Financial Express (Holdings) Limited (“we”, “our”, “us” and derivatives) are committed to protecting and respecting your privacy. This Privacy Policy, together with our Terms of Use, sets out the basis on which any personal data that we collect from you, or that you provide to us, will be processed by us relating to your use of any of the below websites (“sites”).

  • FEAnalytics.com
  • FEInvest.net
  • FETransmission.com
  • Investegate.co.uk
  • Trustnet.hk
  • Trustnetoffshore.com
  • Trustnetmiddleeast.com

For the purposes of the Data Protection Act 1998, the data controller is Trustnet Limited of 2nd Floor, Golden House, 30 Great Pulteney Street, London, W1F 9NN. Our nominated representative for the purpose of this Act is Kirsty Witter.

WHAT INFORMATION DO WE COLLECT ABOUT YOU?

We collect information about you when you register with us or use any of our websites / services. Part of the registration process may include entering personal details & details of your investments.

We may collect information about your computer, including where available your operating system, browser version, domain name and IP address and details of the website that you came from, in order to improve this site.

You confirm that all information you supply is accurate.

COOKIES

In order to provide personalised services to and analyse site traffic, we may use a cookie file which is stored on your browser or the hard drive of your computer. Some of the cookies we use are essential for the sites to operate and may be used to deliver you different content, depending on the type of investor you are.

You can block cookies by activating the setting on your browser which allows you to refuse the setting of all or some cookies. However, if you use your browser settings to block all cookies (including essential cookies) you may not be able to access all or part of our sites. Unless you have adjusted your browser setting so that it will refuse cookies, our system will issue cookies as soon as you visit our sites.

HOW WE USE INFORMATION

We store and use information you provide as follows:

  • to present content effectively;
  • to provide you with information, products or services that you request from us or which may interest you, tailored to your specific interests, where you have consented to be contacted for such purposes;
  • to carry out our obligations arising from any contracts between you and us;
  • to enable you to participate in interactive features of our service, when you choose to do so;
  • to notify you about changes to our service;
  • to improve our content by tracking group information that describes the habits, usage, patterns and demographics of our customers.

We may also send you emails to provide information and keep you up to date with developments on our sites. It is our policy to have instructions on how to unsubscribe so that you will not receive any future e-mails. You can change your e-mail address at any time.

In order to provide support on the usage of our tools, our support team need access to all information provided in relation to the tool.

We will not disclose your name, email address or postal address or any data that could identify you to any third party without first receiving your permission.

However, you agree that we may disclose to any regulatory authority to which we are subject and to any investment exchange on which we may deal or to its related clearing house (or to investigators, inspectors or agents appointed by them), or to any person empowered to require such information by or under any legal enactment, any information they may request or require relating to you, or if relevant, any of your clients.

You agree that we may pass on information obtained under Money Laundering legislation as we consider necessary to comply with reporting requirements under such legislation.

ACCESS TO YOUR INFORMATION AND CORRECTION

We want to ensure that the personal information we hold about you is accurate and up to date. You may ask us to correct or remove information that is inaccurate.

You have the right under data protection legislation to access information held about you. If you wish to receive a copy of any personal information we hold, please write to us at 3rd Floor, Hollywood House, Church Street East, Woking, GU21 6HJ. Any access request may be subject to a fee of £10 to meet our costs in providing you with details of the information we hold about you.

WHERE WE STORE YOUR PERSONAL DATA

The data that we collect from you may be transferred to, and stored at, a destination outside the European Economic Area (“EEA”). It may be processed by staff operating outside the EEA who work for us or for one of our suppliers. Such staff may be engaged in, amongst other things, the provision of support services. By submitting your personal data, you agree to this transfer, storing and processing. We will take all steps reasonably necessary, including the use of encryption, to ensure that your data is treated securely and in accordance with this privacy policy.

Unfortunately, the transmission of information via the internet is not completely secure. Although we will do our best to protect your personal data, we cannot guarantee the security of your data transmitted to our sites; any transmission is at your own risk. You will not hold us responsible for any breach of security unless we have been negligent or in wilful default.

CHANGES TO OUR PRIVACY POLICY

Any changes we make to our privacy policy in the future will be posted on this page and, where appropriate, notified to you by e-mail.

OTHER WEBSITES

Our sites contain links to other websites. If you follow a link to any of these websites, please note that these websites have their own privacy policies and that we do not accept any responsibility or liability for these policies. Please check these policies before you submit any personal data to these websites.

CONTACT

If you want more information or have any questions or comments relating to our privacy policy please email publishing@financialexpress.net in the first instance.

 Information  X 
Enter a valid email address

Kazakhmys PLC (KAZ)

  Print      Mail a friend       Annual reports

Thursday 15 March, 2007

Kazakhmys PLC

Final Results

Kazakhmys PLC
15 March 2007


Thursday 15 March 2007

                         Kazakhmys PLC Audited results
                      for the year ended 31 December 2006


Highlights
----------------------------------------------------------------------------------
$million (unless otherwise stated)            Year ended   Year ended           
                                             31 December  31 December            %
                                                    2006         2005       change
----------------------------------------------------------------------------------
Revenues                                         5,046.5      2,597.5           94
Earnings:
Profit before taxation, finance items and        2,071.6        842.5          146
negative goodwill
Profit before taxation                           2,167.8        848.1          156
EBITDA excluding special items (1)               2,308.4      1,073.5          115
Underlying Profit                                1,402.7        549.8          155
EPS:
Basic and diluted ($)                               2.99         1.29          132
Based on Underlying Profit (2) ($)                  3.00         1.31          129
Free Cash Flow (3)                               1,327.2        450.2          195
ROCE (4) (%)                                        49.7         31.5         18.2
Cash cost of copper after by-product                 695          940         (26)
credits 5 ($/tonne)
----------------------------------------------------------------------------------

(1) Reconciliation of EBITDA excluding special items to profit before taxation,
    finance items and negative goodwill is found in note 3(a).

(2) Reconciliation of EPS based on Underlying Profit is found in note 7(b).

(3) Net cash flows from operating activities less sustaining capital expenditure
    on tangible and intangible assets and investment in mine stripping costs.

(4) Profit before interest and taxation over capital employed (borrowings and
    total equity, including minority interests).

(5) Total of operating costs as presented in the income statement less by-product
    revenues, over the volume of copper cathodes and rods sold.


All references to $ refer to US dollars unless otherwise stated.

   • Solid growth in copper cathode production and buoyant commodity prices
     increased revenues by over 94%
   • Total production of copper cathode (excluding tolling concentrate) up
     4.7% to 405 kt (2005: 387 kt)
   • Production of copper cathode from own concentrate up 8.6% to 368 kt 
     (2005:339 kt)
   • Average realised copper price up over 85% to $7,025 per tonne (2005:
     $3,794 per tonne)
   • EBITDA excluding special items up 115% to $2,308.4 million
     (2005: $1,073.5 million)
   • EPS based on Underlying Profit up 129% to $3.00 per share (2005: $1.31
     per share)
   • Free Cash Flow up 195% to $1,327.2 million (2005: $450.2 million)
   • Final dividend of 25.7 US cents per share, giving a total dividend of
     38.5 US cents per share, up 7% on a comparable post-Listing basis
   • Board strengthened with the appointments of a new Chief Executive, a
     Strategy Director and two new non-executive Directors
   • Successful ramp-up of Zhomart and Kosmurun mines, and expansion of
     Karagaily and Nurkazgan concentrators

Vladimir Kim, Executive Chairman, commenting on the year's results said:

"2006 was the first full financial year for Kazakhmys as a UK listed company,
after the primary listing of our shares on the London Stock Exchange in October
2005. The past year has seen a solid operational performance and a good set of
results for the Group. Overall production of copper cathode rose 4.7% whilst
production of copper cathode from own concentrate rose 8.6% which contributed,
along with higher production of by-products and a buoyant pricing environment,
to these record financial results. Safety remains a high priority for the Board
and implementation of measures to improve our record in this area is of key
importance to us. We have strengthened the composition of the Board and remain
committed to our strategy of delivering shareholder value through organic growth
of our business and diversification in natural resources in Kazakhstan and our
region. Whilst we anticipate that rising labour costs, driven by the burgeoning
economy in Kazakhstan, will impact our costs, we shall continue to be robust in
our cost control. We are confident that 2007 will be another successful year for
Kazakhmys."


For further information please contact:

Jinsoo Yang, Head of IR                             Tel: +44 20 8636 7900
Sergei Stephantsov, Deputy Head of IR
Kazakhmys PLC

Andrew Mitchell                                     Tel: +44 20 7251 3801
Robin Walker
Zoe Watt
Finsbury Group



Results and shareholder value

Against a backdrop of exceptionally buoyant commodity prices seen throughout
2006, including unprecedented increases in copper and zinc, profitability
improved, with pre-tax profits rising by 156% to $2,167.8 million. The increase
in our Free Cash Flow to $1,327.2 million was especially encouraging, as this is
a key component for the successful execution of our capital expenditure and
acquisition strategy.

Despite challenging operating conditions during the earlier part of 2006, we
delivered a solid increase in copper cathode production, driven by an
improvement in copper production from own concentrate. The performances from our
newly commissioned Artemyevskoe, Kosmurun and Zhomart (formerly Zhaman-Aybat)
mines have been particularly pleasing as they continue to ramp-up to their full
operating capacities. Zinc metal and zinc in concentrate revenues rose on the
back of both higher prices and improved production volumes.

The reduced proportion of copper production from purchased concentrate ensured
our margins remained strong in the face of challenging cost pressures. Higher
input costs faced across the mining industry, particularly labour costs for
natural resource companies operating in Kazakhstan, show no sign of diminishing
and we will vigorously pursue operational efficiencies and maximisation of
by-product credits to address these issues.

The proposed final dividend of 25.7 US cents per share results in a 7% increase
in the full year dividend to 38.5 US cents per share on a comparable post-
Listing basis. This increase reflects the Board's confidence in the outlook for
the business, whilst taking account of our future growth opportunities.

Our market capitalisation rose to $10,174 million at the year end, which
compares to $4,619 million at the time of Listing. The 106% increase in our
share price since Listing in sterling terms compares to growth of 16% and 45%
generated by the FTSE 100 group of companies and FTSE Mining Index,
respectively.


Strategy for future growth

A strategic objective for Kazakhmys is to use the cash flows generated by
historically high copper prices to acquire other assets in Kazakhstan and the
neighbouring regions, so as to diversify our resource base.

We continue to review investment opportunities in Kazakhstan, a country that
remains attractive for opportunistic acquisitions within a stable political and
economic environment. We will only undertake acquisitions if we are confident
that they create value for our shareholders.

At the beginning of March 2007, we announced that agreement had been reached to
acquire the East Akzhar petroleum field, an exploration block in western
Kazakhstan, which is a first step in delivering on our strategy of
diversification of the business. Exploration work will be carried out in the
coming year to fully determine the block's potential, and the Board is
considering a number of options for its future development.

As previously announced, the Company has been granted a call option in respect
of the 25% shareholding that I presently own in ENRC Kazakhstan Holding B.V., a
holding company for certain assets of the Eurasia Natural Resources group.
Please refer to the separate report by the Independent Committee of the Board on
this matter.

Organic growth of our existing operations is also a strategic goal and, to this
end, our expansionary capital expenditure for the year was $260.1 million.
Successful projects during the year included the commissioning of the Zhomart
and Kosmurun mines, the construction of an acid plant at the Balkhash complex
and expansions of our Karagaily and Nurkazgan concentrators.

The economic assessments of our Aktogay and Boschekul projects continue and we
expect to decide which one to fast-track to the feasibility study stage by mid
2007. During the latter part of 2006, we secured additional title rights
adjacent to the Boschekul project from the Kazakhstan Government, increasing its
development potential. Meanwhile, we remain committed to rigorous capital
discipline to ensure that only projects which are economically robust throughout
the commodity cycle are taken forward for execution.


Safety and community

I am sad to report that last year there were 32 fatalities within our
operations. This was an improvement on the previous year but is a long way from
our objective of no fatalities. We are working hard at delivering changes within
our working culture and senior operating management have been tasked with
embedding best practice safety standards in conjunction with international
consultants under the auspices of the Group Health, Safety and Environment
Committee. Continuous management focus is being applied to raise safety
standards within our operations.

We remain committed to investing in our workforce and local communities as part
of our social responsibilities within Kazakhstan. A new sports complex at a
total cost of $20 million was completed during the year and we also made
charitable donations to the value of $4.4 million, with particular focus on
providing support to the disadvantaged in society.


Corporate actions and governance

We have made changes to the composition of our Board and it is now in compliance
with the provisions of the Combined Code, with the exception that I was not
independent at the date of my appointment. As announced previously, Oleg
Novachuk will become Chief Executive with effect from 15 March 2007, taking over
this role from Yong Keu Cha who retired at the end of December 2006.

There is a clear division of functions between the new Chief Executive, who is
responsible for the day-to-day management of the Group, and my responsibility
for the strategic direction of the Group. The Board continues to be of the
opinion that it is in the best interests of shareholders for me to serve as
Executive Chairman at the present stage of the Group's development.

David Munro joined our executive management team on 1 October 2006, and is
making a valuable contribution to the development of our strategy. Matthew Hird
will take over Oleg's current role of Chief Financial Officer.

Since 1 January 2006, we have appointed two new independent non-executive
Directors, Simon Heale and Philip Aiken, both of whom bring significant
boardroom and relevant industry experience to the Company. We look forward to
their continuing contributions.

We successfully obtained a secondary listing in Kazakhstan at the end of October
2006, making a meaningful contribution to the development of Kazakhstan's
capital markets. This listing also provides our Kazakhstan based shareholders
with an effective means through which to participate in our growth.

We are also considering the most appropriate means of structuring and
implementing a share for share exchange programme or cash alternative to buy-out
the minority shareholders of the Company's principal operating subsidiary in
Kazakhstan, Kazakhmys Corporation LLC. At present, 0.92% of the share capital of
Kazakhmys Corporation LLC is held by approximately 4,000 individuals in
Kazakhstan. The intention of the buy-out programme will be to provide those
individual shareholders in Kazakhmys Corporation LLC with a more liquid
investment in the Company or with a cash alternative whilst simultaneously
simplifying the shareholding structure of the Group.


Outlook

The global economic outlook for 2007 remains positive, supported by anticipated
economic growth coming from Asia, particularly India and China.   While it
appears unlikely that metals consumption in countries like India and China will
continue to grow at the exceptional rate experienced in the recent past, in the
next few years we expect demand for metal products to remain at historically
high levels.

Although prices in our key commodities recently softened from their all-time
highs, we believe that they will remain above their long-run historic averages
during 2007, as supply and demand fundamentals suggest continued price strength.

Copper cathode production in 2007 is expected to be slightly higher than the
output achieved in 2006. This increase will be driven by higher levels of
production from both own and purchased concentrate. We continue to seek strong
production of our by-products, with 2007 production expected to be similar to
2006 levels. Whilst we anticipate that rising labour costs, driven by the
burgeoning economy in Kazakhstan, will impact our costs, we shall continue to be
robust in our cost control.

