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Kazakhmys PLC (KAZ)

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Thursday 06 March, 2008

Kazakhmys PLC

Audited Results 2007 - Part 2

Kazakhmys PLC
06 March 2008

Part 2




Balance sheet information
                                                                  At 31 December
 -------------------------                                                2007
                                                --------------------------------
                                     
$ million                  Kazakhmys    MKM    Kazakhmys    Kazakhmys    Total
                              Copper               Gold     Petroleum
                                 
 ------------------------ --------- --------    ---------    ---------  -------

Assets
Tangible and intangible      2,124.9    171.8      295.0      482.5    3,074.2
assets
Non-current investments          9.9      2.0        0.3          -       12.2
Operating assets 1           1,038.7    386.1       17.4        0.5    1,442.7
Current investments             57.3        -          -          -       57.3
Cash and cash equivalents      216.9      6.7       13.6       20.9      258.1
------------------------     ---------  -------  ---------  ---------   --------
Segment assets               3,447.7    566.6      326.3      503.9    4,844.5
------------------------     ---------  -------  ---------  ---------   --------
Unallocated assets
Non-current assets -                                                   4,391.5
Corporate
Dividends receivable -                                                   142.6
Corporate
Current assets -                                                           7.1
Corporate
Cash and cash equivalents -                                              180.4
Corporate
Elimination                                                           (2,212.5)
------------------------     ---------  -------  ---------  ---------   --------
Total assets                                                           7,353.6
------------------------     ---------  -------  ---------  ---------   --------
Liabilities
Employee benefits and          112.3      8.8        1.6       26.4      149.1
provisions
Operating liabilities (2)      304.2     40.9        2.2        0.9      348.2
------------------------     ---------  -------  ---------  ---------   --------
Segment liabilities            416.5     49.7        3.8       27.3      497.3
------------------------     ---------  -------  ---------  ---------   --------
Unallocated liabilities
Other payables -                                                         109.8
Corporate
Deferred tax liability -                                                 283.0
Group
Borrowings - Group                                                       197.5
Income tax payable -                                                      65.3
Group
Elimination                                                             (232.5)
------------------------     ---------  -------  ---------  ---------   --------
Total liabilities                                                        920.4
------------------------     ---------  -------  ---------  ---------   --------

1 Operating assets include inventories, trade and other receivables and
prepayments and other current assets.

2 Operating liabilities include trade and other payables and dividends payable
by subsidiaries to the Company.



                                                                  At 31 December
                                                                          2006
                                                        ---------      ---------
$ million                                Kazakhmys          MKM          Total
-----------------------------------        Copper     
                                          ---------     ---------      ---------

Assets
Tangible and intangible assets             1,816.1         166.1       1,982.2
Non-current investments                        3.5           2.7           6.2
Operating assets 1                           713.4         395.2       1,108.6
Current investments                        1,237.2   -                 1,237.2
Cash and cash equivalents                    405.0          30.0         435.0
-----------------------------------        ---------     ---------     ---------
Segment assets                             4,175.2         594.0       4,769.2
-----------------------------------        ---------     ---------     ---------
Unallocated assets
Non-current assets - Corporate                                         1,156.3
Dividends receivable - Corporate                                         304.5
Current assets - Corporate                                                 6.0
Cash and cash equivalents - Corporate                                    350.4
Elimination                                                           (1,465.9)
-----------------------------------        ---------     ---------     ---------
Total assets                                                           5,120.5
----------------------------------         ---------     ---------     ---------
Liabilities
Employee benefits and provisions              85.0           7.0          92.0
Operating liabilities 2                      599.5          37.9         637.4
----------------------------------         ---------     ---------     ---------
Segment liabilities                          684.5          44.9         729.4
----------------------------------         ---------     ---------     ---------
Unallocated liabilities
Other payables - Corporate                                                12.0
Deferred tax liability - Group                                           347.7
Borrowings - Group                                                       277.3
Income tax payable - Group                                               176.9
Elimination                                                             (314.6)
----------------------------------         ---------     ---------     ---------
Total liabilities                                                      1,228.7
----------------------------------         ---------     ---------     ---------

1  Operating assets include inventories, trade and other receivables and
prepayments and other current assets.

2  Operating liabilities include trade and other payables and dividends payable
by subsidiaries to the Company.



Earnings before interest, tax, depreciation and amortisation (EBITDA) excluding
special items 1 by business segments
                                                                           2007
------------------    ------    ---------    ---------        ---------  -------
$ million            Kazakhmys   MKM    Kazakhmys  Kazakhmys   Corporate    Total
                      Copper                 Gold  etroleum   unallocated 2
                           
------------------  ---------  ------  ---------   ---------   ---------  -------

Profit/(loss)         1,976.9    10.3      0.8       (1.4)       61.8      2,048.4
before taxation and
finance items
                                     
Special items:  
  Add: write off of      25.1      -         -        1.1          -         26.2
  property, plant and
  equipment
                        
 ------------------  ---------  ------  ---------  ---------  ---------    -------
  Less: gain on         (1.8)      -         -          -          -         (1.8)
  disposal of
  property, plant and
  equipment
                        
 ------------------  ---------  ------  ---------  ---------  ---------    -------
Profit/(loss)
before taxation and   2,000.2    10.3        0.8       (0.3)      61.8    2,072.8
finance items
excluding special
items

                     
  Add: depreciation    230.7    23.3        5.6          -        1.1      260.7
  and depletion
  Add: amortisation      2.5     0.2        0.1          -          -        2.8
------------------   ---------  ------  ---------  ---------  ---------    -------
EBITDA excluding     2,233.4    33.8        6.5       (0.3)      62.9     2,336.3
special items
                                     
 ------------------  ---------  ------  ---------  ---------  ---------    -------

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

(2) Includes dividend income of $93.9 million from ENRC PLC.

