Kazakhmys PLC
Annual Report & Accounts
Year ended 31 December 2005
Becoming a 
world player
Kazakhmys PLC Annual Report & Accounts Year ended 31 December 2005
Kazakhmys PLC
6th Floor 
Cardinal Place 
100 Victoria Street 
London SW1E 5JH 
United Kingdom
(With effect from 1 May 2006)
T: 0845 080 2369
T: +44 (0)20 8636 7900 (international)
F: 0845 080 2572
E: info@kazakhmys.com
www.kazakhmys.com Kazakhmys PLC is an international mining 
business with operations in Kazakhstan, 
Germany and the UK. Our principal business is 
the mining, processing, smelting, refining and 
sale of copper and copper products, including 
cathodes and rods. We also process, refine  
and sell zinc, gold and silver. We are the tenth 
largest mining and refining copper producer  
in the world.
 1 Highlights 2005
 2 Kazakhmys – Overview
 4 Chairman’s Statement
 6 Market Overview
 8 Kazakhstan
 10 Kazakhmys – Well positioned
 12 Kazakhmys – Mining to refining
 14 Q&A with the Chief Executive
 16 Review of Operations
 20 Financial Review
 36 Kazakhmys in the Community
 40 Board of Directors
 42 Corporate Governance Report
 48 Directors’ Report
 54 Directors’ Remuneration Report
 58 Statement of Directors’ Responsibilities
 59 Independent Auditor’s Report
 60 Consolidated and Company Financial Statements
 128 Technical Information
 146 Glossary
 148 Shareholder Information  Kazakhmys PLC
Annual Report & Accounts 2005
Financial highlights for year ended 3 December 2005
    Year ended Year ended  
    3 December 3 December % 
($ million, unless stated) 2005 2004 change
Revenues 2,597.5 1,259.5 106.2
Earnings:    
 Profit before taxation, finance  
  items and negative goodwill 842.5 578.5 45.6 
 Profit before taxation excluding  
  recognition of negative goodwill 848.1 553.7 53.2 
 EBITDA excluding special items
1
 1,073.5 791.4 35.6 
 Underlying Profit
3
 549.8 376.1 46.2
EPS: 
 Basic and diluted ($) 1.29 1.06 21.7 
 Based on Underlying Profit
2
 ($)  1.31 0.93 40.9
Free Cash Flow
3
 450.2 405.4
4
 11.1
ROCE
3
 (%) 31.5 30.2 4.3
Cash cost of copper after  
 by-product credits
3
 ($/tonne) 997 616 61.9
1  Reconciliation of EBITDA excluding special items to profit before taxation, finance items and negative goodwill is found in 
note 4(a) to the financial statements.
2 Reconciliation of EPS based on Underlying Profit to Basic and Diluted EPS is found in note 12 to the financial statements.
3 Refer to Glossary on page 146 for definitions of these key financial indicators.
4 Inclusive of expansionary and new project capital expenditure and sustaining capital expenditure of $162.2 million.
All references to $ refer to US dollars unless otherwise stated.
Highlights 2005
•  Revenues up 106.2% from $1,259.5 million to $2,597.5 million on the 
strength of rising copper prices and acquisition of MKM 
•  EBITDA excluding special items for the year increased by 35.6% from 
$791.4 million to $1,073.5 million
•  Profit before taxation excluding negative goodwill of $111.3 million 
recognised in 2004 increased by 53.2% to $848.1 million
•  EPS based on Underlying Profit increased by 40.9% to $1.31 per share 
•  Average realised copper price increased from $2,527 per tonne 
to $3,794 per tonne representing a 50.1% rise against an average 
increase in LME copper price of 28.3%
•  Expansionary and new project capital expenditure of $190 million, 
representing significant investment for future growth
•  Completion of Artemyevskoe underground mine well ahead of 
schedule and within budget 
•  Construction of new Zhaman-Aybat mine on schedule with 
completion expected in 2006
•  Successfully listed on LSE raising net proceeds of $491.2 million in 
October 2005 and entered FTSE 100 Index in December 2005
•  Inaugural post-Listing dividend proposed of 36.0 US cents per share  
in respect of full year 2005 earnings
 0
We are a top 10  
global copper producer
20
 years
We have 20 years’  
world class long- 
life reserves 2 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
We are the largest producer of copper in Kazakhstan, 
operating open pit and underground mines as well as 
smelting and refining complexes across the country at  
our sites in Zhezkazgan, Balkhash and the East Region.  
Our power plants and coal mines provide the total  
energy needs for these operations.
Kazakhmys – Overview
Group structure
Zhezkazgan Complex Balkhash Complex East Region
An integrated copper cathode 
production facility incorporating 
mining, mineral processing, smelting 
and refining operations. 
The principal products produced at the 
Zhezkazgan Complex are copper cathode 
and copper rod. 
The Zhezkazgan Complex includes the 
following principal operations: 
•  Open pit ore mining operations 
(collectively called the North mine)
•  Underground ore mining operations (the 
South, Stepnoy, East, West and Annensky 
mines)
•  Mineral processing facilities (the 
Zhezkazgan No. 1 and No. 2 and Satpaev 
concentrators, which produce copper 
concentrate from the mined ore)
•  A smelting/refining operation that 
produces copper cathode and silver 
in slimes that is sent to Balkhash for 
recovery
•  A continuous-casting copper rod plant.
The Complex’s energy requirements are 
provided by the Group’s power plants 
located in Zhezkazgan and Karaganda. 
(1.3%)
(98.7%)
An integrated copper cathode 
production facility incorporating mining, 
mineral processing, smelting and 
refining operations. 
The principal products produced at 
Balkhash Complex are copper cathode,  
zinc, silver and gold. 
The concentrate processed at the Balkhash 
Complex comes from two principal mining 
areas: the mines in the vicinity of Balkhash  
and those in the East Region in the vicinity 
of Ust-Kamenogorsk. 
The Balkhash Complex includes the 
following principal operations:
•  Open pit ore mining operations at 
Kounrad and Nurkazgan
•  The Balkhash underground ore mining 
and concentrating operations (the 
Shatyrkul and Sayak I and III mines)
•  The copper smelting/refining operation
•  The zinc hydrometallurgical plant
•  The precious metals refinery.
One of our principal mining areas  
is located in the eastern region of 
Kazakhstan, in the vicinity  
of Ust-Kamenogorsk.
The principal products produced  
at the East Region are copper and  
zinc concentrate. 
The East Region includes the following 
principal operations:
•  Open pit ore mining operations at 
Nikolaevskoe and Abyz
•  The East Region underground ore mining 
operations (Artemyevskoe, Orlovskoe, 
Belousovskoe, Irtyshskoe and  
Yubileyno-Snegirikhinskoe mines)
•  Five concentrators (Orlovskoe,  
Belousovskoe, Irtyshskoe,  
Nikolaevskoe and Karagaily).
Kazakhmys PLC
Minorities Kazakhmys LLC
Kazakhmys mining 
operations
MKM (Germany)
Balkhash Complex Zhezkazgan Complex East Region Karaganda/Borly Group reserves as at 3 December 2005
  Copper Zinc Gold Silver  
Complex/Region Proved and probable reserves (kt) % % g/t g/t
  Zhezkazgan Complex 465,907 0.95 – – 13.65
  Balkhash Complex 2,180,550 0.46 – 0.09 1.72
  East Region 121,775 2.83 3.84 0.96 53.48
 Total  2,768,232 0.65 0.17 0.11 6.00
Source: IMC
3 Kazakhmys PLC
Annual Report & Accounts 2005
The Group aims to achieve growth as a natural resources 
company and to enhance overall value for its shareholders.  
The Group will pursue this strategy by:
continuing to optimise performance of existing assets through 
improved efficiency, appropriate output expansion and focus on 
maintaining low costs;
completing existing growth and expansion projects, extensions  
to existing mines, a new acid plant at Balkhash and several other 
long-term growth projects within Kazakhstan;
leveraging its competitive position by seeking further growth 
opportunities in natural resources within Kazakhstan and 
elsewhere in the region;
applying strong cash flows and financial flexibility to enable the 
Group to make opportunistic acquisitions; and
improving the Group’s international visibility to broaden its access 
to international capital markets as a public company.
•
•
•
•
•
Group
strategy
Karaganda/Borly MKM
The Borly mines produce coal to supply 
the Group’s Karaganda power plant. 
Coal is transported to the plants by rail, 
using a  30 kilometre spur owned by 
the Group, which runs from the Borly 
mines to join the national rail system. 
Approximately 90% of the extracted 
coal was used by the Group’s heat and 
power plants and the remainder was 
sold externally.
The Group’s Borly operations include:
•  Coal mines (Borlynskoe and  
Kuu-Chekinskoe)
• A rail transport division based in Nurinsk
•  A road haulage division based in 
Prishakhtinsk.
7 .0
  M
T
of coal was mined last year
90
 %
of coal was used to 
power copper mines
Group statistics
The Karaganda power plant is located 
approximately 50 kilometres to the 
south-west of Karaganda. 
The power plant is a coal-fired facility 
of the standard Soviet design. Coal is 
delivered to the site by rail from the Borly 
mines. Electricity is then fed to the Kazakh 
national grid through which it is supplied 
to the Group’s copper refining operations 
at Balkhash and Zhezkazgan, as well as to 
outside customers.
Our copper products fabrications 
company in Germany produces and 
sells copper and copper alloy semi-
finished products worldwide. 
MKM’s main products include wires, 
sheets, plates, strips, tubes and bars 
for customers in the construction, 
automotive, aviation and general 
engineering industries.
MKM currently satisfies its copper 
requirements from copper producers 
outside the Group and from traders who 
have trading arrangements with the Group. [vISUAL OnLy]
4 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
Chairman’s Statement
Vladimir Kim
Executive Chairman
There is no doubt that 2005 will always be a landmark 
year in the history of Kazakhmys.
I am delighted to present Kazakhmys PLC’s 
first set of financial results for the year 
ended 31 December 2005. There is no 
doubt that 2005 will always be a landmark 
year in the history of Kazakhmys. We 
started the year as a long-life, low-cost 
mining company based in Kazakhstan, 
little known outside of the country. By the 
year end, we had successfully launched 
our shares on the London Stock Exchange, 
raising $491.2 million in net proceeds and, 
within three months of Listing and at the 
first opportunity for inclusion, we entered 
the FTSE 100 Index - becoming the first CIS 
business to do so. 
As a result of our successful Listing, 
Kazakhmys is now well placed to pursue 
its long-term goals. Our strong share price 
performance illustrates the appetite from 
institutional investors for Kazakhmys as  
the price rose from £5.40 by 43% to reach 
£7.74 at the end of December 2005.
We believe that the success of our Listing 
also reflects the fundamental attraction 
of our business and Kazakhstan, with its 
current political stability, growing economy 
and exceptionally rich natural resources.  
Less than six months have passed between 
our Listing and the production of our first 
set of financial results as a listed company. 
In this period, a great deal has already 
been achieved. We retained our business 
focus throughout the Listing process and 
in 2005 we have seen production figures 
at levels comparable with previous years, 
which, when combined with high copper 
and other metal prices, resulted in strong 
financial results. In 2005, the Group’s 
revenues for the year rose to $2,597.5 
million, a 106.2% increase on 2004. 
One of our key measures for comparing 
underlying trading performance between 
years, EBITDA excluding special items, 
increased by 35.6% to $1,073.5 million. 
On the back of these results, the Board 
has proposed an inaugural final dividend  5 Kazakhmys PLC
Annual Report & Accounts 2005
equivalent to 36.0 US cents per share in 
respect of full year earnings in line with our 
guidance at the time of the IPO. 
Our strategic objective for the future is to 
maintain and strengthen our position as 
a leading copper producer and achieve a 
world class reputation. We will combine our 
strong focus on copper with diversification 
into other commodities within our region 
whilst continuing to maximise operational 
efficiencies and deliver organic growth. 
With virtually no debt and strong cash 
flows from our operations, we are well 
placed to make acquisitions where we  
find value-adding opportunities.
On 14 March 2006 we announced that the 
independent members of the Board of 
Kazakhmys PLC had granted permission 
to me (in a personal capacity) to acquire 
a 25% interest in EnRC Kazakhstan 
Holding B.v. (‘EKH’), the holding company 
for certain assets of the Eurasia natural 
Resources group’s metals and mining 
business, which primarily operates in 
Kazakhstan, on the basis that the Company 
is given the benefit of a call option in 
respect of my shareholding in EKH. Any 
decision to exercise the call option would 
be taken by an independent committee of 
the Board. While I pledged certain shares  
to facilitate this transaction, I remain a  
fully committed long-term shareholder  
of Kazakhmys PLC.
I continue to remain bound by all of the 
terms of my employment contract with 
Kazakhmys PLC and, in particular, the 
obligations in that contract not to compete, 
directly or indirectly, with Kazakhmys PLC.
As a newly-floated company on the London 
Stock Exchange, my Board colleagues and 
I are firmly committed to delivering high 
standards of corporate governance. We 
believe that the combination of strong 
management and independent Directors 
will play a decisive role in the strategic 
development of the Group. The quality and 
industry knowledge of our Board members 
will strengthen and complement the skills 
and experience of our management team.
Our employees are a fundamental part of 
the business and we remain committed 
to improving the safety environment 
across our asset portfolio. The Group has 
established a Health, Safety & Environment 
(‘HSE’) Committee chaired by David Munro, 
an independent non-executive Director,  
to monitor the Group’s progress in raising 
HSE standards and performance. We  
are also delivering on our commitment  
to the broader community within which  
we operate.
Looking ahead, supply and demand 
fundamentals suggest continued copper 
price strength throughout 2006. We 
anticipate that the lower production levels 
in the first two months of 2006 will not be 
representative of the expected copper 
cathode production for the whole of  
2006. We anticipate that 2006 production 
of copper cathode will be moderately 
higher than 2005, driven by a higher level  
of production from own concentrate.  
We will continue to maintain our tight  
focus on cost control and seek further 
growth opportunities.  
I would also like to take this opportunity 
to thank all our employees, management 
team and advisers, who contributed 
to Kazakhmys’ success in 2005. Their 
dedication and commitment are crucial 
in delivering these results and creating 
further shareholder value in the future.
vladimir Kim
Executive Chairman
29 March 2006
Employees of the Group  Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
High electrical conductivity, ductility, corrosion resistance 
and strength makes copper a widely used metal in electrical 
and electronic applications, and in piping. 
Market Overview
Overview The market
Copper products can be divided 
into three main groups: copper 
wire rod, copper products and 
copper alloy products. 
The main use of copper is wire rod, 
accounting for an estimated 55% of total 
western world consumption. Wire rod is 
used in the following main wire and 
cable markets:
• General and industrial cable
• Utility power cable
• Telecommunication cable
• Other insulated wire and winding wire. 
Copper and copper alloy products 
mainly comprise tube, plate, sheet and 
strip, rods, bars and sections. The main 
copper alloys are brass (copper and zinc) 
and bronze (copper and tin). 
In general, copper products are 
consumed in the following five  
broad sectors:
• Construction
• Electrical and electronic products
• Industrial machinery and equipment
• Transportation equipment
• Consumer products.
Global reﬁned copper supply (M
T
) 
In 2005 global copper mine 
production amounted to 
14.9 M
T
, which produced 16.7 M
T
 