We look forward to pursuing new opportunities to grow our business at this
exciting time, leveraging our financial strength and knowledge of Kazakhstan's
natural resources.  As always, on behalf of the Board I would like to thank our
management team and all our employees for their significant contribution to a
rewarding year for Kazakhmys. Their dedication will be invaluable in continuing
to deliver value to our shareholders, and we are confident that 2007 will be
another successful year for Kazakhmys.


Report by the independent directors

This report sets out the background to the call option that has been granted to
the Company in respect of Mr Kim's 25% shareholding in ENRC Kazakhstan Holding
B.V. ("EKH"), and the current position of the independent directors in respect
of the exercise of this option.


Background to the Company's call option in EKH

Early in 2006, the Company was given the opportunity to acquire a 25%
shareholding in EKH, the holding company of the Eurasia Natural Resources
group's metals and mining business ("ENRC"), which operates in Kazakhstan
producing, in particular, chrome, iron ore, alumina, coal and power.

When this opportunity arose, ENRC was in the process of a significant
restructuring, and the complexity of the group structure meant that adequate due
diligence could not have been undertaken in the time available for the Board to
reach a decision on such an acquisition. The independent directors of the Board
therefore concluded that it would not be appropriate for the Company to acquire
a stake in EKH at that stage as further work was required to consider whether
this would be in the interests of all shareholders.

To avoid losing the opportunity of acquiring a meaningful stake in EKH, Mr Kim
offered to acquire the interest on his own account but with the proviso that
such an interest could be transferable to the Company at a future date. The
independent directors of the Board gave permission to Mr Kim to acquire this
stake through his own company on the basis that the Company would be given the
benefit of a call option in respect of his shareholding in EKH. The terms of the
call option are set out in note 12(a). As required by the Listing Rules, the
exercise of the option will be dependent on the terms of the option being
determined by independent advisers to be fair and reasonable so far as the
remaining shareholders of the Company are concerned.


Current position of the independent directors


In the course of the past year, ENRC has undergone a significant restructuring
as part of its own efforts to simplify its group structure, as ENRC's management
considers options for the strategic direction of the business, including the
possibility of an Initial Public Offering. Following this restructuring, certain
minority interests have been eliminated with the result that EKH has a 75.5%
direct interest in ENRC, with the remaining shares held by the Government of
Kazakhstan. Taking account of the Government's shareholding in ENRC, Mr Kim's
stake in EKH gives him an approximate 18.9% economic interest in the underlying
assets of ENRC.

With the consent and cooperation of EKH, production and financial information in
respect of ENRC has been made available to the Company. The Company's advisers
are in the advanced stages of performing valuation work on ENRC using this
information and the results of an independent technical review.

The independent directors have made good progress in considering the information
which has been made available to the Company. The independent directors also
have reviewed the results of valuation work being undertaken on the Company's
behalf, and requested that this be finalised as soon as practical.

When the independent directors judge that it is appropriate and in the best
interests of all shareholders to exercise the call option, the independent
directors will make a recommendation to shareholders in accordance with the
related party rules relevant to the Company. A positive recommendation made by
the independent directors would require the approval of the independent
shareholders at an extraordinary general meeting. An announcement setting out
the conclusions of the independent directors will be made in due course.

Philip Aiken        Simon Heale        Lord Renwick          James Rutland
Independent non-executive directors


MARKET OVERVIEW

The copper market was exceptionally strong in 2006, with consumption
outstripping worldwide supply by about 90 kt, thereby reducing inventories.
Higher demand from Asia, in particular China, strong demand from
Europe, and large inflows of investment fund capital into base metal drove up
metal prices.

The strength of copper prices in 2006 has led to previously uneconomic projects
becoming viable, leading to expectations of a worldwide increase in supply
capacity. To this end, a number of new sources of copper supply are expected to
come on-stream in 2007. The likelihood of strikes at major producers has also
been reduced. Another factor determining the direction of copper prices going
forward will be the behaviour of investment fund capital.

Historically, Kazakhmys has been flexible as to where it sells its copper. The
proximity to China and good infrastructure links to Western Europe gives access
to both markets, with demand in both areas expected to be robust in 2007. The
majority of copper sales are made under annual supply contracts at a fixed
premium, with the remainder sold on the spot market. During 2006, Kazakhmys saw
attractive commercial terms with customers in Europe which led to the majority
of copper cathode production being sold to that region, with growing volumes
directed to the Mediterranean markets. Kazakhmys' position in China should
remain strong and we expect to continue selling significant copper cathode
volumes into the Chinese market, focusing on expanding our relationship with
end-user customers.

China is the world's main growth driver for copper consumption whose refined
production for 2006 was estimated to be 3,050 kt and consumption at 3,967 kt,
resulting in an import requirement of 917 kt. In 2007, the forecast import
requirement is expected to reduce slightly. The continued lack of clarity
concerning the Chinese government's policy towards re-exports and tax rebates,
and a possible move to global oversupply in 2007, has prompted Chinese customers
to put downward pressure on supplier premiums under annual contracts.

Total refined copper production in Western Europe in 2006 was estimated to be
1,894 kt and consumption 3,884 kt, resulting in an import requirement of 1,990
kt. In 2007, the import requirement is forecast to remain broadly unchanged. For
2007 supply contracts, European end-users have looked to reduce the volumes they
buy under annual supply contracts, instead seeking to purchase cathodes on a
monthly basis on the spot market.


COMMODITY PRICE TRENDS

Copper

As a result of a supply deficit and the influx of capital funds, average LME
prices rose by 83% in 2006 to $6,731 with copper prices hitting historic highs.
Producers were unable to expand production to meet the rising global demand
driven in particular by China. Concerns over drawn-out supply disruption from
labour disputes at major suppliers also led to price spikes during the year.

Zinc

Physical zinc demand outstripped supply during the first three quarters of 2006
giving good fundamental support which, coupled with the increased flow of
investment fund capital during the year, led to strong price growth. The average
LME price for zinc was $3,273 per tonne, 137% higher than the 2005 average
price. Physical stocks reached an all time low late in 2006 and, despite an
outflow in investment fund capital halfway through the year due to concern over
interest rates, investor support returned in the final quarter to drive prices
upwards.

Gold and Silver

Precious metal prices in 2006 reached highs not seen for 20 years due to rising
oil prices, the weakness of the US dollar and the inflow of investment fund
capital. A dip in precious metal prices in June was attributed to a
strengthening US dollar and profit taking by the investment funds as there was
good support from the physical market. The second half of the year saw a stable
period of pricing. Overall, both gold and silver prices were strong in 2006,
with average gold prices increasing by 36% and silver by 58%.


SENSITIVITY ANALYSIS ON PRICES AND GRADES

Fluctuations in ore grade and commodity prices can have a significant impact on
Kazakh Mining's revenues and earnings. Any changes in prices have a direct
effect on the revenues of the Kazakh Mining business, with consequential impacts
on earnings and the cash cost of copper resulting from changes in by-product
credits.

Any changes in ore grades have a direct effect on the production figures of the
Kazakh Mining business given that the volume of mined ore remains largely
constant between years. Revenues and earnings are directly impacted by
production volumes, as is the cash cost of copper, since certain costs are fixed
in nature and some are variable.

The approximate effects on profit before taxation, finance items and negative
goodwill resulting from a 10% movement in commodity prices are shown below.
Prior year commodity prices and ore grades are also provided to demonstrate the
fluctuations in these variables. These sensitivities are based on 2006 figures
and assume that all other variables remain constant. They are estimated
calculations only.



Kazakhh Mining Commodity Price Sensitivity
-----------------------------------------------------------------------
                       Average realised price             Impact of 10%
                    during year ended 31 December   movement on profit*
                                      
                    2006       2005     % movement            $ million
-----------------------------------------------------------------------
Copper ($/tonne)   7,025      3,794           85.2                  234
Zinc ($/tonne)     3,145      1,231          155.5                   33
Silver ($/oz)       11.4        7.3           56.2                   20
Gold ($/oz)          610        449           35.9                    4
-----------------------------------------------------------------------

* Profit before taxation, finance items and negative goodwill, calculated by
flexing the 2006 average realised prices.



Ore Grade Movement
-----------------------------------------------------------------------
                                               Average ore grade during
                                                 year ended 31 December
-----------------------------------------------------------------------
                                                2006               2005
Copper (%)                                      1.17               1.03
Zinc (%)                                        4.28               3.28
Silver (g/t)                                   20.69              19.81
Gold (g/t)                                      0.77               0.68
-----------------------------------------------------------------------


PRODUCTION


Kazakh Mining Copper Production
-----------------------------------------------------------------------------
kt (unless otherwise stated)                           2006              2005
-----------------------------------------------------------------------------
Ore extraction                                       39,240            39,446
Average copper grade                                   1.17%             1.03%
Average zinc grade*                                    4.28%             3.28%

Copper in concentrate                                 433.5             397.6
own concentrate                                       383.2             345.7
purchased concentrate                                  50.3              51.9

Copper cathodes**                                     407.0             396.6
own concentrate                                       368.4             338.2
purchased concentrate                                  36.8              48.3
tolling concentrate                                     1.8              10.1
Copper rod                                             28.5               8.7
-----------------------------------------------------------------------------
*  Complex ores only.
** Includes copper used to produce copper rod.


In 2006, copper cathode production, (excluding copper produced through tolling
arrangements) grew by 4.7% to 405.2 kt driven by the 8.9% increase in copper
cathode output from the Group's own concentrate to 368.4 kt, as a result of
higher ore grades. Own copper in concentrate production increased by 10.8% to
383.2 kt as the Artemyevskoe, Kosmurun, and Zhomart (formerly Zhaman-Aybat)
mines ramped-up production during 2005 and 2006. Copper produced from purchased
concentrate fell by 23.8% to 36.8 kt and copper produced under tolling
arrangements was 82.2% lower at 1.8 kt. Copper rod production more than tripled
in 2006, increasing from 8.7 kt to 28.5 kt as more cathodes were allocated for
rod production and sold into China.

The average copper grade rose 0.14 percentage points over the year to reach a
2006 average of 1.17%, mainly as a result of higher grade ore and output from
the recently commissioned mines in the East and Karaganda Regions.

The increase in output of polymetalic ores from the Artemyevskoe, Kosmurun and
Nurkazgan mines had a positive effect on the production volumes of zinc, gold
and silver, the Group's major by-products.

In 2006, the Group produced 21.6 million ounces of silver, of which 40 thousand
ounces were produced on a tolling basis, and 165.4 thousand ounces of gold, of
which 58.6 thousand ounces were produced on a tolling basis.


COPPER REVIEW BY REGION


Zhezkazgan Complex
---------------------------------------------------------------------------
kt (unless otherwise stated)                         2006              2005
---------------------------------------------------------------------------
Ore extraction                                     27,676            28,046
Average copper grade                                 0.82%             0.87%

Copper concentrate                                  541.1             598.5
Copper in concentrate                               199.3             214.7

Copper cathodes*                                    221.8             235.3
of which tolling                                      0.7               0.1
Copper rod                                           28.5               8.7
---------------------------------------------------------------------------
* Includes copper used to produce copper rod.


The Zhezkazgan Complex produced 71% of the Group's ore output in 2006, unchanged
from 2005 levels. Ore output was slightly below 2005 production levels at all of
the region's mines as they reached more mature stages in their operations,
except for the recently commissioned Zhomart mine (formerly Zhaman-Aybat mine)
whose rapid ramp-up in ore output led to the region being only 1.3% below the
ore output volume achieved in 2005.

Production in the region was negatively affected when temperatures remained
below minus 40 degrees centigrade for nearly two weeks at the beginning of 2006 
and by a collapse at the Annensky and East mines. Mining operations continue at both
mines and plans are being considered to re-access the areas impacted by the
collapse at a reduced rate.

The region's average copper grades in 2006 decreased from 0.87% to 0.82%, mainly
due to decreasing ore grades at the majority of the Zhezkazgan mines as they
reach maturity. As with ore output, the fall in grade was partially offset by
production from the recently commissioned Zhomart mine, which had an average ore
grade of 1.16%.

The Zhezkazgan Complex produced 221.8 kt of copper cathodes of which 0.7 kt were
produced under tolling arrangements. 28.5 kt of copper cathodes were processed
into copper rod.


Balkhash Complex
-------------------------------------------------------------------------
kt (unless otherwise stated)                      2006               2005
-------------------------------------------------------------------------
Ore extraction                                   4,371              5,626
Average copper grade                              0.81%              0.71%

Copper concentrate*                              257.1              180.9
Copper in concentrate                             43.4               32.9

Copper cathodes                                  185.2              161.3
of which tolling                                   1.1               10.0
Copper rod                                          --                 --
-------------------------------------------------------------------------
* Excludes concentrate processed by third parties.


Ore production at the Balkhash Complex fell from 5,626 kt in 2005 to 4,371 kt in
2006, as planned additional stripping works in the first and fourth quarters
impacted output at the region's largest mine, Kounrad.

The region's ore grade increased from 0.71% to 0.81% due to the fall in output
from the low yielding Kounrad mine, whose ore has a grade of only 0.35%. This
was partially offset by Shatyrkul and Sayak copper ore grades decreasing by 0.21
and 0.08 percentage points, respectively, due to geological conditions.

The Balkhash Complex produced 185.2 kt of copper cathodes, including tolling
arrangements, 23.9 kt higher than 2005, as increased concentrate output from the
East and Karaganda Regions were processed at Balkhash.


East Region
---------------------------------------------------------------------------
kt (unless otherwise stated)                        2006               2005
---------------------------------------------------------------------------
Ore extraction                                     4,441              5,082
Average copper grade                                2.83%              2.33%

Copper concentrate*                                534.5              476.8
copper in concentrate                               98.7               87.4

Copper cathodes                                       --                 --
Copper rod                                            --                 --
---------------------------------------------------------------------------
* Excludes concentrate processed by third parties.

Overall, the East Region's metal in ore production rose from 118.5 kt to 125.7
kt, despite ore production falling 12.6% to 4,441 kt as higher grade ore was
mined.

A major slope failure at the Nikolaevskoe open pit mine in the first quarter led
to a 1,441 kt fall in annual ore output and production being switched
underground from July onwards. The Artemyevskoe mine, which commenced production
in August 2005, contributed 1,282 kt of ore, up from 379 kt in 2005.

The Orlovskoe mine remained the largest copper producing mine in the Group
(15.7% of total metal in ore extracted in 2006 and 17.6% in 2005). The Orlovskoe
mine copper ore grade rose from 4.31% in 2005 to 4.69% in 2006, contributing to
the lifting of the average copper grade in the East region from 2.33% to 2.83%.
The region's copper ore grade was also positively impacted by a significant
increase in ore grade at the Yubileyno-Snegirikhinskoe mine from 3.67% to 4.20%.