                                                                         2006
                                                    ---------------------------
                                                
                                       Kazakhmys     MKM    Corporate     Total
-------------------------------        Copper              unallocated     
 $ million                             ---------  -------    -------     -------

Profit/(loss) before taxation, finance  2,082.1     21.6      (32.1)   2,071.6
items and negative goodwill
Special items:
Add: write off of property, plant and       1.4       -          -         1.4
equipment
Add: loss on disposal of property,          8.9      0.1        0.6        9.6
plant and equipment                     ---------  -------  ---------   --------
-------------------------------
Profit/(loss) before taxation, finance  2,092.4     21.7      (31.5)   2,082.6
items and negative goodwill excluding
special items
Add: depreciation and depletion           200.8     21.8        0.4      223.0
Add: amortisation                           2.4      0.4   -               2.8
-------------------------------         ---------  ------- ---------    --------
EBITDA excluding special items          2,295.6     43.9      (31.1)   2,308.4
-------------------------------         ---------  -------  ---------   --------





Net liquid funds/(debt) by business segments
                                                                            At 2007
                       --------   ----------  -----------     ---------- --------
$ million    Kazakhmys    MKM    Kazakhmys    Kazakhmys        Corporate      Total
               Copper               Gold      Petroleum       unallocated
                   
  ---------- ---------- --------   ----------  -----------     ---------- --------

Cash and cash     216.9      6.7      13.6         20.9       180.4           438.5
equivalents                         
Current            57.3       -         -            -           -             57.3
investments
                                           
Borrowings           -    (195.9)     (1.6)           -       (1,265.0)    (1,462.5)
----------       ----------  --------  ----------  -----------  ----------   --------
Inter-segment        -        -          -            -        1,265.0       1,265.0
borrowings 1                                 
----------       ----------  --------  ----------  -----------  ----------   --------
Net liquid        274.2   (189.2)     12.0         20.9         180.4          298.3
funds/(debt)
                                  
     ----------  ----------  --------  ----------  -----------  ----------   --------

1  Borrowings of Corporate unallocated include amounts borrowed from the
Kazakhmys Copper segment.

                                                                       At 2006
                                            --------  ---------          -------
$ million                        Kazakhmys    MKM    Corporate            Total
------------------------------    Copper            unallocated     
                                 --------   --------  --------         ---------
                                   

Cash and cash equivalents         405.0       30.0     350.4             785.4
Current investments             1,237.2         -        -             1,237.2
Borrowings                         -         (359.9)     -              (359.9)
                                                                        (359.9)
Inter-segment borrowings 1         -          82.6       -               82.6
------------------------------ ---------   --------- --------           --------
Net liquid funds/(debt)         1,642.2     (247.3)    350.4           1,745.3
------------------------------  ---------  ---------  --------          --------

1  Borrowings of MKM include amounts borrowed from the Kazakhmys Copper segment.


Capital expenditure, depreciation, write offs and impairment losses by business
segments
                                                                           2007
 ----------                      ------------------------------------------------
                       --------   ----------  -----------     ---------- --------
$ million    Kazakhmys    MKM    Kazakhmys    Kazakhmys        Corporate   Total
              Copper                 Gold     Petroleum       unallocated
                   
                                          
 ---------- ---------- --------   ----------  -----------     ---------- --------

Property,
plant and
equipment

                   431.6      11.0         2.1          7.2         3.2     455.1
Mining              27.6         -         2.0            -           -      29.6
assets          ----------  --------  ----------  -----------  ----------  --------
----------
Intangible
assets
                    10.2         -         3.6        476.4         3.5     493.7
    ----------  ----------  --------  ----------  -----------  ----------  --------
Capital
expenditure
                   469.4      11.0         7.7        483.6         6.7     978.4
    ----------  ----------  --------  ----------  -----------  ----------  --------
Depreciation
and
depletion
                   230.7      23.3         5.6            -         1.1     260.7
Amortisation         2.5       0.2         0.1            -           -       2.8
----------      ----------  --------  ----------  -----------  ----------  --------
Depreciation,
depletion and
amortisation

                   233.2      23.5         5.7            -         1.1     263.5
    ----------  ----------  --------  ----------  -----------  ----------  --------
Write offs and
impairment
losses

                    28.3       0.7           -          1.1           -      30.1
    ----------  ----------  --------  ----------  -----------  ----------  --------




                                                                         2006
                                                   -------   ---------   -------
$ million                               Kazakhmys     MKM     Corporate   Total
-------------------------------           Copper              unallocated       
                                         ---------  ------   ---------   -------

Property, plant and equipment               271.5      4.4        5.2    281.1
Mining assets                                63.6       -         -       63.6
Intangible assets                             8.8      0.2        -        9.0
-------------------------------           ---------  ------- ---------   -------
Capital expenditure                         343.9      4.6        5.2    353.7
-------------------------------           ---------  -------  ---------  -------
Depreciation and depletion                  200.8     21.8        0.4    223.0
Amortisation                                  2.4      0.4        -         2.8
-------------------------------           ---------  ------- ---------   -------
Depreciation, depletion and                 203.2     22.2        0.4    225.8
amortisation                              ---------  -------  ---------  -------
-------------------------------
Write offs and impairment losses              8.3      1.6        -       9.9
-------------------------------           ---------  ------- ---------   -------


(b)        Segmental information in respect of revenues

Revenues by product are as follows:

$ million                                                  2007          2006
------------------------------------------              ---------     ---------
Kazakhmys Copper
Copper cathodes                                         2,516.2       2,389.0
Silver in granules                                        256.5         239.1
Copper rods                                               250.6         196.1
Zinc metal in concentrate                                 200.5         128.0
Zinc metal                                                123.8         201.3
Gold bullion                                               80.3          51.2
Other by-products                                          86.4          38.1
Other revenue                                              74.0          87.6
------------------------------------------              ---------     ---------
                                                        3,588.3       3,330.4
------------------------------------------              ---------     ---------
MKM
Wire                                                      763.2         925.8
Sheet steel and steel strips                              509.0         432.8
Tubes and bars                                            318.8         272.9
Metal trade                                                52.0          84.6
------------------------------------------              ---------     ---------
                                                        1,643.0       1,716.1
------------------------------------------              ---------     ---------
Kazakhmys Gold
Gold dore                                                  25.0             -
Silver                                                      0.3             -
------------------------------------------              ---------     ---------
                                                           25.3             -
------------------------------------------              ---------     ---------
Total revenues                                          5,256.6       5,046.5
------------------------------------------              ---------     ---------



(c)        Provisional pricing

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


For the year ended 31 December 2007 gains of $84.3 million (2006: $49.8
million), relating to the difference between provisional pricing and final
pricing, have been included within revenues.


At 31 December 2007, copper sales totalling 14,295 tonnes (2006: 4,262 tonnes)
remained to be finally priced and were recorded at that date at an average price
of $7,359 per tonne (2006: $6,761 per tonne) based on provisional invoices. The
loss arising in January 2008 of $1.2 million (2006: loss of $4.8 million)
relating to contracts provisionally priced in December 2007 will be recognised
in the financial statements for the year ended 31 December 2008.



(d)        Revenues by destination
                                                                         2007
                                                  ------------------------------

$ million                        Europe       China       Other       Total
----------------------------    ---------   ---------   ---------   ---------
                                3,137.5     1,460.3       658.8     5,256.6
Sales to third parties
----------------------------    ---------   ---------   ---------   ---------

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

$ million                        Europe       China       Other       Total
----------------------------    ---------   ---------   ---------   ---------
                                3,770.1       641.8       634.6     5,046.5
Sales to third parties
----------------------------    ---------   ---------   ---------   ---------


5.         Write offs and impairment losses

$ million                                                      2007       2006
------------------------------------------                  ---------  ---------
Write off of property, plant and equipment                     26.2        1.4
Provisions against/(release of provisions for) trade and        2.3       (8.3)
other receivables
Provisions against prepayments and other current assets         1.6        0.1
Release of impairment of investments                       -              (1.9)
Provisions against obsolete inventories                    -              18.6
------------------------------------------                 ---------   ---------
                                                               30.1        9.9
                ------------------------------------------  ---------  ---------


6.         Finance income and finance costs

$ million                                                   2007         2006
------------------------------------------               ---------    ---------
Finance income
Interest income                                             93.9         78.5
Foreign exchange gains                                     166.2        188.3
------------------------------------------               ---------    ---------
Total finance income                                       260.1        266.8
------------------------------------------               ---------    ---------
Finance costs
Interest expense                                           (13.7)        (8.0)
Interest on employee obligations                            (3.4)        (3.0)
Unwinding of discount on provisions                         (7.1)        (4.2)
------------------------------------------               ---------    ---------
Finance costs before foreign exchange losses               (24.2)       (15.2)
Foreign exchange losses                                   (258.4)      (161.9)
------------------------------------------               ---------    ---------
Total finance costs                                       (282.6)      (177.1)
------------------------------------------               ---------    ---------



7.         Income tax

(a)        Income tax expense

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

$ million                                                    2007         2006
------------------------------------------                ---------    ---------
Current income tax
Corporate income tax - current period (UK)                   17.7          5.2
Corporate income tax - current period (overseas)            696.3        653.5
Corporate income tax - prior periods                        (27.8)         0.4
Excess profits tax - current period                          51.7         77.3
Excess profits tax - prior periods                           (9.0)       (49.4)
------------------------------------------                ---------    ---------
                                                            728.9        687.0
------------------------------------------                ---------    ---------
Deferred income tax
Corporate income tax - current period                      (115.0)        63.0
Corporate income tax - prior periods                         (8.5)        17.1
Excess profits tax - current period                          (6.2)       (12.4)
------------------------------------------                ---------    ---------
                                                           (129.7)        67.7
------------------------------------------                ---------    ---------
Income tax expense                                          599.2        754.7
------------------------------------------                ---------    ---------


The tax assessed on the profit for the year is lower than the standard rate of
corporation tax in the tax jurisdictions in which the Group operates,
principally due to a non-recurring release of a deferred tax liability
subsequent to a Group restructuring in Germany and the lowering of the tax rate
in Germany thereby releasing a further deferred tax liability.


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

$ million                                                      2007       2006
------------------------------------------                  ---------  ---------
Profit before taxation                                      2,025.9    2,167.8
At statutory income tax rate of 30%                           607.8      650.3
(Over)/underprovided in previous years - current income       (27.8)       0.4
tax
(Over)/underprovided in previous years - deferred income       (8.5)      17.1
tax
(Use of previously unrecognised)/unrecognised tax losses      (30.8)      10.4
Effect of domestic tax rates applicable to individual          (1.2)       0.5
Group entities
Change in tax rates                                           (10.9)         -
Unremitted overseas earnings                                      -       91.8
Non deductible expenses/(non taxable income):
Non taxable income on zinc plant                              (26.2)     (46.4)
Recognition of negative goodwill                                  -       (2.0)
Non deductible expenses                                        60.3       17.1
Excess profits tax                                             36.5       15.5
------------------------------------------                  ---------  ---------
At effective income tax rate of 29.6% (2006: 34.8%)           599.2      754.7
------------------------------------------                  ---------  ---------


Corporate income tax is calculated at 30% of the assessable profit for the
period for the Company and operating subsidiaries in Kazakhstan. The MKM tax
rate is calculated at 37.34% (2006: 35.98%) and relates to German corporate
income tax and trade tax.


