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Kazakhmys PLC (KAZ)

  Print      Mail a friend       Annual reports

Wednesday 30 April, 2008

Kazakhmys PLC

Q1 Production Report

Kazakhmys PLC
30 April 2008



                                                                   30 April 2008


              Kazakhmys PLC Production Report for the First Quarter
                              Ended 31 March 2008
                                        

• Copper output was in line with expectations given the severe winter conditions

  • Ore output at 8.3 million tonnes, an increase of 7% versus Q4 2007,
    benefiting from production at new mines
  • Own cathode production of 76 kt was down 10% compared to Q1 2007,
    impacted by a scheduled maintenance shutdown at Balkhash smelter and the 
    severe winter weather
    • Cathode production was in line with Q1 2006, a more comparable winter
      period


• By-product precious metal output was also affected by the weather, though zinc 
  output resisted the seasonal influences, assisted by timing factors

  • Zinc in concentrate production increased 6% from Q4 2007, due to timing of 
    material processing
  • Silver production declined just 3% to 4 million oz from Q4 2007, as weather 
    interrupted processing
  • Gold production was 2% below Q4 2007, but benefited from the commencement 
    of operations at Akbastau mine


• Benefits seen in key areas of the operations

  • Improvements were seen in equipment availability and delivery, though this 
    remains a focus of management attention
  • Successful ramp up at Akbastau and Abyz mines
  • Good recovery rates seen in trial processing at new Nurkazgan concentrator


• Growth projects at Aktogay and Boschekul remain on track with guidance given 
  at the time of the 2007 Annual Results


• Ekibastuz deal on track to complete by end of H1 2008

  • Integration plan in progress
  • Potential for power industry in Kazakhstan remains strong


• 14.6% stake in ENRC continued to show good return on investment with rise 
  in commodity prices

  • 94% increase in market value of the shareholding from 2007 year end*
  • The holding is currently worth $4.65 billion
    • Equivalent to 515 pence per Kazakhmys share*


Oleg Novachuk, Chief Executive Officer, said "We are pleased to report an
increase in ore production in the first quarter of 2008, principally from
bringing new mines on stream. The difficult weather conditions, with
significantly below average temperatures and unusually high snowfall, did impact
cathode production but we expect this to balance out over the year. The outlook
for production in 2008 remains in line with the guidance given at the time of
our 2007 full year results.  Global copper demand appears to be strong with
limited new supply being introduced globally to meet this demand."


For further information please contact:

Kazakhmys PLC                                           Tel: +44 20 7901 7882
John Smelt         Head of Corporate Communications     Tel: +44 787 964 2675
Olga Nekrassova    Financial Analyst                    Tel: +44 20 7901 7814

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



NOTES TO EDITORS

*As at 29 April 2008

This report corresponds to Kazakhmys PLC's first Interim Management Statement as
required by the UK Listing Authority's Disclosure and Transparency rules,
relating to the period from 1 January to 30 June 2008.


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, 10 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.



Copper Summary

KAZAKHMYS COPPER PRODUCTION
                                                 Q1           Q4           Q1
                                               2008         2007         2007

 Ore extraction                 '000 t        8,257        7,729        8,931
 Average copper grade                %         1.21         1.22         1.25
 Average zinc grade(1)               %         3.49         4.19         3.71

 Copper in concentrate          '000 t         86.0         96.8        104.7
 own concentrate                '000 t         80.1         84.7         93.5
 purchased concentrate          '000 t          5.9         12.1         11.2

 Copper cathodes(2)             '000 t         84.1        103.1         99.7
 own concentrate                '000 t         75.5         91.6         83.8
 purchased concentrate          '000 t          8.5         11.3         15.3
 tolling concentrate            '000 t          0.1          0.2          0.6
 Copper rod                     '000 t         13.4          8.8          9.0

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

Ore output increased by 7% from 7,729 kt in Q4 2007 to 8,257 kt in Q1 2008 due
to increases across all four regions but particularly in Balkhash and Karaganda.
This was due to a combination of new mine production and mine restarts after
overburden removal. There was also some benefit from the delivery of equipment.
Delivery and lead times of mining equipment has been discussed in previous
production reports and remains an important focus for the operations. This
increase in ore output was in spite of the severe weather conditions.

Q1 2008 has on average been colder than 2006, which was seen as a harsh winter,
and significantly worse than the mild winter of 2007. February was particularly
cold, accompanied by high levels of snowfall. The weather reduced the number of
operational days at the open pit mines and heavy snowfall created potential
flooding issues. The availability of power was impacted and transport
availability reduced as it focused on delivery of coal.