of reﬁned copper. Chile was the 
largest producer of mined copper, 
with a market share of over 36% 
in 2005, followed by the United 
States (8%), Indonesia (7%) and 
Australia (6%).
Brook Hunt expects that global 
copper mine production will 
increase to 15.8 M
T
 in 2006 
producing 18.1 M
T 
of reﬁned 
copper.
10
15
20
10
12
14
16
18
20
(estimate)
2006 2005 2004 2003 2002 2001 2000
Source: Copper Quarterly Report, March 2006, Brook Hunt
Global reﬁned copper consumption (M
T
)  
In 2005 global reﬁned copper 
consumption fell slightly by 0.2% 
to 16.9 M
T
, while in 2006 demand 
is expected to rise by 5.3% to
17.8 M
T
. 
In 2005, Eastern Bloc 
consumption reached an 
estimated 4.9 M
T
. Demand in 
2006 is expected to increase by 
9.1%. Comparatively, western 
consumption fell an estimated 
3% to 12.0 M
T
, and is anticipated 
to increase by 3.8% in 2006.
10
12
14
16
18
20
(estimate)
2006 2005 2004 2003 2002 2001 2000
  Source: Copper Quarterly Report, March 2006, Brook Hunt
Chinese reﬁned copper consumption and forecasts (M
T
) 
Chinese demand continues 
to be one of the main factors 
driving global consumption 
growth. In 2005, Chinese 
consumption rose by an 
estimated 7%, to 3.8 M
T
. 
This is equal to approximately 
23% of global demand and in 
2006, Chinese consumption 
is expected to increase 
by a further 9%.
2
3
4
5
7
6
(estimate)
2010 2009 2008 2007 2006 2005 2004 2003 2002
Source: Copper Quarterly Report, March 2006, Brook Hunt
1
2
3
4
5
Copper industrial consumption
(by end-use sector)
1 Construction 37% 
2 Electrical 28%
3 Industrial 13%
4 Transport 11%
5 Consumer Products 11%
Source: Brook Hunt 7 Kazakhmys PLC
Annual Report & Accounts 2005
Refined copper is traded on the London 
Metal Exchange and other commodity 
exchanges around the world. It is also  
sold directly to consumers.
Copper prices were depressed for much  
of the period between 1997-2003, with 
average 2002 prices at their lowest level  
for over a century. The initial catalyst for  
the downturn in prices was the 1997  
Asian crisis, which was followed by a  
US economic slowdown towards the end  
of 2000. The effects of the US slowdown 
were experienced across the globe with 
only one country, China, seemingly 
insulated from the slowdown.
During 2005 the price of copper rose  
by 28% to reach $4,576 per tonne giving  
an average of $3,681 per tonne over the 
year. Between 2005 and 2010, Brook  
Hunt expects global consumption to  
grow at an annual average rate of 3.9%.  
The development of the Eastern Bloc 
economies in this period, as well as China,  
is largely responsible for the stronger than 
expected growth rate.
Market outlook
and demand is  
expected to rise by
 .9
 M
T
In 2005 global refined  
copper consumption was
+
5.3 
%
in 200 to
 7 .8
 M
T
Global reﬁned copper supply (M
T
) 
In 2005 global copper mine 
production amounted to 
14.9 M
T
, which produced 16.7 M
T
 
of reﬁned copper. Chile was the 
largest producer of mined copper, 
with a market share of over 36% 
in 2005, followed by the United 
States (8%), Indonesia (7%) and 
Australia (6%).
Brook Hunt expects that global 
copper mine production will 
increase to 15.8 M
T
 in 2006 
producing 18.1 M
T 
of reﬁned 
copper.
10
15
20
10
12
14
16
18
20
(estimate)
2006 2005 2004 2003 2002 2001 2000
Source: Copper Quarterly Report, March 2006, Brook Hunt
Global reﬁned copper consumption (M
T
)  
In 2005 global reﬁned copper 
consumption fell slightly by 0.2% 
to 16.9 M
T
, while in 2006 demand 
is expected to rise by 5.3% to
17.8 M
T
. 
In 2005, Eastern Bloc 
consumption reached an 
estimated 4.9 M
T
. Demand in 
2006 is expected to increase by 
9.1%. Comparatively, western 
consumption fell an estimated 
3% to 12.0 M
T
, and is anticipated 
to increase by 3.8% in 2006.
10
12
14
16
18
20
(estimate)
2006 2005 2004 2003 2002 2001 2000
  Source: Copper Quarterly Report, March 2006, Brook Hunt
Chinese reﬁned copper consumption and forecasts (M
T
) 
Chinese demand continues 
to be one of the main factors 
driving global consumption 
growth. In 2005, Chinese 
consumption rose by an 
estimated 7%, to 3.8 M
T
. 
This is equal to approximately 
23% of global demand and in 
2006, Chinese consumption 
is expected to increase 
by a further 9%.
2
3
4
5
7
6
(estimate)
2010 2009 2008 2007 2006 2005 2004 2003 2002
Source: Copper Quarterly Report, March 2006, Brook Hunt
2001 2002 2005 2004 2003 2000
1,000
2,000
3,000
4,000
5,000
Copper price ($/t)
Source: Brook Hunt 8 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
Kazakhstan is a constitutional republic in Central Asia, the 
ninth largest country in the world and the second largest 
country in the former Soviet Union. 
Kazakhstan
Overview
Natural resources 
Kazakhstan possesses enormous oil and  
gas reserves as well as plentiful supplies  
of other minerals and metals, including 
chrome, iron ore, alumina, lead, zinc, 
copper, manganese and precious metals.  
It also has a large agricultural sector 
featuring livestock and grain. 
 M
T
  %
Kazakhstan (unless   of global 
resources 2005 stated) resources 
 
Zinc  35  7.6 
Copper  20  2.1 
Iron ore 7,000  4.1 
Manganese 357  7.0 
Chrome  470  26.1 
Bauxite 660  2.0 
Gold (kt) 18  20.0 
Coal 34,000 3.5 
Uranium 1  16.8 
Sources: USGS, BP, nWA, World Bank Brokers Estimates, 
www.securities.com
The country is a leading producer of copper, 
zinc, tungsten, manganese, coal, uranium, 
lead and, to a lesser extent, gold and silver. 
Grain, wool and meat are also major exports.
The extraction and production of oil and  
gas and the extraction and processing of 
minerals are the most significant industries 
in the Kazakhstan economy. Foreign  
direct investment, which reached 7.7% of 
GDP in 2004, remains overwhelmingly 
concentrated in these sectors.
In 2005, the population of Kazakhstan  
was approximately 15.2 million, making 
Kazakhstan one of the most sparsely 
populated countries in the world with  
an average population density of 
approximately 5.6 people per square 
kilometre.
Kazakhstan’s population is ethnically 
diverse. Kazakh, the official language,  
is spoken by approximately 64% of the 
population. Russian is spoken by about 
95% and is also officially recognised  
for use in state matters and local 
government.
In December 1997, the capital was moved 
from Almaty to Astana (formerly known  
as Akmola), which is located in central 
Kazakhstan, and most of the government 
departments have relocated to Astana. 
Almaty remains, however, the financial 
capital of the country and is by far the 
largest city. 
Kazakhstan’s location between Russia  
and China, and its position as the most 
stable and economically developed state 
in Central Asia, means that it is well 
situated to develop the rich natural 
resources of the region and satisfy the 
burgeoning Chinese market.
Kazakhstan has established diplomatic 
relations with over 120 countries and  
is a full member of the United Nations,  
the International Monetary Fund and  
the World Bank.
The Kazakh economy 
Since 1991, economic and structural 
reforms have helped to revive Kazakhstan’s 
economy and made it the most 
economically developed country in Central 
Asia – with oil and gas, construction, real 
estate and financial services being the most 
successful sectors. 
  2000  200  2002  2003 2004
 
GDP  
($ billion)  18.4 21.5 24.2 30.0 40.7
Real GDP  
growth 
(% change)  9.8 13.2 9.5 9.2 10.1 
Inflation 
(CPI%  
change)  13.4 8.4 6.6 6.8 6.9
Source: Moody’s 
In September 2002, Kazakhstan became the 
first country in the former Soviet Union to 
receive an investment-grade credit rating. 
Kazakhstan had welcomed over $34 billion of 
foreign direct investment into its economy 
by the end of 2004, with significant investors 
including Shell, Exxon Mobil, Chevron 
Texaco, Glencore and BG Group. $
40.7
 BN
a GDP of $40.7 billion  
and a real growth rate of 10.1% for 2004 
(Source: Moody’s)
 5
 M
with a population of  
more than 15 million
2.7
 M KM
2
Kazakhstan has an area  
of 2.7 million sq km
9
 Th
largest country in the world
Kazakhmys is the first company  
from Kazakhstan to achieve  
FTSE 100 status.
Astana, Kazakhstan 2005
Annual Report & Accounts 2005
Kazakhmys PLC 9 Astana
C
S P I A N
S E A
SEA
Pavlodar
Almaty
A
Kosmurun
Borlynskoe
ARAL
SEA
CHINA
RUSSIA
KAZAKHSTAN
BALKHASH 
COMPLEX
Boschekul
Orlovskoe
Artemyevskoe
Nikolaevskoe Yubileyno-
Snegirikhinskoe
Irtyshskoe
Belousovskoe
Shatyrkul
Kounrad
Sayak
Annensky
KARAGANDA
BORLY
Aktogay
North
Nurkazgan
South 
East
Zhaman-Aybat
ZHEZKAZGAN 
COMPLEX
Ust-Kamenogorsk
West
Stepnoy
ASTANA
Abyz
Kuu-Chekinskoe
Akbastau
EAST REGION
GERMANY
MKM 
GmbH
UK
Kazakhmys 
PLC
0 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
Kazakhmys PLC is well positioned to participate in the 
development of the still largely untapped natural resources 
sector of Kazakhstan and the neighbouring region. The 
Group has a competitive advantage in developing these 
resources as it is one of the largest mining and metals 
companies in Kazakhstan. It is also well established in the 
Central Asian market and understands the local political 
and economic environment.
Kazakhmys – Well positioned
Kazakhstan borders China and is therefore well positioned 
to supply copper and other metals to key Chinese industrial 
centres. The Group has long-standing relationships with 
customers in China and in 2005 sold over 50% of its copper 
cathodes and rods into China. 
Strategically placed Locations – Europe
China accounts for approximately 23%  
of world copper consumption and with 
aggressive refinery expansion in the 
country, copper concentrate imports  
should remain strong.
As China is the principal destination for 
our copper products, Kazakhmys is well 
placed to benefit from the country’s 
anticipated growth in copper demand. 
Key advantages:
•  Proximity to China resulting in low 
transportation costs
•  Local knowledge of Chinese market
•  Future growth in Chinese demand. 
Our asset base
Our large-scale operations take advantage 
of Kazakhstan’s extraordinary mineral 
wealth. Our prime location offers us  
an exceptional platform to benefit from 
China’s dynamic economic growth and  
to tap the natural resource wealth of 
Kazakhstan and our region.
23
%
Chinese consumption of  
global copper supply
Chinese net imports of reﬁned
copper (kt)
2003 2004 2006
(estimate)
2005 2002
0
500
1000
1500
Source: Brook Hunt
2
3
4
5
6
7 8
9
10
11
1
Top ten reﬁned copper consuming 
countries (kt)
  1 China 
  2 USA 
  3 Japan
  4 Germany 
  5 South Korea
  6 Italy
  7 Russia
  8 Taiwan
  9 France
10 Mexico
11 Other Source: Brook Hunt Astana
C
S P I A N
S E A
SEA
Pavlodar
Almaty
A
Kosmurun
Borlynskoe
ARAL
SEA
CHINA
RUSSIA
KAZAKHSTAN
BALKHASH 
COMPLEX
Boschekul
Orlovskoe
Artemyevskoe
Nikolaevskoe Yubileyno-
Snegirikhinskoe
Irtyshskoe
Belousovskoe
Shatyrkul
Kounrad
Sayak
Annensky
KARAGANDA
BORLY
Aktogay
North
Nurkazgan
South 
East
Zhaman-Aybat
ZHEZKAZGAN 
COMPLEX
Ust-Kamenogorsk
West
Stepnoy
ASTANA
Abyz
Kuu-Chekinskoe
Akbastau
EAST REGION
 Kazakhmys PLC
Annual Report & Accounts 2005
Open pit mine
Coal mine
Underground mine
Projects
Potential opportunities
Power plant
Capital city
Airports
Kazakhstan
New mine
Artemyevskoe
• Completed well ahead of schedule
• Underground mine
• Located in the East Region
• Average annual production of 28 kt of copper 
and 98 kt of zinc metal
New sites
Zhaman-Aybat
• Currently under construction
• Located in the Zhezkazgan Complex
•  Underground mine with ore reserves  
of 75.3 M
T
• Containing 1,069 kt of copper
Aktogay
• Site studies currently being conducted
• Located in the Balkhash area
• Open pit mine with ore reserves of 1,614 M
T
• Average grade of 0.36% of copper
• Containing 5,810 kt of copper
Extensions of existing mines
East Saryoba (north mine)
• Underground mine with expected  
mine life of 20 years
• Located near the north mine in the 
Zhezkazgan Complex
• Room-and-pillar extraction method
Taskura (north mine)
• Open pit mine with expected mine  
life of 11 years
• Will be part of the north mine
• Shovel and truck extraction method
Kosmurun and Akbastau 
• Open pit mines with expected mine  
life of 44 and 26 years respectively
• Will extend facilities in East Region
• Shovel and truck extraction method
Future 
opportunities 2 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
Kazakhmys – Mining to refining
We are a vertically integrated business from mining to refining, 
producing copper cathode and value added fabricated copper 
products as well as zinc, gold and silver. We mine all the ore we 
process, produce substantially all the copper concentrate we process 
and generate sufficient electricity to meet our own requirements. In 
addition to our captive power, we also manufacture in-house many 
other raw materials used in our production processes, including 
chemical reagents used in the smelting and refining processes. 
The Group has two coal 
mines located at Borly:
•  Borlynskoe, a surface strip 
coal mine
•  Kuu-Chekinskoe, an open  
pit mine.
 
