed  the  segmental
reporting  presentation  from that disclosed in the 2005 Annual  Report.  Whilst
corporate  costs were not material  during 2005,  the increased size of the head
office  following  the  Listing has  resulted in the need to separate  corporate
costs and  balances  from the  Kazakh  Mining  segment.  The  revised  segmental
reporting  is  consistent  with  the  Group's  internal   management   reporting
structure.

Summary of results

Buoyant commodity prices, particularly copper, seen throughout the first half of
the year have  resulted in  substantial  increases in revenues and profit before
taxation of 90% and 166%, respectively,  to $2,279.8 million and $955.9 million.
Whilst sales  volumes of copper  cathode and rod  remained  flat at 178 thousand
tonnes and adverse cost pressures were experienced in Kazakhstan,  these factors
were more than compensated for by the higher prices seen across the Group's main
products.

A summary of the consolidated income statement is set out below:

                                                                  Six months        Six months
Summary Group income statement                                      ended              ended               Change
                                                                 30 June 2006      30 June 2005               %
                                                                  $ million          $ million

Revenues                                                             2,279.8            1,202.1                90%
Operating costs excluding depreciation, depletion,                                                                  
   amortisation and special items                                   (1,198.5)            (719.3)               67%
                                                                    --------           ---------
EBITDA excluding special items                                       1,081.3              482.8               124%
Special items:
   Add/(less): write back/(off) of property, plant and                  10.2               (0.3)
       equipment
   Less: loss on disposal of fixed assets                               (4.0)             (10.6)
Less: depreciation, depletion and amortisation                        (103.0)            (112.4)
                                                                    --------           ---------
Profit before taxation, finance items and negative                                                                  
   goodwill                                                            984.5              359.5               174%
Net finance expenses (including net foreign exchange                                                                
   losses)                                                             (35.1)              (0.5)                    
Recognition of negative goodwill                                         6.5                -
                                                                    --------           ---------
Profit before taxation                                                 955.9              359.0               166%
Income tax                                                            (317.0)            (126.9)
                                                                    --------           ---------
Profit for the period                                                  638.9              232.1               175%
Minority interests                                                      (6.2)              (6.0)
                                                                    --------           ---------
Profit attributable to equity shareholders of the parent               632.7              226.1               180%
                                                                    --------           ---------
                                                                    --------           ---------
EPS - basic and diluted                                                $1.35              $0.56               141%
                                                                    --------           ---------
                                                                    --------           ---------
EPS based on Underlying Profit                                         $1.32              $0.59               124%
                                                                    --------           ---------
                                                                    --------           ---------


Following  these  results  and in line with the  Group's  dividend  policy,  the
Directors have declared an interim dividend of 12.8 US cents per share.

The improved  earnings  have  strongly  benefited the Group's cash flows and net
liquid funds  position,  with the latter  standing at $1,221.4  million as at 30
June 2006,  rising to $1,514.4  million by 31 August 2006.  The  continued  high
commodity  prices and healthy  funding  position leaves the Group well placed to
pursue future organic growth and opportunistic acquisitions.




The  definitions  of our key financial  indicators are shown in the Glossary and
these measures are set out below:


                                                                    Six months ended      Six months ended
Key financial indicators                                              30 June 2006          30 June 2005

EBITDA excluding special items ($ million)                               1,081.3                 482.8

EPS based on Underlying Profit ($)                                          1.32                  0.59

Free Cash Flow ($ million)                                                 622.3                 149.5

Return on Capital Employed (%)                                             27.7%                17.1%

Cash cost of copper after by-product credits ($/tonne)                     563.1                 869.4

Income statement

Revenues

As the Kazakh  Mining  and MKM  businesses  are  different  in  nature,  the two
segments  have been  analysed  separately.  A summary  of  production  and sales
volumes, and revenues by major categories of products for the half year ended 30
June 2006 and 2005 are set out below:

Production and sales                 Production                   Sales                                      
volumes/revenues              --------------------- --------------------------------------------                        
                                      
                              Six months Six months Six months Six months Six months Six months
                                  ended      ended      ended      ended      ended      ended     
                                30 June    30 June    30 June    30 June    30 June    30 June   
                                  2006       2005        2006       2005       2006       2005      
                                    kt         kt         kt         kt   $ million  $ million                          
   
                                                                                             
Copper cathodes:                                                                             
From own and purchased             187        193        163        173    1,060.2      595.5
concentrate                                                                                  
From tolling                         1          7          1          7        5.7       15.3
                                                                                             
Zinc:                                                                                        
Zinc metal                          34         29         37         38      102.4       46.8
Zinc concentrate                   154        109         81          8       59.1        1.6
                                                                                             
Silver (koz)                    10,692     10,638     10,835     10,963      117.8       77.2
                                                                                             
Gold (koz):                                                                                  
From own production                 54         47         47         33       28.2       14.2
From tolling                        24         16         24         16        1.9        1.1
                                                                                             
Copper rod                          14          6         15          5       98.6       20.1
                                                                                             
Other                                -          -          -          -       47.0       19.8
                                                                           --------   -------                  
Kazakh Mining                                                              1,520.9      791.6
                                                                                             
MKM                                135        111        134        110      758.9      410.5
                                                                           --------   -------                           
                                                                                   
Total                                                                      2,279.8    1,202.1
                                                                           =======   ========                  



Revenues of the Kazakh Mining business increased from $791.6 million to $1,520.9
million,  a 92% improvement  against the prior period. The major contribution to
revenues  remained  copper  cathodes which  accounted for 70% of revenues.  With
prices  rising across all  commodities,  revenues from each of our main products
showed substantial increases.