Ore output decreased by 8% from the levels achieved in Q1 2007 mainly due to the
weather. Production decreased at the Zhezkazgan complex, where the benefits of
new production at Sary-Oba mine were offset by lower output at South mine.

The Q1 2008 average copper grade of 1.21% is slightly decreased from the grade
reported in Q4 2007 due to lower grade output at the Zhomart mine in Zhezkazgan,
which was partially offset by increased grades in the Karaganda Region. The
decrease in the average copper grade from 1.25% in Q1 2007 was caused by the
reduction in output, during Q1 2008, from the high grade Kosmurun mine, in the
Karaganda Region, as it reaches the end of its current deposit.

Copper in own concentrate production decreased from the previous periods, by 5%
from Q4 2007 and by 14% from Q1 2007, reflecting the changes in ore output and
grades.  Ore processing was also affected by the severe winter weather, given
the impact on production facilities and transportation mentioned above.  This
shift in priorities should reverse as the weather improves. The new Nurkazgan
concentrator, in the Karaganda region, started trial processing in Q1 2008 and
demonstrated promising recovery rates, which are encouraging for processing this
type of complex ore.

Cathode production from own concentrate showed a decrease from the previous
periods, by 10% from Q1 2007 and by 18% from Q4 2007, as a consequence of the
overall decrease in own concentrate production, the maintenance shutdown at the
Balkhash smelter and movements in stock and work in progress.

To show the seasonal impact, cathode production from own material in Q1 2008 was
just 1.5% below the same period in 2006, which was a similarly cold period.  In
2008 copper cathode production was supported by lower ore output, but with
significantly higher grade (9.8 million tonnes and 1.07% for Q1 2006).  There
was no smelter maintenance carried out in Q1 2006.

Copper rod, which is produced to customer order, increased markedly as a result
of continued strong demand from Chinese customers.

In Q2 2008 the smelter at Zhezkazgan will undergo maintenance work with a
closure of around 45 days.  Copper in concentrate production should be
unaffected, though cathode production is likely to remain subdued but should
balance out in the second half of the year.


By-products Summary

KAZAKHMYS COPPER BY-PRODUCTS PRODUCTION

                                                Q1            Q4            Q1
                                              2008          2007          2007

Zinc in concentrate           '000 t          33.6          31.6          38.6
Zinc metal                    '000 t          12.4          12.1          14.9

Silver                       '000 oz         4,020         4,154         5,022
own production(1)            '000 oz         4,020         4,154         5,017
tolling(2)                   '000 oz             0             0             5

Gold                         '000 oz          31.4          33.7          34.0
own production(1)            '000 oz          31.4          32.2          19.2
tolling(2)                   '000 oz             0           1.5          14.8

(1) Includes slimes from purchased concentrate
(2) Represents tolled materials provided via third parties

Zinc in concentrate production in Q1 2008 was 34 thousand tonnes, an increase of
6% on Q4 2007, due to timing of receipts of material from third party
processors. Q1 2007 was also an exceptional quarter, due to the receipt of two
months backlog concentrate from third party processors and against this period,
Q1 2008 saw a decline of zinc in concentrate output of 13%.

Zinc metal production in the first quarter remained in line with the previous
period, reflecting the continued emphasis, and attractive conditions, for
marketing zinc concentrate in the Central Asian market.

Silver production from own material in Q1 2008 of 4.0 million ounces was
slightly below the previous period and 20% below the corresponding period of
2007. This was due to lower levels of silver in purchased copper concentrate and
the extremely cold weather, which resulted in higher demand for power in the
region, causing disruptions to energy supply and consequential interruptions in
operations at the silver furnaces.  This has led to a build up of silver in
slimes, which will be processed during the year.

No tolling of gold took place in Q1. No contracts have currently been signed to
toll gold material in 2008, as the commercial terms are not sufficiently
attractive.  Gold production, excluding tolled material, of 31.4 thousand ounces
was slightly below the previous quarter, though significantly ahead of Q1 2007.
Production benefited from a reduction in work in progress along with an increase
in grades and the commissioning of the new Akbastau mine, at the start of 2008.
This was offset, compared to Q4 2007, by the decrease in ore processed from the
Nurkazgan and Kosmurun mines.  Nurkazgan was affected by transportation issues,
discussed above. The Karagaily concentrator, which had processed gold bearing
ores from Kosmurun, switched its focus to processing copper ores from the new
Akbastau mine. The benefits of new production from the gold rich Abyz mine,
which re-started production in 2008 after extensive overburden removal in 2007,
will be seen later in the year when the ore, currently being stockpiled, is
processed at the Karagaily concentrator.


