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Kazakhmys PLC (KAZ)

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Thursday 06 March, 2008

Kazakhmys PLC

Audited Results 2007 - Part 1

Kazakhmys PLC
06 March 2008



Part 1


                                                                 6 March 2008

                         KAZAKHMYS PLC AUDITED RESULTS
                      FOR THE YEAR ENDED 31 DECEMBER 2007

FINANCIAL HIGHLIGHTS


•       Solid financial results driven by strong commodity prices
   o       EBITDA excluding special items increased to $2,336 million
   o       EPS based on Underlying Profit up to $3.02 per share
   o       Free Cash Flow of $895 million


•       Final dividend announced of 27.4 US cents per share, an increase of 7%
   o       Total dividend of 41.0 US cents per share (2006: 38.5 US cents per
           share)


•       Cash return to shareholders of over $800 million over the year:
   o       Including share buy-back programme of $390 million (completed in January
           2008)
   o       Special dividend of $235 million paid in October 2007


OPERATIONS AND STRATEGY


•       Cathode production from own material 341 kt
   o       By-product production remains firm


•       Key first acquisitions:
   o       14.6% stake in ENRC PLC - currently valued at $4.2 billion
   o       Ekibastuz power plant
   o       Eurasia Gold - Dostan-Temir petroleum exploration


•       Major growth projects:
   o       Boschekul on track for pre-feasibility completion end 2008
   o       Aktogay oxide feasibility to complete 2008


•       Asset optimisation:
   o       Abyz and Akbastau commenced operations in January 2008
   o       New concentrator and two concentrator upgrades completed
   o       Operational challenges in 2007 but improvements being made




------------------------------                      -------------  -------------
$ million (unless otherwise stated)                   Year ended     Year ended
                                                     31 December    31 December
                                                            2007           2006
------------------------------                      -------------  -------------
Revenues                                                5,256.6        5,046.5
Earnings:
   Profit before taxation, finance items and
   negative goodwill                                    2,048.4        2,071.6
   Profit before taxation                               2,025.9        2,167.8
   EBITDA excluding special items (1)                   2,336.3        2,308.4
   Underlying Profit                                    1,409.5        1,402.7
                                                        
EPS:
   Basic and diluted ($)                                   3.04           2.99
   Based on Underlying Profit (2) ($)                      3.02           3.00
   Free Cash Flow (3)                                     895.3        1,327.2
   ROCE (4) (%)                                            30.9           49.7 
   Cash cost of copper after by-product credits (5)
  (USc/lb)                                                 58.9           31.5
------------------------------                      -------------  -------------

    (1)    Reconciliation of EBITDA excluding special items to profit
           before taxation, finance items and negative goodwill is found in note 4(a).
    (2)    Reconciliation of EPS based on Underlying Profit is found in note 8(b).
    (3)    Net cash flows from operating activities less sustaining capital
           expenditure on tangible and intangible assets.
    (4)    Profit before taxation, finance items and negative goodwill 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.


Vladimir Kim, Chairman of Kazakhmys PLC, said: "2007 was characterised by some
important steps in the delivery of our strategy, but the year also posed
some operational challenges, which are being addressed.  We believe that there
are further exciting opportunities to deliver on our strategy in the coming
year, from our existing assets, our growth projects and diversification in the
region. The underlying strength of demand from the newly industrialising parts
of the world, such as our neighbour China, leads us to believe that the long
term outlook for metal demand and resources remains positive.  We are,
therefore, confident about the prospects for the Group."



For further information please contact:


-------------------------------                             -------------------
John Smelt, Head of Corporate Communications            Tel: +44 20 7901 7882
                                                        Tel: +44 787 964 2675
Olga Nekrassova, Financial Analyst (Russian language)   Tel: +44 20 7901 7814
-------------------------------                              -------------------
Kazakhmys PLC
-------------------------------                              -------------------

David Simonson                                          Tel: +44 20 7653 6620
Tom Randell                                             Tel: +44 20 7653 6620
Leonid Fink                                             Tel: +44 20 7653 6620
-------------------------------                              -------------------
Merlin
-------------------------------                              -------------------

- ends -


NOTES TO EDITORS


Kazakhmys PLC is the largest copper producer in Kazakhstan and one of the
leading copper producers in the world.  Kazakhmys is a fully integrated copper
producer from mining ore through to the production of finished copper cathode
and rod. The Group produces significant volumes of other metals as by-products,
including zinc, silver and gold.  Existing operations include 20 open pit and
underground mines, 9 concentrators, two copper smelting and refining complexes,
a copper rod plant, a zinc plant and a precious metals refinery.  Production is
backed by a captive power supply and significant rail infrastructure.  Kazakhmys
also owns MKM, a copper products fabrication company in Germany, and has Gold
and Petroleum Divisions with assets in Kazakhstan and other parts of Central
Asia. The Group's strategic aim is to diversify and participate in the
development of the significant natural resource opportunities in Central Asia.


CHAIRMAN'S STATEMENT

2007 was characterised by some important steps in the delivery of our strategy,
but the year also posed some operational challenges. We added two new divisions
to our business, gold and petroleum, and after the year end we announced the
purchase of a substantial power business, an area in which we already operate.
We also acquired a 14.6% stake in ENRC PLC, currently valued at $4.2 billion.

Our strategy remains consistent with that set out at the time of Listing in
October 2005: to create value by optimising our existing assets, completing our
growth projects and taking advantage of natural resource opportunities in the
region.


STRATEGY: ASSET OPTIMISATION

The optimisation of our existing assets will be through improved efficiency and
targeted output expansion.  A major focus of the Group will be to ensure that
the issues which led to reduced production in 2007 are addressed over the course
of 2008.


The demand for commodities and the continued strength of global mining has
created inflationary pressures in the mining industry, which have been felt in
Kazakhstan.  Management will be implementing initiatives to protect profit
margins and maintain our competitive position as a lowest cost quartile copper
producer.

STRATEGY: GROWTH PROJECTS

On our major growth projects, in July 2007 we engaged Fluor to act as consulting
engineers for the pre-feasibility study at Boschekul. Fluor have now also been
appointed to run the pre-feasibility study at Aktogay, for both the oxide and
sulphide deposits.  These projects remain on track and in line with the guidance
given in our 2007 Interim Results.

STRATEGY: DIVERSIFICATION

In April 2007 we purchased an exploration petroleum block in western Kazakhstan
and are now undertaking seismic and drilling work. In July 2007 we purchased
Eurasia Gold Inc. which has now been fully integrated as Kazakhmys Gold.
Kazakhmys Gold has some exciting development projects in Central Asia, which are
progressing to schedule.

In October 2007, we became the owner of an 18.8% interest in ENRC PLC, for $806
million, and after its successful listing in early December, we now own a 14.6%
interest in this business. The stake is currently worth $4.2 billion, a 421%
capital return on our investment, representing £4.64 per Kazakhmys share. This
underlines our ability to source exciting transactions in the region, creating
value for our shareholders.

Since the year end, we announced the purchase of the Ekibastuz Power Plant and
the Maikuben coal field which, on completion in the first half of 2008, will
become our newly formed Kazakhmys Power Division. This is the largest privately
owned power business in Kazakhstan and it has significant potential to increase
current output through refurbishment. In a region with such strong economic
growth, and likely rising power prices, the ownership of this business offers
many commercial opportunities and advantages, such as partnerships and off take
agreements. It also provides a hedge against rising power prices for our own
future needs.

In considering these transactions and reviewing and setting the strategy of the
Group, we have had the benefit of the advice and considerable experience of our
Board. I should like to thank them for their input and commitment over the year.
We place a strong emphasis on sound corporate governance and our Board is the
key to ensuring that this commitment is fully observed.


DIVIDENDS AND RETURNS TO SHAREHOLDERS

Metals prices were generally firm over the year, leading to strong cash flows,
particularly in the first six months. In September 2007, given the unusually
high metals prices and the lower than anticipated spend on diversification up to
June 2007, the Board recommended a return of funds to shareholders. This
consisted of a $390 million share buy-back programme and a special dividend
payment of $235 million, or 50.0 US cents per share. The buy-back commenced at
the end of October 2007 and was completed within three months, well within the
timetable we had outlined.

The Board is recommending an ordinary final dividend of 27.4 US cents per share
which, combined with the ordinary interim dividend, represents a total payment
over the year of 41.0 US cents per share. This is an increase of 7% on last
year's full dividend of 38.5 US cents per share. This reflects our confidence in
our core business and our view that the outlook for commodity prices should
remain favourable in the foreseeable future.

Kazakhmys listed on the London Stock Exchange in October 2005, at 540 pence per
share, raising $491 million. The total returned in cash to shareholders since
Listing, from dividends and the share buy-back programme, amounts to $1,163
million. The share price currently stands at £17.33 representing a total capital
return since Listing of 221%.

In addition to our Listing in London, approximately 2% of our shares are traded
on the Kazakh stock exchange. We are pleased to be part of the Kazakh exchange,
the success of which is important to the development of businesses and the
economy in Kazakhstan.

CUSTOMERS

Around 80% of our copper is sold under annual contracts with long standing
customers, principally in Europe and China. Our business relies on these strong
relationships and I should like to thank our customers for their continued
support over the year.


CORPORATE RESPONSIBILITY

The success of our Group is principally due to the efforts of our employees and
on behalf of the Board I should particularly like to thank them for their
support over the past year. We are committed to the welfare of our workforce and
those associated with the Group, including the local communities around our
operations.

Stability and development in the communities around us is part of our duty to
Kazakhstan and this will contribute to the success of the Group. In January
2008, we were privileged to host the first national conference on corporate
social responsibility in Kazakhstan, chaired by the President of Kazakhstan, at
our operational headquarters in Zhezkazgan. Hosting the event at Zhezkazgan
reflected the lead that we have taken in social development within Kazakhstan, a
role which it is important for us to maintain.

Health and safety remains a key issue for the Group. The number of fatalities
fell from 32 in 2006 to 23 in 2007, maintaining a downward trend set over the
past six years. Significant improvements have been made in several areas, such
as roof falls. It will take some time to ensure that the culture and behaviour,
throughout all our operations, is based on a principle of safety first, but we
are creating this environment as we continue to target zero fatalities.

OUTLOOK

We have continued to see strong demand for our products. Events in financial
markets have given rise to uncertainty over the strength of western economies,
but while there may be periods of weakness, the underlying strength of demand
from the newly industrialising parts of the world, such as our neighbour China,
leads us to believe that the long term outlook for metal demand and resources
remains positive. We are, therefore, confident about the prospects for the
Group.


CHIEF EXECUTIVE'S REVIEW


In 2007 total ore output in our core copper business was 34.0 MT, compared to
39.2 MT in 2006. The average copper grade of 1.22% was slightly higher than
2006, at 1.17%, though this was largely due to the reduced output from the
Zhezkazgan Complex and the low grade Kounrad mine, which was closed for a
scheduled push back in 2007. Copper cathode production from own ore was 341 kt,
a decline of 7%, reflecting the reduction in ore output. In 2007, 39.0 kt of
cathode was produced from purchased concentrate, compared to 36.8 kt in 2006.


Zinc metal in concentrate production was 132.8 kt, compared to 129.1 kt, mainly
as a result of the increased output of zinc bearing ores, particularly from
Kosmurun mine. By-product gold production, excluding tolled material, increased
to 113.4 koz, benefiting from increased grades and higher output from the
Kosmurun mine. Silver production fell to 19.0 Moz from 21.5 Moz, principally as
a result of the decline in production of silver bearing ores in the Zhezkazgan
Complex and East Region.


In September 2007 we reported a flood at South Mine, in the Zhezkazgan Complex.
This prevented ore output from the mine for most of the fourth quarter, but the
mine became fully operational, as anticipated, in December. The decline in ore
output was also the result of a reduction in equipment availability across all
regions. As previously mentioned, longer lead times have been experienced in
several areas, due to the strength of the mining sector. Improvements were seen
towards the year end in the deliveries of ordered equipment, in particular,
larger items. Our own management of equipment and ordering is a key area of
management focus to enable us to cope better with this environment.


Copper prices remained firm in 2007, with an average realised price of $7,175
per tonne, an increase of 2% on 2006. The average price received for silver and
gold in 2007, rose by 17% and 14%, respectively. Zinc prices increased by only
3% in 2007 compared to 2006, as China increased output. The change in commodity
prices more than offset the decline in output, leading to an 8% increase in
revenue in Kazakhmys Copper, to $3.6 billion. Output was reduced at MKM, as the
business successfully focused on higher margin products, so that Group revenue
rose by 4% from $5.0 billion in 2006 to $5.3 billion in 2007.


EBITDA for the Group, excluding special items, was $2,336 million, an increase
of 1.2% from 2006. This represented a Group EBITDA margin of 44% with 62% for
Kazakhmys Copper, reduced at Group level by the lower margin of MKM. For
Kazakhmys Copper, EBITDA, excluding special items, saw a slight decline to
$2,233 million, from $2,296 million in 2006, as rising commodity prices were
offset by inflationary cost pressures, higher prices on purchased concentrate
and the impact of fixed costs on reduced production levels. Earnings per share,
based on Underlying Profit, rose slightly from $3.00 per share in 2006 to $3.02
per share in 2007.  EPS benefited from a pre-listing dividend of $93.9 million,
received from the holding in ENRC, and a lower tax rate.  These were partly
offset by the impact of tenge strength against the US dollar, which created a
foreign exchange loss for our liquid funds on deposit, held by our Kazakh
subsidiaries in US dollars, though this has no impact on actual cash.


Cost of production in 2006, from our own material after by-product credits, was
9.0 US cents per pound. This was unusually low, due to the strong increase in
by-product revenues, compared to inflation.  In 2007 it returned to 32.9 US
cents per pound, in line with the more standard levels seen in previous years.
During 2007, cost inflation growth exceeded the rise in by-product credits, the
former being influenced by several issues, including transportation, fuel,
labour and administrative costs. Our costs remain in the lowest quartile of
copper producers globally.


With high commodity prices and a low cost of production, Free Cash Flow remained
strong at $895 million over 2007.  This was a decline on 2006, principally due
to the timing of tax payments and an increase in sustaining capital expenditure
targeted at upgrading our equipment.


