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Contribution, Worthy of a Leader

Kazakhmys Group of Companies, the flagship of the Kazakhstan’s non-ferrous metallurgy, is celebrating the 20th anniversary of the country’s independence with the company’s new achievements. The group of companies has something to present to the Kazakhstan’s citizens to this memorable date. This is the launch of the Bozshakol field development project, the largest investment projectin the history of Kazakhmys, also the successfully continued modernization of Ekibastuz GRES-1, the listing of the company’s securities on the Hong Kong Stock Exchange, and new agreements with strategic partners.

The giant of the Soviet industry in the past and now a global leader of the sector, Kazakhmys Corporation can be considered by right one of the backbone enterprises of the national economy. As the largest copper producer in the country, Kazakhmys owns 17 mines, 10 concentrating mills, and two copper smelters. Mining production is fully integrated, starting from ore mining to output of finished products such as copper cathodes and copper wire rods. In the 2010 year alone, Kazakhmys produced 303 thousand tons of copper cathodes from its own ore.

Along with that, copper production is not the only activities of the company. The company’s division Kazakhmys Mining extracts considerable volumes of other metals, including zinc, silver, and gold. For example, 167 tons of zinc concentrate was delivered for the market in 2010. In addition, the said group of companies is among the top ten world producers of silver: last year the output of this metal by the company reached 14 million ounces.

The total revenues of Kazakhmys from sales in 2010 were $3.2 billion, while EBITDA (excluding special items of the budget) $2.8 billion. The group of companies employs more than 61 thousand people, mostlydomestic private employer. Kazakhstani nationals, that makes Kazakhmys the largest domestic private employer.

Significant progress was achieved by the group of companies in external markets. Kazakhmys Group of Companies is in the FTSE-100 list that comprises the largest companies listed on the London Stock Exchange. Moreover, Kazakhmys’s securities are listed on the Kazakhstan Stock Exchange and Hong Kong Stock Exchange.

In June 2011 the company’s securities were put in the list on the Hong Kong Stock Exchange, which became a landmark event for the company and increases the investment attractiveness of Kazakhstan, in general. According to Kazakhmys’s Council of the Directors Chairman Vladimir Kim, coupled with the quite successful listing on the London Stock Exchange, conducted six years ago, the current "breakthrough to Hong Kong" has become a new milestone in the company’s development. The head of the Hong Kong Stock Exchange Ronald Arkulli also welcomed the emergence of the first Kazakhstani company among the issuers. In this regard, Kazakhmys not only surpassed other domestic companies, but became a second issuer on the HKEx, the latter represents the world's copper industry.

Entering the Asian stock markets by the company is indeed a strategic move, allowing strengthening mutually beneficial relations with major investors and gaining extra investment opportunities for production expansion projects.

One of the most important projects to Kazakhmys and the related industry was put into implementation in the jubilee year 2011. The company begun developing the large copper deposit Bozshakol, located near Astana. Studies carried out by the world known company Aker Solutions showed that the proved ore reserves of Bozshakol exceed 1.1 billion tons.

The ore that can be extracted in the central part of the deposit is estimated at 845 million tons, and some 326 million tons more can be extracted in the eastern mine. According to the company's schedule, first ore is to be extracted in 2015. It is expected that over the next three years the ore mining complex will reach its full mining capacity of 30 million tons of ore a year with subsequent annual output of to 100 tons of copper concentrate. At this level of mining, the mine will operate for over 40 years. It should be noted as well that significant reserves of associated metals, including 3.5 million ounces of gold and 33 million ounces of silver, are bedded in the depths of the Bozshakol deposit.

The innovative aspect of the project is remarkable, and the company itself regards it the "reason for pride." There the most advanced technologies will be applied. The new mining complex will involve a high capacity ore concentrating mill, significantly surpassing by technical parameters the already existing mining capacities of the company. The project was initially focused on meeting the highest industrial safety standards and maximizing automation. That is why the construction of the Bozshakol ore concentrating mill became part of the 2010–2014 Kazkahstan’s Industrialization Map program.

The social aspect should not be forgotten as well. With the beginning of an active phase of Kazakhmy’s operation, money will be heavily invested in transport, communal services and social infrastructure of the region; inflows to the republican and local budgets will increase.

Along with the other project – the Aktogai field development – Bozshakol will add to increasing the company’s aggregate annual output of copper concentrate by some 200 thousand tons. Due to this, in the coming years Kazakhmys will exceed the mining level of 500 thousand tons of copper a year.