These mines produce enough 
coal to supply the heat and 
power plants at Karaganda, 
Zhezkazgan and Balkhash as 
well as external customers. 
In 2005, the two coal mines 
produced 7.0 M
T
 of coal, of 
which approximately 90% was 
used by the Group, and the 
remainder was sold externally. 
Coal is transported to our power 
plants using our own rail 
transport system. 
Our principal power plant is 
located at Karaganda and 
runs on coal from the Borly 
mines. 
It supplies electricity to the 
Zhezkazgan and Balkhash 
Complexes through the national 
grid on a credit system, enabling 
us to use our own power 
effectively whilst paying only  
the cost of transmission. 
In 2005, the Group produced  
6,441 GWh of electricity, the 
majority of which was used 
internally. 
The coal-fired power and 
heating plants at the 
Zhezkazgan and Balkhash 
Complexes supplement the 
electricity provided by the 
Karaganda plant and also 
produce hot water for local 
heating.
Our mining activities are 
focused on extracting copper 
but gold, silver and zinc are 
also valuable by-products 
produced in the process. 
We operate both underground 
and open pit mines and the 
mineral reserves and resources  
of these mines are sufficient to 
support projected production for 
at least 20 years. 
Our mines employ a variety of 
extraction methods including:
•  Conventional shovel and truck
•  Shrinkage stoping mining
•  Trackless equipment using 
caving
•  Hydraulic excavator and truck
• Room-and-pillar.
Coal mining Power plants Mining
2 3  7
We own a total of 17 mines: 
12 underground  
and five open pit
We own three power 
plants that supply 
electricity to the rest  
of the Group
The Group has two coal 
mines with combined 
reserves of 50 years 3 Kazakhmys PLC
Annual Report & Accounts 2005
Concentrating is the means 
of processing the mined  
ore to produce copper 
concentrate. 
The process comprises two 
stages:
•  Crushing and grinding  
the ore
•  Separating copper 
concentrate from barren  
rock by flotation.
Copper concentrate is then 
pumped or sent by rail to  
the smelters for further 
processing.
We have concentrator facilities 
at Zhezkazgan, Balkhash  
and the East Region.
This process refines the 
copper concentrate and the 
Group does this in two stages: 
•  Smelting uses electric smelting 
furnaces (Zhezkazgan) and 
autogenous bath smelting 
furnaces (Balkhash)
•  The Group also has an electro-
refinery where anodes are 
suspended in solution to 
produce copper cathode by 
electrolysis in the second 
stage of the process.
Gold and silver slimes, and zinc 
concentrate are all by-products 
of this stage of the process. 
These are then refined using 
other Group facilities. 
Our smelters and copper 
refineries treat most of our 
copper concentrate as well as 
concentrate from third parties. 
This is the last stage in the 
process that produces semi-
finished copper products.
Such products are used for 
various applications, notably in 
the construction, automotive, 
aviation and general engineering 
industries, which are then sold 
worldwide.
We have fabricating facilities at 
our operations in Kazakhstan and 
also at MKM, our German 
subsidiary, which sources its 
copper requirements from 
outside the Group.
Main copper products include:
• Wires
• Sheets
• Strips
• Tubes
• Bars.
Most of Kazakhmys’ raw 
materials and production are 
transported by Group-owned 
and national rail lines. 
We own and maintain 
approximately 950 km of our  
own railways, which are linked  
to Kazakhstan’s main national  
rail trunk lines. 
Mined ore is transported by  
rail from the mines to the 
concentrators and then to  
the smelters for the next  
stage of processing. 
Copper and zinc products from 
the Zhezkazgan and Balkhash 
Complexes are transported by rail 
primarily to Alashankou in China  
or to the ports of Novorossiysk or 
St. Petersburg in Russia.
Concentrating Transportation Smelting and refining Fabricating
9  28 475 
Ktpa
490 
Ktpa
The combined capacity  
of the Group is 490 Ktpa  
with 440 Ktpa at MKM and  
50 Ktpa at Kazakhmys LLC
Our processing capacity for 
copper cathode is 475 Ktpa
The Group owns 128 
locomotives with  
1,424 wagons 
We have nine 
concentrators 4 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
Mr Cha has served on the board of directors of Kazakhmys LLC 
since 2000. He answers some of the most frequently asked 
questions since being appointed Chief Executive.
Q&A with the Chief Executive
Yong Keu Cha
Chief Executive
 . What, for you, were the highlights  
of 2005?
I can think of a few highlights that stand out.
Our year-on-year financial performance 
has improved, albeit supported by higher 
copper prices. Revenues are up by 106.2% 
and EBITDA excluding special items is 
35.6% higher than in 2004. Furthermore, 
although we faced operating challenges 
at the beginning of 2005, notably the 
slope failure at the nikolaevskoe mine, we 
managed to sustain our production levels 
returning to full operating capacity by 
June 2005. 
We succeeded in expanding our 
production asset base, completing the 
Artemyevskoe mine project. We have also 
made good progress on several other 
projects and expansions at some of the 
existing mines and will continue to work on 
these as well as developing new projects. 
Key to our operations, our neighbour 
China, the principal destination for our 
copper products, continued to be one  
of the fastest growing economies in  
the world.
But most importantly, 2005 was a 
milestone in the history of the Group. We 
successfully launched our shares on the 
London Stock Exchange and entered the 
FTSE 100 Index at the first opportunity; our 
share price increased substantially, which 
is good news for us and our investors. 5 Kazakhmys PLC
Annual Report & Accounts 2005
2. Can you elaborate on the effects of 
the recent UK listing on the Group’s 
operations? 
Prior to our Listing, Kazakhmys had limited 
financial flexibility and low investor visibility 
and access to international capital markets 
– all key components that are required for 
a company to compete successfully for 
significant investment opportunities. 
Aware of these constraints, our 
management team took the opportunity to 
take Kazakhmys public and list its shares 
on the London Stock Exchange, thus 
building a platform from which shareholder 
value could be created and growth could 
be pursued, at the same time as unlocking 
the Group’s existing potential.
Becoming a UK listed company has 
brought us a number of responsibilities: 
more transparency and detailed 
disclosure, increased accountability to 
shareholders and compliance with all 
relevant regulations in the market. On 
the operational side, we have introduced 
significant changes to our internal 
management information system and 
data analysis. We are introducing a more 
rigorous approach to budgeting, new 
project approval and capital expenditure. 
All key elements of Group strategy are 
approved by the Board, which includes 
several independent Directors with 
significant sector experience.
Alongside these responsibilities, we have 
recognised substantial benefits. We have 
access to much cheaper funding. With our 
current capitalisation and a much stronger 
balance sheet with virtually no debt, we 
are well positioned to consider investment 
opportunities throughout the world. 
However, for the time being, we remain 
firmly focused on the surrounding region. 
We also remain focused on copper with the 
potential to diversify into other base metals 
should we see an attractive opportunity.
3. how do you respond to those, 
particularly in the press, who say 
that Kazakhmys does not conform 
to the UK standards of corporate 
governance? 
The Board believes that effective 
governance structures and procedures are 
essential to the long-term sustainability 
of its business. As a result, in the 
period leading up to Listing, the Board 
implemented a number of changes to the 
corporate governance of the Company. 
These changes were designed to give 
confidence to shareholders that it would 
aspire to be well managed in a manner 
comparable to other international mining 
companies listed on the London Stock 
Exchange whilst taking into account the 
unique circumstances behind the growth 
and development of the Group. 
4. how are the new projects 
progressing? 
We are very pleased with the progress we 
have achieved on our new projects. We 
completed Artemyevskoe, an underground 
mine project, well ahead of schedule and 
within budget. The mine has an expected 
mine life of 22 years. 
We have also made good progress towards 
the completion of the Zhaman-Aybat mine. 
The shaft systems are commissioned and 
the underground development is almost 
complete. We anticipate initial production 
to start later this year. Zhaman-Aybat 
has reserves of 75.3 M
T
 of ore containing 
1,069 kt of copper.
At our largest future project, Aktogay, 
we are continuing with site studies 
and preliminary works but the final 
development decision still has to be made. 
Aktogay is an open pit mine with reserves 
of 1,614 M
T
 of ore at an average grade of 
0.36% of copper containing 5,810 kt of 
copper. 
5. Do you have any acquisition plans 
for the immediate future? 
Kazakhstan is a very rich country with a 
wealth of natural resources and a rapidly 
developing economy. These factors make 
the projects in Kazakhstan attractive 
for both local and foreign investors. We 
are constantly reviewing investment 
opportunities in the region and believe 
that there are several opportunities that 
will allow us to deliver on our strategic 
objective of opportunistic acquisitions 
in the area. However, I cannot be more 
specific at this stage.
 . What are your views on 
Kazakhstan’s economy?
Kazakhstan’s economy is one of the most 
dynamic developing economies in the 
region. The country has enjoyed over 9% 
annual GDP growth rate for the last several 
years and foreign direct investment in 
2005 stood at over $40 billion. The country 
possesses a wealth of impressive natural 
resources, which makes it an attractive 
investment destination.
Recently, Mr nazarbayev was re-elected 
as President of Kazakhstan for another 
seven-year term and this will continue to 
provide a stable political environment. 
Mr nazarbayev is a strong advocate of 
liberalising the economy and attracting 
foreign investment. 
7. What is your view on the outlook  
for the copper market? 
In recent years, growth in demand has 
resulted in steadily increasing copper 
prices. There is a generally accepted view 
in the market that in the short-term, copper 
prices should remain above the long-term 
historic average. nonetheless, there are 
several projects being implemented in 
response to higher copper prices but it 
should take some time before they can 
impact the markets. 
A major factor in performance of the 