A programme of efficiency measures is being carried out to offset inflationary
pressures. This includes an increase in the number of concentrators, to reduce
the cost of transporting of ore, and upgrades to the existing concentrators. In
2007 the construction of the Nurkazgan concentrator was completed and upgrades
were carried out at the Nikolayevsky and Karagaily concentrators. During 2008
four other concentrators (Zhezkazgan, Orlovsky, Irtyshsky and Belousovsky) will
commence planned upgrades, which will focus on improving current recovery rates
and significantly increasing ore capacity in total. Further new concentrators
are being planned, including Kosmurun-Akbastau. In 2007 the management and
maintenance of our railway network was outsourced, though we retain ownership of
the assets. Some long distance road haulage was also outsourced. We are already
seeing benefits in management efficiency and tariffs. There will be further
investment in the transportation and logistics systems in 2008, in order to
improve efficiency and control costs.


The Group has two major growth copper projects at Boschekul and Aktogay. In our
Interim Results we announced the appointment of Fluor to act as consultants for
the pre-feasibility study at Boschekul and they have now also been appointed at
Aktogay.  The timetable for Boschekul remains consistent with previous guidance.
The pre-feasibility study is due to be finished at the end of 2008 and the
feasibility study at the end of 2009. It is anticipated that first ore
production will commence at the end of 2011, with most of the capex falling
between 2009 and 2011.


At Aktogay there is a large sulphide and a smaller oxide deposit, both of which
are currently in pre-feasibility stage. The oxide pre-feasibility study should
complete first, during 2008, and the sulphide pre-feasibility in H1 2009.


Along with the major long term growth projects at Boschekul and Aktogay, there
are a number of smaller near term projects being implemented in Zhezkazgan and
Karaganda. These should keep core production stable and offset grade and tonnage
declines in the more mature mines. In January 2008, shortly after the year end,
mining commenced at the Abyz and Akbastau mines. The North Nurkazgan open pit
mine in the Karaganda Region and the Taskura open pit mine in the Zhezkazgan
Complex are scheduled to commence production in 2008. Further similar projects
are scheduled for the next three years.


Capital expenditure in 2007 was $493.0 million, excluding the cost of acquiring
East Akzhar petroleum exploration block. Capital expenditure for Kazakhmys
Copper in 2008 is likely to be slightly higher, with further infrastructure
spend, and additional spending of $90 million on the Petroleum and Gold
development programmes. Significant spending on our large growth projects, at
Boschekul and Aktogay, is unlikely to commence until 2009.


At the time of Listing in October 2005 one of our main strategic aims was to
diversify our asset base and to take advantage of the many resource
opportunities available in the Central Asia region. Since the beginning of 2007
we have started to see significant delivery of our diversification programme.


In April 2007 we purchased the 602km2 oil and gas exploration block at East
Akzhar, in western Kazakhstan. Drilling has commenced on the shallow section and
will continue throughout the first half of 2008. The main part of the
exploration activity is in the deeper section, where 3D seismic activity will
start in 2008 and continue throughout the year.


In July 2007 we purchased Eurasia Gold Inc., then a Canadian listed precious
metals company. Now renamed Kazakhmys Gold, the annual production for 12 months
in 2007 was 52 koz, of which 33 koz is attributable to Kazakhmys. This was
slightly ahead of management expectations, both at the start of the year and at
the time of acquisition.


Kazakhmys Gold has three major development projects, the Bozymchak deposit of
gold, copper and silver in Kyrgyzstan, the Mizek sulphide gold and copper
deposits in Kazakhstan and the Akjilga silver and copper exploration deposit in
Tajikistan. Worley Parsons have been appointed to complete the pre-feasibility
studies at both Bozymchak and Mizek, which should be finished during 2008. An
external review of the reserve base has been carried out, as a result of which
the declared measured and indicated gold equivalent resources on a JORC basis
have increased from 1.9 Moz at the time of acquisition, to 2.3 Moz. Drilling is
continuing at Bozymchak and Mizek, as both assets move towards feasibility
study, and this may lead to further increases in the resource base.


In October 2007 shareholders approved the exercise of our option to purchase an
18.8% holding in ENRC PLC, for a purchase price of $806 million. ENRC
subsequently listed on the London Stock Exchange and with the issue of new
equity, our interest is now 14.6%. This has clearly been a very successful
investment, but the Board will continue to monitor the holding to ensure that
the capital provides a good return for our shareholders.


Since the period end, we have announced the acquisition of the Ekibastuz power
plant and the accompanying coal mine at Maikuben, for a total consideration of
up to $1.5 billion. The project offers significant potential to increase output
and to develop commercial relationships through surplus power generation. As
announced, the project will require a capital investment of around $650 million,
which is likely to be spread over the years 2008 to 2012.

Extensive work was done by the Soviet State institutes on defining mineral 
resources in Kazakhstan. Technology has developed over the past 20 years and we 
believe that there is scope to re-evaluate some of this data with new exploration 
tools. This will be reviewed over the course of the year to see whether it can 
provide additional opportunities. There will be nominal spend at this stage.


Progress was made on health and safety in 2007, but there is much more still to
do. The total number of fatalities in 2007 was 23, a significant reduction from
32 in 2006. I regret to announce that there have been six fatalities in the
first two months of 2008, which are currently being investigated. As mentioned
at the time of our Interim Results, we saw a significant improvement in
fatalities from roof falls, where the fatality rate decreased from 14 in 2006 to
four in 2007. This was a result of changing methods of inspecting and securing
the roof. A second major source of fatalities has been from electrical
equipment. A visit was made to mines in South Africa in 2007, following which
revised working practices have been successfully introduced.


We are currently completing a new in-house training school which is principally
to develop operational skills, but will also feature and benefit health and
safety procedures.


There will undoubtedly be challenges in 2008, though we anticipate that copper
cathode production should be at least the level of 2007. As mentioned in the
Chairman's Statement we believe that there are further exciting opportunities to
deliver on our strategy in the coming year, from our existing assets, our growth
projects and diversification in the region.


MARKET OVERVIEW

COPPER

The copper market during 2007 continued to show similar strength to that
experienced in 2006 with the average LME price remaining significantly above
long-term historic prices. The year on year average copper price rose 6% from
$6,731 per tonne to $7,126 per tonne.


At the start of 2007, copper traded below $6,000 per tonne, partly as a result
of negative US employment and housing data, and also as buyers reduced
inventories. Copper prices rebounded at the end of the first quarter on the back
of continued strong Chinese demand, tightness of supply, large inflows of
investment fund capital into base metals, and a weakening US dollar.


The copper price fell towards the end of 2007 as factors such as the US sub
prime mortgage lending intensified concerns about the health of the world
economy. This factor, amongst others, is expected to cause continued volatility
in copper prices during 2008 as low inventory levels and continued uncertainty
over the US and global economic outlook persist into the new year. Medium-term
pricing of copper is largely dependent on whether demand growth from China and
Asia is sufficient to offset declines in Western European and US markets and the
extent to which supply increases in response to recent price strength.


The global consumption of refined copper is estimated to have increased by 3.4%
in 2007 to 18.1 MT with production estimated to have grown 5.2% to 18.2 MT.
China remains the world's main growth driver with 2007 refined copper
consumption estimated at 4.6 MT. This compared to estimated Chinese internal
production of 3.5 MT resulting in an import requirement of 1.1 MT. In 2008,
Chinese consumption is expected to increase to 4.9 MT, but expectations of
greater internal production may see import requirements reduce to 0.8 MT.


In Western Europe, Kazakhmys' other main market, total refined copper production
was estimated to be 1.8 MT and consumption 3.7 MT resulting in an import
requirement of 1.9 MT. In 2008, the consumption level and import requirements in
Western Europe are forecast to remain broadly unchanged.


ZINC

Average zinc prices fell by 1% to $3,250 per tonne during 2007 mainly due to
China's expansion of zinc production capacity in response to the high zinc
prices seen in 2006. This meant China, the world's largest zinc producer,
shifted from a net importer to become a net exporter in 2007.


There was a reduction in Chinese exports during March 2007, helping zinc prices
recover from the downward pressure at the start of 2007. Prices however
continued to trend down later in the year due to weaker market conditions.


GOLD AND SILVER

Gold prices were strong in 2007, with average gold prices increasing by 15% to
$696 per troy ounce with gold's safe haven status returning during the year as
the credit issues intensified in July. The interest rate cut by the US Federal
Reserve, market volatility, and the decline of the US dollar pushed the gold
price to record levels later in the year.


Silver prices were also strong in 2007 with average silver prices increasing by
17% to $13.4 per troy ounce. In 2008, the supply of silver is expected to expand
faster than demand which may create a source of downward pressure on prices.



SALES CONTRACTS

In 2007, Kazakhmys utilised its proximity to China and good infrastructure links
to Europe to sell copper into both markets.


The majority of sales are made under annual contracts on a fixed premium to the
prevailing LME price. Volumes above this level are sold on the spot market. This
pattern will continue in 2008 with annual contracts already signed with a
combination of Chinese and European customers.


The by-products produced by Kazakhmys Copper are principally sold under annual
contracts with the remainder sold on the spot market. Kazakhmys Gold sold all of
its production in 2007 as gold cathode sediment for processing into gold bullion
under an annual contract to Europe. This arrangement is not expected to change
in 2008.


SENSITIVITY ANALYSIS ON PRICES AND GRADES

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


Changes in ore grades have a direct effect on the production figures of the
Kazakhmys Copper business. Revenues and earnings are directly impacted by
production volumes, as is the cash cost of copper since the majority of costs
are fixed in nature.


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 2007 figures
and assume that all other variables remain constant. They are estimated
calculations only.


KAZAKHMYS COPPER COMMODITY PRICE SENSITIVITY

  ----------------   --------------   --------------    ---------     ----------
                            Average          Average
                     realised price   realised price
                        during year      during year
                            ended            ended
                        31 December      31 December               Impact of 10%
                             2007             2006                   movement on
                                                                       profit(1)
                                                                     $ million
                                                     % movement
  ----------------   --------------   --------------    ---------     ----------
Copper                      7,175            7,025            2            243
Zinc                        3,237            3,145            3             32
Silver                      13.27            11.41           16             21
Gold                          695              610           14              6
----------------     --------------   --------------    ---------     ----------

(1) Profit before taxation, finance items and negative goodwill.


KAZAKHMYS COPPER ORE GRADE MOVEMENT


                                            Average ore             Average ore
-------------------------                  grade during            grade during
                                          year ended 31           year ended 31
                                          December 2007           December 2006
                                      -----------------       -----------------
Copper (%)                                       1.22                    1.17
Zinc (%)                                         3.87                    4.28
Silver (g/t)                                    20.52                   20.69
Gold (g/t)                                       0.90                    0.77
-------------------------             -----------------       -----------------



OPERATING REVIEW


SUMMARY OF RESULTS

Strong commodity prices during 2007, which remained significantly above their
long term historical averages, have resulted in increased revenues and EBITDA
excluding special items of 4.2% and 1.2% respectively, to $5,256.6 million and
$2,336.3 million. Sales volumes of copper cathodes and copper rods were up 4.6%
(excluding tolling sales) despite production of copper cathodes falling 6.2% to
380 kt in 2007. Despite adverse cost pressures existing in the mining sector in
Kazakhstan, the Group has seen solid stability in earnings in 2007.


2007 has seen the Group delivering on its strategy of growth through
diversification as evidenced by the acquisitions of the oil and gas exploration
licence in Kazakhmys Petroleum for $450.0 million, Kazakhmys Gold for $270.9
million, as well as acquiring a 14.6% interest in ENRC for $806.3 million. At 31
December 2007, the Group's investment in ENRC had a market value of over $2.4
billion. After taking dividends received of $93.9 million from ENRC into
account, this amounts to an unrealised return of over 200% on the original
investment. Since the year end, the fair value of the investment has grown to
well over $3 billion. The Group also undertook a share buy-back programme of
$390 million, completed in January 2008, and paid a special dividend of $235
million in addition to the 2006 final and 2007 interim dividends of $184.1
million.


The strong earnings have given rise to a healthy Free Cash Flow of $895.3
million for 2007, and together with the expansion of the Group in 2007 and the
continued strong commodity prices expected during 2008, leaves the Group well
placed to pursue future organic growth and further acquisition opportunities.


Capital employed increased in the year to $6,630.7 million from $4,169.1 million
in 2006, a 59.0% increase, primarily due to the acquisition of the 14.6%
interest in ENRC which increased capital employed by $1,594.7 million, and
strong profitability of the Group which contributed a further $1,415.7 million.
Given the significant increase in capital employed during the year, ROCE
decreased from 49.7% to 30.9%.

SUMMARY INCOME STATEMENT

--------------------------------------           --------   --------     -------
                                                                      
$ million                                          2007       2006      % change
--------------------------------------           --------   --------     -------
Revenues                                        5,256.6    5,046.5         4.2
Operating costs excluding depreciation,        
depletion, amortisation and special items      (2,920.3)  (2,738.1)
--------------------------------------           --------   --------     ------- 

EBITDA excluding special items                  2,336.3    2,308.4         1.2
Special items:
   Less: write off of property, plant and         
   equipment                                      (26.2)      (1.4)
   Add/(less): gain/(loss) on disposal of          
   property, plant and equipment                    1.8       (9.6) 
Less: depreciation, depletion and                
amortisation                                     (263.5)    (225.8)
---------------------------------------          --------   --------     -------


Profit before taxation, finance items and       
negative goodwill                               2,048.4    2,071.6        (1.1)
Net finance (cost)/income                         (22.5)      89.7
Recognition of negative goodwill                      -        6.5
---------------------------------------          --------   --------     -------

Profit before tax                               2,025.9    2,167.8        (6.5)
Income tax                                       (599.2)    (754.7)
---------------------------------------          --------   --------     -------

Profit for the period                           1,426.7    1,413.1         1.0
Minority interests                                (11.0)     (13.4)
---------------------------------------          --------   --------     -------

Profit attributable to equity shareholders of   
the Company                                      1,415.7    1,399.7         1.1                   
---------------------------------------          --------   --------     -------   

EPS - basic and diluted                           $3.04      $2.99         1.7
---------------------------------------          --------   --------     -------

EPS based on Underlying Profit                    $3.02      $3.00         0.7
---------------------------------------          --------   --------     -------


REVIEW OF KAZAKHMYS COPPER

KAZAKHMYS COPPER PRODUCTION SUMMARY

kt (unless otherwise stated)                               2007           2006
---------------------------------------                   -------        -------
Ore extraction                                           33,967         39,240
Average copper grade (%)                                   1.22           1.17
Average zinc grade (1) (%)                                 3.87           4.28

Copper concentrate                                      1,445.7        1,596.2
Copper in concentrate                                     389.9          433.5
   own concentrate                                        347.9          383.2
   purchased concentrate                                   42.0           50.3

Copper cathodes (2)                                       381.2          407.0
   own concentrate                                        340.9          368.4
   purchased concentrate                                   39.0           36.8
   tolling concentrate                                      1.3            1.8
Copper rod                                                 35.7           28.5
---------------------------------------                   -------        -------

(1) Complex ores only.
(2) Includes copper used to produce copper rod.