Excess profits tax is levied on profitable subsoil contracts where the
cumulative internal rate of return for the current year exceeds 20% in a given
period. The effective rate for excess profits tax for those subsoil contracts
liable to this tax is 15% (2006: 13%).


8.         Earnings per share

(a)        Basic and diluted EPS

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


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

$ million                                                   2007          2006
------------------------------------------               ---------     ---------
Net profit attributable to equity shareholders of        1,415.7       1,399.7
the Company                                              ---------     ---------
------------------------------------------

Number                                                      2007          2006
------------------------------------------               ---------     ---------
Number of shares
Weighted average number of ordinary shares of 20     466,073,506   467,474,200
pence each for EPS calculation                           ---------     ---------
------------------------------------------
EPS - basic and diluted ($)                                 3.04          2.99
------------------------------------------               ---------     ---------


(b)        EPS based on Underlying Profit

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


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


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

Number                                                     2007           2006
------------------------------------------              ---------      ---------
Weighted average number of ordinary shares of 20    466,073,506    467,474,200
pence each for EPS based
on Underlying Profit calculation
------------------------------------------              ---------      ---------
EPS based on Underlying Profit - basic and diluted         3.02           3.00
($)                                                     ---------      ---------
------------------------------------------
------------------------------------------              ---------      ---------



 9.        Dividends paid and proposed

(a)        Dividends paid


The dividends declared and paid during the years ended 31 December 2007 and 2006
are as follows:

                                                         Per share      Amount
                                                          US cents   $ million
             ------------------------------------------    ---------   ---------
Year ended 31 December 2007
Final dividend in respect of year ended 31 December           25.7       120.1
2006
Interim dividend in respect of year ended 31 December         13.6        64.0
2007
Special dividend in respect of year ended 31 December         50.0       235.0
2007                                                       ---------   ---------
------------------------------------------
                                                              89.3       419.1
             ------------------------------------------    ---------   ---------
Year ended 31 December 2006
Final dividend in respect of year ended 31 December           36.0       168.3
2005
Interim dividend in respect of year ended 31 December         12.8        59.8
2006                                                       ---------   ---------
------------------------------------------
                                                              48.8       228.1
             ------------------------------------------    ---------   ---------


(i)         Year ended 31 December 2007

On 14 May 2007, the Company paid the final dividend of $120.1 million in respect
of the year ended 31 December 2006 to shareholders on the register as at 13
April 2007. This final dividend was sourced by way of payment of the interim
dividend in respect of the year ended 31 December 2006 by Kazakhmys LLC.


On 5 October 2007, the Company paid an interim and special dividend of $299.0
million in respect of the year ended 31 December 2007 to shareholders on the
register as at 14 September 2007. These dividends were sourced by way of payment
of the final dividend in respect of the year ended 31 December 2006 and an
interim dividend in respect of the year ended 31 December 2007 by Kazakhmys LLC.


(ii)        Year ended 31 December 2006

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


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


(b)        Dividends declared after the balance sheet date

                                                         Per share      Amount
                                                          US cents   $ million
             ------------------------------------------    ---------   ---------
Proposed by the Directors on 5 March 2008 (not
recognised as a liability as at 31 December 2007):
Final dividend in respect of year ended 31 December           27.4       126.1
2007                                                       ---------   ---------
------------------------------------------


In relation to the dividends proposed by the Directors on 5 March 2008, the UK
pounds sterling per ordinary share amount is 13.8073 pence.



10.       Share capital and reserves

(a)        Authorised and allotted share capital

                                                Number   £ million   $ million
        ---------------------------------      ---------   ---------   ---------
Authorised -  At 31 December 2007 and 31
December 2006
Ordinary shares of 20 pence each           750,000,000       150.0   -
---------------------------------              ---------   --------- ---------

Allotted and called up share capital
---------------------------------              ---------   ---------   ---------
At 31 December  2006                       467,474,200        93.5       173.3
Shares issued                                2,559,665         0.5         1.1
Purchase of Company's issued share          (9,910,577)       (2.0)       (4.1)
capital                                        ---------   ---------   ---------
---------------------------------
At 31 December  2007                       460,123,288        92.0       170.3
---------------------------------              ---------   ---------   ---------


In September 2007 the Company issued 2,559,665 ordinary shares of 20 pence each
and paid $11.5 million in consideration for the transfer to it of 227,959,211
participation shares in Kazakhmys LLC by minority shareholders. As a result of
this, the Company's interest in Kazakhmys LLC increased from 99.08% as at 31
December 2006 to 99.73% as at 31 December 2007.


Commencing from 24 October 2007, the Company began a share buy-back programme.
As at 31 December 2007, 9,910,577 ordinary shares had been bought-back and
cancelled at a total cost of $270.3 million including expenses.


(b)        Capital reserves
----------------------------        ---------        ---------      ---------  ---------
$ million                      Reserve fund    Net unrealised      Currency
                                               gains reserve    translation
                                                                    reserve      Total
 ----------------------------       ---------        ---------      ---------  ---------
At 1 January 2006                       9.4          -                147.9      157.3
Transfer to reserve fund               28.2          -                  -         28.2
Currency translation                    -            -                 80.7       80.7
differences                          ---------       ---------      ---------  ---------
----------------------------
At 31 December 2006                    37.6          -                228.6      266.2
Currency translation                    -            -                223.1      223.1
differences
Unrealised gain on available            -            1,594.7            -      1,594.7
for sale investments                 ---------       ---------      ---------  ---------
----------------------------
At 31 December 2007                    37.6          1,594.7          451.7    2,084.0
----------------------------        ---------        ---------      ---------  ---------


(i)         Reserve fund

In accordance with legislation of the Republic of Kazakhstan the reserve fund
comprises prescribed transfers from retained earnings amounting to 15% of
Kazakhmys LLC's charter capital. During the year ended 31 December 2006, the
reserve fund was increased by $28.2 million as a result of the contributions to
the charter capital of Kazakhmys LLC.