Concerning Aktogai – one of the richest and most promising copper deposits in East Kazakhstan, – here in the current year the company has made a notable step forward as well. On June 13, General Managing Director of Kazakhmys Group of Companies, Oleg Novachuk, and Vice President of China Development Bank, Gao Jian, executed a Memorandum of Understanding to extend a line of credit of to $1.5 billion. These funds will be spent to develop Aktogai, the latter has the copper reserves of about 5 million tons. At the ore concentrating mill design capacity of 100 thousand tons of copper concentrate a year, the life of the ore mine will endure for 43 years, while the number of employees during the period of the mine operation will exceed one thousand people. Moreover, this project does not yield to Bozshakol both in terms of innovation and anticipated development of infrastructure.

An important factor that adds to Kazakhmys’s competitiveness is that its operation is ensured by a developed railway and high capacity power infrastructure. The latter is Ekibastuz GRES-1, the largest power plant in the country, in which Kazakhmys holds a 50 % stake. In fact, the group of companies manages more than 20 % of electric power generation in Kazakhstan. The last fact imposes additional social responsibility on the company.

With regard to the above-said, at the given moment Kazakhmys is implementing an investment program worth of $1 billion that will result in restoring the Ekibastuz GRES-1 capacity to 4,000 MW and a considerable reduction of emissions. Funding of this ambitious project is carried out owing to reinvesting the profits from electric power supply. The company has plans by the year 2017 to restore and upgrade the power units #8, 2 and 1 to meet the growing demand for electricity not only in Kazakhstan but also in neighboring Russia.

As part of the overall modernization program, the upgrading of power unit #8 at Ekibastuz GRES-1, launched in 2009, is still in progress. By now, 40 % of the total scope of operations on modernization has been completed, and in 2012 the power unit is expected to be commissioned into operation. The project worth over 23 billion tenge covers replacement of the boilers and turbine, as well as installation of electrical equipment, modern equipment for automatic control, and an electrostatic filter. The expectations are that with the launch of the power unit into operation the company will be capable to generate to 18 billion kilowatt of electric power an hour in 2013. The capacity of the power station will increase to 3,000 MW, which is 75 % of the planned level.

Moreover, this fall the first conduit for ash discharge outlet was put into operation at Ekibastuz GRES-1. The unit was subjected to modernization under the environmental project worth of 4 billion tenge. Modernization was carried out in line with the leading international safety standards. The company introduced and successfully applies three international standards – ISO 9001:2000, OHSAS 18001:2007, and ISO 14001:2004.

A project of installation of an electric filter of new generation is currently in progress at electric power unit #6 with the project value exceeding 2 billion tenge. The application of new technologies at the operating power unit will add to increase the level of ash collection, which will reduce emissions to 15 tons per year. The cleaning efficiency of the electric filters of new generation reaches 99.8 %, which reduces harmful emissions into the atmosphere by four times. Such filters are to be installed by the year 2013 at six power units in operation that will ensure extra reliability and the safety of the electric power plant.

It should be noted that the modernization of Ekibastuz GRES-1coupled with solving the problem of the growing demand for electric power and preventive measures to prevent its shortage are of great social significance as well. Here Kazakhmys secures jobs to thousand of people, and the number of jobs steadily continues due to newly established divisions of the company.

If we talk about corporate social responsibility of Kazakhmys Group of Companies as a whole, today’s amount of deductions paid by the corporation exceed those paid by other major mining companies, both domestically and abroad. Every year, the company invests tens of millions of dollars in building and repairing of schools, hospitals and roads, provides support to sportsmen, artists and environmentalists, and actively involves in charity and supports socially important initiatives.

Kazakhmys is also an active participant of the program "We choose things produced in Kazakhstan", which was developed by the company jointly with Kazakhstan’s government and is aimed at supporting and increasing competitiveness of domestic small and medium businesses. Today, Kazakhmys’s share of purchased goods and services from domestic producers is much higher than the average indicator within the industry.

All this evidences that Kazakhmys is not only a successful player in the mining and metals markets, but also one of the drivers of the national economy. High capacity mining and processing facilities, professional management, and successful interaction with the investors ensures the leading positions in the breakthrough industrial projects for the company. Suffice it to say that the total investments by Kazakhmys in the industrial and innovative development program of Kazakhstan in the coming 3–4 years will be about $6 billion. These funds will be primarily used to finance energy facilities, mining enterprises and to upgrade the metals industry facilities. That fact that today’s annual income of the company provides about 2.5 % of the domestic GDP is a vivid demonstration of the Kazakhmys’s role in the domestic economy.

This is the contribution worthy of a leader, and in the future it will be only growing!


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