copper market has been demand from 
China. Refined copper consumption in 
2005, one of the factors most important 
to us, grew by 7% compared to 2004. 
China consumed 23% of global copper 
supply in 2005 and last year the country’s 
GDP growth rate was an impressive 9.9%. 
However, there are differing views as to 
how much longer China can continue its 
impressive economic growth. There has 
been a lot of speculation on a hard landing 
for the Chinese economy but there has 
been little evidence of it so far.    Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
The Group has a number of mining projects in Kazakhstan 
that are intended to provide for organic production growth 
and, in the longer term, production replacement. The 
majority of these projects are anticipated to come on line 
in the short to medium-term and include both new sites 
and extensions of existing mines.
Review of Operations 
Summary of operational performance
Over the last year, we have seen copper 
cathode production at levels comparable 
with previous years and improving 
production in zinc and precious metals, 
which, when combined with high copper 
and other metal prices, has resulted in 
strong financial results.
The copper market was buoyant in 2005, 
with average prices on the London Metal 
Exchange of $3,681 per tonne compared 
to $2,868 per tonne in 2004, a rise of 28.3% 
(Source: Brook Hunt). Exceptional demand 
from China has continued driving metal 
prices up to new higher levels. In 2005, 
Chinese copper consumption increased 
by 7% compared to 2004. We are a fully 
integrated copper producer and therefore 
benefit from any strengthening in the 
copper price. The main end-user market 
for copper in 2005 remained the global 
construction industry.
In 2005, we completed the construction 
of the underground mine, Artemyevskoe, 
within budget and ahead of schedule 
so that the Group now comprises 12 
underground and five open pit mines,  
nine concentrators and two copper 
smelter/refineries, a zinc smelting plant,  
a precious metals refinery and a copper 
rod plant, and a fabricated products 
subsidiary, located in Germany.
Our smelting plant, Zhezkazgan Complex 7 Kazakhmys PLC
Annual Report & Accounts 2005
Our smelter, Zhezkazgan Complex Our coal operations
At the beginning of 2005, we experienced 
a more challenging operating environment, 
which included temporary mining 
stoppages at several mines. A slope failure 
at the nikolaevskoe open pit mine in the 
first quarter of 2005 was fully resolved in 
the second quarter with the mine returning 
to full capacity. Furthermore, in accordance 
with our mining plan, we extracted and 
processed lower grade ores at some of  
our mines so that 2005 actual average 
copper content in ore was 21% below 2004 
levels. Zinc content in ore was 20% above 
2004 grade reflecting increasing extraction 
of zinc-rich ores in our production profile.  
In addition, productivity in early 2005  
was affected by unusually cold weather  
in Kazakhstan and some delays in 
equipment supply. 
nonetheless, by the end of May 2005, 
the Group had recovered from these 
operational challenges and ore output  
was satisfactory.
Due to anticipated lower copper content 
in the ores mined, we increased ore 
extraction volumes by 11.5%, compared 
to 2004. We also procured an additional 
268 kt of concentrate from third parties  
and produced around 10 kt of copper 
cathode through tolling arrangements.
In spite of the operating challenges,  
we were able to sustain our production 
at around 400 kt of copper cathode 
and increase zinc metal production to 
51 kt, demonstrating that the Group can 
consistently produce large quantities of 
copper, maintaining our position as one  
of the world’s leading copper producers.
Copper
For the year ended 31 December 2005, 
we produced 397 kt of copper cathode, 
processing 1,985 kt of copper concentrate.  
Included in the 397 kt of copper cathode 
produced was 10 kt of copper produced 
through tolling arrangements.
The Zhezkazgan Complex produced 235 kt 
of copper cathode, of which 9 kt was used 
to produce copper rod.  
The Balkhash Complex produced 162 kt 
of copper cathode, of which 10 kt was 
produced under tolling arrangements.
At the East Region we produced 592 kt 
of copper concentrate and 202 kt of zinc 
concentrate in 2005, with an additional 
29 kt processed for us by third parties.
As part of our maintenance programme, 
we carried out planned shutdowns at 
the Zhezkazgan copper smelter in the 
third quarter of 2005 and at the Balkhash 
copper smelter in the fourth quarter. 
These shutdowns resulted in slightly lower 
production volumes in the corresponding 
quarters, but did not significantly affect
the overall production performance for
the year.
During 2005, the Group produced 1,416 kt 
of copper concentrate, of which 44 kt were 
processed by a third party. A further 268 kt 
of copper concentrate were purchased 
from third parties to better charge the 
Group’s refining capacity. 
At present, the Group has insufficient 
concentrator capacity to handle the 
ore from the recently constructed 
Artemyevskoe mine so this concentrate is 
currently being processed by third parties. 
To address this issue, we are upgrading 
operating capacity at a number of our 
concentrators. The annual production 
capacity of the Karagaily concentrator is 
being upgraded from 1,000 kt to 1,500 kt, 
and the nikolaevskoe concentrator from 
2,000 kt to 2,500 kt due to grinder 
reconstruction. The work began in 2005 
and once the nikolaevskoe upgrade is 
completed, all of the concentrate from 
the Artemyevskoe mine will be processed 
internally.
As stated at the time of our Listing, we 
are currently developing several organic 
growth projects. The majority of these 
projects are anticipated to come on line in 
the short to medium-term and include both 
new sites and extensions to existing mines. 
new site projects include Aktogay, the 
Group’s primary project, where feasibility 
0
100
200
300
400
500
600
2004 2005
20
49
Kt
3
405
10
48
9
339
Copper production by  
source of concentrate
 Tolling  
 Purchased
 Own
 Copper rod
Production of  
copper cathodes: 8 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
Our copper cathode production facilities, Zhezkazgan
In spite of the operating challenges, we were able to 
sustain our production at around 400 kt of copper cathode 
and increase zinc metal production to 51 kt, demonstrating 
that the Group can consistently produce large quantities of 
copper, maintaining our position as one of the world’s 
leading copper producers.
studies continue to be undertaken and 
Zhaman-Aybat, which is expected to 
enter production during 2006. Recently 
completed projects include Stepnoy, which 
is currently ramping up to full capacity and 
Artemyevskoe, which was completed in 
2005 ahead of schedule and within budget, 
and is preparing to ramp up to full capacity 
in 2007.
Zinc
We continue to make progress with the 
implementation of our growth plans in the 
zinc business, although our zinc smelter 
ramp-up is progressing at a slower rate 
than originally anticipated. In 2005, we 
increased the output of zinc metal in 
concentrate to 82 kt from 66 kt in 2004. 
Production of zinc metal increased from 
18 kt in 2004 to 51 kt in 2005.
Over the course of 2006 we will continue 
fine-tuning our operating performance 
at the Balkhash zinc plant complex. The 
zinc-rich concentrate from the recently 
completed Artemyevskoye mine should 
contribute to improving the quality of 
concentrate and ensure zinc metal 
production volumes are more consistent 
in 2006.
Precious metals
Our precious metals refinery, located in the 
Balkhash region, recovers gold and silver 
from the slimes from all of the Group’s 
operations. We also treat slimes from third 
parties on a tolling basis.
Review of Operations continued 9 Kazakhmys PLC
Annual Report & Accounts 2005
Our precious metals output rose during 
the year as the Abyz and Artemyevskoe 
mines started production of their silver-
rich and gold-rich ores. In 2005 the Group 
produced 21 million ounces of silver, of 
which 90 thousand ounces of silver were 
produced on a tolling basis. We produced 
146 thousand ounces of gold of which 45 
thousand ounces were produced on a 
tolling basis. 
MKM production
MKM is a fabricating subsidiary of the 
Group, located in Germany. MKM produces 
and sells copper and copper alloy semi-
finished products, predominantly in the 
European Union, for various applications. 
MKM is organised into three business 
units: wire products, tubes and bars, flat 
products (strips, plates and sheets).
In 2005, MKM’s total production was  
219 kt. The wire products business unit 
produced 120 kt of wire products. Total 
tubes and bars production was 40 kt in 
2005, of which tubes production was  
19 kt and bars production was 21 kt.  
The flat products business unit produced 
59 kt of flat products, of which 5 kt were 
pre-rolled flats, 12 kt were sheets, and  
42 kt were strips.
MKM invested $13.5 million in asset 
optimisation and production expansion in 
the last year, with the main emphasis on the 
expansion of the tube production capacity 
from 19 kt to 28 kt. Production bottlenecks 
were eliminated with an investment of 
$7.2 million for new drawing lines as well  
as upgrades of existing equipment.  
In 2005, MKM’s capabilities to produce 
de-oxidised copper were improved by 
investment in related equipment. As a 
result, an extended product range can be 
produced starting in 2006, allowing MKM  
to target additional market segments.
During 2005, MKM was also able to achieve 
improvement in the utilisation of the 
ContiM
®
 equipment. MKM operates some 
of the most advanced ContiM
®
 equipment 
worldwide. In 2005, production volumes 
for this equipment increased by more than 
200%, primarily driven by good market 
demand for wire products. 
Other production
We also generate power for the needs of 
our business. In Kazakhstan, the Group 
owns and operates a power plant located  
at Karaganda, a combined heat and power 
contained plant located at Zhezkazgan  
and a heat and power plant in Balkhash.  
In 2005, the Group generated 6,441 GWh  
of electricity and 4,013 KGcal of  
heating power, most of which was used  
by our operations.
Kazakhmys revenue split by product 2005
1
1 The chart shows contribution of each product 
 by revenue.
2 Other products include coal, heat and energy.
1 Copper 397 kt
2 Silver 20,516 koz
3 Zinc metal 51 kt
4 Gold 146 koz
5 Other
2 1
4
3
5
2
MKM split by product 2005
1 Strips, plates 
 and sheets 59 kt
2 Tubes and bars 40 kt
3 Wire 120 kt
3
2
1 20 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
1
2005
2004
2003
2002
1,073.5
791.4
418.7
393.8
EBITDA excluding special items
$ million
Key financial indicators
 2005 2004
EBITDA excluding  
special items ($ million)  ,073.5 791.4
  