Karaganda Region
--------------------------------------------------------------------------
kt (unless otherwise stated)                       2006               2005
--------------------------------------------------------------------------
Ore extraction                                    2,752                692
Average copper grade                               2.59%              0.83%

Copper concentrate                                230.8              115.5
Copper in concentrate                              33.7                3.3

Copper cathodes                                      --                 --
Copper rod                                           --                 --
--------------------------------------------------------------------------

Ore extraction volumes in the Karaganda Region grew 297.8% in 2006 from 692 kt
to 2,752 kt, primarily due to increased production volumes at the Nurkazgan mine
and the opening in March 2006 of the Kosmurun mine. This was achieved despite
output at the Abyz mine being suspended from October 2006 for up to two years
whilst major stripping works are undertaken and at a time when the nearby
Karagaily concentrator is upgraded to improve its gold recovery rate.

The region's average copper grade was substantially higher, increasing from
0.83% in 2005 to 2.59% in 2006. With average copper grades of 5.53% and 1.17%,
the Kosmurun and Nurkazgan mines made up 95% of the region's copper output.


REVIEW OF ZINC PRODUCTION

Kazakh Mining Zinc Production
----------------------------------------------------------------------------
kt (unless otherwise stated)                        2006               2005
----------------------------------------------------------------------------
Zinc grade                                          4.28%              3.28%

Zinc in concentrate                                129.1               95.1
Zinc metal                                          59.5               50.9
----------------------------------------------------------------------------

The average zinc grade in 2006 was substantially higher than in 2005, increasing
from 3.28% to 4.28% as the Artemyevskoe mine, with a zinc ore grade of 6.91%,
increased ore output by 903 kt.

Zinc in concentrate production was 129.1 kt, 35.8% above the 95.1 kt of
concentrate produced in 2005 due to a combination of higher ore output and an
increased zinc grade.

Zinc metal production at the Balkhash zinc plant was 59.5 kt, 16.9% higher than
in 2005. On-going technical problems with the coolers have resulted in the
annual output capacity being capped at the 2006 production levels.



REVIEW OF PRECIOUS METALS PRODUCTION


Kazakh Mining Precious Metals Production
----------------------------------------------------------------------------------
koz (unless otherwise stated)                              2006               2005
----------------------------------------------------------------------------------
Silver grade                                           20.69g/t           19.81g/t
Gold grade                                              0.77g/t            0.68g/t

Silver                                                   21,570             20,606
own production                                           21,530             20,517
tolling                                                      40                 89

Gold                                                      165.5              145.3
own production                                            106.9              100.5
tolling                                                    58.6               44.8
----------------------------------------------------------------------------------


The Group's precious metals refinery, located in the Balkhash Region, recovers
gold and silver from the slimes produced from the electro refining of copper and
carries out toll manufacturing for third parties. The recently commissioned
mines in the East and Karaganda regions are particularly rich in gold and
silver, which led to higher production of precious metals in 2006.

Own gold production rose 6.4% in 2006, due mainly to increased production at the
Artemyevskoe mine, whose ore had a gold content of 1.66 g/t, and opening the
Kosmurun mine with a gold content of 1.87g/t. The higher ore output from these
two mines more than offset the impact of the closure of the Abyz mine from
October 2006 for stripping works whilst the Karagaily concentrator is upgraded.

Own silver production rose by 4.9%, largely due to the rich polymetallic ore
from the Artemyevskoe mine, which has a silver grade of 143.23 g/t. This offset
lower silver output from the Zhezkazgan mines, where the silver grade fell from
17.73 g/t to 15.47 g/t.


COAL AND POWER DIVISION

The Group's principal power plant is located in the Karaganda Region and runs on
coal produced by the Borly mines. It supplies electricity to the Zhezkazgan and
Balkhash Complexes through the national grid on a credit system, enabling the
Group to use its own power effectively whilst paying only for the cost of
transmission. The coal-fired power and heating plants at the Zhezkazgan and
Balkhash Complexes supplement the electricity provided by the main Karaganda
plant, and also produce hot water for local heating. In 2006, the Group produced
6,589 GWh of electricity and 4,153 KGcal of heating power, levels comparable to
those in 2005.


MKM PRODUCTION

MKM is the Group's German manufacturing subsidiary engaged in the production and
sale of copper and copper alloy semi-finished products primarily into the
European Union. MKM is organised into three business units: wire products, tubes
and bars, and flat products (strips, plates and sheets).

MKM's total production for 2006 was 273.7 kt, a 24.7% increase compared to 2005
levels. As MKM had sufficient working capital available, it was able to respond
to higher demand in the market, with the main growth being in the wire products
business unit where output of wire rod rose by 44.5% from 88.9 kt to 128.5 kt
and drawn wire where volumes increased by 24.5% from 31.4 kt to 39.1 kt.

Total tubes and bars production in 2006 increased by 7.7%. Of this, tube
production increased by 8.9% and bar production by 6.5% compared to 2005. The
flat products business unit produced 62.6 kt of products, of which 2.4 kt were
pre-rolled strips, 14.8 kt were sheets and 45.4 kt were strips.


FUTURE DEVELOPMENTS AND CAPITAL EXPENDITURE

In March 2006, the Group commissioned a new open pit mine at Kosmurun and a new
underground mine at Zhomart. Both were opened ahead of the original mining plan.

At present, the Group operates nine concentrating plants, with a tenth, the
Nurkazgan concentrator (Karaganda Region), due to be completed in April 2007.
This new concentrator will process all the ore produced by the existing West Pit
at the Nurkazgan mine and also from the new North Pit at the mine which begins
output in 2007. At present, Nurkazgan mine ore is sent by rail to the Balkhash
concentrator.

As the Group has insufficient concentrator capacity to process all the ore from
the Artemyevskoe mine, with approximately 841 kt of ore from the mine being
processed by a third party, the Nikolaevskoe concentrator is being upgraded. Due
to be completed in the third quarter of 2007, the upgraded concentrator will
have sufficient capacity, in combination with the Group's other concentrators,
to ensure all ore produced by the Group can be processed internally.

New concentrators at Kosmurun and Shatyrkul are planned, with construction due
to begin in 2007. Once complete, these are expected to significantly reduce the
costs of transporting ore from mines to concentrators.

Various options are being considered to upgrade the Karagaily concentrator to
improve the recovery rate of gold from the nearby Abyz mine ore. Stripping works
at the Abyz mine will take place in 2007 and 2008 whilst the concentrator
upgrade is being carried out.

To recover SO2 emissions, the construction of a sulphuric acid plant at Balkhash
is expected to be completed in 2007. Also in 2007, a fourth oxygen workshop is
planned at the Balkhash smelter to boost smelting efficiency.

The North Nurkazgan open pit mine will commence production in the third quarter
of 2007, with an annual output of up to 1,000 ktpa containing 3.8 ktpa of
copper. There are medium-term mine expansions planned around the Group including
East Saryoba and Taskura (both at the North Mine in the Zhezkazgan Region) and
Akbastau in the East Region.

New site projects include Aktogay, one of the Group's primary projects, and
Boschekul, where economic assessments and site studies continue.


Financial Review

Summary of the year

Revenues for the year amounted to $5,046.5 million, a 94.3% increase over 2005.
Profit before taxation, finance items and negative goodwill rose by 145.9% to
$2,071.6 million and our key performance measure for earnings, EBITDA excluding
special items, was $2,308.4 million, a 115.0% increase compared to 2005. The
improved earnings were attributable to the increases in commodity prices shown
across all of the Group's main products.

These results translated into an increased profit attributable to equity
shareholders of $1,399.7 million, compared to $538.8 million in the prior year,
an increase of 159.8%. Underlying Profit, a more informed measure of the Group's
financial performance, increased by 155.1% from $549.8 million to $1,402.7
million.

Basic and diluted EPS increased by 131.8% to $2.99 per share. EPS based on
Underlying Profit, was $3.00 per share compared to $1.31 per share reported in
2005, an improvement of 129.0%.


REVENUES

Kazakh Mining

Revenues for Kazakh Mining increased from $1,740.9 million to $3,330.4 million,
a 91.3% improvement against the prior year. The major contribution to revenues
within the Kazakh Mining business remained copper cathodes, although there were
strong performances from other commodities, particularly zinc and silver.

Revenues from the sale of copper cathodes were $2,389.0 million, or 71.7% of the
total revenues of the Kazakh Mining business. Although production volumes,
excluding tolling, were 4.7% higher than the previous year, sales volumes of
copper cathodes were down by 6.1% predominantly due to increased sales volumes
of copper rod, which increased more than three-fold, as well as some shipments
to Europe scheduled to take place in December 2006, which took place in the
following month as the shipments took longer over the New Year holiday period.
The increase in revenue of 91.3% between years was primarily driven by an
improvement in the average realised copper price to $7,025 per tonne compared to
$3,794 per tonne for 2005, an increase of 85.2%.

As the Balkhash zinc smelter continued to ramp-up, zinc metal production
increased by 17.6%, with zinc metal sales volumes increasing by 23.1% during the
year, which contributed to a 213.1% increase in zinc metal revenues. However,
the main factor behind the increase in zinc metal revenues was the increase in
zinc prices with average realised zinc prices increasing by 155.5% from $1,231
to $3,145 per tonne during the year. Sales volumes of zinc metal remained
disappointing though due to the continuing issues associated with the cooling
systems of the zinc smelter.

Zinc in concentrate sales volumes increased by 294.1% and revenues increased
from $15.0 million to $128.0 million partially as a result of higher zinc prices
enjoyed during 2006, but mainly due to increased sales volumes arising from the
ramp-up of production from the Artemyevskoe mine following the commencement of
production in August 2005.

Silver sales volumes were similar to production volumes. Revenues increased by
62.3% compared to the prior year predominantly due to a rise in realised silver
prices of 56.2% compared to 2005.

Gold sales volumes from own ore were 21.5% less than production volumes due to
the internal use of gold within our jewellery factory. There was a 35.8%
improvement in gold revenues from own production primarily due to higher
realised gold prices of 35.9% compared to the prior year.

Copper rod revenues were up from $26.5 million to $196.1 million following a
near three-fold increase in sales volumes. The increase in copper rod sales,
where sales volumes more than tripled from 8 kt in 2005 to 28 kt in 2006, was
due to stronger market demand arising out of China.

Other revenues of $118.3 million compared to $66.4 million in the prior year,
and related to the sale of surplus electricity, heating and coal, as well as the
sales of other minor by-products, such as lead and rhenium. This increase of
78.2% was largely as a result of higher utility tariffs being obtained on the
sale of surplus electricity, heating and coal as well as a greater volume of
minor by-products arising from the production process.


MKM

For the year ended 31 December 2006, MKM generated revenues of $1,716.1 million,
an increase of 100.3% from the prior year's revenue figure of $856.6 million.
The two key factors behind this growth were increased sales volumes, up by 25.2%
compared to the prior year, and the increase in copper prices during the year.

The main component within MKM's revenues is the input value of copper,
accounting for 98.0% of sales price. Contractual arrangements with customers
ensure the input price of copper cathodes is passed on in full. With the
increase in the purchased component of copper increasing by 80.1% in value terms
compared to the prior year, this contributed to approximately $630 million of
the total growth in MKM revenues.

There were strong performances in the sales of wire rods, up 141.6%, drawn wire,
up by 113.6%, and strips, up by 77.4%, compared to the prior year due to
improved market conditions, a regained reputation in the market and an improved
sales strategy which resulted in increased customer demand. Sales of wire rods
particularly benefited from the closure of production facilities of a number of
competitors as well as increased duties being charged on imported Russian wire
rods. As wire rods, drawn wire and strips account for 47.3%, 14.1% and 16.8%
respectively of total sales by volume, these were the main contributors to the
overall growth in sales volumes.


Earnings

Profit before taxation, finance items and negative goodwill increased from
$842.5 million to $2,071.6 million, an increase of 145.9%, split between
$2,082.1 million for the Kazakh Mining business, $21.6 million for MKM and a
loss of $32.1 million for unallocated corporate costs. Depreciation, depletion
and amortisation amounted to $225.8 million in 2006, a small increase of 2.8%
compared to $219.6 million in 2005, as a result of increased capital expenditure
levels in recent years.

Consistent with other international mining companies, EBITDA excluding special
items has been chosen as the key measure in assessing the underlying trading
performance of the Group between the current and prior years. This performance
measure removes depreciation, depletion, amortisation and items that are
non-recurring or variable in nature which do not impact the underlying trading
performance of the business.

During 2006, these non-recurring or variable items related to the loss on
disposal of tangible assets of $9.6 million and the write-off of tangible assets
of $1.4 million, which compared to $4.6 million and $6.8 million, respectively,
for these categories in 2005. Overall, the margin at the level of EBITDA
excluding special items increased from 41.3% to 45.7%, primarily as a result of
increased commodity prices. For 2006, MKM reported a margin based on EBITDA
excluding special items of 2.6% compared to a margin of 68.9% for the Kazakh
Mining business.


Kazakh Mining

The margin at the level of EBITDA excluding special items increased from 60.5%
in 2005 to 68.9% in 2006. The main factors contributing to the higher margin
were average realised copper prices increasing by 85.2% from 2005 to 2006, an
increase in the mined ore grade from 1.03% to 1.17% and a decrease in the
proportion of copper cathodes produced from purchased concentrate, from 12.4% in
2005 to 9.1% in 2006.

Offsetting the positive factors on earnings described above, significant cost
pressures were faced in Kazakhstan which pushed up cost of sales by 34.2% from
$714.4 million to $958.6 million. Purchases of copper concentrate increased in
monetary terms from $166.2 million in 2005 to $305.1 million in 2006, an
increase of 83.6%, which represented 31.6% of the cost of sales of Kazakh
Mining. This was primarily due to the impact of rising copper prices which
increased the cost of purchased copper concentrate, but was offset to some
extent by reduced volumes of copper concentrate being purchased.

Wages and salaries increased by 49.0% from $130.9 million to $195.0 million and
were driven by difficult competition in the labour market for natural resource
companies operating in Central Asia and general improvements in the standard of
living in Kazakhstan.

The other significant factors which increased operating costs were the opening
of new mines (Zhomart and Kosmurun) during the year, together with the ramp-up
of the Nurkazgan and Artemyevskoe mines, which resulted in higher costs for
spare parts, consumables, repairs and maintenance expenditure. There have also
been widespread increases for these items of expenditure seen across the mining
sector.

The captive power stations in the Kazakh Mining business produce sufficient
electricity and heat for the business' own requirements. However, rising diesel
prices adversely impacted running costs for plant and equipment operating in the
mines, which contributed to a 12.7% rise in fuel costs from $53.5 million to
$60.3 million.

Transportation costs increased from $36.8 million to $51.3 million, a 39.4%
increase primarily due to production at the Kosmurun mine whose ore is sent to
the Karagaily concentrator for processing, a distance of some 220km. It is
planned that a new Kosmurun concentrator will be constructed in due course that
will mitigate these transport costs.

The increased production of the Artemyevskoe mine led to higher processing costs
as the processing of zinc concentrate from this mine is outsourced, a situation
that will continue until the concentrator is upgraded, which is due in the third
quarter of 2007.