Copper prices escalated significantly during April and May 2006 reaching $8,788
per tonne on 12 May 2006. The average market and realised prices for our main
products during the period are set out below:

 
Comparison of market and     Six months ended 30     Six months ended 30  
realised prices for main          June 2006               June 2005       
products                     -------------------  -----------------------                                             
                             Average     Average     Average     Average  
                             market     realised     market     realised  
                              price       price       price       price   
                                                                          
Copper cathode ($/tonne)     6,070       6,510       3,328       3,458      
                                                                          
Zinc metal ($/tonne)         2,762       2,767       1,294       1,231      
                                                                          
Silver ($/oz)                10.95       10.87        7.06        7.04       
                                                                          
Gold ($/oz)                    590         600         427         430        

 

The average realised prices for our main products do not differ significantly
from market prices with the exception of copper. In line with industry practice,
our sales agreements for copper cathodes provide for provisional pricing at the
time of delivery with the final price based on the market price for future
periods. With a higher proportion of our sales volumes in the second quarter
(62% for the second quarter compared to 38% for the first quarter), pricing
adjustments have generally been positive. Additionally, a premium over LME
prices is incorporated into our sales agreements.

 

Offsetting higher commodity prices, sales volumes for copper cathodes declined
compared to the prior period. Copper cathode production including tolling
decreased by 6% compared to the prior period. Given that 68% of sales were to
Europe, compared with 33% in the prior period, and the longer delivery time for
European sales, a sizeable time lag arises between production and sales
recognition for accounting purposes.

 

In addition, 14 thousand tonnes of copper cathodes were utilised in the
manufacture of copper rods, whose sales volumes increased by 200%, reflecting
improved customer demand in the Chinese market.

 

Sales volumes of zinc metal remained flat in line with production, although with
the realised price increasing by 125%, revenues increased by 119% to $102.4
million. Similarly, sales volumes of silver were largely unchanged from the
prior period reflecting flat production, but revenues increased by 53% to $117.8
million in line with the increase in realised prices. Sales volumes of gold
increased by 42% reflecting higher production volumes due to the Artemyevskoe
mine which was commissioned in March 2006.

 

Other revenues improved from $19.8 million to $47.0 million. These revenues
relate to the sales of surplus electricity, heating and coal, and minor
by-products arising from the copper cathode production process.

 

MKM's revenues increased by 85% to $758.9 million reflecting an increase in
sales volumes of 22%, but more significantly, higher copper prices that are
passed on to the customer in full. Of the $348.4 million increase in revenues,
$270.8 million resulted from the increase in copper prices. Wire rods and drawn
wire delivered the highest increase in sales volumes against the prior year,
with an increase of 39%. Together, these wire products account for 61% of MKM's
sales volumes.

 



Earnings

 

Profit before taxation, finance items and negative goodwill increased from
$359.5 million to $984.5 million, an increase of 174%, split between $973.1
million for the Kazakh Mining business, $30.0 million for MKM less $18.6 million
for unallocated corporate costs. A reconciliation of profit before taxation,
finance items and negative goodwill to EBITDA excluding special items by
business segment is set out below:

 
                                               Six months     Six months  
                                                 ended          ended     
Reconciliation of EBITDA excluding                                        
special items                                 30 June 2006   30 June 2005 
                                               $ million      $ million   
                                                                          
KAZAKH MINING                                                             
Profit before taxation, finance                   973.1          347.2         
items and negative goodwill                                               
                                                                          
(Less)/add: (gain)/loss from special               (6.6)          10.9          
items                                                                     
                                                                          
Add: depreciation, depletion and                   92.3          102.0         
amortisation                                                              
                                                -------        --------                                                 
                                                  
EBITDA excluding special items                  1,058.8          460.1         
                                                -------        --------                          
                                                                          
Revenues                                        1,520.9          791.6         
                                                -------        --------                                                 
                                                  
EBITDA excluding special items                       70%            58%           
margin                                                                    
                                                -------        --------                                                 
                                                  
MKM                                                                       
Profit before taxation, finance                    30.0           15.6          
items and negative goodwill                                               
                                                                          
Less: gain from special items                      (0.1)             -             
                                                                          
Add: depreciation and amortisation                 10.6           10.4          
                                                -------        --------                                                 
                                                  
EBITDA excluding special items                     40.5           26.0          
                                                -------        --------                                                 
                                                  
Revenues                                          758.9          410.5         
                                                -------        --------                                                 
                                                  