EPS based on  
Underlying Profit ($)  .3 0.93
   
Free Cash Flow ($ million) 450.2 405.4
   
Return on Capital  
Employed (%) 3 .5% 30.2%
  
  
Cash cost of copper (after  
by-product credits) ($/tonne) 997 616
2005
2004
2003
2002
1.31
0.93
0.37
0.41
EPS based on Underlying Proﬁt
$
2005
2004
2003
2002
450.2
405.4
15.1
147.2
Free Cash Flow
$ million
EBITDA excluding special items: 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 Group. EBITDA excluding 
special items is a measure of the cash profits 
of the business and we strive to achieve high 
margins by taking advantage of our low cost 
base through vertically integrated operations.
EPS based on Underlying Profit: defined 
as EPS before special items, and their 
resulting tax and minority interest impacts. 
EPS tells us how much attributable profit 
per share is available for distribution to 
shareholders through dividends. Our 
dividend policy will take into account the 
profitability and underlying growth in 
earnings of the Group, whilst maintaining 
a prudent level of dividend cover.
Free Cash Flow: defined as net cash flows 
from operating activities less sustaining 
capital expenditure on tangible and 
intangible assets and investment in mine 
stripping costs. Free Cash Flow quantifies 
the Group’s cash flows which can be used 
to fund dividend payments and invest in 
the future growth and development of the 
business.
Five key indicators to measure the financial 
performance of the Group are set out below 
to assist comparability with other international 
mining companies.
Key financial 
indicators
2 3
4
2005
2004
2003
2002
31.5%
30.2%
16.8%
19.4%
Return on Capital Employed (’ROCE’)
%
2005
2004
2003
2002
997
616
549
614
Cash cost of copper 
(after by-product credits)
$/tonne
Return on Capital Employed: defined as 
profit before interest and taxation over 
capital employed (borrowings and total 
equity, including minority interests). ROCE 
measures how efficiently the Group’s 
capital is being utilised. Our objective is 
to ensure ROCE is consistently above the 
Group’s weighted average cost of capital.
Cash cost of copper (after by-product 
credits): defined as the total of operating 
costs as presented in the income 
statement less by-product revenues, 
over the volume of copper cathodes 
and rods sold. The cash cost of copper 
measures the performance of the Group 
in maintaining its low cost base whilst 
maximising revenues through the sale  
of by-products.
5
Financial Review 2 Kazakhmys PLC
Annual Report & Accounts 2005
Kazakh Mining
Commodity prices
Production costs  
and efficiency 
volume of contained metal 
within mined ore
Exchange rates.
Commodity prices: As the Kazakh Mining 
business does not hedge the sales of its 
commodities, its revenues are exposed to 
fluctuations in the price of copper and, to  
a lesser degree, zinc, silver and gold. The 
revenues of the Kazakh Mining business  
are set with reference to prevailing market 
prices together with the addition of a pre-
determined margin depending on the terms 
of annual sales contracts. 
•
•
•
•
Production costs and efficiency: The long-
term profitability of the Kazakh Mining 
business is dependent on its ability to 
maintain the efficiency of its operations 
and its low cost base. The economies of 
scale of the operations in Kazakhstan and 
their vertical integration drive the 
profitability of the business, thereby 
maintaining consistently high margins.
Volume of contained metal within mined 
ore: Production costs per unit are significantly 
affected by changes in production volumes. 
Whilst the volume of mined ore remains 
largely consistent between years, the Kazakh 
Mining business may produce at different ore 
grades. This impacts production volumes and 
ultimately the cash cost of copper, since 
certain production costs are fixed in nature 
and some variable costs reduce through 
increased volumes.
Exchange rates: A substantial proportion  
of operating costs of the Kazakh Mining 
business are denominated in Kazakhstan 
tenge, whilst the majority of its revenues 
are linked to US dollar denominated 
commodity prices. Expenses of the Kazakh 
Mining business may therefore increase or 
decrease relative to its revenues as a result 
of fluctuations in exchange rates, thereby 
affecting the profitability of the business in 
US dollar terms. The interaction of 
inflationary pressures in Kazakhstan and 
the strength of the Kazakhstan tenge 
against the US dollar also impact the level 
of expenses denominated in Kazakhstan 
tenge in US dollar terms.
Sales volumes and  
product mix
Market competition
Production costs  
and efficiency
Exchange rates.
Sales volumes and product mix: 
Profitability of MKM is dependent on the 
volume of sales which the business can 
achieve, as well as the product mix of 
those sales. Strong sales growth of higher 
margin products benefits the absolute 
profitability of the business, as well as 
giving rise to higher margins. 
•
•
•
•
Market competition: The market in which 
MKM operates is mature with several large 
competitors. Price pressure in key market 
segments impacts the price which MKM 
can negotiate with its customers, thereby 
impacting its margin. 
Production costs and efficiency: 
Profitability of MKM is dependent on its 
ability to control its operating costs and 
improve the efficiency of its production 
processes. By utilising unused production 
capacity and developing the proprietary 
technology of the ContiM
®
 process, it is 
planned that production costs per unit  
will reduce. These reductions should 
improve the overall profitability of the 
business in absolute terms, as well as 
improving margins.
Exchange rates: A substantial proportion 
of operating costs of MKM are 
denominated in the euro, whilst the 
majority of its revenues and metal input 
within costs of sales are linked to US dollar 
denominated copper prices. Expenses of 
MKM may therefore increase or decrease 
relative to its revenues as a result of 
fluctuations in exchange rates, thereby 
affecting the profitability of the business  
in US dollar terms.
MKM
Key drivers to  
financial performance
There are broadly four key drivers that significantly 
impact the financial performance of each of the 
Group’s business segments. 22 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
Oleg Novachuk
Finance Director
   Year ended Year ended 
   3 December 3 December % 
($ million, unless stated) 2005 2004 change
Revenues 2,597.5 1,259.5 up 106.2
Earnings:
 Profit before taxation, finance items and  
  negative goodwill 842.5 578.5 45.6
 Profit before taxation, finance items, negative  
  goodwill and excluding special items
1
 853.8 634.7 34.6
 EBITDA excluding special items
2
 1,073.5 791.4 35.6
EPS:
 Basic and diluted ($) 1.29 1.06 21.7
 Underlying Profit
3 
 ($) 1.31 0.93 40.9
Post-Listing Dividend
4  
(US cents per share) 36.0 n/a n/a
1  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  Reconciliation of EBITDA excluding special items, to profit before taxation, finance items and negative  
goodwill is found in note 4(a) to the financial statements.
3  Reconciliation of EPS based on Underlying Profit to Basic and Diluted EPS is found in note 12 to the  
financial statements.
4 Final dividend proposed at 20.6856 pence per share in respect of full year 2005 earnings.
Summary
Listing on London Stock Exchange
The major highlight during the year was the 
successful listing of the Company’s shares 
on the London Stock Exchange. The shares 
were listed at £5.40 on 12 October 2005, 
and by 31 December 2005, had risen 43.2% 
to £7.74, leading to a market capitalisation  
of £3.62 billion ($6.23 billion) at this date. 
The Group joined the London benchmark 
FTSE 100 Index on 19 December 2005. net 
proceeds of $491.2 million were received 
by the Company as a result of the Listing.
Financial performance of Kazakh Mining
The average realised price of copper  
cathode increased during the year by 50.1%  
to $3,794 per tonne in line with the growth 
commanded by commodities throughout 
2005. The favourable impact on revenues of 
strongly rising copper prices was offset by 
the reduced level of contained metal in 
mined ore and the production difficulties 
experienced in the first half of the year. 
Although revenues and profit before 
taxation, finance items and negative goodwill 
increased by 106.2% and 45.6%, respectively, 
profit margins were slightly depressed as a 
higher proportion of copper cathodes were 
produced from purchased concentrate 
rather than from own concentrate. A more 
informed measure for comparing underlying 
trading performance between 2005 and 
2004, EBITDA excluding special items, 
increased by 35.6% to $1,073.5 million.
Financial performance of MKM
Sales volumes at MKM in 2005 were over 70% 
higher than in the prior year, with growth being 
driven by wire rod. Earnings are unaffected  
by rising copper prices as the copper price 
component of finished products is passed on 
to the customer in full. The conversion margin 
remained flat due to changed product mix 
towards lower margin products, continued 
price pressure in key market segments and, to 
a lesser degree, product substitution in Europe.
Income tax
The effective tax rate for the year was 
35.1% compared to a rate of 33.6% in the 
prior year. The effective rate is higher than 
the standard rate of taxation in Kazakhstan 
Financial Review – Summary 23 Kazakhmys PLC
Annual Report & Accounts 2005
of 30.0% mainly due to excess profits tax 
arising within profitable subsoil contracts.
Cash flows and balance sheet
During the year, the net liquid funds position 
of the Group strengthened from $231.9 
million to $829.4 million, an increase of 
$597.5 million. This movement was mainly 
attributable to the proceeds raised from  
the Listing and the conversion of higher 
earnings into operating cash flows.
Capital employed increased in the year by 
39.6% to $2,675 million primarily due to the 
proceeds raised from the Listing and retained 
earnings for the year. ROCE has shown an 
improvement from 30.2% to 31.5% mainly 
due to improved earnings. If proceeds raised 
from the Listing are excluded from capital 
employed at the year end, then ROCE would 
have been around 39%.
Other financial matters
The financial statements have been prepared 
as if the Company had always been the 
parent company of Kazakhmys LLC. This 
method of presentation, known as ‘pooling of 
interests’, ensures greater comparability of 
results between years and is consistent with 
the requirements of IFRS.
The Board is committed to improving 
financial risk management within the Group. 
Whilst progress has been made in this area 
since Listing, a number of measures are 
being implemented to raise standards to 
levels seen in other international mining 
companies. Further details on these 
initiatives, as well as information about our 
financial risk management policies, can be 
found on pages 32 and 33.
The Group’s revenues and earnings are 
highly dependent on commodity prices. 
Estimated sensitivity analyses on these 
variables are detailed on page 34.
Set out on page 35 are the Group’s critical 
accounting policies.
Oleg novachuk
Finance Director
29 March 2006
Summary income statement
 2005 2004 %
 $ million $ million change
Revenues 2,597.5 1,259.5 106.2%
Operating costs excluding depreciation, depletion,  
 amortisation and special items ( ,524.0) (468.1) 
EBITDA excluding special items  ,073.5 791.4 35.6%
Special items: 
 Less: write-off of property, plant and equipment ( .8) (30.3) 
 Less: loss on disposal of fixed assets (4. ) (25.9) 
Less: depreciation, depletion and amortisation (2 9. ) (156.7) 
Profit before taxation, finance items  
 and negative goodwill 842.5 578.5 45.6%
net financing income/(expenses) 5. (24.8) 
Recognition of negative goodwill – 111.3 
Profit before tax 848. 665.0 27.5%
Income tax 35. % 33.6% 
Profit for the year 550.8 441.3 24.8%
Minority interests 2.2% 2.6% 
Attributable profit to equity  
 shareholders of the parent  538.8 429.8 25.4%
Reconciliation of EBITDA excluding special items
A reconciliation of profit before taxation, finance items and taxation to EBITDA excluding  
special items by business segment is set out below.
 Year ended year ended
 3 December 2005 31 December 2004
 $ million $ million
KAZAKH MINING  
 Profit before taxation, finance items and  
  negative goodwill 820.8 578.5
 Add: loss from special items  5.4 56.2
 Add: depreciation, depletion and amortisation  98.2 156.7
 EBITDA excluding special items  ,034.4 791.4
 Revenues  ,740.9 1,259.5
 EBITDA excluding special items margin 59.4% 62.8%
MKM   
 Profit before taxation, finance items and  
  negative goodwill 2 .7 –
 Less: gain from special items (4.0) –
 Add: depreciation and amortisation 2 .4 –
 EBITDA excluding special items 39. –
 Revenues 85 . –
 EBITDA excluding special items margin 4. % –
Total EBITDA excluding special items margin 4 .3% 62.8%
Earnings
A summary of the consolidated income statement is set out below. 24 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
Summary of the year
Revenues for the year amounted to 
$2,597.5 million, a 106.2% increase from 
2004. Profit before taxation, finance items 
and negative goodwill rose by 45.6% to 
$842.5 million and our key performance 
measure for earnings, EBITDA excluding 
special items, was $1,073.5 million, a 35.6% 
increase compared to 2004. The improved 
earnings were attributable to rising 
commodity prices during 2005 and the 
acquisition of MKM on 15 December 2004. 
These results translated to an increased 
profit attributable to equity shareholders of 
$538.8 million, compared to $429.8 million 
in the prior year, a rise of 25.4%. As negative 
goodwill of $111.3 million arose during the 
prior year, a more informed measure of the 
Group’s financial performance on a post-tax 
and minority interest level is Underlying 
Profit, which removes special items. An 
increase of 46.2% to $549.8 million was 
reported by this performance measure. 
Basic and diluted EPS increased by 
21.7% to $1.29 per share. EPS based on 
Underlying Profit, was $1.31 per share 
compared to $0.93 per share reported in 
2004, an improvement of 40.9%.
The Directors recommend a final dividend 
of 36.0 US cents per share. Dividend cover 
for the final dividend is over three times, 
and provides a solid platform to ensure a 
stable dividend flow in future years, subject 
to the performance of the business and 
continued growth in earnings.
The following review of the Group’s 
financial performance analyses the two 
business segments separately given their 
distinct nature.
Revenues
A summary of the production and 
sales volumes, and revenues by major 
categories of product is set out below.
Kazakh Mining
Revenues for Kazakh Mining increased from 
$1,259.5 million to $1,740.9 million, a 38.2% 
improvement against the prior year. The 
major contribution to revenues within the 
Kazakh Mining business remained copper 
cathodes, although there were strong 
performances from other commodities, 
particularly zinc metal and silver. 
Revenues from the sale of copper 
cathodes were $1,377.2 million, or 79.1% 
of the total revenues of the Kazakh Mining 
business. Although production volumes, 
excluding tolling, were 5% lower than the 
previous year, sales volumes of copper 
cathodes were flat as 48 kt of 2004 
production was utilised in the manufacture 
of copper rods in that year, compared to 
8 kt during 2005. The increase in revenues 
of 51.1% between years was primarily 
driven by an improvement in the average 
realised copper price to $3,794 per tonne 
compared to $2,527 per tonne for 2004,  
an increase of 50.1%.  
As the commissioning of the Balkhash 
zinc smelter continued to ramp-up, zinc 
metal production increased by 183%, 
which contributed to an 11-fold rise in zinc 
metal revenues. Average realised zinc 
prices increased by 34.7%, which also had 
a positive impact on revenues. However, 
zinc metal sales volumes were slightly 
disappointing as the ramp-up of the zinc 
smelter is taking longer than anticipated. 
In addition, production was lower than 
expected due to the use of low-grade  
ores as a consequence of technical 
Dividend cover for the final dividend is over three times, 
and provides a solid platform to ensure a stable dividend 
flow in future years, subject to the performance of the 
business and continued growth in earnings.
Revenues, Earnings and Dividends
1 kt unless stated
Production and sales volumes
 /revenues
 Production Sales
 2005 2004 2005 2004 2005 2004
 kt kt kt kt $ million $ million
      
Copper cathodes 397 428 372 386  ,380. 920.0
 From own and purchased 
 concentrate 387 408 3 2 366  ,377.2 911.5
 From tolling  0 20  0 20 3.4 8.5
      
Zinc    9 24 79.3 15.0
 Zinc metal 5 18 52 6 4.3 5.7
 Zinc metal in concentrate 82 66  7 18  5.0 9.3
      
Silver (koz) 20,5 17,718 20, 74 17,619  47.3 115.2
      
Gold (koz)  4 86  29 74 40.8 15.6
 From own production  0 54 84 42 37.7 14.4
 From tolling 45 32 45 32 3. 1.2
      