(ii)        Net unrealised gains reserve


The net unrealised gains reserve is used to record the fair value movements of
available for sale investments.


(iii)       Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences
arising from the translation of the financial statements of subsidiaries whose
functional currency is not the US dollar into the Group's presentation currency.


(c)        Capital contributions to charter capital of Kazakhmys LLC

Between 31 January 2006 and 14 March 2006, the Company made contributions of
$186.8 million to its subsidiary, Kazakhmys LLC. Minority shareholders
contributed a further $1.6 million to the charter capital. As the Company took
up the rights of minority shareholders who did not subscribe to the initial
capital contribution, the Company's interest in Kazakhmys LLC increased from
98.68% at 1 January 2006 to 99.08% at 31 December 2006.


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

$ million                                                      2007       2006
------------------------------------------                  ---------  ---------
Profit before taxation                                      2,025.9    2,167.8
Interest income                                               (93.9)     (78.5)
Interest expense                                               13.7        8.0
Depreciation and depletion                                    260.7      223.0
Amortisation                                                    2.8        2.8
Recognition of negative goodwill                                -         (6.5)
Write off and impairment losses                                30.1        9.9
Unrealised foreign exchange loss/(gain)                        45.5      (39.2)
Gain on disposal of assets held for trading                    (0.5)        - 
(Gain)/loss on disposal of property, plant and equipment       (1.8)       9.6
------------------------------------------                  ---------  ---------
Operating cash flows before changes in working capital and  2,282.5    2,296.9
provisions
Increase in inventories                                       (31.3)    (339.2)
Increase in prepayments and other current assets             (100.2)     (64.8)
Increase in trade and other receivables                       (45.8)     (11.1)
Increase in employee benefits                                   2.5        2.3
Increase in provisions                                         14.9        2.1
(Decrease)/increase in trade and other payables              (122.8)     156.1
------------------------------------------                  ---------  ---------
Cash flows from operations before income taxes and          1,999.8    2,042.3
interest
Interest paid                                                 (13.7)      (6.8)
Income taxes paid                                            (849.6)    (623.3)
------------------------------------------                  ---------  ---------
Net cash inflow from operating activities                   1,136.5    1,412.2
------------------------------------------                  ---------  ---------


12.       Movement in net liquid funds
-------------    ---------     ---------    --------      --------     ----------     ----------
                      At                                     Net          Other             At
               1 January      Business                  exchange         non-cash  31 December
                                                                    movements 1
$ million           2007   acquisition   Cash flow   translation                          2007
-------------    ---------     ---------    --------      --------     ----------     ----------
Cash and cash
equivalents
                   785.4          11.6      (396.9)         38.4              -          438.5
Current          1,237.2             -    (1,183.9)         45.0          (41.0)          57.3
investments
Borrowings        (277.3)         (5.9)      112.4             -          (26.7)        (197.5)
-------------    ---------     ---------    --------      --------     ----------     ----------
Net liquid       1,745.3           5.7    (1,468.4)         83.4          (67.7)         298.3
funds            ---------     ---------    --------      --------     ----------     ----------
-------------



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

(1)        Other non-cash movements comprise foreign exchange losses/gains
incurred by Group entities and recognised in the consolidated income statement.


13.       Related party disclosures


Option agreement with Chairman

Following approval of the transaction from the independent shareholders on 19
October 2007, and receipt of regulatory approval from the Government, the Group
exercised the call option over Vladimir Kim's interest in Eurasian Natural
Resources Corporation PLC (ENRC) for a total consideration of $806.3 million on
26 October 2007. This represented 100% of the initial investment of $751 million
plus a 10% margin (reflecting the risk of the initial investment) and the actual
financing and transaction costs incurred by him less any dividends paid to him
as a result of holding the stake.


14.       Events after the balance sheet date


(a)        Share buy-back programme

At the end of January 2008, the Company completed its share buy-back programme
of up to $400 million, which commenced on 24 October 2007. The total number of
ordinary shares purchased and cancelled was 15,079,577. At an average price of
£12.73 per share, this equated to a total cost of $390.1 million, including
expenses. The average closing price and the value weighted average price over
the same period was £13.21 per share and £13.08 per share, respectively. The
issued capital of the Company, after completion of the buy-back programme, is
454,954,288 ordinary shares.


(b)        Acquisition of the Ekibastuz coal-fired power plant and the Maikuben
West coal mine

On 5 February 2008 the Company announced that it had signed an agreement with
AES Corporation to acquire the Ekibastuz coal-fired power plant and the Maikuben
West coal mine. Completion is subject to certain conditions, including obtaining
the necessary regulatory approvals from the Government.


The total cost of up to $1.5 billion includes an initial cash consideration of
$1.1 billion and a deferred cash consideration and other payments of up to $381
million, payable under earnout provisions. Completion of the acquisition is
expected to occur by mid 2008.


(c)        Pre-export finance debt facility

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


(d)        Post year-end dividend

The Directors recommend a final ordinary dividend in respect of the year ended
31 December 2007 of 27.4 US cents per share. Subject to approval of shareholders
at the Annual General Meeting to be held on 30 April 2008, this dividend shall
be paid on  8 May 2008.