In 2007, overall cathode output was 26 kt lower than in 2006 as ore volumes
fell, particularly in the Zhezkazgan Complex. Kazakhmys Copper experienced
delays in obtaining new equipment and spare parts which affected a number of
mining operations, principally the result of pressure on suppliers from the
buoyant mining sector. Kounrad, a large but low grade mine in the Balkhash
Complex produced limited quantities of ore in 2007. A major waste removal
project to expose additional reserves will continue at the mine throughout 2008.


The Nurkazgan concentrator was constructed in 2007 with a production ramp-up due
to occur during 2008. Whilst the concentrator was being constructed, some output
from the West Nurkazgan open pit mine was stockpiled. At the year end, this
stockpile totalled over 1 MT of ore. The Nikolayevsky concentrator in the East
Region has been successfully upgraded during the year, with the aim of
increasing recovery rates from polymetallic ores.


The Zhezkazgan and Balkhash smelters both underwent several weeks of maintenance
and repair work in 2007. These smelters are old and will continue to require
maintenance in the future, which will result in temporary disruption to cathode
output from time to time. Surplus capacity exists and this disruption is
unlikely to impact annual production volumes.


Progress has been made in developing a number of new mines and mine extensions.
The North Nurkazgan open pit mine in the Karaganda Region will start output in
2008 after stripping of the initial overburden is completed. The existing West
Nurkazgan deposit will switch to underground production. Overburden stripping
was carried out on the deposit at Akbastau, close to the existing Kosmurun mine,
with ore mining having commenced in 2008. The Abyz mine, closed for overburden
removal throughout 2007, has reopened. The Zhezkazgan Complex has been an area
of focus as the production capacity of the existing underground mines continue
to slowly decline. The Taskura open pit mine extension is planned to commence
output in 2008.


KAZAKHMYS COPPER REVIEW BY REGION

ZHEZKAZGAN COMPLEX

kt (unless otherwise stated)                                2007          2006
---------------------------------------                    -------       -------
Ore extraction                                            24,355        27,676
Average copper grade (%)                                    0.82          0.82

Copper concentrate                                         491.1         541.1
Copper in concentrate                                      178.6         199.3

Copper cathodes(1)                                         187.5         221.8
   of which tolling                                            -           0.7
Copper rod                                                  35.7          28.5
---------------------------------------                    -------       -------

(1) Includes copper used to produce copper rod.


The Zhezkazgan Complex ore output was 12% lower than in 2006, at 24.4 MT, as
production at the mature Zhezkazgan mines fell.


Annensky mine produced 3.4 MT in spite of the major collapse there late in 2006,
down from 4.2 MT in the prior year. The North and South mines both experienced
shortages of equipment thereby reducing output. The South mine also suffered
flooding in September with management successfully recovering operations in
December. The South mine's output fell from 6.8 MT in 2006 to 5.2 MT in 2007.
Across the Complex, mining operations were impacted by equipment downtime caused
by delays in equipment delivery and shortages of spare parts required for
repairs.


The newest of the Zhezkazgan mines, Zhomart, which commenced output in April
2006, recorded ore extraction volumes of 2.9 MT, up from 2.2 MT in 2006 as it
completed its first full year of production.


The Complex's average copper grades in 2007 remained at the 2006 level of 0.82%.
The increased contribution of the Zhomart mine, which has an above average
grade, offset slightly lower grades at the Complex's older mines.


The Zhezkazgan Complex's reduction in ore volumes and unchanged copper grade
resulted in a decrease in copper in concentrate output from 199.3 kt in 2006 to
178.6 kt in 2007. This impacted production from the Zhezkazgan smelter which had
cathode output of 187.5 kt, 15% lower than in 2006. The Zhezkazgan smelter
underwent a number of repairs during 2007 and further maintenance will be
required in 2008.


The copper rod facility operated at close to capacity at 36 kt as market demand
was strong.

BALKHASH COMPLEX

kt (unless otherwise stated)                                 2007         2006
----------------------------------------                    -------      -------
Ore extraction                                              2,126        4,371
Average copper grade (%)                                     1.05         0.81

Copper concentrate (1)                                      187.9        257.1
Copper in concentrate                                        32.5         43.4

Copper cathodes                                             193.6        185.2
   of which tolling                                           1.3          1.1
----------------------------------------                    -------      -------

(1) Excludes concentrate processed by third parties.


Ore production at the Balkhash Complex decreased by more than 2 MT mainly due to
the scheduled push back at the Kounrad mine, which began at the start of 2007
and is expected to continue throughout 2008. The Kounrad mine produced 2.3 MT of
ore in 2006 and only 0.4 MT in 2007. The Shatyrkul and Sayak mines both reported
lower production in 2007 compared to 2006 due to underground development work
running behind schedule, as a result of delays in obtaining the required
equipment.


The Complex's ore grade increased from 0.81% to 1.05% due to the reduced output
at the Kounrad mine, which has the lowest grade in the Complex.


Concentrate output fell in the Balkhash Complex primarily because of lower ore
output and the stockpiling of ore at the Nurkazgan mine in preparation for the
commissioning of the Nurkazgan concentrator.

The Balkhash smelter, which processes concentrate from the East and Karaganda
Regions, produced 193.6 kt of copper cathodes including tolling arrangements,
8.4 kt higher than in 2006. During 2007, the Balkhash smelter underwent a number
of repairs. In 2008, further maintenance will be required which may lead to
temporary disruptions to production.


EAST REGION

kt (unless otherwise stated)                                 2007         2006
---------------------------------------                     -------      -------
Ore extraction                                              4,140        4,441
Average copper grade (%)                                     2.85         2.83

Copper concentrate (1)                                      506.2        534.5
Copper in concentrate                                        95.9         98.7
---------------------------------------                     -------      -------

(1) Excludes concentrate processed by third parties.


Ore extraction in the East Region in 2007 was only 7% down on 2006 despite
shortages of mining and ore transportation equipment. The Orlovsky mine suffered
a fall in ore output from 1.5 MT of ore to 1.2 MT. The average copper grade
achieved in 2007 was 2.85%, in line with that in 2006.


Copper in concentrate output was 3% below the 98.7 kt produced in 2006 as a
result of the Region's lower ore production.


The Nikolayevsky concentrator underwent a major planned upgrade in 2007 during
which the flotation section was replaced. This has improved the recovery rates
from complex polymetallic ore.


KARAGANDA REGION

kt (unless otherwise stated)                                 2007         2006
---------------------------------------                     -------      -------
Ore extraction                                              3,346        2,752
Average copper grade (%)                                     2.21         2.59

Copper concentrate                                          231.6        230.8
Copper in concentrate                                        33.3         33.7
---------------------------------------                     -------      -------


Ore extraction volumes in the Karaganda Region grew by 22% to 3.3 MT as
production from the Kosmurun mine rose from 0.9 MT in 2006 to 1.5 MT in 2007.
This was partially offset by the closure of the Abyz mine throughout 2007 for
overburden removal. The Abyz mine re-opened in early 2008.


Overburden stripping at the new Akbastau mine and the North Nurkazgan open pit
extension made good progress during 2007 and production is expected to commence
in 2008.


The decrease in the Region's average copper grade to 2.21% was due to a fall in
grade in some areas of the Kosmurun mine as higher volumes of polymetallic
copper/zinc ore were mined. At present, copper/zinc ore is processed at third
parties to maximise the combined metal recovery.


KAZAKHMYS COPPER - ZINC PRODUCTION

kt (unless otherwise stated)                                 2007         2006
----------------------------------------                    -------      -------
Average Zinc grade (%)                                       3.87         4.28
Zinc in concentrate                                         132.8        129.1
Zinc metal                                                   45.2         59.5
----------------------------------------                    -------      -------


Production of zinc in concentrate increased by 3% due to greater polymetallic
ore production at the Kosmurun mine, however the ore has a lower than average
zinc grade at 2.77%, reducing the overall zinc grade from 4.28% to 3.87%.


Summer production at the Balkhash zinc metal smelter continues to be affected by
its cooling capacity which resulted in the production of zinc metal being
limited to 45 kt in 2007. As demand for zinc concentrate has remained strong, a
greater volume of zinc concentrate was sold in preference to metal. A technical
review is underway on the zinc smelter which is expected to report in the second
half of 2008.



KAZAKHMYS COPPER - PRECIOUS METALS PRODUCTION

koz (unless otherwise stated)                               2007          2006
---------------------------------------                    -------       -------
Average silver grade (g/t)                                 20.52         20.69
Silver                                                    18,995        21,570
   own production                                         18,985        21,530
   Tolling                                                    10            40

Average gold grade (g/t)                                    0.90          0.77
Gold                                                       137.0         165.5
   own production                                          113.4         106.9
   Tolling                                                  23.6          58.6
---------------------------------------                    -------       -------


The Group's precious metals refinery, located in the Balkhash Complex, recovers
gold and silver from the slimes produced during the electro refining of copper
and carries out toll processing of precious metal concentrates for third
parties.


Silver production from own ores reduced by 12% to 19 Moz. The lower silver
production is due to the decline in output at the Zhezkazgan and East Region
mines, with the silver grade largely unchanged on prior year at 20.52 g/t, down
from 20.69 g/t in 2006.


Own gold production as a by-product of the copper business increased by 6% in
2007 supported by an increase in production of gold bearing Kosmurun ore. This
was sufficient to offset the impact of the overburden removal at the high gold
content Abyz mine.


KAZAKHMYS COPPER - TRANSPORTATION AND LOGISTICS

The transportation of the Group's raw materials and production represents one of
the largest logistics operations in Kazakhstan incorporating a Group owned
network of over 1,000 kilometres of railway and a fleet of 100 locomotives and
800 wagons.


In July 2007, the Group entered into a long-term agreement with a subsidiary of
Freight Services LLP to outsource the operation and maintenance of the Group's
railways. Freight Services LLP is an experienced freight operator based in
Almaty, Kazakhstan. Approximately 3,300 Group personnel have been reassigned to
the outsourcing company.


The Group has committed $30 million to the initial phase of a railway
refurbishment programme to improve the reliability of the network and to reduce
future operating and maintenance costs.


KAZAKHMYS COPPER - POWER

The Group's principal generation asset is the coal fired thermal power station
at Karaganda located on the northern grid of the Kazakhstan power network.
Additional generation capacity is provided by smaller combined heat and power
plants at the Zhezkazgan and Balkhash Complexes. Fuel for the power assets is
supplied by the Group owned Borly coal mines.


At present, the majority of the Group's generation is dedicated to offsetting
internal electricity requirements. A credit system allows the Karaganda
generation to be transferred through the national grid to the Group's Zhezkazgan
and Balkhash Complexes with the Group only bearing the cost of transmission. Any
surplus generation is sold to the grid.



KAZAKHMYS COPPER - FUTURE DEVELOPMENTS

MINE EXTENSIONS AND NEW MINE DEVELOPMENTS

Kazakhmys Copper has several short to medium term mine expansion and production
upgrade projects in progress at existing mines.


At the Zhezkazgan Complex, where a number of the mines are approaching maturity,
the Taskura open pit extension to the existing North Mine is expected to
supplement production from 2008. The expected life of the mine is 2 years with
estimated ore resources of 4 MT containing 32 kt of copper. The East Sary-Oba
underground mine is planned to commence output in 2010. The mine has an expected
life of 20 years with estimated ore resources of 34 MT, containing over 495 kt
of copper.


In the other regions, additional medium-term development projects include the
Kosmurun, Shatyrkul, Itauz and Nurkazgan complex mine extensions. The Kosmurun
underground mine is expected to commence production in 2011. The project has an
expected life of 13 years with estimated ore resources of 18.7 MT containing
over 597 kt of copper. Kosmurun is in close proximity to the newly developed
Akbastau mine which is expected to attain full production during 2008. Akbastau
has ore resources of 12.4 MT containing 208 kt of copper.


Kazakhmys Copper has also approved the development of the West Nurkazgan
underground mine, which is an extension of the West Nurkazgan open pit mine in
the Karaganda Region. Initial production from the West Nurkazgan underground
mine is anticipated during 2008.


Kazakhmys Copper's longer-term expansion projects include the large copper
porphyry pits at Boschekul and Aktogay which will provide valuable production
replacement as well as growth.


The Boschekul site has measured and indicated resources of 176 MT of ore with
1,269 kt of copper, although the size of the deposit has the potential to
increase significantly if mineralisation in the eastern section of the deposit
is proven. The project is currently at the pre-feasibility stage.


The Aktogay mine, located in the Balkhash Complex, is also intended to be a
significant source of production for Kazakhmys Copper. The project will start
with the development of the deposit's oxide resource and continue with sulphide
operations if economically justified.


The engineering group, Fluor, are acting as the study contractor for both the
Aktogay and Boschekul projects.


CONCENTRATORS AND SMELTERS

The Group has also committed to a medium-term programme of upgrades and
refurbishments to the existing smelting and concentrating facilities. This
programme will also include the construction of new concentrators and will
increase production capacity, increase metal recovery rates and reduce
transportation, consumable and maintenance costs.