Kazakhmys Copper Review by Region

ZHEZKAZGAN COMPLEX
                                                 Q1           Q4           Q1
                                               2008         2007         2007

 Ore extraction                 '000 t        5,804        5,751        6,300
 Average copper grade                %         0.79         0.83         0.83

 Copper concentrate             '000 t        111.7        122.9        120.8
 Copper in concentrate          '000 t         40.0         42.9         46.5

 Copper cathodes(1)             '000 t         46.6         49.1         49.9
 own concentrate                '000 t         46.6         49.0         47.6
 purchased concentrate          '000 t           --          0.1          2.3
 tolling(2)                     '000 t           --           --           --
 Copper rod                     '000 t         13.4          8.8          9.0

(1) Includes copper used to produce copper rod
(2) Represents tolled materials provided via third parties

Ore extraction at the Zhezkazgan complex in Q1 2008 performed well given the
impact of the severe winter weather.  Output of 5,804 thousand tonnes was in
line with Q4 2007. The complex benefited from increased output at North mine,
where the Sary-Oba open pit is ramping up. The open pit will gradually increase
its production as the weather improves and the snow melts.

Output was 8% below Q1 2007 as the benefits of Sary-Oba mine was offset by lower
output at South mine. South mine reopened in December 2007 following a flood in
September 2007. Production has been maintained at reduced level in Q1 2008,
whilst maintenance work is carried out, which should be completed by H2 2008.

In Q1 2008, the copper grade in the Zhezkazgan mines was 0.79%, slightly below
the previous periods. This was driven by lower grades at Annensky and Zhomart
mines, both of which produced higher grade ore in 2007. Over 2008, output will
increase from the Zhomart mine which, combined with the new mine project at
Taskura, commissioning in H2 2008, will compensate for this slight decline in
copper grade.

The change in production of copper in concentrate at the Zhezkazgan complex
reflects the changes in ore extraction and grade.

Cathode production from own concentrate showed a slight decrease from the
previous periods, by 2% from Q1 2007 and by 5% from Q4 2007, reflecting the
overall decrease in ore output and grades but offset by movements in stock and
work in progress. The smelter at Zhezkazgan will be closed for routine
maintenance during Q2 2008 and this will impact cathode output over the period.

Copper rod, which is produced to customer order, increased markedly as a result
of continued strong demand from Chinese customers.


Kazakhmys Copper Review by Region

BALKHASH COMPLEX
                                                   Q1          Q4          Q1
                                                 2008        2007        2007

 Ore extraction                    '000 t         604         419         490
 Average copper grade                   %        0.93        1.07        1.25

 Copper concentrate(1)             '000 t        37.8        47.6        41.2
 Copper in concentrate             '000 t         6.1         8.7         7.6

 Copper cathodes                   '000 t        37.5        54.0        49.9
 own concentrate                   '000 t        28.9        42.6        36.3
 purchased concentrate             '000 t         8.5        11.2        13.0
 tolling(2)                        '000 t         0.1         0.2         0.6

(1) Excludes concentrate processed by third parties
(2) Represents tolled materials provided via third parties

The increased ore extraction in Q1 2008, compared to Q1 2007 and Q4 2007, was
due to greater output from the Kounrad mine, which although still undergoing
extensive overburden removal is enjoying modest output of relatively low grade
ore. Production at Shatyrkul mine has reduced while operations are developed at
another shaft. During 2008, there was a successful transfer of activity from
Shatyrkul mine to Sayak mine to compensate for the lost output.

The average copper grade has decreased from Q1 2007 and Q4 2007 levels to 0.93%,
as a result of the rising output at Kounrad mine, which has a grade of 0.29%.

Production of copper in concentrate of 6.1 thousand tonnes in Q1 2008, was a
decline of 20% from Q1 2007 and 30% from Q4 2007. This reduction was principally
due to stockpiling of ore, which will be processed later in the year. The
additional decline from Q4 2007 was the result of reduced deliveries of
stockpiled Nurkazgan ore to the Balkhash concentrator, due to the severe winter
weather conditions. This should be reversed as the weather improves and is
discussed in the section on Karaganda.

The smelter at Balkhash was closed for 35 days for maintenance during Q1 which
reduced output of cathode from the Complex. The Balkhash smelter processes
concentrates from the East and Karaganda regions as well from its own Balkhash
concentrator and the reduction in copper cathode output from own material in
Balkhash also reflects the changes in copper in concentrate production in each
of these contributing regions.