EBITDA excluding special items                        5%             6%            
margin                                                                    
                                                -------        --------                                                 
                                                  
                                                                          
Unallocated corporate costs                       (18.0)          (3.3)     
excluding special items                                                   
                                                -------        --------                          
Total EBITDA excluding special items            1,081.3          482.8         
                                               ========         ======                           

 

Kazakh Mining

 

The margin at the level of EBITDA, excluding special items for the Kazakh Mining
segment, increased substantially from 58% in the prior period to 70% in the
first half of 2006. The significant increase in copper prices seen since the
beginning of 2006 had the most favourable impact on margins. To a lesser extent,
margins also increased as the proportion of copper cathodes produced from
purchased concentrate reduced from 13% to 10%, primarily resulting from an
increase in mined ore and an improvement in mined ore grade from 1.03% to 1.10%.

 

However, the Kazakh Mining segment also experienced a number of adverse cost
pressures, in common with other companies in the mining industry. Employee
remuneration (production and administration) increased by 34% from the prior
period to $106 million due to rising prosperity within Kazakhstan and the
consequential wage pressures for the business, and a tightening market for
skilled labour across the natural resources sector within the CIS.

 

Although the copper content of purchased concentrate within the production
process decreased from 29 thousand tonnes to 19 thousand tonnes, rising copper
prices increased the cost of this input raw material from $78.2 million to $96.0
million, a 23% increase. In common with other mining companies, there was also
significant cost pressure from mining and processing consumables and fuel, which
increased by around 27% to $136.8 million.

 

In addition, the Kazakhstan tenge appreciated against the US dollar by 3%, with
the average exchange rate strengthening from 131.2 KZT/$ in the prior period to
127.1 KZT/$. As certain costs are denominated in US dollars,, the strengthening
of the Kazakhstan tenge resulted in higher costs for the Kazakh Mining business.

 

Selling and distribution costs increased by 77% to $24.5 million, reflecting a
greater proportion of sales to Europe and the resulting higher transportation
costs. Administration costs rose by 41% to $105.1 million, mainly reflecting
higher employee remuneration costs in Kazakhstan and additional compliance and
related costs following the Listing.

 

Depreciation, depletion and amortisation amounted to $92.3 million, a small
decrease from the prior period. Although capital expenditure increased during
2005 and 2006 compared to earlier years, additional depreciation of $16.0
million was expensed in the first half of 2005 relating to the commissioning of
the Balkhash zinc smelter.

 

The cash cost of copper after by-product credits amounted to $563.1 per tonne
compared to $869.4 per tonne in the prior period. The significant increases in
by-product revenues and the cost of purchased concentrate masked the underlying
cost of production of copper cathode from own mined ore as explained above.

 

MKM

 

Although EBITDA excluding special items rose from $26.0 million to $40.5
million, the increase was largely attributable to a reduction of cost of sales
of $27.5 million arising from increased stock valuation due to higher copper
prices. The effect of this increased stock valuation does not translate into
operating cash flows. Except for the effects of increased copper price on
purchased raw materials, cost of sales remained comparable with the prior
period.

 

With the increase in sales volumes of lower margin wire rods by 43%, the margin
at the level of EBITDA excluding special items decreased from 6% to 5%. The
continued production difficulties associated with the ContiM(c) equipment, which
existed at the time of acquisition in December 2004, also depressed margins.

 

Net finance items

 

Net finance costs were $35.1 million which contrasted with net finance costs of
$0.5 million during the prior period.

 

Included within net finance costs is a net foreign exchange loss of $63.8
million, which increased substantially from the prior year loss of $1.7 million
due to the strong appreciation of the Kazakhstan tenge against the US dollar
since the beginning of the year. Of the foreign exchange losses in the period,
$92.7 million were attributable to losses arising on the revaluation of US
dollar denominated deposits and trade receivable balances into Kazakhstan tenge
within Kazakhmys LLC.

 

Interest income increased from $10.0 million to $34.0 million, primarily as a
result of the utilisation of higher operating cash flows and of the Listing
funds. Following the repayment of short-term credit lines within Kazakhmys LLC
in early 2006, a minor amount of interest expense arose on the new loan facility
entered into by MKM, which stood at $184.5 million as at 30 June 2006.

 

Negative goodwill

 

Negative goodwill of $6.5 million arose during the period upon the acquisition
of ZhREK JSC, an electricity transmission company in Kazakhstan. The acquisition
of this business will assist in maintaining tighter cost control over the
transmission of electricity from our power plants to the operations.

 

Taxation

 

The effective tax rate for the period was 33.2% compared to a rate of 35.3% in
the prior period. The overall tax charge was $317.0 million, an increase of
$190.1 million compared to the prior period as a result of the significant
increase in earnings within the Kazakh Mining business.

 

Excess profits tax is levied in addition to corporate tax on the profits
attributable to certain subsoil contracts where the internal rate of return
exceeds 20%. For the period, excess profits tax of $25.3 million was charged to
earnings representing an incremental 2.6% to the effective tax rate.