Selling and distribution costs increased by 88.3% to $51.6 million, reflecting a
greater proportion of sales to Europe and the resulting higher transportation
costs.

Administration costs rose by 60.5% to $223.7 million. This increase was mainly
due to increases in administrative wages and salaries resulting primarily from
market pressures in Kazakhstan, a rise in levies and charges due to increases in
property taxes, and an increase in social responsibility costs representing the
increase in contributions relating to the development of sport, social objects
and regional State social events within Kazakhstan.

In addition, the Kazakhstan tenge appreciated against the US dollar by 5.1%,
with the average exchange rate strengthening from 132.88 KZT/$ in 2005 to 126.09
KZT/$ in 2006. As certain costs are denominated in US dollars, the strengthening
of the Kazakhstan tenge resulted in higher operating costs for the Kazakh Mining
business.

Depreciation and depletion charges increased slightly from $196.5 million to
$200.8 million. This was due to higher levels of capital expenditure on fixed
assets during 2006 compared to 2005.

Cash cost of copper after by-product credits is a key measure in assessing the
ability of the Kazakh Mining business to control its production costs and
maximise credits from by-product production. The cash cost of copper after
by-product credits amounted to $695 per tonne compared to $940 per tonne in 2005
(restated due to the change in segmental reporting treatment of corporate
unallocated costs). The significant increases in by-product revenues and the
cost of purchased concentrate offset the underlying rising costs of production
of copper cathode from own mined ore as explained above. The table shown below
provides a reconciliation of the cash cost of copper after by-product credits
from 2005 to 2006, which illustrates the relative importance of the above
factors.


Reconciliation of cash cost of copper (after by-product credits)
$
-------------------------------------------------------------------------------------
Average cash cost for year ended 31 December 2005 (per tonne)                     940
Increase in purchased concentrate                                                 278
Increase in other cost of sales                                                   393
Increase in selling and distribution expenses                                      66
Increase in administrative expenses                                               161
Decrease in other operating expenses                                              (30)
Increase in by-product credits                                                 (1,113)
-------------------------------------------------------------------------------------
Average cash cost for year ended 31 December 2006 (per tonne)                     695
-------------------------------------------------------------------------------------


MKM

Although the EBITDA excluding special items margin fell from 4.6% to 2.6%, this
was primarily as a result of higher revenues. MKM's cost of sales includes the
purchase price of copper cathode, and has therefore risen at approximately the
same rate as the increase in revenues.

EBITDA excluding special items increased from $39.1 million in 2005 to $43.9
million in 2006, although this measure is significantly impacted by movements in
stock valuation resulting from copper price fluctuations. Within earnings, a
contribution of approximately $24 million (2005: $25 million) arose from an
increased stock valuation as a result of rising copper prices. This favourable
impact on earnings did not translate into operating cash flows. If copper prices
decline in future, this will conversely have a negative impact on earnings.

A more informed trading performance measure of MKM is the 'Gross Value Add'
(GVA) margin as MKM is primarily a fabricating downstream business. This measure
is commonly used in this industry to measure the 'value add' of the production
process to purchased raw materials. The GVA margin rose from $139.2 million to
$169.8 million due to a combination of more higher margin products being sold,
improved market conditions and greater conversion charges.

Depreciation and amortisation remained in line with 2005 levels at $22.2 million.

A reconciliation of profit before taxation, finance items and taxation to EBITDA
excluding special items by business segment is set out below.



$ million (unless otherwise stated)                                 2006         2005
-------------------------------------------------------------------------------------
Kazakh Mining
Profit before taxation, finance items and negative               2,082.1        840.3
goodwill
Add: loss from special items                                        10.3         15.4
Add: depreciation, depletion and amortisation                      203.2        198.0
-------------------------------------------------------------------------------------
EBITDA excluding special items                                   2,295.6      1,053.7
-------------------------------------------------------------------------------------
Revenues                                                         3,330.4      1,740.9
-------------------------------------------------------------------------------------
EBITDA excluding special items margin                               68.9%        60.5%
-------------------------------------------------------------------------------------
MKM
Profit before taxation, finance items and negative                  21.6         21.7
goodwill
Add/(less):loss/(gain) from special items                            0.1         (4.0)
Add: depreciation and amortisation                                  22.2         21.4
-------------------------------------------------------------------------------------
EBITDA excluding special items                                      43.9         39.1
-------------------------------------------------------------------------------------
Revenues                                                         1,716.1        856.6
-------------------------------------------------------------------------------------
EBITDA excluding special items margin                                2.6%         4.6%
-------------------------------------------------------------------------------------
Unallocated corporate costs excluding special items                (31.1)       (19.3)
-------------------------------------------------------------------------------------
Total Revenues                                                   5,046.5      2,597.5
Total EBITDA excluding special items                             2,308.4      1,073.5
-------------------------------------------------------------------------------------
Total EBITDA excluding special items margin                         45.7%        41.3%
-------------------------------------------------------------------------------------


Net finance items

Net financing income was $89.7 million during 2006, compared to net financing
income of $5.6 million that arose in the prior year.

A foreign exchange gain of $26.4 million was included within net financing
income, compared to a loss of $11.0 million that was recognised during 2005. The
foreign exchange gain mostly arose within Kazakhmys LLC as a result of the
appreciation of the Kazakhstan tenge against the US dollar which moved from
133.77 KZT/$ as at 31 December 2005 to 127.00 KZT/$ at 31 December 2006, a 5.1%
movement. Despite this overall appreciation of the tenge over the year, there
were significant fluctuations which gave rise to the exchange gain; the tenge
appreciated by 11.3% in the first half of the year to 118.69 KZT/$ at 30 June
2006, but then fell back by 7.0% to 127.00 KZT/$ by year end. This relative
depreciation of the tenge in the second half of the year occurred at a time when
dollar cash balances and deposits in Kazakhstan were significantly higher than
in the first half, and the net $26.4 million foreign exchange gain arose as a
result.

Net financing income, other than foreign exchange gains, includes a finance cost
of $8.0 million which predominantly related to interest payable on the MKM bank
loan. Unwinding of long-term provisions and employee benefits also gave rise to
an interest charge of $7.2 million (2005: $5.1 million).

Finance income primarily relates to interest earned from fixed term US dollar
and Kazakhstan tenge denominated deposits placed with banks in the UK and
Kazakhstan. Interest income of $78.5 million was considerably higher than the
2005 figure of $30.6 million reflecting the increased cash generation of the
Group during the year primarily due to the increased commodity prices, and the
effect of having Listing proceeds invested for a full year.


Taxation

The effective tax rate for the year was 34.8% compared to a rate of 35.1% in the
prior year. The rate was split between a current tax rate of 31.7% and a
deferred tax rate of 3.1%. Income tax in absolute terms increased by $457.4
million, or approximately 154%, due to higher earnings within the Kazakh Mining
business compared to 2005.

Although the effective tax rate only decreased by 0.3%, there were significant
movements within the tax charge. A tax benefit of $46.5 million arose from a tax
holiday associated with the Balkhash zinc plant, compared with $8.3 million in
2005, following improved zinc revenues, which reduced the effective tax rate by
2.1%. Management at Kazakhmys LLC re-considered the excess profits tax
methodology following developments in the interpretation of tax legislation
prevailing within Kazakhstan and the results of the recent tax audit in that
entity, which resulted in a release of $49.4 million from the excess profits tax
liability relating to prior years. This release reduced the effective tax rate
by 2.3%, and nets off against the current year excess profits tax charge of
$77.3 million, which increased the effective tax rate by 3.6%.

Withholding tax of $91.8 million has been recognised in relation to unremitted
earnings of Kazakhmys LLC existing as at 31 December 2006 which are expected to
be remitted to the U.K. in due course through dividend distribution. The
withholding tax on these unremitted earnings increased the effective tax rate by
4.2%.

The effective tax rate for MKM in Germany remained the same during 2006 at
35.98%.

The effective tax rate is expected to remain at levels in excess of the
statutory Kazakhstan tax rate of 30% due to excess profits taxes arising on
profitable subsoil contracts at the current time of high commodity prices, and
the additional withholding tax payable on dividend distributions from Kazakhstan
to the UK.


Profit for the year and Underlying Profit

Profit for the year attributable to equity shareholders increased from $538.8
million to $1,399.7 million, an increase of 159.8%. Underlying Profit is seen as
a more informed measure of the performance of the business as it removes any
significant non-recurring or variable non-trading items from attributable profit
for the year, and their resulting tax and minority interest impacts. It provides
a more consistent basis for comparing the underlying trading performance of the
Group between 2006 and 2005.

The increase of 155.1% in Underlying Profits principally reflects the favourable
impact of rising copper prices on earnings.

The reconciliation of Underlying Profit from profit attributable to equity
shareholders is set out below.

Reconciliation to Underlying Profit

--------------------------------------------------------------------------------------
$ million (unless otherwise stated)                    2006         2005      % change
--------------------------------------------------------------------------------------
Profit attributable to equity shareholders          1,399.7        538.8         159.8
of the Company
Special items:
Recognition of negative goodwill                       (6.5)           -
Write-off of tangible assets                            1.4          6.8
Loss on disposal of tangible assets                     9.6          4.6
Tax effect of special items                            (1.5)        (0.5)
Minority interest effect of special items                 -          0.1
--------------------------------------------------------------------------------------
Underlying Profit                                   1,402.7        549.8         155.1
--------------------------------------------------------------------------------------


Earnings per share

The income and share data used in the Basic and diluted EPS and EPS based on
Underlying Profit computations is shown below.

Basic EPS based on attributable profit for the year increased from $1.29 per
share to $2.99 per share, an increase of 131.8%. There are no differences
between basic and diluted EPS.

EPS based on Underlying Profit increased from $1.31 per share to $3.00 per
share, a 129.0% improvement, reflecting the impact of higher commodity prices on
profitability.

At the time of Listing, 58.4 million shares were issued, and aside from a few
minor share issues in 2005 resulting from share exchange agreements with
shareholders of Kazakhmys LLC, this resulted in the weighted average number of
shares in issue increasing from 418.1 million to 467.5 million. If EPS based on
Underlying Profit was calculated for 2005 using the weighted average number of
shares in issue for 2006, then this measure would show an improvement from $1.18
per share to $3.00 per share, a rise of 154%. This increase compares to a rise
of 129% using the actual weighted number of shares in issue for each year as
shown below.


Earnings per share data
--------------------------------------------------------------------------------------
                                                       2006         2005      % change
--------------------------------------------------------------------------------------
Weighted average number of shares in issue      467,474,200  418,105,627          11.8
--------------------------------------------------------------------------------------
Profit attributable to equity shareholders of       1,399.7        538.8         159.8
the Company ($ million)
Underlying Profit ($ million)                       1,402.7        549.8         155.1
--------------------------------------------------------------------------------------
EPS - basic and diluted ($)                            2.99         1.29         131.8
--------------------------------------------------------------------------------------
EPS based on Underlying Profit ($)                     3.00         1.31         129.0
--------------------------------------------------------------------------------------

Cash flows

During the year, the net liquid funds position of the Group strengthened from
$829.5 million to $1,745.3 million, an increase of $915.8 million. This movement
was mainly attributable to the conversion of higher earnings into operating cash
flows. A bank loan was taken out by MKM during the year, and the balance
outstanding as at 31 December 2006 on this loan was $277.3 million.

Other key cash flows during the year were income tax payments of $623.3 million,
capital expenditure of $345.1 million, net proceeds from borrowings of $208.0
million and payment of dividends of $233.4 million.

Free Cash Flow, a key performance indicator demonstrating the Group's ability to
translate earnings into cash flow available for dividends, investment and
financing purposes, was $1,327.2 million, compared to $450.2 million in 2005.
The Free Cash Flow in 2006 was stated after deducting sustaining capital
expenditure of $85.0 million (including expenditure on investment in intangible
assets and mine stripping costs), out of the total capital expenditure of $345.1
million compared with $175.4 million and $365.4 million for 2005 respectively.

The Group's ability to generate continued positive Free Cash Flows ensures funds
are available for expanding the Group's existing operations and capacities, as
well as providing flexibility to respond to any acquisition opportunities.

Capital expenditure on mine stripping costs, mining licences and property, plant
and equipment amounted to $345.1 million, compared to $365.4 million in the
prior year. Major items of capital expenditure were the development of the
Zhomart (formerly Zhaman-Aybat) and Kosmurun mines, the costs of the site study
and economic assessments on the Aktogay project, the construction of the
sulphuric acid plant at the Balkhash Complex, the new Karagaily and Nurkazgan
concentrators as well as the sports complex at Satpaev. Sustaining capital
expenditure and investment in mine stripping costs were $78.3 million and $6.7
million, respectively. This was lower than the 2005 figure of $175.4 million for
sustaining capital expenditure due to the significant expenditure incurred in
Zhezkazgan and Balkhash Complexes on various renewal programmes during 2005
which were not repeated in 2006. Proceeds from the disposal of property, plant
and equipment were $3.4 million as redundant assets are normally sold for scrap
or negligible value.


Balance sheet

Shareholders' funds as at 31 December 2006 stood at $3,859.9 million, an
increase of $1,260.1 million compared to the balance as at 31 December 2005. The
increase was primarily due to retained earnings for the year of $1,399.7
million, currency translation differences of $80.7 million and dividends payable
of $228.1 million.


CAPITAL EMPLOYED

A summary of capital employed is shown below:


Capital employed/ROCE

$ million (unless otherwise stated)                                 2006         2005
-------------------------------------------------------------------------------------
Equity shareholders' funds                                       3,859.9      2,599.8
Minority interests                                                  31.9         26.3
Borrowings                                                         277.3         49.0
-------------------------------------------------------------------------------------
Capital employed                                                 4,169.1      2,675.1
-------------------------------------------------------------------------------------
Profit before taxation, finance and negative goodwill            2,071.6        842.5
-------------------------------------------------------------------------------------
ROCE (%)                                                           49.7%        31.5%
-------------------------------------------------------------------------------------

Capital employed increased during the year to $4,169.1 million as at 31 December
2006, from $2,675.1 million at the prior year end, due to the increased
profitability of the Group during the year offset by higher working capital
requirements, largely within the MKM business. ROCE has also shown an
improvement from 31.5% to 49.7% reflecting the higher profitability of the
Group.

The minority interests balance increased from $26.3 million to $31.9 million.


Dividends

The Board has proposed a final dividend for the year ended 31 December 2006 of
25.7 US cents per share which if approved will be paid to shareholders on 14 May
2007 to shareholders on the register at the close of business on 13 April 2007.
Together with the interim dividend of 12.8 US cents per share paid to
shareholders on 27 October 2006, this brings the total dividend for the year to
38.5 US cents. For those shareholders who have elected to receive their
dividends in sterling, the currency conversion rate of 1.9304 to the US dollar
was based on the average foreign currency exchange rate for the five business
days ending two days before the date of this preliminary results announcement.