Production and sales figures

SUMMARY OF SIGNIFICANT PRODUCTION AND SALES FIGURES



kt (unless otherwise stated)                                2007         2006
---------------------------------------                 ----------   ----------
Kazakhmys Copper
Ore mined                                                 33,967       39,240
Copper content in ore mined (%)                             1.22         1.17
Copper cathode production:
From own concentrate                                         341          368
From purchased concentrate                                    39           37
---------------------------------------                 ----------   ----------
Total copper cathodes produced (excluding tolling)           380          405
Tolling                                                        1            2
---------------------------------------                 ----------   ----------
Total copper cathodes produced (including tolling)           381          407
---------------------------------------                 ----------   ----------
Total copper cathodes and copper rods sold                   386          368
---------------------------------------                 ----------   ----------
MKM
Wire sales                                                   155          167
Flat sales                                                    66           63
Tubes and bars sales                                          44           43
---------------------------------------                 ----------   ----------
Total MKM sales                                              265          273
---------------------------------------                 ----------   ----------
Kazakhmys Gold 1
Ore extraction                                             1,206            -
Gold ore grade (g/t)                                        1.52            -
---------------------------------------                 ----------   ----------
Total gold dore produced (koz)                              32.5            -
---------------------------------------                 ----------   ----------
Total gold dore sold (koz)                                  34.1            -
---------------------------------------                 ----------   ----------

1 Kazakhmys Gold was acquired on 5 July 2007



KAZAKHMYS COPPER - MINING

METAL MINING

                                Ore mined         Copper           Zinc           Gold            Silver
                               -----------      -----------    -----------     -----------      -----------

                             2007     2006    2007    2006    2007    2006    2007    2006     2007     2006
                               kt       kt       %       %       %       %     g/t     g/t      g/t      g/t
             -------------   ------   ------  ------  ------  ------  ------  ------  ------   ------   ------
Zhezkazgan Complex
North                       2,375    3,143    0.65    0.66       -       -       -       -     8.25     7.36
South                       5,220    6,818    0.69    0.72       -       -       -       -    16.86    14.08
Stepnoy                     2,849    3,200    0.80    0.79       -       -       -       -    11.81    16.58
East                        5,615    5,502    0.82    0.88       -       -       -       -    16.82    19.29
West                        2,054    2,585    0.37    0.41       -       -       -       -    11.11    14.26
Annensky                    3,360    4,225    1.03    1.10       -       -       -       -    21.86    23.75
Zhomart                     2,882    2,203    1.27    1.16       -       -       -       -     8.15     5.78
-------------                ------   ------  ------  ------  ------  ------  ------  ------   ------   ------
Total Zhezkazgan Complex   24,355   27,676    0.82    0.82       -       -       -       -    14.59    15.47
-------------                ------   ------  ------  ------  ------  ------  ------  ------   ------   ------
Balkhash Complex
Kounrad                       403    2,267    0.30    0.35       -       -       -       -     0.86     1.81
Shatyrkul                     351      441    2.05    2.03       -       -    0.30    0.31     1.71     2.59
Sayak I and III             1,372    1,663    1.02    1.11       -       -    0.34    0.27     5.22     6.12
-------------                ------   ------  ------  ------  ------  ------  ------  ------   ------   ------
Total Balkhash Complex      2,126    4,371    1.05    0.81       -       -   0.33(1)  0.28(1)  3.82     3.53
-------------                ------   ------  ------  ------  ------  ------  ------  ------   ------   ------
East Region
Orlovsky                    1,231    1,542    5.24    4.69    4.60    3.72    0.59    0.58    55.90    52.35
Belousovsky                   163      246    0.85    1.00    2.87    3.52    0.46    0.50    47.89    52.60
Irtyshsky                     390      449    1.39    1.26    3.24    2.80    0.37    0.31    53.66    44.10
Nikolayevsky                  532      578    1.75    1.47    3.07    2.48    0.71    0.26    38.60    24.50
Yubileyno-Snegirikhinsky      429      344    3.31    4.20    3.27    3.05    0.70    0.57    49.23    37.41
Artemyevsky                 1,395    1,282    1.65    1.74    5.19    6.91    1.28    1.66    95.99   143.23
-------------                ------   ------  ------  ------  ------  ------  ------  ------   ------   ------
Total East Region           4,140    4,441    2.85    2.83    4.27    4.32    0.82    0.82    65.97    72.98
-------------                ------   ------  ------  ------  ------  ------  ------  ------   ------   ------
Karaganda Region
Abyz                            -      210       -    1.67       -    3.47       -    3.67        -    47.89
Akbastau                       40        -    3.91       -    2.84       -    1.80       -    33.43        -
Nurkazgan                   1,842    1,670    1.11    1.17       -       -    0.32    0.31     2.77     3.71
Kosmurun                    1,464      872    3.55    5.53    2.77       -    2.46    1.87    36.72    31.97
-------------                ------   ------  ------  ------  ------  ------  ------  ------   ------   ------
Total Karaganda Region      3,346    2,752    2.21    2.59    2.77(2)  3.47(4) 1.27    1.06    17.99    16.04
-------------                ------   ------  ------  ------  ------  ------  ------  ------   ------   ------
Total Kazakhmys Copper     33,967   39,240    1.22    1.17    3.87(3)  4.28(5) 0.96(6) 0.77(6) 20.52    20.69    
    -------------           ------   ------  ------  ------  ------  ------  ------  ------   ------   ------
(1) Production only from Shatyrkul, and Sayak I and III mines in Balkhash Complex.
(2) Production only from Kosmurun and Akbastau mines.
(3) Production only from East Region, Kosmurun and Akbastau mines of Karaganda Region.
(4) Production only from Abyz mine.
(5) Production only from East Region and Abyz mine of Karaganda Region.
(6) Production only from Balkhash Complex (excluding Kounrad mine), East Region and Karaganda Region 
   (excluding Akbastau mine).