 

Withholding taxes of $6.8 million were accrued during the period representing an
incremental 0.7% to the effective tax rate. These withholding taxes relate to
profits arising within Kazakhmys LLC which have either been, or will be,
remitted to the UK for dividend purposes.

 

The effective rate of taxation has decreased from the prior period principally
due to higher non-taxable income arising from the Balkhash zinc smelter for
which Kazakhmys LLC benefits from a tax holiday, and the rate of excess profits
tax and withholding taxes not having increased at the same proportion as
earnings.

 

The effective tax rate is expected to remain above the statutory Kazakhstan rate
of tax of 30% due to excess profits tax and the imposition of withholding taxes
on the remittance of earnings to the UK.

 

Minority interests

Capital contributions of $186.7 million were made by Kazakhmys PLC to Kazakhmys
LLC in the first quarter of 2006, and included subscribing to the rights of
minorities who did not participate in the initial capital contribution. As a
consequence, the Company's interest in Kazakhmys LLC increased from 98.68% as at
31 December 2005 to 99.08% as at 30 June 2006.

 

Despite the smaller interest held by minority shareholders in Kazakhmys LLC,
their attributable share of earnings and assets
increased slightly due to the higher earnings reported by Kazakhmys LLC in the
period.

 

Underlying Profit and earnings per share

 

A reconciliation of attributable profit to Underlying Profit is set out below:

 
                                             Six months   Six months             
                                               ended         ended               
Reconciliation to Underlying Profit         30 June 2006 30 June 2005  Change                                         
                                             $ million     $ million   %         
                                                                                 
Profit attributable to equity                  632.7        226.1         180%      
shareholders of the parent                                                       
                                                                                 
Special items:                                                                   
Recognition of negative goodwill                (6.5)           -                       
Write (back)/off of property, plant            (10.2)         0.3                     
and equipment                                                                    
Loss on disposal of fixed assets                 4.0         10.6                    
                                                                                 
Tax effect of special items                     (0.8)        (0.2)                   
                                                                                 
Minority interest effect of special              0.1         (0.1)                   
items                                                                            
                                               -----     ---------                                  
Underlying Profit                              619.3        236.7         162%      
                                                                                 
                                               =====     =========
 

The increase in Underlying Profit of 162% principally reflects the favourable
impact of higher commodity prices on earnings.

 

Basic earnings per share rose from 56 US cents to 135 US cents, an increase of
141%. There is no difference between basic and diluted earnings per share
figures.

 

Earnings per share based on Underlying Profit was 132 US cents compared to 59 US
cents for the prior period, a rise of 124%. At the time of Listing, 58.4 million
shares were issued, and in the absence of other changes in issued share capital,
these newly issued shares have resulted in the weighted average number of shares
in issue increasing by 14%. If earnings per share based on Underlying Profit for
the prior period was determined using the actual number of shares in issue for
the current period, then earnings per share based on Underlying Profit would
have shown an increase from 51 US cents to 132 US cents, a 159% increase.

 

Dividends

 

The Directors have declared an interim dividend of 12.8 US cents per share in
respect of the 2006 financial year. This is in line with our dividend policy and
takes account of the growth requirements for the Group.

 

The Board intends to maintain a dividend policy which will take into account the
profitability of the business and underlying growth in earnings of the Group, as
well as its cash flows and growth requirements. The Directors will also ensure
that dividend cover is prudently maintained. Interim and final dividends will be
paid in the approximate proportions of one-third and two-thirds of the total
annual dividend, respectively.

 

 



Cash flows

 

A summary of cash flows is shown in the table below:

                                                                   Six months ended      Six months ended
Cash flow summary                                                    30 June 2006          30 June 2005
                                                                       $ million             $ million

EBITDA                                                                    1,087.5                471.9

Recognition of negative goodwill                                             (6.5)                 -

Write (back)/off of assets and impairment losses                             (5.7)                 3.6

Loss on disposal of property, plant and equipment                             4.0                 10.6

Foreign exchange loss adjustment                                            (14.4)                (2.5)

Working capital movements                                                  (197.0)               (31.4)

Interest paid                                                                (0.2)                (7.1)

Income tax paid                                                            (169.2)              (190.2)
                                                                           ------              --------
Net cash flows from operating activities                                    698.5                254.9

Sustaining capital expenditure                                              (76.2)              (105.4)
                                                                           ------              --------
Free Cash Flow                                                              622.3                149.5

Expansionary and new project capital expenditure                            (95.4)               (50.0)

Interest received                                                            46.5                  6.3

Acquisition of subsidiaries, net of cash acquired                            (2.0)                 -

Dividends paid                                                             (170.4)               (54.9)

Other movements                                                               0.6                  2.5
                                                                           ------              --------
Cash flow movement in net liquid funds                                      401.6                 53.4
 
                                                                           ======              ========
                                                                         

 

Cash flows from operating activities during the period were $698.5 million,
which compared to $254.9 million in the prior period. Despite adverse working
capital movements compared to the prior period, the impact of higher earnings
were seen in strong operating cash flows, and an increase in net liquid funds.