Funding has been approved to upgrade Zhezkazgan Concentrator No.2 which will
increase the processing capacity of the plant by around 5 MT of ore per year and
improve the metal recovery rates achieved at the plant. This project is
anticipated to be completed in 2010.


New concentrators include the Kosmurun concentrator which will be constructed
for the Akbastau and Kosmurun mines. The Kosmurun concentrator will have an ore
processing capacity of around 2 MT per year and will achieve a significant
reduction in ore transportation costs for the Akbastau and Kosmurun mines. A
Shatyrkul concentrator is also being considered to reduce transportation costs
and is likely to have an ore processing capacity of around 0.5 MT per year.



REVIEW OF KAZAKHMYS GOLD

KAZAKHMYS GOLD - PRODUCTION SUMMARY

koz (unless otherwise stated)                            H2 2007       H2 2006
---------------------------------------                    -------       -------
Ore extraction (kt)                                        1,206         1,151
Gold ore grade (g/t)                                        1.52          1.29
Gold precipitation                                          32.7          30.1
Gold dore production                                        32.5          28.4
---------------------------------------                    -------       -------


In the period since acquisition, ore output from the three operational mines
(Mizek, Central Mukur and Zhaima) has increased by 5% compared to the same
period in 2006, principally as milder winter weather has enabled the heap
leaching process to continue to operate in November. The increased ore output,
coupled with a higher gold grade, has led to a 9% rise in the volume of gold
recovered.


At Mizek, a new hydrometallurgical workshop has been constructed to recover
copper and improve gold recovery from ores with high copper content. This
facility will become fully operational in 2008. Whilst this was being
constructed, the mine was focused on lower copper grade ore with any higher
copper grade ore being stockpiled.


KAZAKHMYS GOLD - FUTURE DEVELOPMENTS

Since becoming part of the Group, Kazakhmys Gold has focused on the development
of two main gold deposits, Mizek Sulphide and Bozymchak, both of which are
expected to result in profitable operations. As part of these developments,
Kazakhmys Gold has continued to upgrade the confidence in ore quality, with the
total measured and indicated gold resources having been raised from 1.9 MT to
2.3 MT during 2007.


Mizek Sulphide

At the Mizek site in north east Kazakhstan, approximately 340 km southwest of
Semey, there is a large sulphide ore body which is the subject of a
pre-feasibility study, expected to complete by June 2008, with
planned extraction to commence in 2010. At present, Kazakhmys Gold is carrying
out open pit mining on the oxide ore body located at the site.


To exploit the sulphide ore, a new open pit and underground mine will be
constructed together with a concentrator to process the ore on-site. In
addition, upgrades are planned for the power and water infrastructure.


Bozymchak

A pre-feasibility study on the Bozymchak deposit in south western Kyrgyzstan has
been in progress during 2007. Kazakhmys Gold was able to successfully extend the
license to develop the central part of the deposit to December 2027.


The site is 185 km from the nearest rail link and has a good water supply. In
2008, the infrastructure will be developed including improving the road links
and installing power lines. Alongside this, the feasibility study will be
carried out with production planned to commence in 2010. Exploration work will
continue in 2008 focusing on both the main ore body below an existing adit and
conducting further drilling across the site.


Other Projects

Kazakhmys Gold carried out further exploration work on the Akjilga silver and
copper deposit in Tajikistan in 2007. This will be stepped up in 2008 and this
project is expected to enter the pre-feasibility stage in the second half of the
year. Kazakhmys Gold will also conduct exploration work at a number of other
sites in Central Asia.


REVIEW OF KAZAKHMYS PETROLEUM

In April 2007, the Group acquired the petroleum exploration rights to East
Akzhar. This is a 602 km2 exploration block, located to the south of Aktobe in a
region home to numerous oil and gas operations on the eastern fringe of the
Caspian depression. East Akzhar is in close proximity to the Loktibai-Kenkiyak
oil pipeline and the Kenkiyak-Atyrau gas pipeline.


Kazakhmys Petroleum has hired an experienced team to manage the exploration work
with subcontractors being brought in to undertake the various site activities.
Re-analysis of the available data on the exploration area was completed in 2007
and Kazakhmys Petroleum has started its shallow well drilling programme on the
northern Elimisai section. This is expected to continue through to June 2008.


The main focus of the exploration activity is the southern Akhzar subsalt
section which will be the subject of a 3D seismic survey conducted during 2008.
The results of the survey will be used to plan the location of future new deep
wells.


REVIEW OF MKM PRODUCTION

The Group's downstream copper business in Germany, MKM, is engaged in the
production and sale of copper and copper alloy semi-finished products. MKM is
organised into three business units: wire products, tubes and bars and flat
products (strips, plates and sheets).


MKM's total sales were 265 kt, 8 kt less than in 2006, with the fall mainly
attributable to a cut in the wire section output from 167 kt to 155 kt. In 2007,
MKM has focused on higher margin products within its portfolio, switching output
away from lower margin wire rod to tubes and bars, and flat products which saw
sales rise from 43 kt to 44 kt and 63 kt to 66 kt, respectively.


Conti-M, MKM's continuous casting process for flat products, has been
successfully producing ETP and DHP grade copper in 2007. Previously, this
specification rolled strip had to be sourced externally, which had a negative
impact on profit margins.



FINANCIAL REVIEW


INCOME STATEMENT

SUMMARY OF THE YEAR

Revenues for the year amounted to $5,256.6 million, a 4.2% increase over 2006.
Profit before taxation, finance items and negative goodwill was in line with the
prior year at $2,048.4 million and our key performance measure for earnings,
EBITDA excluding special items, was $2,336.3 million, 1.2% higher than in 2006.
Earnings reflect the continued strength in commodity prices shown across the
Group's main products.


Profit attributable to equity shareholders was $1,415.7 million, compared to
$1,399.7 million in the prior year, an increase of 1.1%. Underlying Profit, a
more informed measure of the Group's financial performance, increased slightly
from $1,402.7 million to $1,409.5 million.


Basic and diluted EPS increased to $3.04 per share, up from $2.99 in 2006. EPS
based on Underlying Profit, was $3.02 per share compared to $3.00 per share
reported in 2006.


The Directors recommend a final ordinary dividend of 27.4 US cents per share,
which together with the interim ordinary dividend of 13.6 US cents per share
gives a total full year ordinary dividend of 41.0 US cents per share based on
earnings for 2007 (2006: 38.5 US cents per share based on earnings for 2006).
Coupled with a special dividend of 50.0 US cents per share which was declared at
the time of the interim results, the total full year dividend in respect of 2007
earnings is 91.0 US cents per share.  Dividend cover for the full year ordinary
dividend is over seven 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.


KAZAKHMYS COPPER

Revenues

Revenues for Kazakhmys Copper increased from $3,330.4 million to $3,588.3
million, a 7.7% increase compared to the prior year. With commodity prices
continuing to remain above their long run historic averages, revenues generated
from the sales of our main products were strong, particularly for copper
cathode, copper rod, zinc metal in concentrate and silver.


Revenues from the sale of copper cathodes were $2,516.2 million, or 70.1% (2006:
71.7%), of the total revenues of the Kazakhmys Copper business. Although
production volumes, excluding tolling, were 6.2% lower than the previous year at
380 kt, sales volumes of copper cathodes were 3.2% higher at 351 kt. This is
primarily due to 49 kt of shipments to Europe that were scheduled to be
delivered in December 2006 being delivered in January 2007 as the shipments took
longer than anticipated over the New Year period. The comparative quantity of
copper cathodes which was in transit at 31 December 2007 was 28 kt.


Zinc metal sales volumes fell by 40.1% to 38 kt compared to 2006. This was
partially offset by slightly higher realised prices resulting in a fall in
revenues of 38.5% to $123.8 million from $201.3 million in 2006. The continued
difficulties faced by the Balkhash zinc smelter with its cooling systems
resulted in a fall in production of zinc metal from 60 kt to 45 kt which
impacted the volume of zinc metal sales. However, with the relative
attractiveness of zinc concentrate prices and the availability of smelting
capacity in the CIS, zinc is being sold as concentrate instead of being
stockpiled at the zinc smelter without a material impact on overall Group
profitability.


Zinc in concentrate sales volumes increased by 32.8% and revenues increased from
$128.0 million to $200.5 million, an increase of 56.6%. This increase was driven
by higher levels of ore from the Artemyevsky and Kosmurun mines being processed
in the year and the reduction in zinc concentrate inventory levels at the
Balkhash zinc smelter. Capacity constraints at the zinc smelter in the
production of zinc metal, as mentioned above, increased the volumes of zinc
concentrate sold which, coupled with favourable prices for zinc concentrate, led
to the large rise in revenues. During 2007, zinc in concentrate accounted for
5.6% of Kazakhmys Copper's revenues compared with 3.8% in 2006.


Silver sales volumes were 7.8% down compared to the prior year at 19,323 koz,
with production falling 11.8% to 18,985 koz.  Whilst silver production decreased
due to lower ore output from the silver-rich ores in the Zhezkazgan and East
Region mines, sales volumes were supported by a reduction in silver inventory
levels across the year.  Despite the reduction in sales volumes, revenues
increased by 7.3% compared to the prior year predominantly due to a marked rise
in realised silver prices of 16.7% compared to 2006.


Gold sales volumes from own ore were 38.1% higher than in 2006 at 116.0 koz and
revenues were 56.8% higher at $80.3 million.  The higher revenues were driven
primarily by increased production, which was 5.6% higher than 2006, a reduction
in the volume of gold used internally within the jewellery factory and higher
realised prices, which were 13.9% more favourable than in 2006.


Copper rod revenues were up from $196.1 million to $250.6 million, an increase
of 27.8% following a 25.0% increase in sales volumes due to strong demand from
the Chinese market.  Copper rod now accounts for 7.0% of Kazakhmys Copper's
revenues compared with 5.9% in 2006.


Other revenues of $160.4 million compared to $125.7 million in the prior year,
related to the sale of surplus electricity, heating and coal, as well as the
sales of other minor by-products, such as lead, rhenium, selenium, cadmium and
sulphuric acid.


Whilst volatility was seen in copper prices throughout 2007, the average price
during the year was 5.9% higher than in 2006.  Gold and silver prices were
particularly strong, rising 15.2% and 16.5%, respectively.  The average market
and realised prices for our main products during the year are set out below:


Comparison of market and realised prices for main products

                                                  2007                    2006
----------------------             -------------------     -------------------
                                                          
                                Average        Average     Average     Average
                                 market       realised      market    realised
                                  price          price       price       price
----------------------         ----------     ----------  ----------  ----------
Copper ($/tonne)                  7,126          7,175       6,731       7,025
Zinc metal ($/tonne)              3,250          3,237       3,273       3,145
Silver ($/oz)                      13.4           13.3        11.5        11.4
Gold ($/oz)                         696            695         604         610
----------------------         ----------     ----------  ----------  ----------


The average realised prices for our main products do not differ significantly
from market prices as they are priced with reference to prevailing prices on
global commodity exchanges. In line with industry practice, our sales agreements
for copper cathodes provide for provisional pricing at the time of delivery with
the final price based on the market price for future periods. Additionally, a
premium over LME prices is incorporated into our sales agreements for copper
cathode which reflects delivery terms and other contractual commitments.



Earnings

$ million (unless otherwise stated)                            2007       2006
------------------------------------------                  ---------  ---------
KAZAKHMYS COPPER
Profit before taxation, finance items and negative          
goodwill                                                    1,976.9    2,082.1  
Add: loss from special items                                   23.3       10.3
Add: depreciation, depletion and amortisation                 233.2      203.2
------------------------------------------                  ---------  ---------
EBITDA excluding special items                              2,233.4    2,295.6
------------------------------------------                  ---------  ---------
Revenues                                                    3,588.3    3,330.4
------------------------------------------                  ---------  ---------
EBITDA excluding special items margin (%)                      62.2       68.9
------------------------------------------                  ---------  ---------


Cost pressures were faced within Kazakhstan due to its strong economy and, in
common with other companies in the mining industry, there was more widespread
pressure on input costs. General cost inflation within Kazakhstan and the mining
industry was generally running in excess of 15% during 2007 which places
pressure on input prices. In addition, the Kazakhstan tenge appreciated against
the US dollar by 2.8%, with the average exchange rate strengthening from 126.09
KZT/$ in 2006 to 122.55 KZT/$ in 2007. The strengthening of the Kazakhstan tenge
against the US dollar adversely impacts the profitability of the Kazakhmys
Copper business in US dollar terms.


The EBITDA margin (excluding special items) fell from 68.9% in 2006 to 62.2% in
2007. Although commodity prices remained strong during 2007, the main reasons
behind the lower margin were higher production costs, including the cost of
purchased concentrate, with cost of sales for the Kazakhmys Copper business
increasing by 27.2% from $965.9 million to $1,229.0 million. As a significant
proportion of costs are fixed in nature, the reduction in production volumes did
not result in a corresponding decrease in operating costs, and hence the margin
fell.


Given the various production and technical issues experienced during the year,
such as the flooding of the South mine, equipment shortages and the closure of
mines for overburden removal, copper cathode production from own concentrate
fell by 27 kt to 341 kt compared to 2006.  To offset this reduction in own
concentrate, the volume of cathodes produced from purchased concentrate
increased by 5.4% from 37 kt to 39 kt in 2007, which represents 10.3% of total
copper cathode production in 2007 (2006: 9.1%). The cost of purchased
concentrate increased by $38.7 million, or 12.7%, to $343.8 million compared to
2006 due to the higher volumes of concentrate purchased as well as external
market factors. The cost of concentrate also increased from 2006 reflecting the
higher average copper price seen during the year and the gold and silver
by-products contained within the concentrate.


Excluding the effects of purchased concentrate on costs and revenues generated
from cathodes produced from purchased concentrate, the EBITDA excluding special
items margin would have been 69.7% compared to 73.1% in 2006.  This margin is a
more informed measure when considering the results of the core mining business,
and excludes the effects of purchased concentrate.


Employee remuneration was higher, for both production and administrative staff,
increasing by 19.0% to $314.3 million, following a pay rise in the fourth
quarter of 2006 which was necessary to bring average salaries within the
business into line with the local market. Wages and salaries are increasing
generally across Kazakhstan due to improvements in the standard of living and a
tight labour market for skilled labour across the natural resources sector
within the CIS.  Outsourcing opportunities are being actively considered to
manage employee remuneration levels in the future, but with a current high rate
of inflation within Kazakhstan, cost pressures are expected to continue.