COAL MINING

       Coal mined                 Waste stripped                  Strip ratio
    ---------------               ---------------               ---------------

                        2007      2006      2007      2006      2007      2006
                          kt        kt      kbcm      kbcm     bcm:t     bcm:t
   -----------------  --------  --------  --------  --------  --------  --------
Molodezhny             6,650     6,400    11,730     9,330      1.76      1.46
Kuu-Chekinsky            850       872     3,854     4,045      4.53      4.64
-----------------     --------  --------  --------  --------  --------  --------
Total Kazakhmys        7,500     7,272    15,584    13,375      2.08      1.84
Copper                --------  --------  --------  --------  --------  --------
-----------------



KAZAKHMYS COPPER - PROCESSING

                                              Copper                 Copper in
                                            concentrate             concentrate
                                             produced                            

                                         2007       2006       2007       2006
                                           kt         kt          %          %
--------------------------            ---------  ---------  ---------  ---------
Zhezkazgan Complex:
Zhezkazgan No.1                           195        189       39.4       40.0
Zhezkazgan No.2                           173        205       39.0       39.6
Satpayev                                  123        147       27.8       28.8
--------------------------            ---------  ---------  ---------  ---------
Total Zhezkazgan Complex                  491        541       36.4       36.8
--------------------------            ---------  ---------  ---------  ---------
Balkhash Complex:
Balkhash                                  188        257       17.3       16.9
--------------------------            ---------  ---------  ---------  ---------
Total Balkhash Complex                    188        257       17.3       16.9
--------------------------            ---------  ---------  ---------  ---------
East Region:
Orlovsky                                  284        309       20.9       21.1
Belousovsky                                18         20       16.4       13.7
Irtyshsky                                  29         26       15.3       13.4
Nikolaevsky                               175        179       16.7       15.1
--------------------------            ---------  ---------  ---------  ---------
Total East Region                         506        534       18.9       18.5
--------------------------            ---------  ---------  ---------  ---------
Karaganda Region:
Karagaily (Abyz)                            -         47          -        4.0
Karagaily (Akbastau)                        3          -       14.1          -
Karagaily (Kosmurun)                      229        184       14.4       17.3
--------------------------            ---------  ---------  ---------  ---------
Total Karaganda Region                    232        231       14.4       14.6
--------------------------            ---------  ---------  ---------  ---------
Own copper concentrate processed by        29         33       26.4       24.6
third party                           ---------  ---------  ---------  ---------
--------------------------
Total Kazakhmys Copper (own             1,446      1,596       24.1       24.0
concentrate)                          ---------  ---------  ---------  ---------
--------------------------
Purchased concentrate                     152        214       27.6       23.5
--------------------------            ---------  ---------  ---------  ---------
Total Kazakhmys Copper (own and         1,598      1,810       24.4       24.0
purchased concentrate)                ---------  ---------  ---------  ---------
--------------------------





KAZAKHMYS COPPER - ZINC AND PRECIOUS METALS PROCESSING

                        Zinc            Zinc in             Silver 1              Gold 1
                     concentrate       concentrate                   
                      produced    
                   -------------      -------------        -------------       -------------

                 2007      2006      2007      2006       2007       2006      2007      2006
                   kt        kt         %         %        g/t        g/t       g/t       g/t
  -----------  --------  --------  --------  --------   --------   --------  --------  --------
Zhezkazgan
Complex
Zhezkazgan
No.1
                    -         -         -         -      677.0      712.5         -         -
Zhezkazgan
No.2
                    -         -         -         -      660.6      733.5         -         -
Satpaev             -         -         -         -      600.7      636.7         -         -
-----------    --------  --------  --------  --------   --------   --------  --------  --------
Total               -         -         -         -      652.1      699.8         -         -
Zhezkazgan     --------  --------  --------  --------   --------   --------  --------  --------
Complex
-----------
Balkhash
Complex:
Balkhash            -         -         -         -       56.5       53.4       3.6       2.7
-----------    --------  --------  --------  --------   --------   --------  --------  --------
Total               -         -         -         -       56.5       53.4       3.6       2.7
Balkhash       --------  --------  --------  --------   --------   --------  --------  --------
Complex
-----------
East Region
Orlovsky           91        88      45.1      45.3      103.8      101.4       1.2       1.1
Belousovsky        10        14      40.4      41.8      220.2      398.8       3.1       3.7
Irtyshsky          17        13      35.9      39.0      561.2      467.8       2.4       2.2
Nikolaevsky        84        55      41.8      39.5      200.7      157.1       2.7       1.6
Artemyevsky        86       106      52.8      51.8   2,523.0(3)  2,369.5(3)   14.1(3)   20.8(3)
(KazZinc)      --------  --------  --------  --------   --------   --------  --------  --------
-----------
Total East        288       276     42.72     42.7(2)   295.2(2)    149.3(2)    2.5(2)    1.4(2)
Region         --------  --------  --------  --------   --------   --------  --------  --------
-----------
Karaganda
Region
Karagaily           3         5      29.5      33.4       96.1      103.3       4.0       5.4
-----------    --------  --------  --------  --------   --------   --------  --------  --------
Total               3         5       29.5     33.4       96.1      103.3       4.0       5.4
Karaganda
Region

                                     
  -----------  --------  --------  --------  --------   --------   --------  --------  --------
Total             291       281     42.6(2)   42.4(2)    353.5(2)   317.2(2)    2.0(2)   2.7(2)
Kazakhmys      
Copper
-----------    --------  --------  --------  --------   --------   --------  --------  --------

(1) Grade in grammes per tonne of copper concentrate.
(2) Production only from own concentrators within East Region.
(3) Includes gold and silver content in gravity concentrate toll processed by
    KazZinc from Artemyevsky ore.