Dividend cover for the final dividend is over 11 times, and provides a solid
platform to ensure a stable dividend flow in future years, subject to the
performance of the business and the underlying growth in earnings of the Group.

The Company 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.


Annual General Meeting

The 2007 Annual General Meeting will be held at 12.15pm on Wednesday 9 May 2007
at Claridge's (the Ballroom entrance), Brook Street, Mayfair, London W1K 4HR.

The Annual Report and Accounts and details of the business to be conducted at
the Annual General Meeting will be mailed to shareholders in early April 2007.


Availability of this announcement

This announcement will shortly be available on the Kazakhmys website (www.kazakhmys.com)


Consolidated income statement
Year ended 31 December 2006

$ million                                                  Notes         2006       2005
----------------------------------------------------------------------------------------
Revenues                                                   3          5,046.5    2,597.5
Cost of sales                                                        (2,612.4)  (1,506.6)
----------------------------------------------------------------------------------------
Gross profit                                                          2,434.1    1,090.9
Selling and distribution expenses                                       (81.4)     (55.5)
Administrative expenses                                                (280.8)    (185.3)
Other operating income                                                   44.7       39.0
Other operating expenses                                                (35.1)     (34.8)
Write-offs and impairment losses                           4             (9.9)     (11.8)
----------------------------------------------------------------------------------------
Profit before taxation, finance items and negative                    2,071.6      842.5
goodwill
Finance income                                             5            266.8       87.4
Finance costs                                              5           (177.1)     (81.8)
Recognition of negative goodwill                                          6.5          -
----------------------------------------------------------------------------------------
Profit before taxation                                                2,167.8      848.1
Income tax expense                                         6           (754.7)    (297.3)
----------------------------------------------------------------------------------------
Profit for the year                                                   1,413.1      550.8
----------------------------------------------------------------------------------------
Attributable to:
Equity shareholders of the Company                                    1,399.7      538.8
Minority interests                                                       13.4       12.0
----------------------------------------------------------------------------------------
                                                                      1,413.1      550.8
----------------------------------------------------------------------------------------
Earnings per share attributable to equity shareholders of
the Company
Basic and diluted                                          7            $2.99      $1.29
EPS based on Underlying Profit                             7            $3.00      $1.31
----------------------------------------------------------------------------------------



Consolidated balance sheet
At 31 December 2006

$ million                                                  Notes         2006       2005
----------------------------------------------------------------------------------------
Assets
Non-current assets
Intangible assets                                                        28.9       21.6
Tangible assets                                                       1,958.3    1,743.1
+---------------------------------------------------------------------------------------+
|Property, plant and equipment                                        1,912.6    1,701.3|
|Mine stripping costs                                                    45.7       41.8|
+---------------------------------------------------------------------------------------+
Investments                                                               6.2        5.8
----------------------------------------------------------------------------------------
                                                                      1,993.4    1,770.5
----------------------------------------------------------------------------------------
Current assets
Inventories                                                             730.6      377.7
Prepayments and other current assets                                    109.6       41.5
Trade and other receivables                                             263.5      210.8
Investments                                                           1,237.2      356.5
Restricted cash                                                           0.8        1.0
Cash and cash equivalents                                               785.4      522.0
----------------------------------------------------------------------------------------
                                                                      3,127.1    1,509.5
----------------------------------------------------------------------------------------
TOTAL ASSETS                                                          5,120.5    3,280.0
----------------------------------------------------------------------------------------
Equity and liabilities
Share capital                                              9(a)         173.3      173.3
Share premium                                                           503.4      503.4
Foreign currency translation reserve                       9(d)         228.6      147.9
Reserve fund                                               9(d)          37.6        9.4
Retained earnings                                                     2,917.0    1,765.8
----------------------------------------------------------------------------------------
Equity attributable to shareholders of the Company                    3,859.9    2,599.8
Minority interests                                                       31.9       26.3
----------------------------------------------------------------------------------------
Total equity                                                          3,891.8    2,626.1
----------------------------------------------------------------------------------------
Non-current liabilities
Deferred tax liability                                                  347.7      260.9
Employee benefits                                                        32.7       28.7
Provisions                                                               57.4       44.5
Borrowings                                                              277.3          -
----------------------------------------------------------------------------------------
                                                                        715.1      334.1
----------------------------------------------------------------------------------------
Current liabilities
Provisions                                                                1.9        1.4
Borrowings                                                                  -       49.0
Trade and other payables                                                330.4      158.7
Dividend payable                                                          4.4        3.1
Income tax payable                                                      176.9      107.6
----------------------------------------------------------------------------------------
                                                                        513.6      319.8
----------------------------------------------------------------------------------------
Total liabilities                                                     1,228.7      653.9
----------------------------------------------------------------------------------------
TOTAL EQUITY AND LIABILITIES                                          5,120.5    3,280.0
----------------------------------------------------------------------------------------




Consolidated cash flow statement
Year ended 31 December 2006

$ million                                                   Notes        2006       2005
----------------------------------------------------------------------------------------
Cash flows from operating activities
Cash receipts from customers                                          5,076.6    2,529.4
Cash paid to employees and suppliers                                 (3,034.3)  (1,561.5)
----------------------------------------------------------------------------------------
Cash inflow before interest and income taxes paid                     2,042.3      967.9
Interest paid                                                            (6.8)      (9.0)
Income tax paid                                                        (623.3)    (333.3)
----------------------------------------------------------------------------------------
Net cash inflow from operating activities                    10       1,412.2      625.6
----------------------------------------------------------------------------------------

Cash flows from investing activities
  Interest received                                                      77.2       17.4
  Proceeds from disposal of property, plant and equipment                 3.4        7.2
  Purchase of property, plant and equipment                            (338.0)    (333.7)
  Mine stripping costs                                                   (6.7)     (26.5)
  Purchase of intangible assets                                          (0.4)      (5.2)
  Licence payments for subsoil contracts                                 (1.6)      (0.9)
  Proceeds from disposal of non-current investments                       2.6        0.2
  Acquisition of non-current investments                                 (0.7)      (3.0)
  Proceeds from disposal of assets held for trading                       1.0        0.5
  Acquisition of assets held for trading                                (50.8)      (1.0)
  Investment in short-term bank deposits, net                          (784.7)     (98.3)
  Acquisition of subsidiary, net of cash acquired                        (2.0)         -
  Acquisition of Apro business                                              -       (1.0)
-----------------------------------------------------------------------------------------
Net cash flows used in investing activities                          (1,100.7)    (444.3)
-----------------------------------------------------------------------------------------

  Cash flows from financing activities
  Proceeds on issue of shares by the Company                                -      548.4
  Proceeds from contribution to charter capital of                        1.6          -
  subsidiary by minority interests
  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                                              249.5      525.6
  Repayment of borrowings                                               (41.5)    (580.3)
  Dividends paid by the Company                                        (230.4)    (109.9)
  Dividends paid by subsidiary to former shareholders                       -      (53.6)
  Dividends paid by subsidiary to minority interests                     (3.0)      (1.3)
-----------------------------------------------------------------------------------------
Net cash flows (used in)/from financing activities                      (23.8)     271.7
-----------------------------------------------------------------------------------------

  Net increase in cash and cash equivalents                             287.7      453.0
  Cash and cash equivalents at the beginning of the year                522.0       74.1
  Effect of exchange rate changes on cash and cash equivalents          (24.3)      (5.1)
-----------------------------------------------------------------------------------------
  Cash and cash equivalents at the end of the year                      785.4       522.0
-----------------------------------------------------------------------------------------


Consolidated statement of changes in equity
Year ended 31 December 2006

                             Attributable to equity shareholders of the Company
                             ---------------------------------------------------
$ million                                              Foreign  
                                                      currency                     
                                    Share   Share  translation   Reserve  Retained             Minority     Total 
                           Notes  capital premium      reserve      fund  earnings    Total   interests    equity 
-----------------------------------------------------------------------------------------------------------------
At 1 January 2005                   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
Currency translation  
differences                             -       -        (70.4)        -         -    (70.4)       (0.4)    (70.8)
------------------------------------------------------------------------------------------------------------------
                                        -       -        (70.4)        -     538.8    468.4        11.6     480.0
Transfer from reserve fund  9(d)        -       -            -      (5.4)      5.4        -           -         -
Shares issued pursuant to   9(b)      1.9    32.5            -         -         -     34.4       (25.9)      8.5
Kinton Trade 
Limited transaction
Shares issued pursuant to   9(b)     20.3   528.1            -         -         -    548.4           -     548.4
Listing of the Company
Transaction costs                      -    (57.2)           -         -         -    (57.2)          -     (57.2)
associated with issue of shares
Equity dividends paid by    8          -        -            -         -     (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    8          -        -            -         -    (110.0)  (110.0)          -    (110.0)
the Company
------------------------------------------------------------------------------------------------------------------
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 year                    -        -            -         -   1,399.7  1,399.7        13.4   1,413.1
Currency translation                   -        -         80.7         -         -     80.7         0.4      81.1
differences
------------------------------------------------------------------------------------------------------------------
                                       -        -         80.7         -   1,399.7  1,480.4        13.8   1,494.2
------------------------------------------------------------------------------------------------------------------
Contribution to charter    9(e)        -        -            -         -         -        -         1.6       1.6
capital of subsidiary by
minority shareholders
Gain from dilution of                  -        -            -         -       7.8      7.8        (7.8)        -
minority interest in
subsidiary
Transfer to reserve fund  9(d)         -        -            -      28.2     (28.2)       -           -         -
Acquisition of minority                -        -            -         -         -        -         1.0       1.0
interest in subsidiary
Equity dividends paid by               -        -            -         -         -        -        (3.0)     (3.0)
subsidiary to minority
shareholders
Equity dividends paid by  8            -        -            -         -    (228.1)  (228.1)          -    (228.1)
the Company
------------------------------------------------------------------------------------------------------------------
At 31 December 2006                173.3    503.4        228.6      37.6   2,917.0  3,859.9        31.9   3,891.8
------------------------------------------------------------------------------------------------------------------



NOTES TO THE FINANCIAL INFORMATION

1. General information

Kazakhmys PLC (the 'Company') is a public limited company incorporated in the
United Kingdom of Great Britain and Northern Ireland. The Company's registered
address is 6th Floor, Cardinal Place, 100 Victoria Street, London, SW1E 5JL,
United Kingdom. The Group comprises the Company and its consolidated
subsidiaries as set out below.

The figures shown are based on the statutory accounts for the relevant years on
which the auditors' reports were unqualified but do not constitute statutory
accounts as definted in section 240 of the Companies Act 1985. The annual report
and accounts for the current year were approved by the Board of Directors on 14
May 2007 but have not yet been delivered to the Registrar of Companies.

2. Basis of preparation

The financial statements have been prepared using consistent accounting
policies. The Group has changed the segmental reporting presentation in respect
of its operating activities 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.

(a) Basis of accounting

The consolidated financial statements have been prepared on a historical cost
basis, except for certain classes of property, plant and equipment which have
been revalued at 1 January 2002 to determine deemed cost as part of the first-
time adoption of International Financial Reporting Standards (IFRS) at that
date, and derivative financial instruments which have been measured at fair
value. The consolidated financial statements are presented in US dollars ($) and
all monetary amounts are rounded to the nearest million dollars except when
otherwise indicated.

(b) Basis of consolidation

The consolidated financial statements set out the Group's financial position as
at 31 December 2006 and the Group's financial performance for the year ended 31
December 2006.

Subsidiaries are those enterprises controlled by the Group. Control exists when
the Group has the power, directly or indirectly, to govern the financial and
operating policies of an enterprise so as to obtain benefits from its
activities. Subsidiaries are consolidated from the date on which control is
transferred to the Group and cease to be consolidated from the date on which
control is transferred out of the Group. On acquisition of a subsidiary, the
purchase consideration is allocated to the assets, liabilities and contingent
liabilities on the basis of their fair value at the date of acquisition. The
excess of the cost of the acquisition over the fair value of the Group's share
of identifiable net assets of the subsidiary acquired is recognised as positive
goodwill. Negative goodwill arises where the fair value of the Group's share of
identifiable net assets of the subsidiary exceeds the cost of the acquisition.
Negative goodwill is recognised directly in the income statement.

The financial statements of subsidiaries are prepared for the same reporting
year as the Company, using consistent accounting policies. All intercompany
balances and transactions, including unrealised profits arising from intra-group
transactions, have been eliminated in full. Unrealised losses are eliminated in
the same way as unrealised gains except that they are only eliminated to the
extent that there is no evidence of impairment.


Minority interests primarily represent the interests in Kazakhmys LLC not held
by the Company.

(c) Statement of compliance

The consolidated financial statements of the Company and all its subsidiaries
have been prepared in accordance with IFRS as issued by the International
Accounting Standards Board  (IASB) and interpretations issued by the
International Financial Reporting Interpretations Committee (IFRIC) of the IASB,
as adopted by the European Union up to 31 December 2006, and in accordance with
the provisions of the Companies Act 1985.

(d) Comparative figures

Where a change in the presentational format of the consolidated financial
statements has been made during the year, comparative figures have been restated
accordingly.

(e) Changes in accounting policies

There have been no changes in accounting policies. The accounting policies
adopted are consistent with those of the previous financial year.

The Group adopted new and amended IFRS and IFRIC interpretations during the
year. Adoption of these revised standards and interpretations did not have any
significant impact on financial statements of the Group.


3. Segment information

A segment is a distinguishable component of the Group that is engaged either in
providing products or services in a particular business sector (business
segment), or in providing products or services within a particular economic
environment (geographical segment), which is subject to risks and rewards that
are different from those of other segments. Segment information is presented in
respect of the Group's primary basis of segmentation in business segments, which
are based on the Group's management and internal reporting structure.

Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Unallocated items comprise corporate head office assets and liabilities,
borrowings, income taxes payable, deferred taxes and dividends payable/
receivable.

The Group's principal operations are based in Kazakhstan, with MKM, a subsidiary
of Kazakhmys LLC, being based in Germany.

The Group's activities principally relate to:

   • Kazakh mining operations which involve the production and sale of:

     - Copper cathodes and copper rod
     - Zinc metal and zinc metal in concentrate
     - Gold and silver
     - Other by-product metals (lead, rhenium and selenium)

   • German copper processing operation.

Segmental information is also provided in respect of revenues, by destination 
and by product.

(a) Business segments

The Kazakh Mining business, which involves the processing and sale of copper and
other metals, is managed as one business segment. The products are subject to
the same risks and returns, exhibit similar long-term financial performance and
are sold through the same distribution channels. The Group processes
substantially all the copper ore it produces and utilises most of the copper
concentrate it processes. The Group has a number of activities that exist solely
to support the mining operations including power generation, coal mining and
transportation. These other activities generate less than 10% of total revenues
(both external and internal) and the related assets are less than 10% of total
assets.

The UK operation consists of two functions:

   • A trading function responsible for the purchases of products from the
     Kazakh Mining operations, application of an appropriate mark-up and then
     onward sale to third parties.

   • A corporate head office function.