Transportation costs increased from $51.3 million to $95.5 million, an increase
of 86.2% compared to 2006.  This increase is primarily attributable to higher
maintenance spend in order to improve the reliability of equipment, and also due
to higher volumes of ore transported from the Kosmurun mine to the Karagaily
concentrator, approximately 220 km away. An evaluation is in progress on the
construction of a new concentrator at the Kosmurun and Akbastau mines which
should reduce these transportation costs in the future. Furthermore, railway
transportation was outsourced midway during the year and this is expected to
result in cost efficiencies in the future.


In addition, fuel costs increased by 23.1% to $74.2 million reflecting the
global increase in costs for gasoline and diesel fuel and the increased
transportation relating to the Kosmurun mine. Utility costs increased by 27.3%
to $21.0 million as a result of above-inflation increases in tariffs and the
higher volumes of energy required to transmit electricity to the more remote
mines in the East and Karaganda Regions.


Selling and distribution costs fell slightly by 6.0% to $48.5 million,
reflecting a shift in sales from Europe to China in 2007 compared to 2006, with
lower relative transportation and tariff charges.


Administrative costs rose by 55.2% to $325.3 million. This increase was mainly
due to increases in administrative wages and salaries as mentioned above,
greater use of consultants in the areas of change management and automation, and
higher social responsibility costs (which more than doubled to $37.6 million)
within Kazakhstan which reflects our commitment to the communities in which we
operate.


Depreciation and depletion increased by 14.9% from $200.8 million to $230.7
million. This was due to a higher book value of property, plant and equipment
attributable to rising levels of capital expenditure in recent years as well as
the effect of the appreciation of the Kazakhstan tenge against the US dollar.
In addition, with increasing levels of overburden removal affecting the open pit
mines, higher depletion charges have been recognised in 2007 compared to the
prior year.


The cash cost of copper after by-product credits is a measure in monitoring the
low cost producer status of the Kazakhmys Copper business. The cash cost of
copper after by-product credits amounted to 58.9 US cents per pound compared to
31.5 US cents per pound in 2006. This increase was primarily due to the
increased cost of purchased concentrate and other higher production costs as
mentioned above, whilst credits from by-product revenues were largely static
across the years.  Excluding the effects of purchased concentrate, the cash cost
of copper was 32.9 US cents per pound which places the business amongst the
lowest cost producers of copper in the world.  The table shown below provides a
reconciliation of the cash cost of copper  including purchased concentrate after
by-product credits from 2006 to 2007, which illustrates the relative importance
of the above factors.

USc/lb
-------------------------------------------------                      ---------
Average cash cost for year ended 31 December 2006                         31.5
Increase in purchased concentrate                                          7.5
Increase in other cost of sales                                           16.1
Decrease in selling and distribution expenses                             (0.6)
Increase in administrative expenses                                        5.6
Increase in other operating expenses and other income                      3.7
Increase in by-product credits                                            (4.9)
-------------------------------------------------                      ---------
Average cash cost for year ended 31 December 2007                         58.9
-------------------------------------------------                      ---------


MKM

Revenues

For the year ended 31 December 2007, MKM reported revenues of $1,643.0 million
compared to $1,716.1 million in 2006, a decrease of 4.3%. The main component
within MKM's revenues is the input value of copper, accounting for approximately
98.0% of sales price.  Contractual arrangements with customers ensure the input
price of copper cathode is passed on in full.  Whilst the reduction in revenues
is primarily due to a fall in sales volumes, this was partially offset by the
higher average copper price seen in 2007 compared to the prior year.


Sales volumes during the year fell from 273 kt in 2006 to 265 kt in 2007, a fall
of 2.9%.  This reduction was primarily due to a change in sales strategy with
the focus during the year on selling higher value added products (tubes, bars
and flat products) rather than lower margin wire rods. Whilst this strategy
curtailed revenue growth, particularly in the lower margin wire rod business,
increased volumes of higher margin products had a positive impact on relative
profitability as well as working capital levels within the business and the
associated financing costs.


Following this change in focus in MKM's sales activities, there were strong
performances in the revenues of the higher margin products with revenues for
sheets up 21.2%, strips up 16.5% and bars up 26.2% compared to 2006 due to
positive market conditions and increased customer demand for these products.
However, revenues from wire rods were down 18.3% compared to 2006 as MKM moved
away from selling these lower margin products.


The slowdown in the global economy seen in the second half of 2007 has had an
impact on MKM, particularly in its larger western European markets and in North
America. Despite this, there is still good demand for sheets, bars and
industrial tubes.  MKM is also strengthening its presence in its core markets,
and is looking at new opportunities outside these markets, such as Eastern
Europe, the CIS and the Far East.


Earnings

$ million (unless otherwise stated)                            2007       2006
------------------------------------------                  ---------  ---------
MKM
Profit before taxation, finance items and negative             
goodwill                                                       10.3       21.6  
Add: loss from special items                                      -        0.1
Add: depreciation and amortisation                             23.5       22.2
------------------------------------------                  ---------  ---------
EBITDA excluding special items                                 33.8       43.9
------------------------------------------                  ---------  ---------
Revenues                                                    1,643.0    1,716.1
------------------------------------------                  ---------  ---------
EBITDA excluding special items margin (%)                       2.1        2.6
------------------------------------------                  ---------  ---------


Although EBITDA excluding special items fell from $43.9 million (2.6% margin) in
2006 to $33.8 million (2.1% margin) in 2007, the underlying performance of MKM
was masked by the impact of copper price fluctuations on the valuation of stock.
These fluctuations were also impacted by falling stock levels at MKM. The
business has been gradually managing stock levels downwards for working capital
purposes during 2007. Included within earnings in 2007 is a cost of
approximately $3 million (2006: contribution of approximately $24 million)
arising from the impacts of copper price fluctuations on the valuation of stock
and falling stock levels. Excluding the impact of these material influences on
earnings, the improvements made in the underlying trading performance of MKM
compared to the prior year can be seen, with EBITDA excluding special items
increasing from $19.9 million in 2006 to $36.8 million in 2007, an increase of
84.9%.


As described previously, MKM's earnings prepared under IFRS are particularly
volatile due to the impacts of copper price fluctuations on the valuation of
stock and stock levels.  In assessing MKM's performance, management uses a more
informed trading measure termed the 'Gross Value Add' (GVA) 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. Despite sales volumes falling by 2.9%, the GVA rose from $169.8
million to $207.7 million, an increase of 22.3% due to a combination of higher
margin products being sold and greater conversion charges.



KAZAKHMYS GOLD

On 5 July 2007, the Group acquired 96.34% of the ordinary shares of Eurasia Gold
(subsequently renamed Kazakhmys Gold), a company listed on the Toronto Stock
Exchange. Since the offer was accepted by holders of more than 90% of the
Eurasia Gold shares, Kazakhmys Gold Inc., an indirectly wholly owned subsidiary
of the Company, exercised its right under Canadian legislation to acquire the
outstanding Eurasia Gold shares not already owned by it. On 12 September 2007,
the Group completed the compulsory acquisition, thereby taking its interest in
Eurasia Gold to 100% with the total consideration being paid for the company of
$270.9 million. The principal activity of Kazakhmys Gold and its subsidiaries is
the mining and processing of gold ore into refined ore, and exploration and
development activity in the precious metals sector within Central Asia.


The results of Kazakhmys Gold have been consolidated into those of the Group
from the date of acquisition.


Revenues

Revenues for Kazakhmys Gold for the period since acquisition, from the three
operating mines (Zhaima, Mizek and Mukur) amounted to $25.3 million, which
comprised $25.0 million of gold dore (34.1 koz) and $0.3 million of silver (23.5
koz).  The average realised price for gold dore over the period since
acquisition was $734.1 per ounce, which was slightly above the average LBMA
market price of $732.4 per ounce.  The gold dore is sold for further processing
into gold bullion under an annual sales contract with a European refiner.


Earnings

$ million (unless otherwise stated)                            2007       2006
------------------------------------------                  ---------  ---------
KAZAKHMYS GOLD
Profit before taxation, finance items and negative              
goodwill                                                        0.8          -
Add: depreciation, depletion and amortisation                   5.7          -
------------------------------------------                  ---------  ---------
EBITDA excluding special items                                  6.5          -
------------------------------------------                  ---------  ---------
Revenues                                                       25.3          -
------------------------------------------                  ---------  ---------
EBITDA excluding special items margin (%)                      25.7          -
------------------------------------------                  ---------  ---------


EBITDA excluding special items for the period since acquisition was $6.5 million
(25.7% margin).  Of the total depreciation, depletion and amortisation charge of
$5.7 million for the period since acquisition, $4.0 million was attributable to
the uplift in tangible fixed assets and mining assets which were identified
during the fair value exercise at the time of acquisition.  Cost of sales
amounted to $21.5 million and other operating costs were $3.0 million. Compared
to the performance in prior years, earnings benefited from the milder winter
weather experienced in Kazakhstan at the end of 2007, which allowed the heap
leaching process to continue for longer in the season than would normally be
expected.


KAZAKHMYS PETROLEUM

On 2 April 2007, the Group acquired Kazakhmys Petroleum LLP (previously called
Dostan-Temir LLP), a company which held a licence to conduct oil and gas
exploration and development activity on a 602 km2 petroleum block in the East
Akzhar region in western Kazakhstan.  The total consideration payable was $450.0
million, including the subscription bonus which was payable to the Government
when the exploration licence was signed.

$ million                                                      2007       2006
------------------------------------------                  ---------  ---------
KAZAKHMYS PETROLEUM
Loss before taxation, finance items and negative               
goodwill                                                       (1.4)         -
Add: loss from special items                                    1.1          -
------------------------------------------                  ---------  ---------
EBITDA excluding special items                                 (0.3)         -
------------------------------------------                  ---------  ---------


The four year exploration licence was signed on 22 May 2007 and thereafter,
Kazakhmys Petroleum has been engaged in purchasing and analysing geological and
geophysical data relating to the exploration block. In June 2007, the Group
engaged an experienced team to manage the exploration programme, and the well
drilling programme commenced in the shallow northern area of the block.  3D
seismic work has also commenced in the deeper southern area of the block, and
will continue throughout 2008.  Once this data has been interpreted, the deep
drilling programme will commence.


Since the Group adopts a successful efforts approach to exploration activity,
the majority of the costs incurred during the year have been capitalised.
Operating costs charged to the income statement during the period amounted to
$1.4 million.


GROUP EARNINGS

Profit before taxation, finance items and negative goodwill decreased slightly
from $2,071.6 million to $2,048.4 million, split between $1,976.9 million for
Kazakhmys Copper, $10.3 million for MKM, $0.8 million for Kazakhmys Gold, a loss
of $1.4 million for Kazakhmys Petroleum and a profit of $61.8 million for
unallocated corporate costs (which includes dividend income of $93.9 million
from ENRC PLC).


Depreciation, depletion and amortisation amounted to $263.5 million in 2007, an
increase of 16.7% compared to $225.8 million in 2006, as a result of increased
capital expenditure in the Group and acquisitions of new businesses made during
the year.

$ million (unless otherwise stated)                            2007       2006
------------------------------------------                  ---------  ---------
EBITDA excluding special items:
Kazakhmys Copper                                            2,233.4    2,295.6
MKM                                                            33.8       43.9
Kazakhmys Gold                                                  6.5          -
Kazakhmys Petroleum                                            (0.3)         -

Unallocated income/(costs) excluding special items
(excluding depreciation of $1.1 million; 2006: $0.4
million)                                                       62.9      (31.1)
------------------------------------------                  ---------  ---------
Total EBITDA excluding special items                        2,336.3    2,308.4
------------------------------------------                  ---------  ---------
Total EBITDA excluding special items margin (%)                44.4       45.7
------------------------------------------                  ---------  ---------


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 non-recurring or
variable items in nature which do not impact the underlying trading performance
of the business.


During 2007, these non-recurring or variable items related to a gain on disposal
of fixed assets of $1.8 million, the write off of property, plant and equipment
of $26.2 million and the tax benefit of a Group restructuring of $30.8 million.
Despite the significant cost pressures faced by the Group's operations in
Kazakhstan and the lower production levels, the overall margin at the level of
EBITDA before special items was in line with the prior year at 44.4% compared to
45.7% in 2006.


NET FINANCE ITEMS

Net financing costs were $22.5 million during 2007, which contrasts with net
financing income of $89.7 million that arose in the prior year.


A net foreign exchange loss of $92.2 million is included within the net finance
cost, compared to a gain of $26.4 million that was recognised in 2006. The
foreign exchange loss primarily arose on the high level of US dollar denominated
cash deposits and current investments held with Kazakhmys LLC during the
majority of the year, as a result of the appreciation of the Kazakhstan tenge
against the US dollar which moved from 127.00 KZT/$ as at 31 December 2006 to
120.30 KZT/$ at 31 December 2007, a 5.3% movement.


Net financing costs, other than foreign exchange gains, includes a finance cost
of $13.7 million which predominantly relates to interest payable on the MKM bank
loan. Unwinding of long-term provisions and employee benefits also gave rise to
an interest charge of $10.5 million.


Finance income primarily relates to interest earned from US dollar denominated
deposits placed with financial institutions in the UK, and to a lesser extent,
fixed term deposits placed with financial institutions in Kazakhstan denominated
either in US dollar or Kazakhstan tenge. Interest income of $93.9 million is
19.6% higher than the 2006 figure of $78.5 million reflecting the higher cash
and deposit balances compared to 2006 as a result of continued buoyant commodity
prices, and the effect of higher global interest rates received on the Group's
liquid funds.


TAXATION

The effective tax rate for the year was 29.6% compared to a rate of 34.8% in the
prior year. The overall tax charge was $599.2 million, a reduction of $155.5
million compared to the prior year, reflecting the lower taxable profits and
effective tax rate.