Copper rod 9 49 8 48 2 .5 134.7 
      
Other – – – –  .4 59.0
      
Kazakh Mining – – – –  ,740.9 1,259.5
      
MKM 2 9 – 2 8 – 85 . –
      
Total – – – – 2,597.5 1,259.5
Financial Review – Financial performance 
for the year 25 Kazakhmys PLC
Annual Report & Accounts 2005
problems experienced in the first half  
of the year. 
Zinc concentrate sales volumes decreased 
by 3%, although revenues increased by 
61.8% to $15.0 million as a result of higher 
zinc prices enjoyed during 2005.
Silver sales volumes were similar to 
production volumes. Revenues improved by 
27.8% compared to the prior year assisted 
by an increase in production volumes as a 
result of the commencement of operations 
at the Abyz mine, which has a relatively 
higher grade of silver, and a rise in realised 
silver prices of 11.6% compared to 2004.
Gold sales volumes from own ore were 
17% less than production volumes due to 
the internal use of gold within the jewellery 
factory. There was a 162.1% improvement 
in gold revenues from own production 
due to the commencement of operations 
at the Abyz mine and higher realised gold 
prices of 30.5% compared to the prior year. 
Gold tolling revenues were $3.1 million 
compared to $1.2 million in the prior year 
due to higher volumes.
Copper rod revenues were down by 
80.3% following an 83% decrease in sales 
volumes. The fall in copper rod sales 
followed a combination of weak customer 
demand and the decreased amount of 
refined copper being allocated to copper 
rod production in order to fulfil export 
contracts for copper cathodes.
Other revenues of $66.4 million compared 
to $59.0 million in the prior year, and related 
to the sale of surplus electricity, heating 
and coal, as well as the sales of other minor 
by-products, such as lead and rhenium.
MKM
For the year ended 31 December 2005, 
MKM reported revenues of $856.6 million, 
an increase of over 75% from the prior 
year’s revenue figure of $486.9 million. 
The two key factors behind this growth 
were increased sales volumes, up by over 
70% compared to the prior year, and the 
increase in copper prices during the year.
The main component within MKM’s 
revenues is the input value of copper, 
accounting for approximately 85% of 
sales price. Contractual arrangements 
with customers ensure the input price of 
copper cathodes is passed on in full. With 
the increase in the purchased component 
of copper increasing by 29% in value 
terms compared to the prior year, this 
contributed to approximately $140 million 
of the total growth in revenues.
There were strong performances in the 
sales of wire rods, up eight-fold, drawn 
wire, up by 10%, and strips, up by 12%, 
compared to the prior year. As wire rods, 
drawn wire and strips account for 40%, 
14% and 19% respectively, of total sales by 
volume, these were the main contributors 
to the overall growth in sales volumes.
Earnings
Profit before taxation, finance items and 
negative goodwill increased from $578.5 
million to $842.5 million, an increase of 
45.6%, split between $820.8 million for the 
Kazakh Mining business and $21.7 million 
for MKM. Depreciation, depletion and 
amortisation amounted to $219.6 million 
in 2005, an increase of 40.2% compared 
to $156.7 million in 2004, as a result of 
increased capital expenditure and the 
acquisition of MKM.
Consistent with other international mining 
companies, EBITDA excluding special 
items has been chosen as the key measure 
in assessing the underlying trading 
performance of the Group between the 
current and prior years. This performance 
measure removes depreciation, depletion, 
amortisation and non-recurring or variable 
items in nature which do not impact 
the underlying trading performance of 
the business. These latter items were 
particularly significant in the prior year. 
During 2004, these non-recurring or variable 
items related to the loss on disposal of fixed 
assets of $25.9 million and the write-off 
of fixed assets of $30.3 million, which 
compared to $4.6 million and $6.8 million, 
respectively, for these categories in 2005. 
Overall, the margin at the level of EBITDA 
before special items decreased from 
62.8% to 41.3%, primarily as a result of the 
acquisition of MKM. For 2005, MKM reported 
a margin based on EBITDA excluding special 
items of 4.6% compared to a margin of 59.4% 
for the Kazakh Mining business. 
Kazakh Mining
The margin at the level of EBITDA excluding 
special items was slightly depressed from 
62.8% in 2004 to 59.4% in 2005. Although 
average realised copper prices increased 
by 50.1% from 2004 to 2005, the reduction 
in mined ore grade from 1.30% to 1.03% 
and the resulting increased proportion of 
copper cathodes produced from purchased 
concentrate (less than 1% of total copper 
cathode production in 2004 to 12.4% of 
total copper cathode production in 2005, 
excluding tolling), acted to offset the impact 
of rising copper prices on the profit margin. 
Purchases of copper concentrate 
increased in monetary terms from around 
$32 million in 2004 to $166 million in 
2005. This significant increase reflects the 
higher volumes of purchased concentrate 
amounting to 268 kt during 2005 compared 
to 14 kt in the prior year. The impact of 
rising copper prices also increased the cost 
of purchased concentrate compared to the 
prior year.
Costs associated with the transportation of 
purchased concentrate also increased from 
the prior year by approximately $9.5 million or 
77%, which was attributable to the increased 
volumes of purchased concentrate. 
Revenue by products 
0
250
500
750
1,000
1,500
1,250
Copper   
cathodes   
2005
2004
n/a
MKM
1,377
912
857
$ million
$ million
2005
2004
0
50
100
150
200
250
Silver Zinc
metal and 
concentrate
Gold Copper
rods
Other revenues 
(including revenues 
from copper and 
gold tolling)
147
115
79
15
38
14
27
135
73
69 2 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
Other factors which contributed to the 
lower profit margin included an increase 
in fuel costs of 50%, which accounted for 
15% of cost of sales, and an increase of 
approximately 27% in wages and salaries, 
which accounted for around 27% of total 
operating costs, excluding depreciation, 
depletion, amortisation and special items. 
The captive power stations in the Kazakh 
Mining business produce sufficient 
electricity and heat for the business’ own 
requirements. However, rising diesel prices 
adversely impact running costs for plant 
and equipment operating in the mines. 
Wages and salaries increased by 
approximately $41 million or 27% from 
2004 to 2005 due to the new Abyz and 
Artemyevskoe mines entering production, 
a wage increase agreed in november 2005 
in Kazakhstan and the inception of a head 
office in London. Competition amongst 
mining companies, together with a strongly 
performing economy in Kazakhstan, 
contributed to wage pressures.
Legal and professional fees increased over 
three-fold to approximately $24 million, 
largely as a result of the Listing, and 
additional professional fees incurred in the 
London head office. Selling and distribution 
costs were $7.6 million or 42% higher as 
a greater proportion of the Group’s sales 
were made to European customers which 
involve higher transportation costs.
Depreciation and depletion increased by 
26.4% from $155.6 million to $196.7 million. 
Of the increase, approximately $30 million 
arose from the Balkhash zinc smelter, with 
the remainder arising from higher levels of 
capital expenditure during 2005. 
As described on page 20, cash cost of 
copper after by-product credits is a key 
measure in assessing the ability of the 
Kazakh Mining business to control its 
production costs. The table shown above 
provides a reconciliation of the cash cost 
of copper after by-product credits from 
2004 to 2005, which illustrates the relative 
importance of the above factors. 
MKM
MKM’s cost of sales includes the purchase 
price of copper cathode, and has therefore 
risen at approximately the same rate as  
the increase in revenues. Gross profit 
margins are therefore largely unaffected  
by increases in copper prices. 
Despite the growth in sales volumes,  
the change in product mix, towards lower 
margin wire rods, adversely impacted 
margins during 2005. Margins also 
came under pressure through product 
substitution in certain key market segments.
Financial Review – Financial performance 
for the year continued
Within profit before taxation and finance 
items of $21.7 million, a contribution of 
approximately $25 million arose from an 
increased stock valuation as a result of 
rising copper prices. This favourable 
impact on earnings did not translate into 
operating cash flows. If copper prices 
decline in future, this will conversely  
have a negative impact on earnings.
Depreciation remained in line with 2004 
levels at around $21 million.
Net finance items
net financing income was $5.6 million 
during 2005, which contrasted with the  
net financing cost of $24.9 million that 
arose in the prior year. 
A foreign exchange loss of $11.0 million 
is included within net financing income, 
compared to a loss of $29.5 million that 
was recognised during 2004. The foreign 
exchange loss mostly arose within 
Kazakhmys LLC as a result of the loss 
arising on the euro denominated loan 
extended by Kazakhmys LLC to MKM due 
to the strengthening of the Kazakhstan 
tenge against the euro. This loss was partly 
offset by the gains arising on the US dollar 
denominated deposits as a result of the 
strengthening of the US dollar against the 
Kazakhstan tenge.
net financing income, other than foreign 
exchange losses, included a finance cost 
of $8.8 million which related to interest 
payable on the short-term credit lines 
within Kazakhmys LLC and the $100.0 
million loan to Citibank which was repaid in 
november 2005. Unwinding of long-term 
provisions and employee benefits also gave 
rise to an interest charge of $5.2 million. 
Finance income primarily relates to interest 
earned from fixed term US dollar and 
Kazakhstan tenge denominated deposits 
placed with banks in Kazakhstan, and the 
proceeds raised from the Listing which 
remained in the UK until the year end.
Income tax
The effective tax rate for the year was 
35.1% compared to a rate of 33.6% in the 
prior year. The rate was split between a 
current tax rate of 35.4% and a deferred 
tax credit of 0.3%. Income tax in absolute 
terms increased by $73.5 million, or 
approximately 33%, primarily due to 
higher earnings within the Kazakh Mining 
business compared to 2004.
The effective tax rate increased over the 
prior year principally due to the recognition 
of non-taxable negative goodwill arising 
during 2004 on the acquisition of MKM, and 
additional levels of excess profits tax being 
accrued during 2005 as a result of higher 
profits within certain profitable subsoil 
contracts. Excess profits tax added  
3.8% to the effective tax rate during  
2005, which compared to an incremental 
2.1% during 2004. 
The higher German effective tax rate 
for MKM was reduced during 2005 from 
38.13% to 35.98% which marginally 
reduced the overall effective rate by 0.3% 
as deferred tax balances within MKM were 
recalculated using the lower rate.
Withholding taxes of $11.9 million were 
accrued during 2005 on profits arising 
within Kazakhmys LLC which either have 
been or will be remitted to the UK for 
dividend purposes. These withholding 
taxes added an additional 1.4% to the 
effective tax rate.
The effective tax rate is expected to 
remain at levels in excess of the statutory 
Kazakhstan tax rate of 30% due to excess 
profits taxes arising on profitable subsoil 
contracts at the current time of high 
commodity prices.
Minority interests
Upon completion of the share exchange 
agreement with Kazakhmys LLC’s 
shareholders, the Company’s interest 
in Kazakhmys LLC was 97.40%. As the 
financial statements have adopted a 
pooling of interests method of accounting, 
this interest was used in determining the 
Company’s share of Kazakhmys LLC’s 
earnings for all periods presented. On 
26 September 2005, the Company issued 
additional shares in consideration for the 
transfer to it of further units in Kazakhmys 
LLC which resulted in the Company’s 
interest in Kazakhmys LLC increasing to 
98.68%, this being the Company’s interest 
in Kazakhmys LLC at the year end date.
Reconciliation of cash  
cost of copper  
(after by-products credits)
 
 $
Average cash cost for year ended  
31 December 2004 (per tonne) 616
Increase in purchased concentrate 351
 
Increase in other cost of sales 210
 
Increase in selling and  
distribution expenses 31
 
Increase in administrative expenses 161
Increase in other operating expenses 24
Increase in by-product credits (396)
Average cash cost for year ended  
31 December 2005 (per tonne) 997 27 Kazakhmys PLC
Annual Report & Accounts 2005
Profit for the year and Underlying 
Profit
Profit for the year attributable to equity 
shareholders increased from $429.8 million 
to $538.8 million, an increase of 25.4%. Due 
to the recognition of negative goodwill of 
$111.3 million during 2004, together with 
the presence of several non-recurring or 
variable non-trading items during that year, 
amounting to $56.2 million (before tax and 
minority interests effects), Underlying Profit 
is seen as a more informed measure of the 
performance of the business at a post-tax 
and minority interest level.
Underlying Profit removes non-recurring 
or variable non-trading items from 
attributable profit for the year, and 
their resulting tax and minority interest 
impacts. It provides a more consistent 
basis for comparing the underlying trading 
performance of the Group between 2004 
and 2005. 
The increase of 46.2% in Underlying Profits 
principally reflects the favourable impact of 
rising copper prices on earnings.
The reconciliation of Underlying Profit from 
profit attributable to equity shareholders is 
set out below.
Dividends
The Board has proposed a final dividend 
equivalent to 36.0 US cents per share in 
respect of the year ended 31 December 
2005.
The interim dividend paid on 5 July 2005 
of $6.81 per ordinary share of £5 each (or 
equivalent to 27.0 US cents per ordinary 
share of 20 pence each after the share split 
which took place on 23 September 2005) at 
a total cost of $110.0 million was paid out of 
profits available for distribution as shown in 
the accounts of the Company for the year 
ended 31 December 2004 but was charged 
against retained earnings during the year 
ended 31 December 2005 in accordance 
with IFRS.
The Company intends to adopt a dividend 
policy which will take into account the 
profitability of the business and underlying 
growth in earnings of the Group, but 
taking cognisance of the cash flows 
required to invest in its capital expenditure 
programme. The Directors will also ensure 
dividend cover is prudently maintained. 
Interim and final dividends will be paid in 
the approximate proportions of one-third 
and two-thirds of the total annual dividend, 
respectively.
Earnings per share data
 2005 2004 % change
Weighted average number of shares in issue 4 8, 05, 27 403,725,750 3.6%
 
Profit attributable to equity shareholders 
     of the parent ($ million) 538.8 429.8 25.4%
Underlying Profit ($ million) 549.8 376.1 46.2%
Basic and Diluted EPS ($)  .29 1.06 21.7%
EPS based on Underlying Profit ($)  .3 0.93 40.9%
Earnings per share
The income and share data used in the 
Basic and Diluted EPS and EPS based on 
Underlying Profit computations is shown 
below.
Basic EPS based on attributable profit for 
the year increased from $1.06 per share 
to $1.29 per share, despite the recognition 
of negative goodwill during 2004 of $111.3 
million, which increased last year’s Basic 
EPS by $0.28 per share. The increase in 
the weighted average number of shares 
in issue arises mainly from the 58.4 million 
newly issued shares at the time of Listing. 
There are no differences between Basic 
and Diluted EPS.
Assuming no changes in capital structure 
during 2006, the weighted average number 
of shares in issue will increase from 
418.1 million shares during 2005 to 467.5 
million shares during 2006, an increase of 
11.8%. Without a corresponding increase 
in earnings during 2006, the increased 
weighted average number of shares in 
issue will lower the EPS figure in 2006.
EPS based on Underlying Profit increased 
from $0.93 per share to $1.31 per share, a 
40.9% improvement, principally reflecting 
the impact of higher commodity prices.
Reconciliation to Underlying Profit   
 2005 2004 %
 $ million $ million change
Profit attributable to equity 
 shareholders of the parent 538.8 429.8 25.4%
Special items    
Recognition of negative goodwill – (111.3) 
Write-off of property, plant and equipment  .8 30.3
Loss on disposal of fixed assets 4. 25.9
Tax effect of special items (0.5) 2.8
Minority interest effect of special items 0. (1.4) 
 
Underlying Profit 549.8 376.1 46.2% 28 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
Financial Review – Financial 
performance for the year continued
Operating cash flows
Operating cash flows increased by 10.2% 
from $567.6 million in 2004 to $625.6 million 
in 2005.
During the year, the Kazakh Mining 
business benefited from its payment terms 
with customers whereby, as a minimum, 
over 90% of settlements for copper 
cathode delivery are paid prior to transfer 
of title. All settlements are received in 
advance of transfer of title for zinc metal, 
silver and gold sales. These terms ensured 
rapid conversion of increased revenues 
into cash available for the business. Tight 
controls over working capital ensured there 
was no material change in the working 
capital requirements for the Kazakh Mining 
business.
As MKM must pay in advance for its supply 
of copper cathodes, working capital 
requirements increased substantially in 
light of rising copper prices. The increase 
in MKM’s working capital was the main 
factor contributing to an overall increase in 
the working capital of the Group of around 
$100 million. 
If the two businesses are taken together, 
cash flows from operations before 
income tax and interest increased by 
31.8%, compared to an increase in 
EBITDA excluding special items of 35.6%. 
The lower increase in cash flows from 
operations compared to the equivalent of 
the cash profits of the Group (being EBITDA 
excluding special items) was primarily 
a result of the adverse working capital 
movements within MKM, as noted above.
Income tax payments more than doubled 
from $164.2 million to $333.3 million, 
principally reflecting improved earnings 
during 2005 and correspondingly higher 
A summary of cash flows is shown in the 
table opposite highlighting the key items.
Summary of the year
During the year, the net liquid funds 
position of the Group strengthened from 
$231.9 million to $829.4 million, an increase 
of almost $600 million. This movement 
was mainly attributable to net proceeds 
of $491.2 million raised from the Listing 
and the conversion of higher earnings into 
operating cash flows. 
Other key cash flows during the year were 
income tax payments of $333.3 million, 
capital expenditure of $365.4 million, net 
repayment of borrowings of $54.7 million 
and payment of dividends of $164.8 million.
Free Cash Flow, a key performance 
indicator of the Group’s ability to translate 
earnings into cash flow available for 
dividends, and investment and financing 
purposes, was $450.2 million, compared 
to $405.4 million in 2004. The Free Cash 
Flow in 2005 was stated after deducting 
sustaining capital expenditure of 
$175.4 million (including expenditure on 
investment in intangible assets and mine 
development costs), out of the total capital 
expenditure of $365.4 million. In respect 
of 2004, total capital expenditure of $162.2 
million has been included within Free 
Cash Flow; this has not been separated 
between sustaining capital expenditure 
and expansionary and new project capital 
expenditure. 
The Group’s ability to generate continued 
positive Free Cash Flows provides funds 
for additional investment in expanding the 
Group’s existing operations and capacities, 
as well as providing flexibility to respond to 
any opportunistic acquisitions.
The Group’s ability to generate continued positive Free Cash 
Flows provides funds for additional investment in expanding the 
Group’s existing operations and capacities, as well as providing 
flexibility to respond to any opportunistic acquisitions.
Cash flows
  
 2005 2004 
 $ million $ million
EBITDA  ,0 2. 735.2
Write-offs and impairment losses  .8 41.9
Loss on disposal of tangible and intangible assets 4. 25.9
Foreign exchange loss adjustment ( 0.7) (16.2)
Working capital movements (99.8) (52.1)
Income tax paid (333.3) (164.2)
Interest paid (9. ) (2.9)
   
Net cash flows from operating activities  25. 567.6
Sustaining capital expenditure ( 75.4) (162.2)
   
Free Cash Flow 450.2 405.4
Expansionary and new project capital expenditure ( 90.0) –
Interest received  7.3 13.5
Acquisition of subsidiaries, net of cash required ( .0) 4.6
Listing proceeds, net 49 .2 –
Capital transactions between subsidiary and shareholders – (161.1)
Dividends paid ( 4.8) (53.7)
Other movements 3.7 3.7
   