 

Adverse working capital movements were largely attributable to higher inventory
levels due to the impact of rising commodity prices, increased sales volumes
within MKM and the time lag between production and sales recognition as
described earlier. These factors together accounted for an adverse movement of
$179.2 million in working capital. Aside from these effects, working capital was
tightly controlled within both businesses. The difference between the working
capital movements across balance sheets, and those seen in the cash flow summary
are mainly attributable to the appreciation of the Kazakhstan tenge which is a
non-cash movement.

 

Income tax payments decreased by $21.0 million to $169.2 million. At the
beginning of a financial year in Kazakhstan, a schedule of tax payments to be
made during the course of the year is agreed with the tax authorities, and a
final payment is remitted with the submission of the tax return by March of the
following year. The payment schedule agreed for 2006 is at a similar level to
the amount of tax paid in respect of 2005. The reduction in tax payments for the
six month period results from a non-recurring amount of tax payable in
Kazakhstan in the first half of 2005 relating to acquisitions undertaken by
Kazakhmys LLC in previous years. Notwithstanding this effect, the overall amount
of tax payable for the year as a whole is expected to show a significant
increase compared to the prior year due to the higher earnings within the Kazakh
Mining business.

 

Capital expenditure in aggregate (including expenditure on intangible assets and
mine stripping costs) amounted to $171.6 million, split between $76.2 million
for sustaining capital expenditure and $95.4 million for expansionary and new
project capital expenditure. Significant items within the latter category
related to $19.6 million for the final construction costs of the Zhaman-Aybat
mine and $15.6 million for initial construction costs on the Aktogay project.
Consistent with the Group's commitment to its employees and local communities,
$12.9 million was invested in the construction of a new sports and social
complex in Satpayev, which is one of the most advanced in Kazakhstan.

 

Interest received increased by $40.2 million to $46.5 million reflecting the
higher net liquid funds position of the Group. Dividends paid during the period
by the Company of $168.3 million related to the payment of the final dividend of
36 US cents per share for the 2005 financial year.

 

Given the strong cash flows generated by the Kazakh Mining business, the short
term credit facilities were repaid early in the period. Financing for MKM, which
had previously been undertaken by way of intercompany loans from Kazakhmys LLC,
was provided by a new four year loan facility entered into with Deutsche Bank of
$250.0 million, of which $184.5 million had been drawn down as at 30 June 2006.
This facility carries an interest rate of Euribor +1.45%.

 

Balance sheet

 

Shareholders' funds were $3,346.3 million as at 30 June 2006, an increase of
$746.5 million compared with the balance as at 31 December 2005. The increase
reflected retained earnings for the period of $632.7 million, favourable
currency translation differences of $273.4 million and a gain arising from a
reduction in the minority interest of Kazakhmys LLC of $8.7 million offset by
the final 2005 dividend declared during the period of $168.3 million. The
currency translation differences were mainly attributable to the consolidation
of the results and balances of Kazakhmys LLC into US dollars, as the functional
currency of this company is the Kazakhstan tenge.

 

Property, plant and equipment increased by 17% to $1,988.3 million over the
period after the effect of depreciation was more than offset by capital
expenditure of $165.0 million and favourable currency translation differences of
$216.0 million. Disposals of property, plant and equipment were not material
during the period.

 

Net liquid funds increased from $829.5 million to $1,221.4 million on account of
the increased operating cash flows, with $146.8 million held as cash and
$1,259.2 million held in the form of deposits with varying maturities between
one and 12 months.

 

 



FINANCIAL HIGHLIGHTS

-------------------------------------------------------------------------------------------------
                                                Six months ended      30 Six months Year ended 31
                                                       June 2006 ended 30 June 2005 December 2005
                                                       $ million          $ million     $ million
-------------------------------------------------------------------------------------------------    
                                                                                                
Group                                                                                           
                                                                                                
Revenues                                                  2,279.8          1,202.1       2,597.5
                                                                                                
Profit before taxation, finance items and                   984.5            359.5         842.5
negative goodwill                                                                               
                                                                                                
EBITDA excluding special items                            1,081.3            482.8       1,073.5
                                                                                                
EBITDA excluding special items margin (%)                   47.4%            40.2%         41.3%
                                                                                                
Net finance items and negative goodwill                    (28.6)            (0.5)           5.6
                                                                                                
Profit before taxation                                      955.9            359.0         848.1
                                                                                                
Effective tax rate (%)                                      33.2%            35.3%         35.1%
                                                                                                
Profit for the period                                       638.9            232.1         550.8
                                                                                                
Equity minority interests (%)                                1.0%             2.6%          2.2%
                                                                                                
Profit attributable to equity shareholders                  632.7            226.1         538.8
                                                                                                
Underlying Profit                                           619.3            236.7         549.8
                                                                                                
EPS:                                                                                            
Basic and Diluted ($)                                        1.35             0.56          1.29
EPS based on Underlying Profit ($)                           1.32             0.59          1.31
                                                                                                