As previously mentioned, power output at Balkhash was affected by the cold
weather, causing some stoppages. The power station at Balkhash will be shut for
maintenance in stages during H2 2008, with minimum disruption anticipated.

The construction of the new sulphuric acid plant at Balkhash, with target annual
capacity of 1.2 million tonnes, continues to be on track with previous guidance
and production is expected to start operations in H2 2008.


Kazakhmys Copper Review by Region

EAST REGION
                                                 Q1           Q4           Q1
                                               2008         2007         2007

 Ore extraction                 '000 t        1,048        1,005        1,146
 Average copper grade                %         2.96         3.16         2.69

 Copper concentrate(1)          '000 t        134.6        147.4        126.2
 Copper in concentrate          '000 t         25.1         27.8         23.7

(1) Excludes concentrate processed by third parties

Despite the severe weather conditions and decreased production at Nikolayevsky
mine in Q1 2008, ore extraction in the East region increased by 4%, compared to
Q4 2007, to 1,048 thousand tonnes.  This was the result of increased output at
Orlovsky and Irtyshsky mines, both benefiting from the delivery of previously
ordered equipment.

Ore extraction in Q1 2008 was 9% lower than in Q1 2007, due to decreased output
at Artemyevsky mine, which is undergoing backfill work. Production at
Nikolayevsky mine was lower year on year, due to heavy snowfall and water
resulting from melting snow.

The decrease in the copper grade to 2.96%, compared to 3.16% in Q4 2007, was due
to in the lower grade at the Orlovsky mine, though this was accompanied by an
increase in output volumes. The increase in copper grade, compared to Q1 2007,
reflects the increased ore output at the relatively high grade Orlovsky mine.

In Q4 2007 ore from Karaganda's Kosmurun mine started to be processed at the
Nikolayevsky concentrator in the East Region.  This is reflected in the 6%
increase in copper in concentrate production, from 23.7 thousand tonnes in Q1
2007 to 25.1 thousand tonnes in Q1 2008. Production in Q1 2008 decreased by 10%
from the Q4 2007 levels due to changes in the composition of processed ores and
the weather, which adversely impacted recovery rates at the Nikolayevsky
concentrator. Through better technological processes, however, underlying
improvements have been made in the recovery rates at the Nikolayevsky
concentrator. The Nikolayevsky concentrator will, therefore, continue to be used
to process material from Kosmurun as it has shown the best recovery rates for
the complex ores from this mine.


Kazakhmys Copper Review by Region

KARAGANDA REGION
                                                   Q1          Q4          Q1
                                                 2008        2007        2007

 Ore extraction                    '000 t         801         554         995
 Average copper grade                   %        2.20        1.94        2.27

 Copper concentrate                '000 t        47.6        38.9        79.2
 Copper in concentrate             '000 t         7.0         4.2        12.6


Ore extraction in Karaganda increased significantly in Q1 2008, compared to the
previous quarter, with a rise of 44% to 801 thousand tonnes.  This was mainly
due to the commencement of the new Akbastau mine and the re-opening of Abyz
mine, which was closed for overburden removal throughout 2007. This was only
partially offset by decreased production at Kosmurun mine. The region showed a
reduction in output compared to Q1 2007, as the new output was offset by lower
production at West Nurkazgan and Kosmurun.

West Nurkazgan, the highest ore producer in Q1 2007, is currently in the final
stage of open pit extraction. Nurkazgan is due to commence underground
production towards the end of 2008.

The new North Nurkazgan open pit mine will start ore extraction once weather
conditions permit and the recently commissioned Nurkazgan concentrator is ready
to process this ore.

Output from Kosmurun was reduced to avoid additional stockpiling of Kosmurun ore
and potential ore oxidation. The current stockpile of Kosmurun ore is currently
being processed at the Nikolayevsky concentrator in East Region. Production at
Kosmurun is planned to increase after the stockpiled ore is processed. Kosmurun
is currently nearing completion of its open pit operations.  Major preparation
works will start in H2 2008 to take Kosmurun operations underground.

Output at the newly restarted Abyz mine has been in line with expectations and
the ore has a rich gold content of 3.36 g/t along with a copper grade of 1.63%.
The ore is currently being stockpiled while the Karagaily concentrator, in
Karaganda Region, adapts production processes to maximise recovery rates from
the ore.

The Q1 2008 average copper grade of 2.20% increased from the grade reported in
Q4 2007 due to production at Akbastau, which also allowed grade to remain steady
compared to Q1 2007, as Akbastau offset the decline in production at Kosmurun.