The effective tax rate has decreased from 2006 principally due to the
non-recurring benefit of a Group tax restructuring that took place during 2007
which lowered the effective rate by 1.5%, and the absence of a need for any
additional accrual for withholding tax at the end of 2007.  Partially offsetting
these factors were higher disallowable items within Kazakhmys LLC, principally
arising from higher social spending and other items of expenditure within
Kazakhstan which are non-deductible, and the reduced benefit of the tax holiday
associated with the Balkhash zinc smelter which lowered the effective rate by
1.3% in 2007 compared to 2.1% in 2006 as a result of reduced zinc metal revenues
caused by lower zinc production.


Excess profits tax is levied in addition to corporate tax on the profits
attributable to certain subsoil contracts where the internal rate of return
exceeds 20%. For 2007, excess profits tax of $36.5 million was charged to
earnings which represented an incremental 1.8% to the effective tax rate, up
from 0.7% in 2006.  In the prior year, the incremental impact arising from
excess profits tax was masked by a release of $49.4 million from the excess
profits tax liability relating to prior years as the excess profits tax
methodology was re-considered following developments in the interpretation of
tax legislation within Kazakhstan.  Excluding the effects of this reassessment,
last year's charge arising from excess profits tax increased the effective tax
rate by 3.0%.  The determination of excess profits tax depends on a number of
factors, including the profitability of individual subsoil contracts, the level
of capital expenditure and future pricing assumptions.


Withholding taxes of $91.8 million had been recognised in 2006 in relation to
the unremitted earnings of Kazakhmys LLC existing as at 31 December 2006 which
were expected to be remitted to the UK in the future through dividend
distributions. This contributed an additional 4.2% to the effective tax rate in
2006.  Based on the expected dividend flows in the future, an additional charge
to the income statement is not required for 2007.


Following an increase in trade taxes in Germany, the effective tax rate for MKM
slightly increased from 35.98% to 37.34% during the year. However, following the
German government's decision to reduce corporate tax rates, the effective tax
rate for MKM will fall in 2008. The effect of this lower tax rate has resulted
in a reduction in German deferred taxes which reduces the effective tax rate by
0.5% in 2007.


The recurring 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.


MINORITY INTERESTS

In the second half of 2007, the Company issued 2,559,665 ordinary shares of 20
pence each and paid $11.5 million in consideration for 227,959,211 participating
shares in Kazakhmys LLC owned by minority shareholders. As a result of this
transaction, the Company's interest in Kazakhmys LLC increased from 99.08% as at
31 December 2006 to 99.73% as at 31 December 2007.  There are no immediate plans
to acquire further minority interests.


As a result of the smaller interest held by minority shareholders in Kazakhmys
LLC during the year, the minority interest's attributable share of earnings and
net assets reduced in the year.


PROFIT FOR THE YEAR AND UNDERLYING PROFIT

Profit for the year attributable to equity shareholders increased from $1,399.7
million to $1,415.7 million, a slight increase of 1.1%. Underlying Profit is
seen as a more informed measure of the Group's financial performance as it
removes non-recurring or variable items (and their resulting tax and minority
interest impacts) that have taken place during the year, to give a more
representative figure of underlying Group performance.  It provides a more
consistent basis for comparing the underlying trading performance of the Group
between 2007 and 2006.


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

$ million                                          2007        2006   % change
-----------------------------------             ---------  ----------   --------
Profit attributable to equity shareholders of   
the Company                                     1,415.7     1,399.7        1.1
Special items:
   Recognition of negative goodwill                  -        (6.5)
   Write off of property, plant and equipment      26.2         1.4
   (Gain)/loss on disposal of fixed assets         (1.8)        9.6
Tax effect of special items                        0.3        (1.5)
Release of deferred tax liability following       
Group restructuring                               (30.8)          -
Minority interest effect of special items          (0.1)          -
-----------------------------------             ---------  ----------   --------
Underlying Profit                               1,409.5     1,402.7        0.5
-----------------------------------             ---------  ----------   --------


EARNINGS PER SHARE

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


Basic EPS for the year increased from $2.99 per share to $3.04 per share, an
increase of 1.7%. There are no differences between basic and diluted EPS. EPS
based on Underlying Profit increased from $3.00 per share to $3.02 per share, an
increase of 0.7%.


The weighted average number of shares in issue reduced slightly from 467.5
million shares during 2006 to 466.1 million shares in 2007, due to the issue of
2.6 million shares to acquire the minority interests in Kazakhmys LLC between
June and September 2007, offset by the purchase and cancellation of 9.9 million
shares towards the end of 2007 as part of the Company's share buy-back
programme.

                                                 2007          2006   % change
----------------------------------           ----------    ----------   --------
Weighted average number of shares in      
issue                                      466,073,506   467,474,200      (0.3)  
----------------------------------           ----------    ----------   --------  

Profit attributable to equity
shareholders of the Company ($ million)       1,415.7       1,399.7        1.1             
Underlying Profit ($ million)                 1,409.5       1,402.7        0.5
----------------------------------           ----------    ----------   --------
EPS - basic and diluted ($)                      3.04          2.99        1.7
----------------------------------           ----------    ----------   --------
EPS based on Underlying Profit ($)               3.02          3.00        0.7
----------------------------------           ----------    ----------   --------


DIVIDENDS

The Directors recommend a final ordinary dividend of 27.4 US cents per share,
which together with the interim ordinary dividend of 13.6 US cents per share
gives a total full year ordinary dividend of 41.0 US cents per share based on
earnings for 2007 (2006: 38.5 US cents per share based on earnings for 2006).
Coupled with a special dividend of 50.0 US cents per share which was declared at
the time of the interim results, the total full year dividend in respect of 2007
earnings is 91.0 US cents per share.


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
ordinary dividends will be paid in the approximate proportions of one-third and
two-thirds of the total annual dividend, respectively. The Directors also
propose special dividends when they deem these appropriate after taking into
consideration the capital structure of the Group, operating cash flows and major
future funding commitments.


SHARE BUY-BACK PROGRAMME

Commencing on 24 October 2007, the Group began a share buy-back programme as a
means of returning cash to shareholders. During 2007, the Group bought back and
cancelled 9.9 million ordinary shares at an average price of £13.16 per share
and at a total cost of $270.3 million, including expenses. This reduced the
issued share capital of the Company to 460,123,288 ordinary shares as at 31
December 2007.


The buy-back programme was completed by the end of January 2008, whereby a total
of 15.1 million ordinary shares at an average price of £12.73 per share have
been bought back and cancelled at a total cost of $390.1 million, including
expenses.


The Group considers share buy-back programmes and special dividends as an
integral part of managing the Group's capital base effectively.


ENRC INVESTMENT

Following approval from the independent shareholders at an extraordinary general
meeting held on 19 October 2007, and receipt of regulatory approvals from the
Government, the Group exercised the call option over Vladimir Kim's interest in
Eurasian Natural Resources Corporation PLC (ENRC) and acquired 18.8% of the
shares at a price of $806.3 million on 26 October 2007.


In December 2007, shortly after ENRC listed on the main board of the London
Stock Exchange, the Group received a dividend of $93.9 million from ENRC which
represented a return on the original investment of 11.6%. The dividend is shown
within unallocated corporate income.


At the time of the listing of ENRC in December 2007, new shares were issued by
ENRC which the Group did not subscribe to and hence the Group's interest in ENRC
reduced from 18.8% to 14.6%, taking into account the full exercise of the
over-allotment option. At 31 December 2007, the market value of this investment
was $2,401 million, a return of over 200% on the original investment taking the
receipt of dividends into account, and represented a value of £2.61 per
Kazakhmys share in issue at that time. Since the year end, the market value of
the investment has grown to well over $3 billion.


CASH FLOWS

A summary of cash flows is shown below highlighting the key items.

$ million                                                      2007       2006
-----------------------------------------                   ---------  ---------
EBITDA                                                      2,311.9    2,297.4
Recognition of negative goodwill                                  -       (6.5)
Write off of assets and impairment losses                      30.1        9.9
Gain on disposal of assets held for trading                    (0.5)         -
(Gain)/loss on disposal of property, plant and equipment       (1.8)       9.6
Foreign exchange loss adjustment                              (57.2)     (13.5)
Working capital movements                                    (282.7)    (254.6)
Interest paid                                                 (13.7)      (6.8)
Income tax paid                                              (849.6)    (623.3)
-----------------------------------------                   ---------  ---------
Net cash flows from operating activities                    1,136.5    1,412.2
Sustaining capital expenditure                               (241.2)     (85.0)
-----------------------------------------                   ---------  ---------
Free Cash Flow                                                895.3    1,327.2
Expansionary and new project capital expenditure             (701.8)    (260.1)
Interest received                                             121.3       77.2
Acquisition of subsidiaries, net of liquid funds and         
borrowings acquired                                          (265.2)      (2.0)
Capital transactions between subsidiary and shareholders     (281.8)       1.6
Dividends paid                                               (423.9)    (233.4)
Acquisition of interest in ENRC                              (806.3)         -
Other movements                                                (0.3)       3.7
-----------------------------------------                   ---------  ---------
Cash flow movement in net liquid funds                     (1,462.7)     914.2
-----------------------------------------                   ---------  ---------


SUMMARY OF THE YEAR

During the year, the net liquid funds position of the Group reduced from
$1,745.3 million to $298.3 million, a reduction of $1,447.0 million. Key cash
outflows during the year were income tax payments of $849.6 million, significant
capital expenditure of $943.0 million, including $450.0 million for the oil and
gas exploration licence acquired within Kazakhmys Petroleum in the first half of
2007, the acquisition of Kazakhmys Gold for $270.9 million in the second half of
2007, the acquisition of an 18.8% interest in ENRC for $806.3 million in October
2007, net repayment of borrowings of $112.4 million primarily within MKM and a
total return to shareholders of $694.2 million.


Despite adverse working capital movements, significantly higher payments to the
tax authorities and increased sustaining capital expenditure, Free Cash Flow, a
key performance indicator of the Group's ability to translate earnings into cash
flow available for returns to shareholders, and investment and financing
purposes, was a healthy $895.3 million.


The Group's ability to generate continued positive Free Cash Flow provides funds
for additional investment in expanding the Group's existing operations and
capacities, as well as providing flexibility to respond to any capital
management initiatives and opportunistic acquisitions.


OPERATING CASH FLOWS

Operating cash flows decreased by $275.7 million from $1,412.2 million in 2006
to $1,136.5 million in 2007 primarily due to the increased tax payments made
during the year which increased by $226.3 million to $849.6 million. The higher
level of tax payments is mainly attributable to the 2007 schedule of tax
payments on account that was agreed with the tax authorities being based on
earnings for 2006, which were significantly higher than earnings in 2005 (on
which the 2006 tax payments schedule was based upon). In addition, payments were
made to the tax authorities in April 2007 in respect of the final instalment of
2006 tax due of $38.4 million and the excess profits tax relating to 2006 of
$62.6 million.  The tax liability for the Kazakhmys Copper business at the year
end is approximately $200 million lower than at the comparative year end,
reflecting the markedly higher tax remittances during 2007.


Working capital levels for the Group increased by $282.7 million during 2007.
Increased levels of inventories held by Kazakhmys Copper offset the reduction in
inventory held within MKM. Additionally, the level of goods in transit held by
Kazakhmys Copper at 31 December 2007 fell significantly compared to 31 December
2006 when 49 kt of copper cathodes were in transit and were sold in early 2007.
At 31 December 2007, 28 kt of copper cathodes were in transit which were sold in
early 2008.  The increased inventory balances within the Kazakhmys Copper
business were mainly attributable to targeted increases in spare parts and
consumables in order to reduce stoppage time of plant and equipment, and
stockpiled ore at the Nurkazgan mine awaiting processing prior to the
commissioning of the adjoining concentrator in 2008.  There was also an adverse
working capital impact relating to the expiry of a 2006 sales contract, whereby
in December 2006, the customer made a significant payment in advance of the
goods being shipped in early 2007.


FINANCING CASH FLOWS

Of the total interest income of $121.3 million, $100.1 million was received by
Kazakhmys Copper arising from the significantly higher cash and bank deposit
levels held during the year compared to 2006. During the year, short term bank
deposits held within Kazakhmys LLC were converted to cash on maturity and were
gradually moved from Kazakhstan financial institutions to financial institutions
based in western Europe in order to reduce credit and counterparty risk over the
course of the year. These funds were utilised by the Group to fund the
acquisitions executed during the year, as well as returning cash to shareholders
through dividends and the share buy-back programme.


Given the change in sales strategy during the year within MKM of focusing on
higher margin products and increasing the levels of tolling, inventory levels
reduced by approximately 25% in volume terms and this had a direct impact on the
financing requirements of the business.  Accordingly, MKM repaid external
borrowings, and when combined with the repayment of external borrowings within
Kazakhmys Gold after its acquisition, the Group made a net repayment of
borrowings of $112.4 million during the year.


During 2007, the total returns to shareholders amounted to $694.2 million which
contrasted with $233.4 million that were returned during 2006.  Total dividends
of $423.9 million were paid by the Group, representing the 2006 final dividend
of $120.1 million, the 2007 interim dividend of $64.0 million, a special
dividend of $235.0 million and dividends paid by Kazakhmys LLC to minority
interests of $4.8 million. The Group also commenced a share buy-back programme,
as described previously, at a total cost of $270.3 million, including expenses.


INVESTING CASH FLOWS

Capital expenditure on mining assets, property, plant and equipment and
intangible assets amounted to $943.0 million (2006: $345.1 million), split
between $241.2 million for sustaining capital expenditure and $701.8 million for
expansionary and new project capital expenditure. Included within the latter
category, is the acquisition cost of the petroleum licence of $450.0 million,
which includes the subscription bonus that was payable to the Government when
the exploration licence was signed in May 2007. Details of the major areas of
capital expenditure during the year are described below.  Proceeds from the
disposal of property, plant and equipment were $8.0 million as redundant assets
are normally sold for scrap or negligible value.


The acquisition cost of Eurasia Gold amounted to $270.9 million, of which $260.1
million was paid in July 2007 when the original offer closed, with a further
payment in September 2007 for the compulsory purchase of the minority interests
not acquired initially.