Dividend per share (US cents) (1)                            12.8         12.0 (2)          36.0
                                                                                                
Return on Capital Employed (%) (3)                          27.7%            17.1%         31.5%
                                                                                                
Free Cash Flow                                              622.3            149.5         450.2
                                                                                                
Net liquid funds                                          1,221.4            277.7         829.5
                                                                                                
Cash cost of copper after by-products credits               563.1            869.4         997.2
($/tonne)                                                                                       
                                                                                                
Kazakh Mining                                                                                   
                                                                                                
Revenues                                                  1,520.9           791.6        1,740.9
                                                                                                
Profit before taxation, finance items and                   973.1           347.2          840.3
negative goodwill                                                                               
                                                                                                
EBITDA excluding special items                            1,058.8           460.1        1,053.7
                                                                                                
EBITDA excluding special items margin (%)                   69.6%           58.1%          60.5%
                                                                                                
Net liquid funds                                            920.6           223.7          328.0
                                                                                                
Cash cost of copper after by-product credits                563.1           869.4          997.2
($/tonne)                                                                                       
                                                                                                
Average KZT/$ exchange rate                                127.10          131.20         132.88
                                                                                                
MKM                                                                                             
                                                                                                
Revenues                                                    758.9           410.5          856.6
                                                                                                
Profit before taxation and finance items                     30.0            15.6           21.8
                                                                                                
EBITDA excluding special items                               40.5            26.0           39.1
                                                                                                
EBITDA excluding special items margin (%)                    5.3%            6.3%           4.6%
                                                                                                
Net liquid (debt)/funds                                   (166.0)            25.3          (4.8)
                                                                                                
Average Euro/$ exchange rate                                 0.81            0.78           0.80
-------------------------------------------------------------------------------------------------

(1) Dividend per share is based on the earnings for that period.

(2) Calculated based on the Company's dividend policy of interim and final
dividends being paid in the approximate proportion of one-third and two-thirds
of the total final annual dividend.

(3) Return on Capital Employed is calculated based on profit before taxation,
interest and negative goodwill for that period.



Interim consolidated income statement
for the six months ended 30 June 2006

                                                                  Notes     Six months      Six months      Year ended
$ million                                                                 ended 30 June    ended 30 June    31 December
                                                                               2006            2005              2005
------------------------------------------------------------------------------------------------------------------------

Revenues                                                            4           2,279.8          1,202.1        2,597.5
Cost of sales                                                                  (1,153.4)          (724.5)      (1,506.6)
------------------------------------------------------------------------------------------------------------------------
                                                                                1,126.4            477.6        1,090.9
Gross profit                                                                                       
                                                                         
Selling and distribution expenses                                                 (38.1)           (27.6)         (55.5)
Administrative expenses                                                          (116.1)           (85.5)        (185.3)
Other operating income                                                             19.9             21.1           39.0
Other operating expenses                                                          (13.3)           (22.5)         (34.8)
Write back/(off) of assets and impairment losses                    5               5.7             (3.6)         (11.8)
------------------------------------------------------------------------------------------------------------------------

Profit before taxation, finance items and negative goodwill                       984.5            359.5          842.5
Finance income                                                      6              62.9             53.8           87.4
Finance costs                                                       6             (98.0)           (54.3)         (81.8)
Recognition of negative goodwill                                    7               6.5              -               -
------------------------------------------------------------------------------------------------------------------------

Profit before taxation                                                            955.9            359.0          848.1
Income tax expense                                                  8            (317.0)          (126.9)        (297.3)
------------------------------------------------------------------------------------------------------------------------

Profit for the period                                                             638.9            232.1          550.8
------------------------------------------------------------------------------------------------------------------------
Attributable to:
Equity shareholders of the parent                                                 632.7            226.1          538.8
Minority interests                                                                  6.2              6.0           12.0
------------------------------------------------------------------------------------------------------------------------

                                                                                  638.9            232.1          550.8
------------------------------------------------------------------------------------------------------------------------

Earnings per share attributable to equity shareholders of the                                                           
parent:                                                                                                                 
 
                                                                         
Basic and diluted                                                   9              $1.35            $0.56         $1.29
                                                                         
EPS based on Underlying Profit                                      9              $1.32            $0.59         $1.31
------------------------------------------------------------------------------------------------------------------------



Interim consolidated balance sheet
as at 30 June 2006



$ million                                                         Notes       As at            As at           As at
                                                                                                            31 December
                                                                           30 June 2006    30 June 2005          2005
------------------------------------------------------------------------------------------------------------------------