Copper in concentrate production increased by 67%, to 7.0 thousand tonnes, from
the levels reported in Q4 2007, in line with increased ore output and improved
grades. The decrease in copper in concentrate production compared to Q1 2007 was
due to the transfer in October 2007 of the processing of complex ores from
Kosmurun mine from Karaganda to the Nikolayevsky concentrator in East Region.

Previously stockpiled ore from Nurkazgan mine continues to be processed at the
Balkhash complex, where there is spare capacity. During Q1 2008 another 0.3
million tonnes of ore was shipped and processed, reducing the stockpiled ore to
1.1 million tonnes. Once the cold season is over and rail transport availability
will improve, as the priority shifts from the transportation of coal, more ore
will be shipped and processed at Balkhash.  This ore will be processed at the
new Nurkazgan concentrator, when it is fully operational.

The Nurkazgan concentrator started trial ore processing in February 2008, with
52 thousand tonnes of ore being processed. Initial results demonstrated higher
than expected recovery rates which is an encouraging result for this type of
complex ore.


Other divisions review

KAZAKHMYS GOLD PRODUCTION

                                                  Q1           Q4           Q1
                                                2008         2007         2007

Ore extraction                        t          192          479          210
Gold ore grade                      g/t         1.55         1.38         1.30

Gold in ore to pads             '000 oz          8.6         26.0          6.6
Gold precipitation              '000 oz          6.9         15.9          6.0

Gold dore production            '000 oz          7.9         15.5          7.2
Silver production               '000 oz          9.3         11.6          9.9


Production at Kazakhmys Gold uses a heap leaching process which is sensitive to
weather as the process slows down in line with decreases in the temperature of
the solution, with an optimal temperature of 15 degrees celsius.

Ore extraction decreased from Q1 2007 due to the harsher winter conditions and,
as expected, the seasonal change caused a significant decrease in production
when compared to Q4 2007.

The increased gold in ore to pad, compared to Q1 2007, is a result of the higher
gold grade and a change in ore structure.

The higher gold dore production was slightly ahead of Q1 2007 due to the release
of gold work in progress stocks from the previous period.


KAZAKHMYS PETROLEUM

The main focus of the exploration activity is the Southern Akzhar (subsalt)
section, where the 3D seismic survey is on track. The survey will continue
throughout 2008. The results of this survey will be used to plan the location of
future new deep wells.

While the 3D seismic work is taking place, the company will drill a twin of an
early discovery well.

The obligations under the exploration contract have been fulfilled on the
Northern Elimessai (suprasalt) section, with the completion of the shallow well
drilling programme which did not reveal petroleum which could be commercially
extracted.

Under the contract, from April 2009, each year a part of the exploration
territory must be returned to the Government, where no basis for commercial
extraction is established. Completion of the shallow well drilling programme
means that contractual obligations are being fulfilled and will allow the return
of explored territory to be carried out within this time frame.


Financial Information

MATERIAL EVENTS AND TRANSACTIONS 

Share buy-back programme

At the end of January 2008, Kazakhmys PLC (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 since the buy-back programme commenced. The average
closing price and the volume 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, was 454,954,288 ordinary
shares.

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.

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 the end of H1 2008.

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 and
Maikuben West coal mine. No draw down of the debt facility has yet taken place.

Final dividend in respect of the year ended 31 December 2007

At the time of the 2007 Annual Results, the Board recommended 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, a dividend of $125 million should be paid to shareholders
on 8 May 2008.


FINANCIAL PERFORMANCE

Sales volumes

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

                                                 Q1           Q4           Q1
                                               2008         2007         2007

 Copper cathodes                '000 t         71.9         77.2        112.4
 Copper rod                     '000 t         11.0          9.9          8.9
 Total copper products          '000 t         82.9         87.1        121.3

 Zinc metal                     '000 t          4.9          7.7         10.8
 Zinc in concentrate            '000 t         18.1         14.0         21.8

 Gold                          '000 oz         32.2         32.2         25.4

 Silver                        '000 oz        4,405        5,176        3,376



Financial Information (contd)

Copper cathode sales in Q1 2007 benefited from a large volume of goods in
transit at the 2006 year end, which be recognised in January 2007. At the start
of 2008, 28 thousand tonnes of copper cathodes were in transit, down from 49
thousand tonnes at the beginning of 2007.

During Q4 2007, there was a build-up of copper cathodes in stock and in transit
of 16 thousand tonnes, resulting in sales being below production. In Q1 2008,
the volume of cathodes in stock and in transit remained flat, so sales were
broadly in-line with production.