Cashflow movement in net liquid funds  0 . 212.4
Cash flow summary 29 Kazakhmys PLC
Annual Report & Accounts 2005
tax charges. Tax payments in 2005 
included around $80 million in respect  
of tax arising in prior periods. 
The major component of interest paid 
related to the interest incurred on the 
$100.0 million loan payable to Citibank 
which amounted to $4.7 million. 
Investing and financing cash flows
Of the total interest income of $17.3 million, 
$4.4 million was received in the UK, largely 
attributable to the proceeds received on 
Listing, with the balance arising within 
Kazakhmys LLC from its funds on deposit.
Capital expenditure on mine development 
costs, mining licences and property, 
plant and equipment amounted to 
$365.4 million, compared to $162.2 million 
in the prior year. Major items of capital 
expenditure were the development of 
the Zhaman-Aybat, Artemyevskoe and 
Abyz mines, as well as the construction 
of the sulphuric acid plant at the Balkhash 
Complex. Sustaining capital expenditure 
and investment in mine development costs 
were around $144 million and $26 million, 
respectively. Proceeds from the disposal 
of property, plant and equipment were 
under $10 million as redundant assets are 
normally sold for scrap or negligible value.
Listing proceeds, net of expenses, 
amounted to $491.2 million. During the 
year, dividends of $164.8 million were 
paid by the Group, representing the 2004 
interim dividend of $52.2 million payable 
by Kazakhmys LLC in February 2005 and 
the 2005 interim dividend of $110.0 million 
payable by the Company in July 2005 
(which was largely funded by the 2004  
final dividend paid by Kazakhmys LLC). 
The major net cash outflow in respect 
of borrowings was the repayment of the 
$100.0 million Citibank loan in november 
2005. There was a cash inflow of $7.2 
million relating to an increase in short-term 
borrowings within MKM and $38.8 million 
within Kazakhmys LLC. 
To maximise returns, the Group invested 
surplus funds in current investments with 
varying maturities of between one and 12 
months. The cash outflow from investing in 
these deposits was $98.8 million compared 
to a cash inflow of $3.6 million arising from 
liquidation of these funds in the prior year.
Summary of movements
Shareholders’ funds as at 31 December 
2005 stood at $2,600 million, an increase 
of $833.2 million compared to the balance 
as at 31 December 2004. The increase was 
primarily due to net proceeds received 
on the Listing of $491.2 million, retained 
earnings for the year of $538.8 million, 
offset by currency translation differences 
of $70.4 million and dividends payable of 
$160.8 million.
The currency translation differences largely 
arose in respect of Kazakhmys LLC due to 
the weakening of the Kazakhstan tenge 
against the US dollar from a rate of 129.96 
KZT/$ as at 1 January 2005 to 133.77 KZT/$ 
as at 31 December 2005. There was also 
a depreciation of the euro against the US 
dollar in respect of MKM which contributed 
to the currency translation difference.
non-current assets and liabilities
Property, plant and equipment as at 
31 December 2005 was slightly higher 
compared to the prior year balance, after 
capital expenditure of $333.7 million was 
offset by depreciation of $216.8 million 
and currency translation differences of 
$67.9 million.
Mine stripping costs increased 
substantially from $16.9 million to $41.8 
million due to the stripping work at 
nurkazgan and Artemyevskoe mines.
The liability for employee benefits 
remained at a similar level to the prior year. 
The main component of the liability relates 
to unfunded post-retirement benefits of 
$23.1 million for employees in Kazakhmys 
LLC. It also includes a liability of $5.6 
million relating to part-time contracts for 
older employees at MKM that have been 
collectively agreed with the employees’ 
trade union.
  $ million
1  Write offs, impairment losses  
and fixed asset disposal losses 16.4
2 Working capital movements (99.8)
3  Income tax paid (333.3)
4 Interest paid (9.1)
5 Sustaining capital expenditure (175.4)
6  Unrealised foreign exchange (10.7)
Reconciliation of EBITDA to Free Cash Flow
Balance sheet
$ million
0
200
400
600
800
1,000
1,200
450.2 6 5 4 3 2 1 1,062.1 30 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
The Group has no pension obligations, 
other than a contingency in respect of the 
payment obligations of the Kazakhmys 
LLC-sponsored pension fund, termed 
the Accumulating Pensions Funds of 
Kazakhmys LLC Corporation (the ‘Fund’). 
Certain of Kazakhmys LLC’s employees 
and former employees are beneficiaries. 
The Fund’s rules set out that the payment 
obligations to fund beneficiaries are based 
on the nominal value of contributions 
made by the beneficiaries, indexed in 
accordance with a formula set out in the 
Fund’s rules. In the event that the assets 
of the Fund are insufficient to cover the 
payment obligations to the beneficiaries, 
the voting shareholders of the Fund 
(including Kazakhmys LLC) are jointly  
liable for the shortfall. 
The last valuation as at 31 December 2005 
showed that the payment obligations of the 
Fund were $102.4 million, and the market 
value of its assets was $119.6 million. no 
deficit has arisen within the Fund at any 
balance sheet date since its inception.
Provisions of $45.9 million were in line 
with the prior year. The most significant 
provision of $24.5 million relates to 
site restoration obligations which are 
determined with reference to the 
requirements of legislation in Kazakhstan. 
Working capital
Working capital, including inventories, 
trade and other receivables, prepayments 
and other current assets, restricted cash 
and trade and other payables, increased 
by approximately $100.0 million. Although 
working capital was tightly controlled 
within the Kazakh Mining business, the 
effects of higher copper prices caused 
inventories, trade receivables and other 
debtors within MKM to increase from 
$134.0 million to $220.0 million, an increase 
of $86.0 million. If copper prices decline 
during the course of 2006, working capital 
within MKM should move back towards 
levels seen as at 31 December 2004.
net liquid funds
net liquid funds as at 31 December 2005 
comprised cash and cash equivalents of 
$522.0 million, current investments  
of $356.5 million and borrowings of  
$49.1 million. A summary of the position  
as at 31 December 2004 and 2005 is  
shown below.
Cash and cash equivalents include 
$496.6 million of fixed rate deposits with a 
maturity of less than three months. Of the 
total cash and cash equivalents balance, 
the Company held $491.2 million and 
$15.1 million as fixed rate deposits and 
cash, respectively, in the UK. Cash held by 
MKM was $2.6 million, and the balance of 
cash and cash equivalents of $13.1 million 
was held by Kazakhmys LLC in Kazakhstan.
Current investments include fixed rate 
deposits of $245.3 million and $111.2 million 
held in US dollars and Kazakhstan tenge, 
respectively, within Kazakhmys LLC. 
The maturities of the deposits held in 
Kazakhmys LLC are of varying periods up 
to 12 months.
Borrowings decreased from $102.1 million 
to $49.1 million. During the year, the loan 
of $100.0 million payable to Citibank was 
voluntarily repaid in light of the Group’s 
strong cash position, leaving short-term 
credit facilities for Kazakhmys LLC and 
MKM of $41.6 million and $7.3 million, 
respectively. The Kazakhmys LLC facilities 
are used to fund its working capital 
depending on cash flow requirements and 
the maturity profile of bank deposits.
If the proceeds raised from the Listing are excluded from  
capital employed as at 31 December 2005, then ROCE  
would have been around 39%.
Financial Review – Financial 
performance for the year continued
Capital employed
A summary of capital employed is shown 
below.
Capital employed increased in the year 
to $2,675 million as at 31 December 2005 
from $1,916 million at the prior year end, 
primarily due to the proceeds raised from 
the Listing and retained earnings for the 
year. ROCE has shown an improvement 
from 30.2% to 31.5% partly due to a 
full year’s contribution from MKM, but 
primarily due to the improved earnings. 
If the capital employed attributable to 
MKM was excluded from the Group capital 
employed figure as at 31 December 
2004, then ROCE would have been in the 
region of 33%. To achieve a like-for-like 
comparison, if the proceeds raised from 
the Listing are excluded from capital 
employed as at 31 December 2005, then 
ROCE would have been around 39%.
The minority interests balance decreased 
from $47.2 million to $26.3 million as a 
result of the reduction in minority interest 
arising from the transaction with Kinton 
Trade Limited, as explained in note 24 to 
the financial statements, which was partly 
offset by increased retained earnings 
within Kazakhmys LLC.
 Cash and cash equivalents
  Current investments
 Borrowings
0
200
400
600
1,000
800
$ million
829.4
231.9
Analysis of net liquid funds
2005 2004
Analysis of net liquid funds
 
 2005 2004 
 $ million $ million
Current investments 356.5 259.9
Cash and cash equivalents 522.0 74.1
Borrowings (49.1) (102.1)
  
Net liquid funds  829.4 23 .9
Capital employed/ROCE
 
 2005 2004 
 $ million $ million
Equity shareholders’ funds 2,599.8 1,766.6
Minority interests 26.3 47.2
Borrowings 49.1 102.1
   