ASSETS
                                                                                                                        
 
Non-current assets                                                                                                      
 
Intangible assets                                                                  30.3             21.2            21.6
Tangible assets                                                                 2,040.8          1,620.4         1,743.1
------------------------------------------------------------------------------------------------------------------------
  Property, plant and equipment                                    11           1,988.3          1,597.9         1,701.3
  Mine stripping costs                                                             52.5             22.5            41.8
------------------------------------------------------------------------------------------------------------------------
Investments                                                                         7.3              5.8             5.8
------------------------------------------------------------------------------------------------------------------------
                                                                                2,078.4          1,647.4         1,770.5
------------------------------------------------------------------------------------------------------------------------
Current assets
Inventories                                                                       541.2            319.7           377.7
Prepayments and other current assets                                               79.4             96.8            41.5
Trade and other receivables                                                       304.2            141.1           210.8
Investments                                                        12             823.8            313.5           356.5
Restricted cash                                                                     2.9              2.9             1.0
Cash and cash equivalents                                          13             582.2            169.0           522.0
------------------------------------------------------------------------------------------------------------------------

                                                                                2,333.7          1,043.0         1,509.5
------------------------------------------------------------------------------------------------------------------------
                                                                         
TOTAL ASSETS                                                                    4,412.1          2,690.4         3,280.0
------------------------------------------------------------------------------------------------------------------------
EQUITY AND LIABILITIES
                                                                                                                        
 
Equity                                                                                                                  
 
Share capital                                                      14             173.3            151.1           173.3
Share premium                                                      14             503.4              -             503.4
Foreign currency translation reserve                               14             421.3            129.9           147.9
Reserve fund                                                       14              37.6              9.4             9.4
Retained earnings                                                               2,210.7          1,563.1         1,765.8
------------------------------------------------------------------------------------------------------------------------
Equity attributable to shareholders of the parent                               3,346.3          1,853.5         2,599.8
Minority interests                                                                 28.7             46.7            26.3
------------------------------------------------------------------------------------------------------------------------

Total equity                                                                    3,375.0          1,900.2         2,626.1
------------------------------------------------------------------------------------------------------------------------

Non-current liabilities
Deferred tax liability                                                            280.2            232.7           260.9
Employee benefits                                                                  32.7             27.2            28.7
Provisions                                                                         55.4             41.1            44.5
Borrowings                                                         15             184.5             44.5             -
------------------------------------------------------------------------------------------------------------------------
                                                                                  552.8            345.5           334.1
------------------------------------------------------------------------------------------------------------------------
Current liabilities
Provisions                                                                          3.7             11.2             1.4
Borrowings                                                                          0.1            160.3            49.0
Trade and other payables                                                          193.1            163.3           158.7
Dividend payable                                                                    1.9              1.1             3.1
Income tax payable                                                                285.5            108.8           107.6
------------------------------------------------------------------------------------------------------------------------

                                                                                  484.3            444.7           319.8
------------------------------------------------------------------------------------------------------------------------
                                                                         
Total liabilities                                                               1,037.1            790.2           653.9
------------------------------------------------------------------------------------------------------------------------
                                                                         
TOTAL EQUITY AND LIABILITIES                                                    4,412.1          2,690.4         3,280.0
------------------------------------------------------------------------------------------------------------------------

The interim consolidated financial statements were approved by the Board of
Directors on 18 September 2006.





Interim consolidated cash flow statement
for the six months ended 30 June 2006

$ million                                                         Notes    Six months        Six months       Year ended
                                                                              ended            ended         31 December
                                                                          30 June 2006      30 June 2005         2005
------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
  Cash receipts from customers                                                  2,340.4           1,209.6      2,529.4
  Cash paid to employees and suppliers                                         (1,472.5)           (757.4)    (1,561.5)
------------------------------------------------------------------------------------------------------------------------
  Cash inflow before interest and tax paid                                        867.9             452.2        967.9  
               
                                                                                  
  Interest paid                                                                    (0.2)             (7.1)        (9.0)
  Income tax paid                                                                (169.2)           (190.2)      (333.3)
------------------------------------------------------------------------------------------------------------------------
                                                                                  698.5             254.9        625.6
Net cash inflow from operating activities                          16
------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Interest received                                                                46.5               6.3         17.3
  Proceeds from disposal of property, plant and equipment                           0.1               3.9          7.3
  Purchase of property, plant and equipment                                      (165.0)           (144.6)      (333.7)
  Mine stripping costs                                                             (5.9)             (7.0)       (26.5)
  Purchase of intangible assets                                                    (0.7)             (3.8)        (5.2)
  Licence payments for subsoil contracts                                           (0.9)             (0.4)        (0.9)
  Proceeds from disposal of non-current investments                                 1.1               0.2          0.2
  Acquisition of non-current investments                                           (1.3)             (1.2)        (3.0)
  Proceeds from disposal of available for sale securities                           1.0               0.5          0.5
  Acquisition of available for sale securities                                      -                (0.7)        (1.0)
  Investment in short term bank deposits, net                                    (447.2)            (56.8)       (98.3)
  Acquisition of subsidiaries, net of cash acquired                                (2.0)              -              -
  Acquisition of Apro business                                                      -                 -           (1.0)
------------------------------------------------------------------------------------------------------------------------