In Q1 2008, the production of zinc metal was 12.4 thousand tonnes, in-line with
output in Q4 2007. During Q4 2007, zinc metal inventory was built up to
approximately two month's production. The inventory level remained unchanged
over Q1 2008 although it is expected to be reduced later in the year.  Due to
shipment delays at the quarter end, 8.7 thousand tonnes of zinc metal was in
transit and will be recognised in sales in Q2 2008, explaining the lower volume
of zinc metal sold than produced.

Gold sales were substantially higher than those in Q1 2007 but in-line with Q4
2007. The sales volume reflects the production which was substantially higher
than in Q1 2007. Silver sales were above production as stock levels reduced
slightly in Q1 2008.

Kazakhmys Copper experienced disruptions to its deliveries to China as a result
of the severe snowstorms in Q1 2008 and also from the Chinese new year
celebrations. These factors held up a number of shipments at the Chinese border,
however by the quarter end the affected shipments had reached their
destinations.


Commodity Prices

The following table sets out the average realised prices for the major
commodities:

                                          Q1               Q4               Q1
                                        2008             2007             2007

Copper              $/tonne            7,497            7,277            6,072
Zinc                $/tonne            2,442            2,415            3,527
Gold                $/tr.oz              940              789              644
Silver              $/tr.oz               18               14               13


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

                                          Q1               Q4               Q1
                                        2008             2007             2007

Copper              $/tonne            7,796            7,188            5,933
Zinc                $/tonne            2,430            2,623            3,456
Gold                $/tr.oz              928              789              650
Silver              $/tr.oz               18               14               13


Realised prices will differ from average prices during the same period,
principally because of timing issues and this effect is particularly noticeable
over shorter time periods. Prices rose fairly steadily during Q1 2008 from
$6,677 per tonne at 1 January 2008 to $8,520 at 31 March 2008. Realised prices
were lower than the LME averages due to some copper cathode shipments priced in
2007 and a greater weight of shipments taking place in January and February,
compared to March.


Financial Information (contd)

FINANCIAL POSITION

Investment in Eurasian Natural Resources Corporation ("ENRC") PLC

At 31 March 2008, the Group's 14.6% shareholding in ENRC PLC had a market value
of $3,689 million, an increase of $1,288 million from the 31 December 2007
market value (53.6% increase). This represents a value of £4.07 per Kazakhmys
PLC share in issue as at 31 March 2008.


Net liquid funds

Net liquid funds consists of cash and cash equivalents, current investments and
borrowings and amounted to $160 million at 31 March 2008, compared to $298
million at 31 December 2007.


The primary reasons for the reduction in net liquid funds were due to the
completion of the share buy-back programme in January 2008 which consumed $120
million of liquid funds, increased borrowings within MKM on account of higher
copper prices which impact working capital levels, and the timing of tax
payments on account in Kazakhstan which are based on earnings for 2007.


Foreign exchange rates

The Kazakhstan tenge ("KZT") to US dollar exchange rate at 31 March 2008 stood
at KZT120.69/$, a change of 0.3% compared to the exchange rate at 31 December
2007. The average rate for the three month period ended 31 March 2008 was
similar to the average rate for 2007.


Any weakening of the KZT against the US dollar gives rise to foreign currency
translation losses which on consolidation are charged directly to equity. A
downward movement in the KZT has a beneficial impact on the profitability of the
Kazakh mining businesses in US dollar terms resulting from conversion of local
currency costs.


Kazakhmys Copper

COPPER MINING

Zhezkazgan complex
                                               Q1           Q4             Q1 
                                             2008         2007            2007 
North                  ore ('000 t)           558          478             725
                       grade (%)             0.68         0.70            0.67
East                   ore ('000 t)         1,322        1,428           1,348
                       grade (%)             0.82         0.82            0.84
South                  ore ('000 t)           968          967           1,547
                       grade (%)             0.66         0.63            0.73
West                   ore ('000 t)           488          488             550
                       grade (%)             0.45         0.41            0.41
Stepnoy                ore ('000 t)           716          746             610
                       grade (%)             0.84         0.86            0.71
Annensky               ore ('000 t)           947          873             840
                       grade (%)             0.81         0.98            1.01
Zhomart                ore ('000 t)           805          771             680
                       grade (%)             1.10         1.23            1.44

Complex total          ore ('000 t)         5,804        5,751           6,300
Complex average        grade (%)             0.79         0.83            0.83