For the purposes of business segmental reporting, the trading function
is regarded as a sales function on behalf of the Kazakh Mining business
and consequently the assets and liabilities related to those trading
operations, i.e. trade creditors and trade receivables, are included
within the Kazakh Mining business segment. The expenses, assets and
liabilities of the corporate head office function are disclosed
separately as unallocated items.

The price at which sales are made to the Company by Kazakhmys LLC is
based on the prevailing price of commodities as determined by the LME.

At the end of 2004, the Group acquired MKM which operates in Germany,
where it manufactures copper and copper alloy semi-finished products.
MKM faces different risks to the Group's Kazakh Mining business and,
therefore, from 1 January 2005 the Group has operated two distinct
business segments. Segmental information in respect of these two
business segments for the years ended 31 December 2006 and 2005 is
presented below.


i. Income statement information

                                                     2006                        2005
                                 ----------------------------------------------------
                                  Kazakh      MKM    Total   Kazakh    MKM      Total
$ million                         Mining                     Mining
-------------------------------------------------------------------------------------
Sales to external customers      3,330.4  1,716.1  5,046.5  1,740.9  856.6    2,597.5
-------------------------------------------------------------------------------------
Gross profit                     2,364.5     69.6  2,434.1  1,024.8   66.1    1,090.9
Operating costs                   (282.4)   (48.0)  (330.4)  (184.6) (44.3)    (228.9)
-------------------------------------------------------------------------------------
Segment results                  2,082.1     21.6  2,103.7    840.2   21.8      862.0
Unallocated corporate costs                          (32.1)                     (19.5)
-------------------------------------------------------------------------------------
Profit before taxation, finance                    2,071.6                      842.5
items and negative goodwill
Net finance income                                    89.7                        5.6
Recognition of negative goodwill                       6.5                          -
-------------------------------------------------------------------------------------
Profit before taxation                             2,167.8                      848.1
Income tax expense                                  (754.7)                    (297.3)
-------------------------------------------------------------------------------------
Profit for the year                                1,413.1                      550.8
-------------------------------------------------------------------------------------


ii. Balance sheet information

                                          At 31 December 2006           At 31 December 2005
                                   --------------------------------------------------------
$ million                          Kazakh       MKM     Total    Kazakh       MKM     Total
                                   Mining                        Mining
-------------------------------------------------------------------------------------------
Assets
Tangible and intangible assets   1,816.1      166.1   1,982.2   1,598.1     165.8   1,763.9
Non-current investments              3.5        2.7       6.2       2.7       3.1       5.8
Operating assets (1)               713.4      395.2   1,108.6     403.3     220.0     623.3
Current investments              1,237.2          -   1,237.2     356.5         -     356.5
Cash and cash equivalents          405.0       30.0     435.0      28.2       2.6      30.8
-------------------------------------------------------------------------------------------
Segment assets                   4,175.2      594.0   4,769.2   2,388.8     391.5   2,780.3
-------------------------------------------------------------------------------------------
Unallocated assets
Non-current assets - Corporate                            5.0                           0.8
Dividend receivable - Corporate                         304.5                         164.5
Current assets - Corporate                                6.0                           7.7
Cash and cash equivalents - Corporate                   350.4                         491.2
Elimination                                            (314.6)                       (164.5)
-------------------------------------------------------------------------------------------
Total assets                                          5,120.5                       3,280.0
-------------------------------------------------------------------------------------------
Liabilities
Employee benefits and provisions    85.0        7.0      92.0      67.3       7.3      74.6
Operating liabilities (2)          599.5       37.9     637.4     286.2      29.6     315.8
-------------------------------------------------------------------------------------------
Segment liabilities                684.5       44.9     729.4     353.5      36.9     390.4
-------------------------------------------------------------------------------------------
Unallocated liabilities
Other payables - Corporate                               12.0                          10.5
Deferred tax liability - Group                          347.7                         260.9
Borrowings - Group                                      277.3                          49.0
Income tax payable - Group                              176.9                         107.6
Elimination                                            (314.6)                       (164.5)
-------------------------------------------------------------------------------------------
Total liabilities                                     1,228.7                         653.9
-------------------------------------------------------------------------------------------

(1) Operating assets include inventories, trade and other receivables, prepayments
    and other current assets and restricted cash.

(2) Operating liabilities include trade and other payables and dividends payable
    by Kazakhmys LLC.



iii. Earnings before interest, tax, depreciation and amortisation (EBITDA) excluding 
special items* by business segments

                                                                       2006                            2005
                                   ------------------------------------------------------------------------
$ million                          Kazakh           Corporate            Kazakh           Corporate  
                                   Mining    MKM  unallocated    Total   Mining   MKM   unallocated   Total
-----------------------------------------------------------------------------------------------------------

Profit before taxation, finance   2,082.1   21.6        (32.1) 2,071.6    840.2  21.8         (19.5)  842.5
items and negative goodwill
Special items:
Add: write off of property,           1.4      -            -      1.4      6.8     -             -     6.8
plant and equipment
Add/(less): loss/(gain) on            8.9    0.1          0.6      9.6      8.6  (4.0)            -     4.6
disposal of property, plant and
equipment
-----------------------------------------------------------------------------------------------------------
Profit before taxation, finance   2,092.4   21.7       (31.5)  2,082.6    855.6  17.8         (19.5)  853.9
items and negative goodwill
excluding special items
Add: depreciation and depletion     200.8   21.8         0.4     223.0    196.5  21.0           0.2   217.7
Add: amortisation                     2.4    0.4           -       2.8      1.5   0.4             -     1.9
-----------------------------------------------------------------------------------------------------------
EBITDA excluding special items    2,295.6   43.9       (31.1)  2,308.4  1,053.6  39.2         (19.3) 1,073.5
-----------------------------------------------------------------------------------------------------------

* EBITDA excluding special items is defined as profit before interest, taxation,
depreciation and amortisation, as adjusted for special items. Special items are
those items which are non-recurring or variable in nature and which do not
impact the underlying trading performance of the business.



iv. Net liquid funds/(debt) by business segments

                                                    At 31 December 2006                At 31 December 2005
                               ---------------------------------------------------------------------------
$ million                      Kazakh    MKM*    Corporate    Total   Kazakh      MKM*   Corporate   Total
                               Mining          unallocated            Mining           unallocated
----------------------------------------------------------------------------------------------------------
   
Cash and cash equivalents      405.0    30.0         350.4    785.4     28.2      2.6        491.2   522.0
Current investments          1,237.2       -             -  1,237.2    356.5        -            -   356.5
Borrowings                         -  (359.9)            -   (359.9)   (41.6)  (202.5)           -  (244.1)
Inter-segment borrowings *         -    82.6             -     82.6        -    195.3            -   195.3
Finance leases                     -       -             -        -        -     (0.2)           -    (0.2)
----------------------------------------------------------------------------------------------------------
Net liquid funds/(debt)      1,642.2  (247.3)        350.4  1,745.3    343.1     (4.8)       491.2   829.5
----------------------------------------------------------------------------------------------------------

* Borrowings of MKM include amounts borrowed from the Kazakh Mining segment.



v. Capital expenditure, depreciation, write offs and impairment losses by business segments

                                                           2006                              2005
                             ---------------------------------------------------------------------
                               Kazakh   MKM   Corporate   Total  Kazakh   MKM   Corporate    Total
$ million                      Mining       unallocated          Mining       unallocated
--------------------------------------------------------------------------------------------------
Property, plant and equipment   328.4   4.4         5.2   338.0   320.7  12.5         0.5    333.7
Mine stripping costs              6.7     -           -     6.7    26.5     -           -     26.5
Intangible assets                 8.8   0.2           -     9.0     4.2   1.0           -      5.2
--------------------------------------------------------------------------------------------------
Capital expenditure             343.9   4.6         5.2   353.7   351.4  13.5         0.5    365.4
--------------------------------------------------------------------------------------------------
Depreciation and depletion      200.8  21.8         0.4   223.0   196.5  21.0         0.2    217.7
Amortisation                      2.4   0.4           -     2.8     1.5   0.4           -      1.9
--------------------------------------------------------------------------------------------------
Depreciation, depletion and     203.2  22.2         0.4   225.8   198.0  21.4         0.2    219.6
amortisation
--------------------------------------------------------------------------------------------------
Write offs and impairment         8.3   1.6           -     9.9    11.4     -         0.4     11.8
losses
--------------------------------------------------------------------------------------------------



(b) Segmental information in respect of revenues
Revenues by product are as follows:


$ million                                                                2006        2005
-----------------------------------------------------------------------------------------
Kazakh Mining
Copper cathodes                                                       2,389.0     1,377.2
Silver in granules                                                      239.1       147.3
Zinc metal                                                              201.3        64.3
Copper rods                                                             196.1        26.5
Zinc metal in concentrate                                               128.0        15.0
Gold bullion                                                             51.2        37.7
Other by-products                                                        38.1        14.5
Other revenue                                                            87.6        58.4
-----------------------------------------------------------------------------------------
                                                                      3,330.4     1,740.9
-----------------------------------------------------------------------------------------

MKM
Wire                                                                    925.8       389.1
Sheet steel and steel strips                                            272.9       252.3
Tubes and bars                                                          432.8       167.3
Metal trade                                                              84.6        47.9
-----------------------------------------------------------------------------------------
                                                                      1,716.1       856.6
-----------------------------------------------------------------------------------------
Total revenues                                                        5,046.5     2,597.5
-----------------------------------------------------------------------------------------


(c) Provisional pricing

Almost all copper sales agreements provide for provisional pricing of sales in
the month of sale with final pricing settlement based on the average LME copper
price for the month following the sale.

For the year ended 31 December 2006 gains of $49.8 million (2005: $52.4
million), relating to the difference between provisional pricing and final
pricing, have been included within revenues.

At 31 December 2006, copper sales totalling 4,262 tonnes (2005: 20,881 tonnes)
remained to be finally priced and were recorded at that date at an average price
of $6,761 per tonne (2005: $4,342 per tonne) based on provisional invoices. The
loss arising in January 2007 of $4.8 million (2005: gain of $7.9 million)
relating to contracts provisionally priced in December 2006 will be recognised
in the financial statements for the year ended 31 December 2007.


(d) Revenues by destination

                                                              Year ended 31 December 2006
                                               ------------------------------------------
$ million                                      Europe       China       Other       Total
-----------------------------------------------------------------------------------------
Sales to third parties                        3,770.1       641.8       634.6     5,046.5


                                                              Year ended 31 December 2005
                                               ------------------------------------------
$ million                                      Europe       China       Other       Total
-----------------------------------------------------------------------------------------
Sales to third parties                          995.1     1,303.0       299.4     2,597.5



4. Write offs and impairment losses

$ million                                                                2006        2005
-----------------------------------------------------------------------------------------
Write off of property, plant and equipment                                1.4         6.8
Provisions against prepayments and other current assets                   0.1         3.8
(Release of impairments)/impairment of investments                       (1.9)        1.8
Write off of goodwill                                                       -         0.4
(Release of provisions)/provisions against trade and other               (8.3)        0.3
receivables
Provisions against /(release of provisions for) obsolete inventories     18.6        (1.3)
-----------------------------------------------------------------------------------------
                                                                          9.9        11.8





5. Finance income and finance costs

$ million                                                                2006        2005
-----------------------------------------------------------------------------------------
Finance income
Interest income                                                          78.5        30.6
Foreign exchange gains                                                  188.3        56.8
-----------------------------------------------------------------------------------------
Total finance income                                                    266.8        87.4
-----------------------------------------------------------------------------------------
Finance costs
Interest expense                                                         (8.0)       (8.9)
Interest on employee obligations                                         (3.0)       (2.0)
Unwinding of discount on provisions                                      (4.2)       (3.1)
-----------------------------------------------------------------------------------------
Finance costs before foreign exchange losses                            (15.2)      (14.0)
Foreign exchange losses                                                (161.9)      (67.8)
-----------------------------------------------------------------------------------------
Total finance costs                                                    (177.1)      (81.8)
-----------------------------------------------------------------------------------------


6. Income tax

Income statement
Major components of income tax expense for the years presented are:

$ million                                                                2006        2005
-----------------------------------------------------------------------------------------
Current income tax
Corporate income tax - current period (UK)                                5.2         2.2
Corporate income tax - current period (overseas)                        653.5       269.8
Corporate income tax - prior periods                                      0.4         1.3
Excess profits tax - current period                                      77.3        27.0
Excess profits tax - prior periods                                      (49.4)          -
-----------------------------------------------------------------------------------------
                                                                        687.0       300.3
-----------------------------------------------------------------------------------------
Deferred income tax
Corporate income tax - current period                                    63.0        (8.1)
Corporate income tax - prior periods                                     17.1           -
Excess profits tax - current period                                     (12.4)        5.1
-----------------------------------------------------------------------------------------
                                                                         67.7        (3.0)
-----------------------------------------------------------------------------------------
Income tax expense                                                      754.7       297.3
-----------------------------------------------------------------------------------------

The tax assessed on the profit for the year is higher than the standard rate of
corporation tax in the tax jurisdictions in which the Group operates.

A reconciliation of income tax expense applicable to accounting profit before
income tax at the statutory income tax rate to income tax expense at the Group's
effective income tax rate for the periods presented is as follows:


$ million                                                                 2006        2005
------------------------------------------------------------------------------------------
Profit before taxation                                                 2,167.8       848.1
At statutory income tax rate of 30%                                      650.3       254.4
Underprovided in previous years - deferred income tax                     17.1           -
Underprovided in previous years - current income tax                       0.4         1.3
Unrecognised tax losses                                                   10.4         4.7
Effect of higher tax rate in Germany                                       0.5         1.0
Change in the tax rate in Germany                                            -        (2.7)
Unremitted overseas earnings                                              91.8        11.9
Non-deductible expenses/(non taxable income): 
Non-taxable income on zinc plant                                         (46.5)       (8.3)
Recognition of negative goodwill                                          (2.0)          -
Non-deductible expenses                                                   17.1         2.9
Excess profits tax                                                        15.5        32.1
------------------------------------------------------------------------------------------
At effective income tax rate of 34.8% (2005: 35.1%)                      754.7       297.3
------------------------------------------------------------------------------------------


Corporate income tax is calculated at 30% of the assessable profit for the
period for the Company and Kazakhmys LLC. The MKM tax rate is calculated at
35.98% (2005: 35.98%) and relates to German corporate income tax and trade tax.

Excess profits tax is levied on profitable subsoil contracts where the internal
rate of return for the current year exceeds 20%. The effective rate for excess
profits tax for those subsoil contracts liable to this tax is 13% (2005: 14%).


7. Earnings per share

The earnings per share (EPS) calculation has assumed that the number of ordinary
shares issued pursuant to share exchange agreements in relation to the
acquisition of Kazakhmys LLC have been in issue from 1 January 2005 consistent
with the pooling of interests method used to account for combinations of
businesses under common control. The EPS calculation has also assumed that the
share split that occurred on 23 September 2005, in which the Company's share
capital was redenominated into ordinary shares of 20 pence each, was in effect
for all prior periods.