BALANCE SHEET

SUMMARY MOVEMENTS

Shareholders' funds as at 31 December 2007 stood at $6,419.2 million, an
increase of $2,559.3 million compared to the balance as at 31 December 2006. The
increase was primarily due to the acquisition of the 14.6% interest in ENRC
which increased shareholders' funds by $1,594.7 million, retained earnings for
the year of $1,415.7 million, positive currency translation movements of $223.1
million offset by the returns to shareholders.


The currency translation differences largely arose in respect of Kazakhmys LLC
due to the appreciation of the Kazakhstan tenge against the US dollar from a
rate of 127.00 KZT/$ as at 31 December 2006 to 120.30 KZT/$ as at 31 December
2007, a 5.3% movement. There was also an appreciation of the Euro against the US
dollar in respect of MKM which contributed to the positive currency translation
movement.


NON-CURRENT ASSETS AND LIABILITIES

Property, plant and equipment as at 31 December 2007 was higher compared to the
prior year balance, after capital expenditure of $455.1 million and the benefits
of $112.3 million arising from currency translation differences which were
offset by depreciation of $228.9 million. Significant expansionary and new
project capital expenditure during the year related to the construction of a new
concentrator at the Nurkazgan mine, expenditure on the Balkhash acid plant which
is expected to be commissioned during 2008, construction of initial
infrastructure related to the Group's major growth projects at Aktogay and
Boschekul, the opening of new mines and extensions at the North Nurkazgan, East
Sary-Oba and Taskura mines and payments for new aircraft as part of the fleet
replacement programme. Disposals of property, plant and equipment were not
significant during the year.


Mining assets increased from $143.5 million at 31 December 2006 to $388.0
million at 31 December 2007. This increase was primarily due to acquisition of
Kazakhmys Gold during the year, which increased mining assets by $238.6 million,
reflecting the development potential of the mining reserves within this
business. Also included within mining assets are mine stripping costs which
increased from $45.7 million to $56.8 million due to overburden removal,
primarily at the Abyz mine, but also at the Kounrad, Nurkazgan and Kosmurun open
pit mines.


Intangible assets increased by $538.6 million from $28.9 million at 31 December
2006 to $567.5 million at 31 December 2007. This increase was mainly represented
by the purchase of Kazakhmys Petroleum and the related oil and gas licence for
$450.0 million. In addition to this acquisition, $26.4 million in respect of
contractual reimbursements to the Government for geological information and
social commitments relating to the oil and gas licence have also been
capitalised, with a corresponding provision. New mining licences, totalling $9.4
million, were acquired by Kazakhmys Copper during the year, and relate to the
development of new mineral deposits across Kazakhstan.


Goodwill of $45.9 million has been recognised relating to the acquisition of
Kazakhmys Gold.  The goodwill arises from the requirement to recognise a
deferred tax liability on the fair value adjustments recognised at the time of
acquisition, and this goodwill will be tested annually for impairment in
accordance with international accounting standards.


The liability for employee benefits increased by $4.5 million to $37.2 million.
The main component of the liability relates to unfunded post-retirement benefits
of $33.6 million for employees in Kazakhmys LLC. The Group has no pension
obligations, other than a contingency in respect of the payment obligations of
the Kazakhmys LLC-sponsored pension fund, termed the Accumulating Pensions Funds
of Kazakhmys LLC Corporation (the 'Fund'). Certain of Kazakhmys LLC's employees
and former employees are beneficiaries. The Fund's rules set out that the
payment obligations to fund beneficiaries are based on the nominal value of
contributions made by the beneficiaries, indexed in accordance with a formula
set out in the Fund's rules. In the event that the assets of the Fund are
insufficient to cover the payment obligations to the beneficiaries, the voting
shareholders of the Fund (including Kazakhmys LLC) are jointly liable for the
shortfall.


The last valuation as at 31 December 2007 showed that the payment obligations of
the Fund were $191.4 million, and the market value of its assets was $208.8
million. No deficit has arisen within the Fund at any balance sheet date since
its inception.


Provisions of $111.9 million were $52.6 million higher than in 2006. The
increase was primarily as a result of new provisions in respect of the
contractual reimbursements to the Government for geological information and
social commitments relating to the oil and gas exploration, referred to
previously. Site restoration provisions of $44.0 million were $15.6 million
higher than in 2006, which are determined with reference to the requirements of
subsoil use contracts in accordance with Kazakhstan legislation.


WORKING CAPITAL

Working capital increased by $282.7 million during 2007. Inventory levels
increased within the Kazakhmys Copper business primarily due to higher levels of
spare parts and consumables and stockpiled ore at the Nurkazgan mine, partially
offset by the reduction of goods in transit of copper cathode by 21 kt.  There
was also an increase in advances paid and VAT reclaimable reflecting upfront
payments remitted to suppliers towards the end of 2007 in respect of significant
items of capital expenditure.  Furthermore, there was an adverse impact relating
to the expiry of a 2006 sales contract, whereby in December 2006, the customer
made a significant payment in advance of the goods being shipped in early 2007.
Working capital levels within MKM fell primarily as a result of management
reducing inventory levels held within the business and increasing tolling
levels.


NET LIQUID FUNDS

Net liquid funds consists of cash and cash equivalents, current investments and
borrowings. A summary of the net liquid funds position as at 31 December 2007
and 2006 is shown below.

$ million                                                  2007          2006
------------------------------------------              ---------     ---------
Current investments                                        57.3       1,237.2
Cash and cash equivalents                                 438.5         785.4
Borrowings                                               (197.5)       (277.3)
------------------------------------------              ---------     ---------
Net liquid funds                                          298.3       1,745.3
------------------------------------------              ---------     ---------


The level of net liquid funds has dropped significantly during the year as a
result of the acquisitions completed by the Group during 2007, which exceeded
$1.5 billion, and the returns to shareholders amounting to almost $700 million.


After the staged withdrawal of funds from Kazakhstan during the year, surplus
funds within the Group are held predominantly in the UK, with funds remaining
within Kazakhstan utilised mainly for working capital purposes.


Cash and cash equivalents include $189.5 million of fixed rate deposits with a
maturity of less than three months, with the remaining balance being held as
cash in low interest on-demand or interest free accounts. Of the total cash and
cash equivalents balance of $438.5 million, Kazakhmys Copper held $216.9 million
(of which $20.5 million was held in the UK), MKM held $6.7 million, Kazakhmys
Gold held $13.6 million, Kazakhmys Petroleum held $20.9 million and corporate
entities held $180.4 million (of which $94.1 million was held in the Netherlands
and $86.3 million was held in the UK).  Of the total cash and cash equivalents
balance, $316.1 million (2006: $726.2 million) was denominated in US dollars,
$107.9 million (2006: $22.5 million) was denominated in Kazakhstan tenge, $14.3
million (2006: $36.1 million) was denominated in Euros with the remaining balance
being held in other currencies.


Current investments include fixed rate deposits of $50.0 million and $7.3
million held in US dollars and Kazakhstan tenge, respectively, within Kazakhmys
Copper. The maturities of these deposits, which are held with financial
institutions based in Kazakhstan, are of varying periods up to 12 months.


Borrowings reduced from $277.3 million to $197.5 million primarily due to
improved working capital management at MKM which reduced financing requirements.
By the year end, Kazakhmys Gold had repaid most of its outstanding borrowings
absorbed by the Group at the time of acquisition.


On 29 February 2008, the Group signed a five year pre-export finance debt
facility of $2.1 billion to be used for general corporate purposes, including
the acquisition of the Ekibastuz power plant.


CAPITAL EMPLOYED

A summary of capital employed is shown below.

$ million (unless otherwise stated)                          2007        2006
-------------------------------------------                --------   ---------
Equity shareholders' funds                                6,419.2     3,859.9
Minority interests                                           14.0        31.9
Borrowings                                                  197.5       277.3
-------------------------------------------                --------   ---------
Capital employed                                          6,630.7     4,169.1
-------------------------------------------                --------   ---------
Profit before taxation, finance and negative goodwill     2,048.4     2,071.6
-------------------------------------------                --------   ---------
ROCE (%)                                                     30.9        49.7
-------------------------------------------                --------   ---------


Capital employed increased in the year by $2,461.6 million to $6,630.7 million
from $4,169.1 million in the prior year, a 59.0% increase, primarily due to the
acquisition of the 14.6% interest in ENRC which increased capital employed by
$1,594.7 million.  The remainder of the increase was due to a combination of
factors: the continued strong profitability of the Group during the year which
offset the returns to shareholders, positive currency translation differences
due to the appreciation of the Kazakhstan tenge against the US dollar and a
reduction in the level of borrowings reflecting the improved working capital
management and financing position of MKM.  Earnings have not risen at the same
rate as the increase in capital employed, primarily due to the uplift in equity
arising from the investment in ENRC, and as a result, ROCE has fallen from 49.7%
in 2006 to 30.9% in 2007.


The minority interests balance fell from $31.9 million to $14.0 million
reflecting the acquisition of the majority of the remaining minority interests
in Kazakhmys LLC in September 2007.


PAYMENT OF DIVIDENDS

The Board has recommended a final dividend for the year ended 31 December 2007
of 27.4 US cents per share which if approved will be paid to shareholders on 8
May 2008 to shareholders on the register at the close of business on 4 April
2008. For those shareholders who have elected to receive their dividends in
sterling, the currency conversion rate of £0.503916 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.


ANNUAL GENERAL MEETING

The 2008 Annual General meeting will be held at 12.15pm on Wednesday 30 April
2008 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 and posted on the
Company's website (www.kazakhmys.com) in late March 2008.



FORWARD LOOKING STATEMENTS

This announcement includes forward-looking statements with respect to the
business, strategy and plans of Kazakhmys and its current goals, assumptions and
expectations relating to its future financial condition, performance and
results.


By their nature, forward-looking statements involve known and unknown risks,
assumptions, uncertainties and other factors which may cause actual results,
performance or achievements of Kazakhmys to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements.


Shareholders are cautioned not to place undue reliance on the forward-looking
statements. Except as required by the Listing Rules and applicable law,
Kazakhmys does not undertake any obligation to update or change any
forward-looking statements to reflect events occurring after the date of this
announcement.


AVAILABILITY OF THE ANNOUNCEMENT

This announcement will shortly be available on the Company's website
(www.kazakhmys.com)

CONSOLIDATED INCOME STATEMENT

Year ended 31 December 2007

$ million                                          Notes       2007       2006
-------------------------------------               ------  ---------  ---------
Revenues                                               4    5,256.6    5,046.5
Cost of sales                                              (2,832.2)  (2,612.4)
-------------------------------------               ------  ---------  ---------
Gross profit                                                2,424.4    2,434.1
Selling and distribution expenses                             (81.4)     (81.4)
Administrative expenses                                      (360.0)    (280.8)
Other operating income                                        136.0       44.7
Other operating expenses                                      (40.5)     (35.1)
Write offs and impairment losses                       5      (30.1)      (9.9)
-------------------------------------               ------  ---------  ---------
Profit before taxation, finance items and negative          
goodwill                                                    2,048.4    2,071.6
Finance income                                         6      260.1      266.8
Finance costs                                          6     (282.6)    (177.1)
Recognition of negative goodwill                       3         -         6.5
-------------------------------------               ------ ---------   ---------
Profit before taxation                                       2,025.9    2,167.8
Income tax expense                                   7(a)    (599.2)    (754.7)
-------------------------------------              ------   ---------  ---------
Profit for the year                                         1,426.7    1,413.1
-------------------------------------               ------  ---------  ---------
Attributable to:
Equity shareholders of the Company                          1,415.7    1,399.7
Minority interests                                             11.0       13.4
-------------------------------------               ------  ---------  ---------
                                                            1,426.7    1,413.1
-------------------------------------               ------  ---------  ---------
Earnings per share attributable to equity
shareholders of the Company
Basic and diluted                                    8(a)     $3.04      $2.99
EPS based on Underlying Profit                       8(b)     $3.02      $3.00
-------------------------------------              ------   ---------  ---------

Dividends
Dividend per share (US cents)                          9       89.3       48.8
Total amount of dividends                              9      419.1      228.1
-------------------------------------               ------  ---------  ---------



CONSOLIDATED BALANCE SHEET

At 31 December 2007

$ million                                          Notes       2007       2006
-------------------------------------               ------  ---------  ---------
Assets
Non-current assets
Intangible assets                                             567.5       28.9
Tangible assets                                             2,517.3    1,958.3
-------------------------------------                       ---------  ---------
Property, plant and equipment                               2,129.3    1,814.8
Mining assets                                                 388.0      143.5
-------------------------------------                       ---------  ---------
Available for sale investments                              2,401.0          -
Other non-current investments                                  12.2        6.2
-------------------------------------                       ---------  ---------
                                                            5,498.0    1,993.4
-------------------------------------                       ---------  ---------
Current assets
Inventories                                                   815.1      730.6
Prepayments and other current assets                          211.8      110.4
Trade and other receivables                                   332.9      263.5
Investments                                                    57.3    1,237.2
Cash and cash equivalents                                     438.5      785.4
-------------------------------------                       ---------  ---------
                                                            1,855.6    3,127.1
-------------------------------------                       ---------  ---------
TOTAL ASSETS                                                7,353.6    5,120.5
-------------------------------------                      ---------  ---------
Equity and liabilities
Share capital                                     10(a)       170.3      173.3
Share premium                                                 481.0      503.4
Capital reserves                                  10(b)     2,084.0      266.2
Retained earnings                                           3,683.9    2,917.0
-------------------------------------                       ---------  ---------
Equity attributable to shareholders of the                  6,419.2    3,859.9
Company
Minority interests                                             14.0       31.9
-------------------------------------                       ---------  ---------
TOTAL EQUITY                                                6,433.2    3,891.8
-------------------------------------                       ---------  ---------
Non-current liabilities
Deferred tax liability                                        283.0      347.7
Employee benefits                                              37.2       32.7
Provisions                                                     97.7       57.4
Borrowings                                                    195.9      277.3
-------------------------------------                       ---------  ---------
                                                              613.8      715.1
-------------------------------------                       ---------  ---------
Current liabilities
Provisions                                                     14.2        1.9
Borrowings                                                      1.6          -
Trade and other payables                                      223.4      330.4
Income taxes payable                                           65.3      176.9
Dividend payable                                                2.1        4.4
-------------------------------------                       ---------  ---------
                                                              306.6      513.6
-------------------------------------                       ---------  ---------
TOTAL LIABILITIES                                             920.4    1,228.7
-------------------------------------                       ---------  ---------
TOTAL EQUITY AND LIABILITIES                                7,353.6    5,120.5
-------------------------------------                       ---------  ---------