Balkhash complex
                                               Q1           Q4              Q1 
                                             2008         2007            2007
Kounrad                ore ('000 t)           145           41              48
                       grade (%)             0.29         0.48            0.38
Sayak I, III           ore ('000 t)           399          338             339
                       grade (%)             1.01         1.03            1.09
Shatyrkul              ore ('000 t)            60           40             103
                       grade (%)             1.98         2.01            2.18

Complex total          ore ('000 t)           604          419             490
Complex average        grade (%)             0.93         1.07            1.25


East region
                                                  Q1          Q4            Q1 
                                                2008        2007          2007
Nikolayevsky                 ore ('000 t)         82         111           120
                             grade (%)          2.18        1.93          1.74
Artemyevsky                  ore ('000 t)        333         313           399
                             grade (%)          1.67        1.70          1.70
Irtyshsky                    ore ('000 t)        118          95            98
                             grade (%)          1.38        1.45          1.34
Belousovsky                  ore ('000 t)         61          54            57
                             grade (%)          0.90        0.83          0.81
Orlovsky                     ore ('000 t)        360         326           368
                             grade (%)          5.06        5.74          4.54
Yubileyno-Snegirikhinsky     ore ('000 t)         94         106           104
                             grade (%)          3.53        3.52          3.35

Region total                 ore ('000 t)      1,048       1,005         1,146
Region average               grade (%)          2.96        3.16          2.69


Karaganda region
                                                  Q1          Q4            Q1 
                                                2008        2007          2007
West Nurkazgan               ore ('000 t)        222         263           634
                             grade (%)          0.96        0.88          1.18
Akbastau                     ore ('000 t)        380           -             -
                             grade (%)          3.04           -             -
Kosmurun                     ore ('000 t)         74         291           361
                             grade (%)          2.58        2.90          4.18
Abyz                         ore ('000 t)        125           -             -
                             grade (%)          1.63           -             -

Region total                 ore ('000 t)        801         554           995
Region average               grade (%)          2.20        1.94          2.27

Total                        ore ('000 t)      8,257       7,729         8,931
Average                      grade (%)          1.21        1.22          1.25



COPPER PROCESSING

                                                      Q1        Q4          Q1 
                                                    2008      2007        2007
Zhezkazgan complex
Copper concentrate                     '000 t      111.7     122.9       120.8
Copper in concentrate                  '000 t       40.0      42.9        46.5
Balkhash complex
Copper concentrate                     '000 t       37.8      47.6        41.2
Copper in concentrate                  '000 t        6.1       8.7         7.6
East region
Copper concentrate                     '000 t      134.6     147.4       126.2
Copper in concentrate                  '000 t       25.1      27.8        23.7
Karaganda region
Copper concentrate                     '000 t       47.6      38.9        79.2
Copper in concentrate                  '000 t        7.0       4.2        12.6

Total own processed
Copper concentrate                     '000 t      331.7     356.8       367.4
Copper in concentrate                  '000 t       78.2      83.6        90.4

Own ore processed by third parties
Copper concentrate                     '000 t        6.9       4.1        12.2
Copper in concentrate                  '000 t        1.9       1.1         3.1

Total own
Copper concentrate                     '000 t      338.6     360.9       379.6
Copper in concentrate                  '000 t       80.1      84.7        93.5

Purchased concentrate
Copper concentrate                     '000 t       24.0      41.3        42.6
Copper in concentrate                  '000 t        5.9      12.1        11.2

Total copper in concentrate            '000 t       86.0      96.8       104.7



COPPER SMELTER / REFINERY - COPPER CATHODES PRODUCTION

                                               Q1           Q4              Q1
                                             2008         2007            2007
Zhezkazgan smelter
Own concentrate                '000 t        46.6         49.0            47.6
Purchased concentrate          '000 t           -          0.1             2.3
Sub - total                    '000 t        46.6         49.1            49.9
Tolling                        '000 t           -            -               -
Total including tolling        '000 t        46.6         49.1            49.8

Balkhash smelter
Own concentrate                '000 t        28.9         42.6            36.3
Purchased concentrate          '000 t         8.5         11.2            13.0
Sub - total                    '000 t        37.4         53.8            49.3
Tolling                        '000 t         0.1          0.2             0.6
Total including tolling        '000 t        37.5         54.0            49.9