The Directors believe that this basis for the EPS calculation provides a more
relevant performance measure for the Group than using an EPS calculation which
reflected shares issued based on the actual date of issue.


(a) Basic and diluted EPS

Basic EPS is calculated by dividing profit for the year attributable to equity
shareholders of the Company by the weighted average number of ordinary shares of
20 pence each outstanding during the year. The Company has no dilutive potential
ordinary shares.


The following reflects the income and share data used in the EPS computations:

$ million                                                                2006        2005
-----------------------------------------------------------------------------------------
Net profit attributable to equity shareholders of the Company         1,399.7       538.8
-----------------------------------------------------------------------------------------

Number                                                                   2006        2005
-----------------------------------------------------------------------------------------
Number of ordinary shares
Weighted average number of ordinary shares of 20 pence each for   467,474,200 418,105,627
EPS calculation
-----------------------------------------------------------------------------------------
EPS - basic and diluted                                                 $2.99       $1.29
-----------------------------------------------------------------------------------------


(b) EPS based on Underlying Profit

The Group's Underlying Profit is the profit for the year after adding back items
which are non-recurring or variable in nature and which do not impact the
underlying trading performance of the business and their resultant tax and
minority interest effects, as shown in the table below. EPS based on Underlying
Profit is calculated by dividing Underlying Profit by the number of ordinary
shares of 20 pence each outstanding during the year. The Directors believe EPS
based on Underlying Profit provides a more consistent measure for comparing the
underlying trading performance of the Group.

The following shows the reconciliation of Underlying Profit from the reported
profit and the share data used in the computations for EPS based on Underlying
Profit:

$ million                                                                2006        2005
-----------------------------------------------------------------------------------------
Net profit attributable to equity shareholders of the Company         1,399.7       538.8
Special items:
Recognition of negative goodwill                                         (6.5)          -
Write off of property, plant and equipment                                1.4         6.8
Loss on disposal of property, plant and equipment                         9.6         4.6
Tax effect of non-recurring items                                        (1.5)       (0.5)
Minority interest effect of non-recurring items                             -         0.1
-----------------------------------------------------------------------------------------
Underlying Profit                                                     1,402.7       549.8
-----------------------------------------------------------------------------------------

Number                                                                   2006        2005
-----------------------------------------------------------------------------------------
Weighted average number of ordinary shares of 20 pence each for   467,474,200 418,105,627
EPS based on Underlying Profit calculation
-----------------------------------------------------------------------------------------
EPS based on Underlying Profit - basic and diluted                      $3.00       $1.31
-----------------------------------------------------------------------------------------



8. Dividends paid and proposed

The dividend per share disclosures below have been calculated using the number
of ordinary shares in issue at the date of payment after reflecting the share
split that occurred on 23 September 2005 for comparability purposes. The
dividends declared and paid during the years ended 31 December 2006 and 2005 are
as follows:

                                                                    Per share      Amount
                                                                     US cents   $ million
-----------------------------------------------------------------------------------------
Year ended 31 December 2006
Declared by the Company:
Final dividend in respect of year ended 31 December 2005 (sourced        36.0       168.3
from 2005 earnings)
Interim dividend recognised in year ended 31 December 2006               12.8        59.8
(sourced from 2006 earnings)
-----------------------------------------------------------------------------------------
                                                                         48.8       228.1
-----------------------------------------------------------------------------------------
Year ended 31 December 2005
Declared by the Company:
Interim dividend recognised in year ended 31 December 2005               27.0       110.0
(sourced from 2004 earnings)
Declared by Kazakhmys LLC:
Interim dividend payable to former shareholders (sourced from            13.0        52.1
2004 earnings)
-----------------------------------------------------------------------------------------
                                                                         40.0       162.1
-----------------------------------------------------------------------------------------


The dividends shown above are those that have been paid and proposed by the
Company in respect of the period following the share exchange, and Kazakhmys LLC
for the period prior to the share exchange. This presentation is consistent with
the pooling of interests method used to account for combinations of businesses
under common control.


(a) Dividends declared by Kazakhmys LLC

On 24 February 2005, Kazakhmys LLC paid an interim dividend in respect of the
year ended 31 December 2004 of $52.1 million, which was paid to shareholders on
the register of Kazakhmys LLC as at 31 October 2004. Accordingly, as the share
exchange agreement was not effective until 23 November 2004, these dividends
were paid directly to Kazakhmys LLC's former shareholders, rather than to the
Company. The dividends are shown in the consolidated financial statements as
cash outflows for the Group, consistent with the pooling of interests method of
accounting.



(b) Dividend declared by the Company

On 5 July 2005, the Company paid an interim dividend of $110.0 million in
respect of the year ended 31 December 2005 to shareholders on the register as at
1 July 2005. This interim dividend was sourced by way of payment of the final
dividend in respect of the year ended 31 December 2004 by Kazakhmys LLC.


On 26 May 2006 the Company paid the final dividend of $168.3 million in respect
of the year ended 31 December 2005 to shareholders on the register as at 28
April 2006. This final dividend was sourced by way of payment of the interim
dividend in respect of the year ended 31 December 2005 by Kazakhmys LLC.


On 27 October 2006, the Company paid an interim dividend of $59.8 million in
respect of the year ended 31 December 2006 to shareholders on the register as at
29 September 2006. This interim dividend was sourced by way of payment of the
final dividend in respect of the year ended 31 December 2005 by Kazakhmys LLC.



(c) Dividend declared after the balance sheet date

                                                                    Per share      Amount
                                                                     US cents   $ million
-----------------------------------------------------------------------------------------
Proposed by the Directors on 14 March 2007 (not recognised as a
liability as at 31 December 2006):
Final dividend in respect of the year ended 31 December 2006             25.7       120.1
-----------------------------------------------------------------------------------------



9. Share capital and reserves


(a) Authorised and allotted share capital

A pooling of interests method of accounting has been applied in the presentation
of the consolidated financial statements. This method presents the results of
the Group as if the Company had always been the parent company.

                                                          Number   £ million   $ million
----------------------------------------------------------------------------------------
Authorised - At 31 December 2006 and 31 December 2005
Ordinary shares of 20 pence each                     750,000,000       150.0           -
----------------------------------------------------------------------------------------
Allotted and called up share capital
As at 31 December 2006                               467,474,200        93.5       173.3
As at 31 December 2005                               467,474,200        93.5       173.3
----------------------------------------------------------------------------------------


(b) Ordinary shares
(i) Rights at general meetings

At general meetings of the Company each member present or by proxy has one vote
on a show of hands, and on a poll every member who is present in person or by
proxy has one vote per ordinary share.


(ii) Year ended 31 December 2005

Between 23 November 2004 and 23 August 2005, a total number of 16,148,948
ordinary shares of £5 each in the Company were issued and a further 2,000
ordinary shares of 20 pence each were issued on 29 December 2005 (equivalent to
80 ordinary shares of £5 each prior to the share split) pursuant to share
exchange agreements in relation to the acquisition of Kazakhmys LLC.

Pursuant to a special resolution passed on 23 September 2005 it was resolved
inter alia to:
   • Divide the £50,000 nominal amount of authorised share capital of the
     Company formerly divided into 50,000 redeemable preference shares of £1 each
     into 10,000 ordinary shares of £5 each.
  
   • Subdivide each ordinary share of £5 each in the capital of the
     Company into 25 ordinary shares of 20 pence each.
  
   • Increase the authorised share capital of the Company from
     £100,050,001 to £150,000,001 by the creation of 249,750,000 ordinary
     shares of 20 pence each.


On 26 September 2005, the Company issued 5,314,425 ordinary shares
of 20 pence each in consideration for the transfer to it of 127,546,200 
units in Kazakhmys LLC from Kinton Trade Limited. This was an exchange rate
equivalent to that applied pursuant to the share exchange offer made by the
Company in November 2004 when it first acquired units in Kazakhmys LLC.

On 12 October 2005, the Company's ordinary shares were admitted to the Official
List of the Financial Services Authority and to trading on the London Stock
Exchange. Following the exercise of an over-allotment option, the global offer
comprised 140,849,373 ordinary shares of 20 pence each at a price of £5.40, of
which 58,434,025 new ordinary shares of 20 pence each were issued by the Company
and 82,415,348 ordinary shares of 20 pence each were sold by existing 
shareholders. Gross proceeds of $548.4 million (£315.5 million) were  received
by the Company following the issue of the new ordinary shares.


(c) Special share

At 31 December 2005 the Company had 1 special share of £1 as part of its
authorised share capital. The special share was cancelled by special
resolution at the Company's Annual General Meeting on 23 May 2006.


(d) Reserves
(i) Reserve fund

In accordance with legislation of the Republic of Kazakhstan the reserve fund
comprises proscribed transfers from retained earnings amounting to 15% of
Kazakhmys LLC's charter capital. During the year ended 31 December 2006, the
reserve fund was increased by $28.2 million as a result of the contributions to
the charter capital of Kazakhmys LLC (see note 9(e)). During the year ended 31
December 2005, the reserve fund was reduced by $5.4 million to match a reduction
in Kazakhmys LLC's capital.

(ii) Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences
arising from the translation of the financial statements of Kazakhmys LLC and
MKM into US dollars.

(e) Capital contributions to charter capital of Kazakhmys LLC

Between 31 January 2006 and 14 March 2006, the Company made contributions of $18
6.8 million to its subsidiary, Kazakhmys LLC. Minority shareholders contributed
a further $1.6 million to the charter capital. As the Company took up the rights
of minority shareholders who did not subscribe to the initial capital
contribution, the Company's interest in Kazakhmys LLC increased from 98.68% at
31 December 2005 to 99.08% at 31 December 2006.



10. Reconciliation of profit before taxation to net cash inflow from operating activities

$ million                                                                2006        2005
-----------------------------------------------------------------------------------------
Profit before taxation                                                2,167.8       848.1
Interest income                                                         (78.5)      (30.6)
Interest expense                                                          8.0         8.9
Depreciation and depletion                                              223.0       217.7
Amortisation                                                              2.8         1.9
Recognition of negative goodwill                                         (6.5)          -
Write off and impairment losses                                           9.9        11.8
Unrealised foreign exchange loss                                        (39.2)        0.2
Loss on disposal of property, plant and equipment                         9.6         4.6
-----------------------------------------------------------------------------------------
Operating cash flows before changes in working capital and            2,296.9     1,062.6
provisions
Increase in inventories                                                (339.2)      (97.1)
(Increase)/decrease in prepayments and other current assets             (65.0)       18.0
Increase in trade and other receivables                                 (11.1)      (69.5)
Decrease in restricted cash                                               0.2        29.0
Increase in employee benefits                                             2.3         1.1
Increase in provisions                                                    2.1         3.5
Increase in trade and other payables                                    156.1        20.3
-----------------------------------------------------------------------------------------
Cash flows from operations before income taxes and interest           2,042.3       967.9
Interest paid                                                            (6.8)       (9.0)
Income taxes paid                                                      (623.3)     (333.3)
-----------------------------------------------------------------------------------------
Net cash inflow from operating activities                             1,412.2       625.6
-----------------------------------------------------------------------------------------



11. Movement in net liquid funds


$ million                                      At                     Net      Other           At
                                        1 January                exchange   non-cash  31 December
                                             2006  Cash flow  translation  movements*        2006 
--------------------------------------------------------------------------------------------------
Cash and cash equivalents                   522.0      287.7        (24.3)         -        785.4
Current investments                         356.5      834.5         12.8       33.4      1,237.2
Borrowings                                  (48.8)    (208.2)       (13.8)      (6.5)      (277.3)
Finance leases                               (0.2)       0.2            -          -            -
-------------------------------------------------------------------------------------------------
Net liquid funds                            829.5      914.2        (25.3)      26.9      1,745.3
-------------------------------------------------------------------------------------------------


$ million                                      At                     Net      Other           At
                                        1 January                exchange   non-cash  31 December
                                             2005  Cash flow  translation  movements*        2006 
--------------------------------------------------------------------------------------------------
Cash and cash equivalents                    74.1     453.0          (5.1)         -        522.0
Current investments                         259.9      98.8          (8.5)       6.3        356.5
Borrowings                                 (101.0)     54.0           2.6       (4.4)       (48.8)
Finance leases                               (1.0)      0.7           0.1          -         (0.2)
Redeemable preference shares                 (0.1)      0.1             -          -            -
-------------------------------------------------------------------------------------------------
Net liquid funds                            231.9     606.6         (10.9)       1.9        829.5
-------------------------------------------------------------------------------------------------

* Other non cash movements comprise foreign exchange losses/gains incurred by
the Company's entities and recognised in the consolidated income statement.


12. Related party disclosures

Option agreement with Executive Chairman

On 14 March 2006, the Company announced that an entity wholly owned by the
Company's Executive Chairman, Vladimir Kim, had agreed to acquire a 25% stake in
ENRC Kazakhstan Holding B.V. (EKH), the holding company for certain assets of
the Eurasia Natural Resources group's metals and mining business. EKH primarily
operates in Kazakhstan producing, in particular, chrome, iron ore and alumina.
The Company has been given the benefit of a call option in respect of Vladimir
Kim's shareholding in EKH. The terms of the call option allow the Company, at
its absolute discretion, from 1 January 2007 to 31 December 2007, to call for
Vladimir Kim's interest in EKH to be transferred to the Company for a
consideration representing 100% of the initial investment of $751 million plus a
10% margin (reflecting the risk of the initial investment) and the actual
financing and transaction costs incurred by Vladimir Kim. This is provided that,
as required by the Listing Rules, this consideration and the terms of the option
are determined by an independent adviser to be fair and reasonable so far as the
remaining shareholders of the Company are concerned. Vladimir Kim is not
permitted to dispose of his interest in EKH before 1 January 2008 without the
consent of the Company. Should the Company exercise the call option, then it
will comply with all class tests and related party rules relevant to the
Company. Any such decision would be taken by an independent committee of the
Board.

The accounting treatment of the option is governed by International Accounting
Standard 39 'Financial Instruments: Recognition and Measurement'. IAS 39
contains special accounting requirements for those equity instruments that do
not have a quoted market price in an active market and derivatives that are
linked to, and must be settled by delivery of, such unquoted equity instruments.
If the fair value of such equity instruments cannot be reliably measured, they
must be measured at cost, less impairment. To be able to reliably measure the
option, the variability in the range of fair value estimates should not be
significant, and the probabilities of the various estimates within the range
should be capable of being reasonably assessed. There currently remain
significant differences in the fair value estimates being obtained for EKH from
external advisers and those estimated by other parties, and the probability of
each value cannot be reasonably assessed. The Directors have therefore
considered the requirements of IAS 39 in this regard and are of the view that
the fair value of the option cannot be reliably measured on the basis that, to
date, insufficient information on EKH's financial performance, position and cash
flows has been made available to the Company in order to arrive at a reliable
valuation for the option. Consequently the option is valued at cost, which is
nil, due to the fact that no payment was made by the Company to enter into the
option arrangement with Vladimir Kim.