Net cash flows used in investing activities                                      (574.3)           (203.6)      (444.3)
------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds on issue of shares by parent company                                     -                 -          548.4
  Proceeds from contribution to charter capital of subsidiary                                                           
      by minority interests                                                         1.6               -              -
  Transaction costs associated with issue of shares                                 -                 -          (57.2)
  Receipt of funds from preference shares                                           -                 -            0.1
  Redemption of preference shares                                                   -                 -           (0.1)
  Proceeds from borrowings                                                        167.0             326.0        525.6
  Repayment of borrowings                                                         (41.4)           (222.8)      (580.3)
  Dividends paid by the Company                                                  (168.3)              -         (109.9)
  Dividends paid by subsidiary to former shareholders                               -               (53.6)       (53.6)
  Dividends paid by subsidiary to minority interests                               (2.1)             (1.3)        (1.3)
------------------------------------------------------------------------------------------------------------------------

Net cash flows (used in)/from financing activities                                (43.2)             48.3        271.7
------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents                                          81.0              99.6        453.0
                                                                                   
Cash and cash equivalents at the beginning of the period                          522.0              74.1         74.1
Effect of exchange rate changes on cash and cash equivalents                      (20.8)             (4.7)        (5.1)
------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at the end of the period                 13             582.2             169.0        522.0
------------------------------------------------------------------------------------------------------------------------


Interim consolidated statement of changes in equity
for the six months ended 30 June 2006

                                   Attributable to equity shareholders of the parent                    
                                  ---------------------------------------------------
$ million                    Note  Share   Share    Foreign   Reserve Retained  Total  Minority   Total 
                                  capital premium  currency    fund   earnings         interests equity 
                                                  translation                                           
                                                    reserve                          
--------------------------------------------------------------------------------------------------------                
  
At 31 December 2004                 151.1       -       218.3    14.8  1,382.4 1,766.6      47.2 1,813.8
Profit for the six months               -       -           -       -    226.1   226.1       6.0   232.1
Transfer from reserve fund              -       -           -   (5.4)      5.4       -         -       -
Equity dividends paid by                -       -           -       -        -       -     (2.9)   (2.9)
subsidiary to minority                                                                                  
shareholders                                                                                            
Equity dividends paid by      10        -       -           -       -   (50.8)  (50.8)     (1.3)  (52.1)
subsidiary prior to share                                                                               
exchange transactions                                                                                   
Currency translation                    -       -      (88.4)       -        -  (88.4)     (2.3)  (90.7)
differences                                                                                             
--------------------------------------------------------------------------------------------------------                
At 30 June 2005                     151.1       -       129.9     9.4  1,563.1 1,853.5      46.7 1,900.2
--------------------------------------------------------------------------------------------------------                
At 31 December 2004                 151.1       -       218.3    14.8  1,382.4 1,766.6      47.2 1,813.8
Profit for the year                     -       -           -       -    538.8   538.8      12.0   550.8
Transfer from reserve fund              -       -           -    (5.4)     5.4       -         -       -
Shares issued pursuant to             1.9    32.5           -       -        -    34.4     (25.9)    8.5
Kinton Trade Limited                                                                                    
transaction                                                                                             
Shares issued pursuant to            20.3   528.1           -       -        -   548.4         -   548.4
Listing of the Company                                                                                   
Transaction costs associated            -   (57.2)          -       -        -   (57.2)        -   (57.2)
with issue of shares                                                                                    
Equity dividends paid by      10        -       -           -       -    (50.8)  (50.8)     (1.3)  (52.1)
subsidiary prior to share                                                                               
exchange transactions                                                                                   
Equity dividends paid by                -       -           -       -        -       -      (5.3)   (5.3)
subsidiary to minority                                                                                  
shareholders                                                                                            
Equity dividends paid by the  10        -       -           -       -   (110.0) (110.0)        -  (110.0)
Company                                                                                                 
Currency translation                    -       -       (70.4)      -        -   (70.4)     (0.4)  (70.8)
differences                                                                                             
--------------------------------------------------------------------------------------------------------                
At 31 December 2005                 173.3   503.4       147.9     9.4  1,765.8 2,599.8      26.3 2,626.1
Profit for the six months               -       -           -       -    632.7   632.7       6.2   638.9
Contribution to charter                 -       -           -       -        -       -       1.6     1.6
capital of subsidiary by                                                                                
minority shareholders                                                                                   
Transfer to reserve fund                -       -           -    28.2    (28.2)      -         -       -
Gain from dilution of                   -       -           -       -      8.7     8.7      (8.7)       -
minority interest in                                                                                    
subsidiary                                                                                              
Acquisition of minority       7         -       -           -       -        -       -       0.9     0.9
interest in subsidiary                                                                                  
Equity dividends paid by                -       -           -       -        -       -      (0.9)   (0.9)
subsidiary to minority                                                                                  
shareholders                                                                                            
Equity dividends paid by the  10        -       -           -       -   (168.3) (168.3)        -  (168.3)
Company                                                                                                 
Currency translation                    -       -       273.4       -        -   273.4       3.3   276.7
differences                                                                                             
--------------------------------------------------------------------------------------------------------                
At 30 June 2006                     173.3   503.4       421.3    37.6  2,210.7 3,346.3      28.7 3,375.0

--------------------------------------------------------------------------------------------------------                



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