Grand total                    '000 t        84.1        103.1            99.7



Kazakhmys Copper

BY-PRODUCTS MINING, PROCESSING AND SMELTER / REFINERY

ZINC                                              Q1         Q4             Q1 
                                                2008       2007           2007
East region
Nikolayevsky                  grade (%)         2.91       2.74           2.74
Artemyevsky                   grade (%)         5.30       4.91           5.41
Irtyshsky                     grade (%)         3.28       3.25           3.15
Belousovsky                   grade (%)         1.92       2.67           3.00
Orlovsky                      grade (%)         5.06       5.03           4.14
Yubileyno-Snegirikhinsky      grade (%)         3.72       3.56           3.66

Region average                grade (%)         4.46       4.29           4.25

Karaganda region
Kosmurun                      grade (%)         4.70       3.88           2.00
Akbastau                      grade (%)         0.60          -              -
Abyz                          grade (%)         3.39          -              -

Region average                grade (%)         1.73       3.87           2.00

Overall average               grade (%)         3.49       4.19           3.71

Zinc in concentrate           '000 t            33.6       31.6           38.6
Zinc metal                    '000 t            12.4       12.1           14.9




SILVER
                                                  Q1          Q4            Q1 
                                                2008        2007          2007
Zhezkazgan complex
North                       grade (g/t)        11.39        8.79          9.04
East                        grade (g/t)        19.14       16.22         16.52
South                       grade (g/t)        13.46       14.48         16.08
West                        grade (g/t)        13.01       11.71         11.98
Stepnoy                     grade (g/t)         9.87       12.61         12.16
Annensky                    grade (g/t)        12.87       16.66         26.09
Zhomart                     grade (g/t)         6.31        6.86          8.26

Region average              grade (g/t)        12.99       13.27         15.11

Balkhash complex
Kounrad                     grade (g/t)         1.92        0.07          0.87
Sayak I, III                grade (g/t)         6.58        5.17          5.53
Shatyrkul                   grade (g/t)         0.65        1.49          2.00

Region average              grade (g/t)         4.87        4.32          4.33

East region
Nikolayevsky                grade (g/t)        48.06       50.37         26.44
Artemyevsky                 grade (g/t)        103.5       69.00         110.7
Irtyshsky                   grade (g/t)         51.4       52.73          50.1
Belousovsky                 grade (g/t)        40.47       47.95         45.10
Orlovsky                    grade (g/t)        60.46       56.22         53.76
Yubileyno-Snegirikhinsky    grade (g/t)        70.88       58.37         41.39

Region average              grade (g/t)        71.88       58.99         68.85

Karaganda region
Nurkazgan                   grade (g/t)         2.31        2.84          2.77
Akbastau                    grade (g/t)        37.27           -             -
Kosmurun                    grade (g/t)        70.35       55.34         27.01
Abyz                        grade (g/t)        41.48           -             -

Region average              grade (g/t)        31.30       30.42         11.57

Overall average             grade (g/t)        21.65       19.97         21.02

Silver in concentrate       '000 oz            3,069       4,382         3,669
   own concentrate          '000 oz            2,470       3,236         2,551
   purchased concentrate    '000 oz              599       1,146         1,118
              
Silver metal(1)             '000 oz            4,020       4,154         5,017




GOLD
                                                  Q1         Q4             Q1 
                                                2008       2007           2007 
Balkhash complex
Sayak I, III                 grade (g/t)        0.33       0.52           0.24
Shatyrkul                    grade (g/t)        0.08       0.38           0.32

Region average               grade (g/t)        0.30       0.50           0.26

East region
Nikolayevsky                 grade (g/t)        0.48       0.68           0.69
Artemyevsky                  grade (g/t)        1.18       0.79           1.38
Irtyshsky                    grade (g/t)        0.39       0.39           0.36
Belousovsky                  grade (g/t)        0.44       0.47           0.49
Orlovsky                     grade (g/t)        1.00       0.63           0.57
Yubileyno-Snegirikhinsky     grade (g/t)        0.80       0.73           0.61

Region average               grade (g/t)        0.90       0.67           0.85

Karaganda region
Nurkazgan                    grade (g/t)        0.29       0.32           0.31
Akbastau                     grade (g/t)        1.10          -              -
Kosmurun                     grade (g/t)        2.73       4.52           1.53
Abyz                         grade (g/t)        3.36          -              -

Region average               grade (g/t)        1.38       2.53           0.75

Overall average              grade (g/t)        0.94       1.17           0.71

Gold in concentrate          '000 oz            16.5       47.4           19.3
   own concentrate           '000 oz            12.8       24.6           12.7
   purchased concentrate     '000 oz             3.7       22.8            7.5
               
Gold output(1)               '000 oz            31.4       32.2           19.2

(1) Includes slimes from purchased concentrate












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