13. Events after the balance sheet date
(a) Post year-end dividend

The Directors have proposed a final dividend in respect of the year ended 31
December 2006 of 25.7 US cents per share. Subject to approval of shareholders at
the Annual General Meeting to be held on 9 May 2007, this dividend shall be paid
on 14 May 2007.

(b) Acquisition of Dostan-Temir LLP

On 7 March 2007, the Group entered into an agreement to acquire Dostan-Temir
LLP, a Kazakhstan based company which holds the right to sign a contract with
the Government of Kazakhstan to conduct oil and gas exploration and development
activity in the East Akhzar Exploration Block in Western Kazakhstan. This
transaction, when concluded, is not expected to have a significant impact on the
Group's net asset position. The financial effect of the transaction on the
Group's results will be dependent upon both the nature and extent of future oil
and gas exploration and development activity carried out in the East Akhzar
Block.


Production and sales figures

Summary of significant production and sales figures


                                                                   2006      2005
---------------------------------------------------------------------------------
Kazakh Mining
Ore mined (kt)                                                    39,240   39,446
Copper content in ore mined (%)                                     1.17     1.03
---------------------------------------------------------------------------------
Copper cathode production (kt)
From own concentrate                                                 368      339
From purchased concentrate                                            37       48
---------------------------------------------------------------------------------
Total Kazakhmys copper cathodes produced (excluding tolling) (kt)    405      387
Tolling (kt)                                                           2       10
---------------------------------------------------------------------------------
Total Kazakhmys copper cathodes produced (including tolling) (kt)    407      397
Total Kazakhmys copper cathodes and copper rods sold (kt)            368      370
---------------------------------------------------------------------------------
MKM
Wire sales (kt)                                                    167.2    119.4
Flat sales (kt)                                                     62.9     57.8
Tubes and bars sales (kt)                                           42.5     40.8
---------------------------------------------------------------------------------
Total MKM sales (kt)                                               272.6    218.0
---------------------------------------------------------------------------------


MINING
Metal Mining
                  Ore mined      Copper         Zinc          Gold         Silver
-------------------------------------------------------------------------------------
                  2006   2005   2006   2005   2006   2005   2006   2005   2006   2005
                    kt     kt      %      %      %      %    g/t    g/t    g/t    g/t
-------------------------------------------------------------------------------------
North            3,143  3,516   0.66   0.77      -      -      -      -   7.36  10.48
South            6,818  7,281   0.72   0.82      -      -      -      -  14.08  13.44
Stepnoy          3,200  3,481   0.79   0.76      -      -      -      -  16.58  17.27
East             5,502  5,776   0.88   0.95      -      -      -      -  19.29  24.26
West             2,585  3,185   0.41   0.61      -      -      -      -  14.26  18.25
Annensky         4,225  4,807   1.10   1.15      -      -      -      -  23.75  21.67
Zhomart          2,203      -   1.16      -      -      -      -      -   5.78      -
(formerly
Zhaman-Aybat)
-------------------------------------------------------------------------------------
Total           27,676 28,046   0.82   0.87      -      -      -      -  15.47  17.73
Zhezkazgan
Complex
-------------------------------------------------------------------------------------
Kounrad          2,267  3,508   0.35   0.28      -      -      -      -   1.81   1.62
Shatyrkul          441    473   2.03   2.24      -      -   0.31   0.37   2.59   2.62
Sayak I and      1,663  1,645   1.11   1.19      -      -   0.27   0.30   6.12   6.02
Sayak III
-------------------------------------------------------------------------------------
Total Balkhash   4,371  5,626   0.81   0.71      -      -   0.28(1)0.32(1) 3.53   2.99
Complex
-------------------------------------------------------------------------------------
Orlovskoe        1,542  1,667   4.69   4.31   3.72   3.91   0.58   0.55  52.35  54.20
Belousovskoe       246    247   1.00   0.91   3.52   2.84   0.50   0.45  52.60  46.68
Irtyshskoe         449    448   1.26   1.07   2.80   2.74   0.31   0.31  44.10  44.72
Nikolaevskoe       578  2,019   1.47   1.06   2.48   2.01   0.26   0.19  24.50  18.37
Yubileyno-         344    322   4.20   3.67   3.05   4.26   0.57   0.65  37.41  42.46
Snegirikhinskoe
Artemyevskoe     1,282    379   1.74   1.72   6.91   6.65   1.66   1.81 143.23 184.78
-------------------------------------------------------------------------------------
Total East       4,441  5,082   2.83   2.33   4.32   3.23   0.82   0.48  72.98  47.77
Region
-------------------------------------------------------------------------------------
Abyz               210    445   1.67   1.07   3.47   3.90   3.67   4.91  47.89  54.55
Nurkazgan        1,670    247   1.17   0.40      -      -   0.31   0.15   3.71   1.41
Kosmurun           872      -   5.53      -      -      -   1.87      -  31.97      -
-------------------------------------------------------------------------------------
Total Karaganda  2,752    692   2.59   0.83  3.47(2) 3.90(2)1.06   3.21  16.04  35.56
Region
-------------------------------------------------------------------------------------
Total Kazakhmys 39,240 39,446   1.17   1.03  4.28(3) 3.28(3)0.77(4)0.68(4)20.69 19.81
-------------------------------------------------------------------------------------

1 Production only from Shatyrkul and Sayak I and Sayak III mines in Balkhash Complex.

2 Production only from Abyz mine in Karaganda Region.

3 Production only from East Region and Abyz mine in Karaganda Region.

4 Production only from Balkhash Complex (excluding Kounrad mine), East Region 
  and Karaganda Region.



Coal mining
                               Coal mined   Waste stripped   Strip ratio
                             -------------------------------------------
                                2006   2005    2006    2005   2006   2005
                                  kt     kt    kbcm    kbcm  bcm:t  bcm:t
-------------------------------------------------------------------------
Molodezhny (formerly           6,400  5,745   9,330   6,207   1.46   1.08
Borlynskoe)
Kuu-Chekinskoe                   872  1,262   4,045   4,631   4.64   3.67
-------------------------------------------------------------------------
Total Kazakhmys                7,272  7,007  13,375  10,838   1.84   1.55
-------------------------------------------------------------------------


Processing
Copper processing

                        Copper concentrate produced    Copper in concentrate
                        ----------------------------------------------------
                                        2006    2005            2006    2005
                                          kt      kt               %       %
----------------------------------------------------------------------------
Zhezkazgan No.1                          189     186            40.0    39.8
Zhezkazgan No.2                          205     234            39.6    39.4
Satpaev                                  147     179            28.8    27.3
----------------------------------------------------------------------------
Total Zhezkazgan Complex                 541     599            36.8    35.9
----------------------------------------------------------------------------
Balkhash                                 257     181            16.9    18.2
----------------------------------------------------------------------------
Total Balkhash Complex                   257     181            16.9    18.2
----------------------------------------------------------------------------
Orlovskoe                                309     321            21.1    20.2
Belousovskoe                              20      12            13.7    14.6
Irtyshskoe                                26      23            13.4    14.1
Nikolaevskoe                             179     121            15.1    14.6
----------------------------------------------------------------------------
Total East Region                        534     477            18.5    18.3
----------------------------------------------------------------------------
Karagaily (Abyz)                          47     115             4.0     2.9
Karagaily (Kosmurun)                     184       -            17.3       -
----------------------------------------------------------------------------
Total Karaganda Region                   231     115            14.6     2.9
----------------------------------------------------------------------------
Own copper concentrate processed by       33      44            24.6    16.2
third party
----------------------------------------------------------------------------
Total Kazakhmys own                    1,596   1,416            24.0    24.4
concentrate
----------------------------------------------------------------------------
Purchased concentrate                    214     268            23.5    19.4
----------------------------------------------------------------------------
Total Kazakhmys own and purchased      1,810   1,684            24.0    23.6
concentrate
----------------------------------------------------------------------------


Zinc and precious metals processing

                                        Zinc      Zinc in             Silver(1)        Gold(1)
                                 concentrate   concentrate
                                    produced
                                 2006   2005   2006   2005     2006       2005   2006   2005
                                   kt     kt      %      %      g/t        g/t    g/t    g/t
--------------------------------------------------------------------------------------------
Zhezkazgan No.1                     -      -      -      -    712.5      789.0      -      -
Zhezkazgan No.2                     -      -      -      -    733.5      846.0      -      -
Satpaev                             -      -      -      -    636.7      522.3      -      -
--------------------------------------------------------------------------------------------
Total Zhezkazgan Complex            -      -      -      -    699.8      731.6      -      -
--------------------------------------------------------------------------------------------
Balkhash                            -      -      -      -     53.4       55.8    2.7    2.2
--------------------------------------------------------------------------------------------
Total Balkhash Complex              -      -      -      -     53.4       55.8    2.7    2.2
--------------------------------------------------------------------------------------------
Orlovskoe                          88    106   45.3   43.2    101.4      116.8    1.1    1.2
Belousovskoe                       14     11   41.8   43.6    398.8      553.2    3.7    4.4
Irtyshskoe                         13     17   39.0   37.3    467.8      472.4    2.2    2.2
Nikolaevskoe                       55     53   39.5   38.1    157.1      104.7    1.6    0.8
YSR (KazZinc)                       -     15      -   34.4        -      147.2      -    1.8
Artemyevskoe (KazZinc)            106     14   51.8   51.1  2,369.5(3) 4,082.5(3)20.8(3)13.4(3)
--------------------------------------------------------------------------------------------
Total East Region                 276    216   42.7(2)41.2(2) 149.3(2)   142.2(2) 1.4(2) 1.2(2)
--------------------------------------------------------------------------------------------
Karagaily                           5     15   33.4   36.0    103.3      123.9    5.4   12.6
--------------------------------------------------------------------------------------------
Total Karaganda Region              5     15   33.4   36.0    103.3      123.9    5.4   12.6
-------------------------------------------------------------------------------------------
Total Kazakhmys                   281    231  42.4(2) 40.9(2) 317.2(2)   386.5(2) 2.7(2) 3.2(2)
--------------------------------------------------------------------------------------------


(1) Grade in grammes per tonne of copper concentrate.

(2) Production only from own concentrators within East Region.

(3) Includes gold and silver content in gravity concentrate toll processed by
    KazZinc from Artemyevskoe ore.


Copper Smelter/Refinery - copper cathodes production

                                Concentrate      Copper in       Copper
                                  smelted       concentrate     cathodes
---------------------------------------------------------------------------
                                 2006    2005    2006    2005   2006   2005
                                   kt      kt       %       %     kt     kt
---------------------------------------------------------------------------
Own concentrate                   632     667    34.0    33.8    215    227
Purchased concentrate              26      31    31.1    25.4      6      8
Other1                            101     192     0.7     3.2      -      -
---------------------------------------------------------------------------
Total Zhezkazgan Complex          759     890    29.5    26.9    221    235
---------------------------------------------------------------------------
Own concentrate                   990     706    16.9    16.5    153    112
Purchased concentrate             170     232    22.0    18.5     31     40
Other1                             27     146     9.6     1.3      -      -
---------------------------------------------------------------------------
Total Balkhash Complex          1,187   1,084    17.4    14.9    184    152
---------------------------------------------------------------------------
Total Kazakhmys (excluding      1,946   1,974    22.2    20.3    405    387
tolling)
---------------------------------------------------------------------------
Tolling                             2      11    73.5    80.6      2     10
---------------------------------------------------------------------------
Total Kazakhmys (including      1,948   1,985    95.7   100.9    407    397
tolling)
---------------------------------------------------------------------------

1 Includes materials recovered (slag, scrap, etc.) reprocessed at both
  Zhezkazgan and Balkhash Complexes.



Copper Smelter/Refinery - copper rod and acid production

                  Copper rod    Acid production
-----------------------------------------------
                   2006    2005    2006    2005
                     kt      kt      kt      kt
-----------------------------------------------
Zhezkazgan           29       9     202     245
-----------------------------------------------
Total Kazakhmys      29       9     202     245
-----------------------------------------------


Zinc Smelter/Refinery - zinc metal production

                                   Zinc           Zinc in      Zinc metal
                                concentrate     concentrate
                                  smelted
---------------------------------------------------------------------------
                                 2006    2005    2006    2005   2006   2005
                                   kt      kt       %       %     kt     kt
---------------------------------------------------------------------------
Total Kazakhmys (all Balkhash     155     186    45.4    41.2     60     51
Complex)
---------------------------------------------------------------------------


Precious metal production

                                  Silver           Gold
-------------------------------------------------------------
                                 2006    2005    2006    2005
                                  koz     koz     koz     koz
-------------------------------------------------------------
Kazakhmys                      21,530  20,517     107     101
Tolling                            40      89      59      45
-------------------------------------------------------------
Total Kazakhmys (including     21,570  20,606     166     146
tolling)
-------------------------------------------------------------


Other Production - Kazakhmys

                                                  2006    2005
-------------------------------------------------------------
Electricity power space (GWh)                    6,589   6,441
Heating power (KGcal)                            4,153   4,013
Enamel wire (t)                                    558     506
Lead dust (t)                                   12,622  13,697
--------------------------------------------------------------


Kazakhmys sales
                                          2006              2005
------------------------------------------------------------------------
                                        kt(1)            kt(1)      
                                              $ million         $ million
-------------------------------------------------------------------------
Copper cathode                           340    2,389.0     362   1,377.2
Copper rod                                28      196.1       8      26.5
-------------------------------------------------------------------------
Total copper sales (excluding            368    2,585.1     370   1,403.7
tolling)
-------------------------------------------------------------------------
Zinc metal in concentrate                 67      128.0      17      15.0
Zinc metal                                64      201.3      52      64.3
Silver (koz)                          20,962      239.1  20,174     147.3
Gold (koz)                                84       51.2      84      37.7
-------------------------------------------------------------------------

(1) Kilotonnes unless otherwise stated.


Average realised prices
                           2006    2005
---------------------------------------
Copper ($/t)              7,025   3,794
Zinc ($/t)                3,145   1,231
Silver ($/oz)             11.41    7.30
Gold ($/oz)                 610     449
---------------------------------------

MKM production and sales

                     2006             2005
------------------------------------------------
               Production Sales Production Sales
                   kt      kt       kt      kt
------------------------------------------------
Wire rod            128.5 128.8       88.9  88.1
Drawn wire           39.1  38.4       31.4  31.3
------------------------------------------------
Total wire          167.6 167.2      120.3 119.4
------------------------------------------------
Pre-rolled            2.4   2.5        4.9   4.9
Sheets               14.8  14.7       12.2  11.7
Strips               45.4  45.7       41.6  41.2
------------------------------------------------
Total flat           62.6  62.9       58.7  57.8
products
------------------------------------------------
Tubes                20.7  19.9       19.0  19.2
Bars                 22.8  22.6       21.4  21.6
------------------------------------------------
Total tubes          43.5  42.5       40.4  40.8
and bars
------------------------------------------------
Total MKM           273.7 272.6      219.4 218.0
------------------------------------------------





                      This information is provided by RNS
            The company news service from the London Stock Exchange