KAZAKHMYS COPPER - COPPER CATHODES PRODUCTION

                          Concentrate          Copper in        Copper cathodes
                            smelted           concentrate
                        ---------------    ---------------      ---------------

                        2007      2006      2007      2006      2007      2006
                          kt        kt         %         %        kt        kt
   -----------------  --------  --------  --------  --------  --------  --------
Zhezkazgan Complex
Own concentrate          569       632      33.7      34.0       183       215
Purchased                  7        26      33.8      31.1         4         6
concentrate
Other 1                   70       101       1.1       0.7         1         -
-----------------     --------  --------  --------  --------  --------  --------
Total Zhezkazgan         646       759      30.2      29.5       188       221
Complex               --------  --------  --------  --------  --------  --------
-----------------
Balkhash Complex
Own concentrate          931       990      18.2      16.9       156       153
Purchased                163       170      26.7      22.0        35        31
concentrate
Other 1                   82        85       2.8       3.1         1         -
-----------------     --------  --------  --------  --------  --------  --------
Total Balkash          1,176     1,245      18.3      16.6       192       184
Complex               --------  --------  --------  --------  --------  --------
-----------------
Total Kazakhmys        1,822     2,004      22.5      21.5       380       405
Copper (excluding     --------  --------  --------  --------  --------  --------
tolling)
-----------------
Tolling                    1         2      66.2      73.5         1         2
Total Kazakhmys        1,823     2,006      22.6      21.6       381       407
Copper (including     --------  --------  --------  --------  --------  --------
tolling)
-----------------

1 Includes materials (slag, scrap, etc.) and ore used directly in smelting
process reprocessed at both the Zhezkazgan and Balkhash Complexes.


KAZAKHMYS COPPER - COPPER ROD AND ACID PRODUCTION

                                           Copper rod          Acid production
                                        ---------------        ---------------
                                                                 
                                         2007       2006       2007       2006
                                           kt         kt         kt         kt
-----------------------------         ---------  ---------  ---------  ---------
Total Kazakhmys Copper (Zhezkazgan         36         29        149        202
Complex)                              ---------  ---------  ---------  ---------
-----------------------------



KAZAKHMYS COPPER - ZINC METAL PRODUCTION

                               Zinc             Zinc in          Zinc metal
                           concentrate        concentrate                 
                              smelted                     
                        ---------------     ---------------    ---------------

                        2007      2006      2007      2006      2007      2006
                          kt        kt         %         %        kt        kt
-----------------     --------  --------  --------  --------  --------  --------
Total Kazakhmys          137       155      43.8      45.4        45        60
Copper (Balkhash      --------  --------  --------  --------  --------  --------
Complex)
-----------------





KAZAKHMYS COPPER - PRECIOUS METAL PRODUCTION

                                              Silver                 Gold
                                        -----------------     -----------------

                                         2007       2006       2007       2006
                                          koz        koz        koz        koz
--------------------------            ---------  ---------  ---------  ---------
Kazakhmys Copper                       18,985     21,530        113        107
Tolling                                    10         40         24         59
--------------------------            ---------  ---------  ---------  ---------
Total Kazakhmys Copper (including      18,995     21,570        137        166
tolling)                              ---------  ---------  ---------  ---------
--------------------------



KAZAKHMYS COPPER - OTHER PRODUCTION

                                                          2007            2006
---------------------------------------              ----------      ----------
Electricity power space (GWh)                            6,409           6,589
Heating power (KGcal)                                    4,343           4,153
Enamel wire (t)                                            843             558
Lead dust (t)                                            8,773          12,622
---------------------------------------               ----------      ----------



KAZAKHMYS COPPER - SALES

                                        2007                      2006

                                   kt 1   $ million         kt 1     $ million
  --------------------------    ---------   ---------    ---------     ---------
Copper cathodes                     351     2,516.2          340       2,389.0
Copper rod                           35       250.6           28         196.1
--------------------------      ---------   ---------    ---------     ---------
Total copper sales                  386     2,766.8          368       2,585.1
--------------------------      ---------   ---------    ---------     ---------
Zinc metal in concentrate            89       200.5           67         128.0
Zinc metal                           38       123.8           64         201.3
Silver (koz)                     19,323       256.5       20,962         239.1
Gold (koz)                          116        80.3           84          51.2
--------------------------      ---------   ---------    ---------     ---------

1 Kilotonnes (unless otherwise stated).



AVERAGE REALISED PRICES

                                                          2007            2006
---------------------------------------               ----------      ----------
Copper ($/t)                                             7,175           7,025
Zinc ($/t)                                               3,237           3,145
Silver ($/oz)                                            13.27           11.41
Gold ($/oz)                                                695             610
---------------------------------------               ----------      ----------



MKM - PRODUCTION AND SALES

                                           2007                       2006
                                     -----------------          -------------

                               Production      Sales     Production      Sales
                                       kt         kt             kt         kt
  --------------------------      ---------  ---------      ---------  ---------
Wire rod                              117        115            129        129
Drawn wire                             40         40             39         38
--------------------------        ---------  ---------      ---------  ---------
Total wire                            157        155            168        167
--------------------------        ---------  ---------      ---------  ---------
Pre-rolled                              2          2              2          2
Sheets                                 15         15             15         15
Strips                                 49         49             45         46
--------------------------        ---------  ---------      ---------  ---------
Total flat                             66         66             62         63
--------------------------        ---------  ---------      ---------  ---------
Tubes                                  19         19             21         20
Bars                                   25         25             23         23
--------------------------        ---------  ---------      ---------  ---------
Total tubes and bars                   44         44             44         43
--------------------------        ---------  ---------      ---------  ---------
Total MKM                             267        265            274        273
--------------------------        ---------  ---------      ---------  ---------



KAZAKHMYS GOLD PRODUCTION AND SALES

                                                                 July - December
-----------------------------------------                              2007 (1)
                                                               -----------------
Ore extraction (kt)                                                      1,206
Gold ore grade (g/t)                                                      1.52
Gold precipitation (koz)                                                  32.7
-----------------------------------------                      -----------------

Gold dore production (koz)                                                32.5
Silver production (koz)                                                   20.7
-----------------------------------------                      -----------------

Gold dore sales (koz)                                                     34.1
-----------------------------------------                      -----------------

(1) Kazakhmys Gold was acquired on 5 July 2007






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