CONSOLIDATED CASH FLOW STATEMENT 

Year ended 31 December 2007

$ million                                          Notes       2007       2006
--------------------------------------             ------   ---------  ---------
Cash flows from operating activities
   Cash receipts from customers                             5,258.6    5,076.6
   Cash paid to employees and suppliers                    (3,258.8)  (3,034.3)
--------------------------------------                      ---------  ---------
   Cash inflow before interest and income taxes             1,999.8    2,042.3
   paid
   Interest paid                                              (13.7)      (6.8)
   Income taxes paid                                         (849.6)    (623.3)
--------------------------------------                      ---------  ---------
Net cash inflow from operating activities             11    1,136.5    1,412.2
--------------------------------------                      ---------  ---------

Cash flows from investing activities
   Interest received                                          121.3       77.2
   Proceeds from disposal of property, plant and                8.0        3.4
   equipment
   Purchase of property, plant and equipment                 (455.1)    (281.1)
   Investments in mining assets                               (29.6)     (63.6)
   Purchase of intangible assets                             (458.3)      (0.4)
   Licence payments for subsoil contracts                      (3.3)      (1.6)
   Proceeds from disposal of non-current                        3.0        2.6
   investments
   Acquisition of non-current investments                      (8.5)      (0.7)
   Proceeds from disposal of assets held for                   51.8        1.0
   trading
   Acquisition of assets held for trading                         -      (50.8)
   Acquisition of available for sale investments             (806.3)         -
   Receipts from/(investments in) short-term bank           1,132.6     (784.7)
   deposits (net)
   Acquisition of subsidiaries (net of cash acquired)  3     (259.3)      (2.0)
                                                            ---------  ---------
--------------------------------------
Net cash flows used in investing activities                  (703.7)  (1,100.7)
--------------------------------------                      ---------  ---------

Cash flows from financing activities
   Purchase of minority interests                             (11.5)         -
   Proceeds from contribution to charter capital of               -        1.6
   subsidiary by minority interests
   Purchase of Company's issued share capital                (270.3)         -
   Proceeds from borrowings                                       -      249.5
   Repayment of borrowings                            12     (112.4)     (41.5)
   Dividends paid by the Company                             (419.1)    (230.4)
   Dividends paid by subsidiary to minority                    (4.8)      (3.0)
   interests                                                ---------  ---------
--------------------------------------
Net cash flows used in financing activities                  (818.1)     (23.8)
--------------------------------------                      ---------  ---------

   Net (decrease)/increase in cash and cash                  (385.3)     287.7
   equivalents
   Cash and cash equivalents at the beginning of the          785.4      522.0
   year
   Effect of exchange rate changes on cash and cash            38.4      (24.3)
   equivalents                                              
--------------------------------------                      ---------  ---------  
Cash and cash equivalents at the end of the year      12      438.5      785.4
--------------------------------------                      ---------  ---------


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 

Year ended 31 December 2007

                                  Attributable to equity shareholders of the Company
                                  ----------------------------------------------------------
                                                 
$ million        Notes     Share     Share     Capital   Retained            Minority   Total
                           capital  premium    reserves  earnings   Total    interests  equity         
----------------           -------  -------    -------   --------   --------   ------  -------     
At 1 January               173.3    503.4      157.3    1,765.8    2,599.8     26.3    2,626.1
2006                       
---------------            -------  -------    -------   --------   --------   ------  -------

Profit for the                 -        -          -    1,399.7    1,399.7     13.4    1,413.1
year                       -------  -------    -------   --------   --------   ------  -------
---------------
Currency                       -        -       80.7          -       80.7      0.4       81.1
translation
differences
                             
 ---------------   ------  -------  -------    -------   --------    -------   ------    -------
                               -        -       80.7    1,399.7    1,480.4     13.8    1,494.2
Contribution to
charter capital    10(c)       -        -          -          -          -      1.6        1.6
of subsidiary by
minority
shareholders       

                          
Transfer to        10(b)      -        -       28.2      (28.2)         -        -          -
reserve fund

Gain from
dilution of                   -        -          -        7.8        7.8     (7.8)         -
minority
interest in
subsidiary

                               
Acquisition of                -        -          -          -          -      1.0        1.0
minority
interest in
subsidiary
                               
Equity dividends     9        -        -          -     (228.1)    (228.1)       -     (228.1)
paid by the
Company
                      
 ---------------           -------  -------    -------   --------    -------   ------    -------
Equity dividends              -        -          -          -          -     (3.0)      (3.0)

paid by
subsidiary to
minority
shareholders

                               
At 31 December             173.3    503.4      266.2    2,917.0    3,859.9     31.9    3,891.8
2006                       -------  -------    -------   --------    -------   ------    -------
---------------

Profit for the                 -        -          -    1,415.7    1,415.7     11.0    1,426.7
year
Unrealised gain     10(b)      -        -    1,594.7          -    1,594.7        -    1,594.7
on available for
sale
investments

                
 ---------------           -------  -------    -------   --------    -------   ------    -------
Currency                       -        -      223.1          -      223.1      0.5      223.6
translation
differences
                               
 ---------------           -------  -------    -------   --------    -------   ------    -------
                              
Shares issued                  -        -    1,817.8    1,415.7    3,233.5     11.5    3,245.0
pursuant to
acquisition of     10(a)     1.1     66.4          -      (52.3)      15.2    (27.3)     (12.1)  
minority
interest in
subsidiary (net
of issue costs
of $1.0 million)

                 
Purchase of        10(a)    (4.1)   (88.8)         -     (177.4)    (270.3)       -     (270.3) 
Company's issued
share capital
Equity dividends     9         -        -          -     (419.1)    (419.1)       -     (419.1)
paid by the
Company
                     
 ---------------            -------  -------    -------   --------    -------   ------    -------
Equity dividends               -        -          -          -          -     (2.1)      (2.1)
paid by
subsidiary to
minority
shareholders

                             
 ---------------            -------  -------    -------   --------    -------   ------    -------
At 31 December               170.3    481.0    2,084.0    3,683.9    6,419.2     14.0    6,433.2
2007               
---------------             -------  -------    -------   --------    -------   ------    -------



NOTES TO THE FINANCIAL INFORMATION

Year ended 31 December 2007


1.         General information

(a)        Organisation and operation

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.


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 defined 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 5
March 2008 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 presentation in respect of its mine
development costs and mine stripping costs from that disclosed in the 2006
Annual Report. Mine development costs, which were previously included within
property, plant and equipment, have now been reclassified under "Mining assets"
which includes mine stripping costs. The revised presentation of mining assets
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 ($) and
all monetary amounts are rounded to the nearest million dollar ($ million)
except when otherwise indicated.


(b)        Basis of consolidation

The consolidated financial statements set out the Group's financial position as
at 31 December 2007 and the Group's financial performance for the year ended 31
December 2007.


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. The Company applies the equity concept method of consolidation
and accounts for the acquisition of minority interests within equity.


(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 2007, and in accordance with
the provisions of the Companies Acts 1985 and 2006.


(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.         Business acquisitions

Eurasia Gold Inc.

On 5 July 2007 the Group acquired 96.34% of the ordinary shares of Eurasia Gold
Inc. (Eurasia Gold) a company listed on the Toronto Stock Exchange. Since the
offer was accepted by holders of more than 90% of the Eurasia Gold shares,
Kazakhmys Gold Inc., an indirectly wholly owned subsidiary of Kazakhmys PLC
exercised its right under the compulsory acquisition provisions of the Business
Corporations Act (British Columbia) to acquire the outstanding Eurasia Gold
shares not already owned by Kazakhmys Gold Inc. at the same price of CA$0.85 for
each Eurasia Gold share. On 12 September 2007, the Group completed the
compulsory acquisition, thereby taking its interest in Eurasia Gold to 100%. The
principal activity of Eurasia Gold and its subsidiaries is the mining and
processing of gold ore into refined gold dore.


Eurasia Gold was purchased for a total consideration of $270.9 million in cash.
At the acquisition date, the net identifiable assets and liabilities of Eurasia
Gold, including fair value adjustments, were as follows:


---------------------------------      -----------      ---------      ---------
                                   Carrying value      Fair value    Fair value at
                                    at acquisition     adjustments    acquisition
                                             date
$ million
---------------------------------      -----------      ---------      ---------
Assets
Property, plant and equipment (1)            8.6           (0.2)           8.4
Mining assets (1)                            7.6          231.0          238.6
Other assets (1)                             2.0           (2.0)             -
Inventories (2)                             11.2            4.1           15.3
Trade and other receivables                  9.0              -            9.0
Cash and cash equivalents                   11.6              -           11.6
Liabilities
Deferred tax liability (3)                     -          (46.8)         (46.8)
Provisions                                  (1.2)             -           (1.2)
Loans and borrowings                        (9.2)           3.3           (5.9)
Trade and other payables                    (4.0)             -           (4.0)
---------------------------------      -----------      ---------      ---------
Net identifiable assets                     35.6          189.4          225.0
Goodwill arising on purchase (4)                                          45.9
---------------------------------      -----------      ---------      ---------
Purchase consideration paid                                              270.9
---------------------------------      -----------      ---------      ---------

(1)  Fair value adjustments have been made to reflect the fair values of land and
     buildings, plant and machinery, reserves and resources and other exploration and
     development projects.
(2)  Inventories have been revalued to their net realisable value.
(3)  The increase in the deferred tax liability largely reflects the tax effect of
     the fair value adjustments.
(4)  Goodwill has been recognised as a consequence of the requirement to recognise
     a deferred tax liability on the fair value adjustments.


From the date of acquisition, Eurasia Gold has contributed an after tax loss of
$2.1 million to the net profit of the Group. If the combination had taken place
at the beginning of the year, the net profit of the Group would have been $4.1
million lower at $1,422.6 million and revenues would have been $11.9 million
higher at $5,268.5 million.


4.         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 structures.


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 being based
in Germany.


The Group's activities principally relate to:

• Kazakhmys Copper operations which involve the production and sale of:
  -       Copper cathodes and copper rod;
  -       Zinc metal and zinc metal in concentrate;
  -       Gold and silver; and
  -       Other by-products (lead, rhenium, selenium, cadmium and sulphuric acid).

• Kazakhstan and Central Asia gold production, exploration and
development activity.

• Kazakhstan oil and gas exploration and development activity.

• German copper processing operation.


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


(a)        Business segments

In the year ended 31 December 2007, the Group operated the following four
business segments:


Kazakhmys Copper (previously known as Kazakh Mining)

The Kazakhmys Copper 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
Kazakhmys Copper 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 Kazakhmys Copper business and
consequently the assets and liabilities related to those trading operations,
i.e. trade creditors and trade receivables, are included within the Kazakhmys
Copper 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.


Kazakhmys Gold

In September 2007, the Group completed the acquisition of Eurasia Gold Inc. (see
note 4). The principal activities of Eurasia Gold (subsequently renamed
Kazakhmys Gold) and its subsidiaries is the mining and processing of gold ore
into refined ore and exploration and development activity in the precious metal
sector within the Central Asian region.


Kazakhmys Petroleum

In April 2007, the Group acquired Kazakhmys Petroleum LLP (previously called
Dostan-Temir LLP), a company which holds a licence to conduct oil and gas
exploration and development activity in the East Akzhar Exploration Block in
western Kazakhstan.


MKM

MKM operates in Germany, where it manufactures copper and copper alloy
semi-finished products. MKM faces different risks to the Group's other
businesses and is therefore shown as a separate business segment.


In the year ended 31 December 2006, the Group operated two business segments:
Kazakhmys Copper and MKM.



Income statement information
                                                                          2007
  -----------------------                    -----------------------------------
  $ million                  Kazakhmys    MKM    Kazakhmys    Kazakhmys    Total
                              Copper                Gold    Petroleum
                                                         
  -----------------------  ---------  -------    ---------   ---------  -------

Sales to external           3,588.3   1,643.0       25.3          -    5,256.6
customers                   ---------  --------  ---------  ---------   --------
-----------------------
Gross profit                2,359.3      61.3        3.8          -    2,424.4
Operating costs              (382.4)    (51.0)      (3.0)      (1.4)    (437.8)
-----------------------     ---------  --------  ---------  ---------   --------
Segment results             1,976.9      10.3        0.8       (1.4)   1,986.6
Unallocated corporate                                                     61.8
income (net) 1              ---------  --------  ---------  ---------   --------
-----------------------
Profit before taxation and
finance  items
                                                                       2,048.4
Net finance costs                                                        (22.5)
-----------------------     ---------  --------  ---------  ---------   --------
Profit before taxation                                                 2,025.9
Income tax expense                                                      (599.2)
-----------------------     ---------  --------  ---------  ---------   --------
Profit for the year                                                    1,426.7
-----------------------     ---------  --------  ---------  ---------   --------

1 Includes dividend income of $93.9 million from ENRC PLC.

                                                                          2006
                                                         -----------------------

$ million                                      Kazakhmys      MKM         Total
-----------------------------------               Copper      
                                                 ---------  ---------  ---------

Sales to external customers                      3,330.4    1,716.1    5,046.5
-----------------------------------              ---------  ---------  ---------
Gross profit                                     2,364.5       69.6    2,434.1
Operating costs                                   (282.4)     (48.0)    (330.4)
-----------------------------------              ---------  ---------  ---------
Segment results                                  2,082.1       21.6    2,103.7
Unallocated corporate costs                                              (32.1)
-----------------------------------              ---------  ---------  ---------
Profit before taxation, finance  items and                             2,071.6
negative goodwill
Net finance income                                                        89.7
Recognition of negative goodwill                                           6.5
-----------------------------------              ---------  ---------  ---------
Profit before taxation                                                 2,167.8
Income tax expense                                                      (754.7)
-----------------------------------              ---------  ---------  ---------
Profit for the year                                                    1,413.1
-----------------------------------              ---------  ---------  ---------





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