Capital employed 2, 75.2  ,9 5.9
Profit before taxation,  
finance items and  
negative goodwill 842.5 578.5
ROCE (%) 3 .5% 30.2% 3 Kazakhmys PLC
Annual Report & Accounts 2005
829.4
Comparison between business segments
0
500
1000
1500
2000
2500
3000
Revenues
EBITDA
excluding
special items
1,741
857
1,034
39
0
500
1,000
1,500
2,000
3,000
2,500
$ million
2005 2005
Formation of the Group in preparation  
of Listing
The Company listed its shares on the 
London Stock Exchange on 12 October 
2005. In preparation for the Listing, a new 
UK holding company was incorporated 
on 15 July 2004. During the fourth quarter 
of 2004, shareholders who held shares in 
Kazakhmys LLC were invited to enter into 
exchange agreements with the Company 
whereby shareholders received newly 
allotted shares of the Company in exchange 
for giving up their shares in Kazakhmys LLC. 
A cash payment of KZT 4,736 per share 
was also offered under the terms of the 
share exchange agreements, although no 
shareholder in Kazakhmys LLC elected for 
this option. Under these share exchange 
agreements, the Company acquired 
Kazakhmys LLC on 23 november 2004 and 
the Company’s interest in Kazakhmys LLC 
amounted to 97 .4%.
The share exchange transaction involved the 
combination of businesses under common 
control. Consequently, a pooling of interests 
method of accounting has been applied  
in the presentation of the consolidated 
financial statements for the two years ended  
31 December 2005 which present the results  
of the Group as if the Company had always 
been the parent company of Kazakhmys LLC.
Transition to International Financial 
Reporting Standards
The Group’s financial statements on pages 
60 to 127 are prepared in accordance with 
IFRS and the requirements of the 
Companies Act 1985. Comparative 
information presented in the financial 
statements has been taken without material 
modification from the information for the 
year ended 31 December 2004 as included 
within the Price Range Prospectus.
Factors affecting comparability 
Acquisition of MKM
The Group acquired MKM on 15 December 
2004, and therefore MKM had no material 
impact on the Group’s results for the year 
ended 31 December 2004. The Group’s 
revenues in 2005 have increased 
substantially due to the inclusion of MKM’s 
sales which reflect the rising copper prices 
during the year.
Due to the different nature of MKM’s 
business and the margins inherent in its 
operations, the Group’s profit margin has 
decreased following the acquisition. In 
addition, the Group’s cost of sales and 
administrative expenses are significantly 
higher as a result of the relatively higher 
employment and other operating costs in 
Germany, as compared to Kazakhstan.
Termination of sales agreement with  
Apro Limited
Between 2002 and 2004, Kazakhmys 
LLC appointed Apro to sell its export 
products. Apro purchased copper, zinc 
and silver products from Kazakhmys LLC 
at a discount to the prevailing LME price 
and below the price at which Apro sold the 
products on to its customers.
On 1 January 2005, the Company took over 
the sales business of Apro, such that sales 
contracts for 2005 were entered into directly 
by the Company and the end customers. 
The Company has in turn contracted 
with Kazakhmys LLC for the supply of the 
products which are now purchased at a 
price based on the prevailing LME prices. 
The margin previously derived by Apro as 
a result of its purchasing agreement with 
Kazakhmys LLC and onward sale of the 
products is now retained by the Group. 
This results in higher margins in the year 
ended 31 December 2005, in the absence 
of changes in other factors impacting 
profitability.
Following the acquisition of MKM on 15 December 2004, the 
Group has two business segments, Kazakh Mining and MKM. 
 Kazakh Mining 
 MKM
Financial Review – Basis of preparation  
of consolidated financial statements
The Group’s principal operating subsidiary, 
Kazakhmys LLC, had a transition date to 
IFRS of 1 January 2002. Consistent with the 
pooling of interests method of accounting, 
the Group has not presented any 
reconciliation of either equity or results 
reported under IFRS with those reported 
under the previous acccounting principles 
in these financial statements.
Reporting and functional currency
The US dollar is the reporting currency of 
the Group, consistent with that adopted 
by other international natural resource 
companies. The functional currencies of 
the Company’s subsidiaries, Kazakhmys 
LLC and MKM, are the Kazakhstan tenge 
and euro, respectively, as the majority of 
their operating costs are incurred in these 
currencies.
Segmental reporting
Kazakh Mining, which involves the 
processing and sale of copper and other 
metals, is managed as one business 
segment. The products are subject to the 
same risks and returns, exhibit similar long-
term financial performance and are sold 
through the same distribution channels. 
The UK operation primarily purchases its 
products from Kazakhmys LLC and applies 
a mark-up prior to onward sale to third 
party customers. It is therefore regarded as 
a sales function on behalf of Kazakh Mining 
and is not considered a distinct business 
segment. 
Following the acquisition of MKM on 15 
December 2004, the Group has two business 
segments, Kazakh Mining and MKM. These 
two businesses face different risks and 
rewards and are consistent with the internal 
management reporting structure. 
Basis of preparation of consolidated financial statements 32 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
Background
The Board is committed to ensuring that 
financial risk management within the  
Group is comparable with that of other 
international mining companies listed on 
the London Stock Exchange. The Board 
acknowledges that whilst the underlying 
routine accounting and treasury processes 
within the Group are robust, further 
progress is required in the wider area of 
financial risk management. 
As an interim measure at the time of Listing, 
at the request of the Board, the Audit 
Committee assessed financial risk 
management within the Group and 
approved certain treasury policies and 
procedures. Since Listing, the Audit 
Committee has also reviewed the steps that 
have been implemented by management  
to raise the standards of financial risk 
management across the Group.
Improvements currently being 
implemented include:
Recruitment of suitable qualified 
accounting resource in the financial 
control function, and review of the 
effectiveness of its reporting structure
Recent appointment of a Head of 
Internal Audit, and the development 
of internal audit, to review the Group’s 
internal control environment and to act 
as facilitators of risk management
Refinement of treasury policies and 
procedures to embrace wider financial risks 
than those approved at the time of Listing
Implementation of improved accounting 
systems incorporating budgeting, 
financial reporting, management 
accounting and tax reporting
Education and embedding of a risk 
management culture on a top-down 
basis throughout the Group. 
•
•
•
•
•
The Board is committed to building on the progress that has 
already been achieved, with the aim of achieving comparable 
levels of financial risk management with other listed 
international mining companies.
1
2
Analysis of current investments, cash equivalents and cash at bank by currency
2005
1 US dollar 85%
2 KZT 14%
3 Other 1%
1
2
3
2004
1 US dollar 79%
2 Euro 19%
3 KZT 2%
3
Financial Review – Financial
risk management
Improvements to the current system of 
financial risk management, as outlined 
previously, may take one to two years to 
complete. However, several measures 
have already been implemented to 
improve financial risk management since 
Listing. Moreover, the Board is committed 
to building on the progress that has already 
been achieved, with the aim of achieving 
comparable levels of financial risk 
management with other listed international 
mining companies.
Board reserved powers
The Board adopted a schedule of reserved 
powers at the time of Listing which set out 
the Board’s sanction over treasury, 
investment and capital expenditure with 
defined limits of authority and procedure. 
These powers set the tone of the Board’s 
commitment to embedding high standards 
of risk management throughout the 
business.
The overall internal control environment 
and risk management programme is 
reviewed by the Audit Committee on 
behalf of the Board.
Financial risks
The principal financial risks arising from  
the Group’s activities are those relating to 
commodity price risk, foreign currency risk, 
interest rate risk, counterparty risk and 
liquidity risk. The Group does not engage  
in speculative treasury activity.
In general, the Group does not use 
derivative financial instruments to manage 
its exposure to fluctuations in commodity 
prices, foreign currency rates and interest 
rates, with the exception of MKM where 
limited commodity futures are used to 
manage its exposure to copper prices. 
Commodity price risk
The Group is exposed to fluctuations in the 
price of copper and, to a lesser extent, 
zinc, silver and gold. These commodities 
are priced on the LME in US dollars. Within 
the Kazakh Mining business, revenues are 
set with reference to prevailing market 
prices together with the addition of a pre-
determined margin depending on the 
terms of the Group’s annual sales 
contracts. Any change in commodity 
prices has a direct impact on the Group’s 
revenues and earnings. 
MKM uses natural hedging arising on back-
to-back purchase and supply contracts to 
manage its exposure to changes in the price 
of copper. In those limited cases where a 
natural hedge is not possible, MKM uses 
commodity futures to manage its exposure 
to changes in the price of copper to ensure 
profitability is materially unaffected.
The Group prepares an annual budget and 
regular forecasts during the year, including 
sensitivity analyses, using various levels of 
copper prices.
Foreign currency risk
The Group presents its consolidated 
financial statements in US dollars. The 
functional currencies of the Company, 
Kazakhmys LLC and MKM are the US dollar, 
Kazakhstan tenge and euro, respectively.  
A substantial proportion of the Group’s 
revenues are linked to US dollar 
denominated commodity prices, with  
the majority of operating costs being 
denominated in local currencies. The 
Group therefore faces both translational 
and transactional foreign currency risks. 
Translational risk arises when the results 
and balances of Kazakhmys LLC and MKM, 
as presented in their own financial 
statements, are translated into US dollars 
for the purposes of presentation in the 
Group’s consolidated financial statements. 
All foreign exchange differences arising on 
this translation are taken to a separate 
component of equity. 33 Kazakhmys PLC
Annual Report & Accounts 2005
Transactional risk arises when sales or 
purchases by an operating company are 
denominated in currencies other than that 
company’s functional currency. The 
currencies giving rise to this risk are 
primarily the US dollar for revenues, certain 
bank deposits, trade receivables, certain 
trade payables and loans within 
Kazakhmys LLC, and the US dollar in 
respect of certain revenues and certain 
trade receivables and payables of MKM. 
Accordingly, the Group’s expenses may 
increase or decrease as a result of 
fluctuations in exchange rates. Any foreign 
exchange differences arising on this 
translation is charged or credited to the 
income statement as appropriate.
The Group does not enter into hedging 
positions in respect of its exposure to its 
foreign currency risks.
A substantial proportion of the Group’s 
bank deposits (with maturities less than 
and more than three months) are 
denominated in US dollars reflecting the 
primary revenue streams of the Group. 
Additionally, these deposits are used to 
fund the Group’s dividends and purchases 
of plant and equipment, both of which are 
largely denominated in US dollars. 
Borrowings are substantially denominated 
in US dollars to provide a natural hedge 
against the Group’s bank deposits. 
An analysis of current investments, cash 
equivalents, cash at bank and borrowings 
by currency is shown below.
Interest rate risk
The Group’s monetary assets and liabilities 
are exposed to interest rate risk, in 
particular to changes in US dollar and 
Kazakhstan tenge interest rates. The Group 
does not have a formal policy for achieving 
a pre-defined balance of monetary assets 
and liabilities at fixed versus floating rates. 
In Kazakhstan, general market practice 
dictates that US dollar denominated 
borrowings are carried at floating rates, 
and cash at bank and bank deposits are 
carried at fixed rates.
Consequently, it has been the Group’s 
practice for borrowings to be carried at 
floating rates, as such borrowings are 
largely denominated in US dollars. As at  
31 December 2005, Group borrowings 
amounted to $49.1 million, so any upward 
movement in interest rates is unlikely to 
impact the Group significantly where 
borrowings continue to remain at this  
level in the future.
In line with local market conditions, the 
Group’s practice in Kazakhstan has been to 
carry cash and bank deposits at fixed rates. 
The rates which Kazakhmys LLC receives 
on its bank deposits depend on prevailing 
market rates at the time of placement, their 
currency of denomination and maturity 
period. Proceeds raised from the Listing 
held in the UK are also substantially carried 
at fixed rates.
Counterparty risk
The Group’s policy is to seek the best 
available capital protection on its cash  
and bank deposits.
Cash and bank deposits give rise to credit 
risk on the amounts due from 
counterparties. The Group has adopted  
an interim policy to control and monitor  
the distribution of these exposures to 
minimise the risk of loss in the event of 
non-performance by counterparties. 
The Group’s interim policy mandates that 
proceeds raised from the Listing are 
invested in international banks, with 
approved upper limits on the amount that 
can be deposited at any one time. These 
banks must have assigned credit ratings 
above defined levels. 
Cash and deposits within Kazakhmys LLC 
are invested in banks located in 
Kazakhstan. These include overseas 
branches of international banks and 
Kazakhstan domiciled banks. The 
availability of banks in Kazakhstan offering 
high credit ratings are more limited than 
typically found in countries with more 
developed capital markets. Consequently, 
management regularly monitors the 
financial strength of banks in which the 
Group’s deposits are placed through their 
knowledge of local market conditions to 
ensure counterparty risk is minimised.
Liquidity risk
The Group maintains a balance between 
availability of funding to meet its liabilities 
as they fall due and maximising investment 
return on its liquid resources through the 
use of bank deposits of varying maturities 
and short-term credit facilities. Maturity 
periods for the Group’s bank deposits are 
selected depending on the funding 
requirements of the Group, the cost of 
securing short-term credit facilities and 
available rates of interest.
Cash balances amounted to $25.1 million 
as at 31 December 2005 (2004: 
$71.2 million) and bank deposits (with 
maturities less than three months) were 
$496.6 million as at 31 December 2005 
(2004: $2.9 million). Together with undrawn 
facilities amounting to $147.9 million as at 
31 December 2005 (2004: $138.0 million), 
these available resources should be 
sufficient to meet the Group’s anticipated 
requirements.
Financial Review  
– Financial risk management continued
Analysis of interest bearing financial assets and liabilities by currency
 31 December 2005
 US dollar  Euro KZT UK sterling Other Total 
 $ million  $ million  $ million $ million  $ million  $ million
 
non-current investments 0.5 3.1 1.4 – – 5.0
 
Current investments
1
 245.3 – 111.2 – – 356.5
 
Cash and cash equivalents
2
 490.2 2.6 9.4 4.3 0.1 506.6
 
Borrowings (41.5) (7.5) (0.1) – – (49.1)
 
Total  94.5 ( .8)  2 .9 4.3 0. 8 9.0
 31 December 2004
 US dollar  Euro KZT UK sterling Other Total 
 $ million  $ million  $ million $ million  $ million  $ million
 
non-current investments 0.6 3.4 0.5 – – 4.5
 
Current investments
1
 259.4 – 0.5 – – 259.9
 
Cash and cash equivalents
2
 3.4 61.8 8.7 – – 73.9
 
Borrowings (101.0) (1.0) – – – (102.0)
 
Total  2.4 4.2 9.7 – – 23 .3
1  Current investments include bank deposits with maturities greater than three months of $355.5 million  
(2004: $259.4 million) and available-for-sale securities of $1.0 million (2004: $0.5 million).
2  Cash in the table above is interest bearing only. Cash equivalents are bank deposits with maturities less  
than three months. 34 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
Fluctuations in ore grade and commodity 
prices can have a significant impact on the 
Group’s revenues and earnings. 
Any changes in prices have a direct effect on 
the revenues of the Kazakh Mining business, 
with consequential impacts on earnings 
and the cash cost of copper resulting from 
changes in by-product credits. 
Any changes in ore grade have a direct 
effect on the production figures of the 
Kazakh Mining business given that the 
volume of mined ore remains largely 
constant between years. Revenues 
and earnings are directly impacted by 
production volumes, as is the cash cost 
of copper since certain costs are fixed in 
nature and some are variable costs which 
are reduced through increased volumes.
The approximate effects on profit before 
taxation, finance items and negative 
goodwill resulting from a 10% movement in 
commodity prices are shown above. Prior 
year commodity prices and ore grades 
are also provided to demonstrate the 
fluctuations in these variables.
These sensitivities are based on 2005 
figures and assume that all other variables 
remain constant. They are estimated 
calculations only.
Fluctuations in ore grade and commodity prices can have a 
significant impact on the Group’s revenues and earnings.
Impact of 10% movement in commodity price on proﬁt before taxation, 
ﬁnance items and negative goodwill 
Zinc Silver Gold Copper
$ million
0
30
60
90
120
150
Financial Review – Sensitivity analyses
Sensitivity analyses
  Impact of 10% 
 Average realised price movement 
 during year ended 31 December on profit
 2005 2004 % 
Commodity price sensitivity $ $ movement $ million
Copper 3,794 2,527 50.1% 123
 
Zinc  ,23 914 34.7% 8
 
Silver 7.30 6.54 11.6% 14
 
Gold 449 344 30.5% 4
  
 Average ore grade 
 during year ended 31 December
 2005 2004 %
Ore grade movement   movement
Copper (%)  .03 1.30 (20.8%)
 
Zinc (%) 3.28 2.74 19.7%
Silver (g/t)  9.8 20.23 (2.1%)
  
Gold (g/t) 0. 8 0.39 74.4% 35 Kazakhmys PLC
Annual Report & Accounts 2005
Summary
The Group’s significant accounting policies 
are described in note 3 of the financial 
statements. The accounting policies are 
consistent with those described in the 
Price Range Prospectus. 
The application of these policies requires 
management to make estimates and 
exercise judgement. Set out in note 2(h)  
are key judgements which are likely to have 
the most significant effect on the amounts 
recognised in the financial statements. 
Information about significant areas of 
estimation uncertainty is also highlighted  
in that note.
The Directors believe that the following 
general accounting policies (as opposed to 
specific judgements and estimates set out 
in note 2(h)) are the critical policies which 
could have a significant impact on the 
financial statements.
Mining properties and mine development 
costs
The Group’s mine-related assets are 
depreciated on a unit of production basis 
over the estimated economically 
recoverable reserves to which they relate, 
or over a shorter period prior to the 
depletion of the reserves having regard to 
the asset’s physical life limitation. Changes 
in reserve estimates, which affect unit of 
production calculations, are accounted for 
prospectively. 
The estimation process for recoverable 
reserves is complex and involves significant 
judgement. When determining reserves, 
estimates that were valid at the time of 
assessment may change when new 
information becomes available. Any 
changes could affect depreciation rates 
and asset carrying values.
Impairment of tangible assets
The Group’s cash-generating units, and  
if applicable, specific assets, are subject to 
an impairment review where an indicator 
of impairment arises. If there are indicators 
of impairment of the Group’s cash-
generating units or specific assets, then 
the recoverable value of an asset is 
compared to its carrying amount. If the 
carrying amount of the cash-generating 
unit or asset exceeds its recoverable 
amount, then an impairment provision  
is recognised to write down the carrying 
value of the cash-generating unit or the 
asset to its recoverable amount. 
The assessment of whether an indicator  
of impairment has arisen can require 
considerable judgement taking account  
of future operational and financial plans, 
sales demand and the competitive 
environment. The calculation of the 
recoverable amount requires significant 
estimates and assumptions to be made 
about the calculation of future cash flows 
from a cash-generating unit or asset.
Taxation
The determination of the Group’s 
obligations for taxes for each reporting 
period requires an interpretation of tax 
legislation. Whilst the Group believes  
that its judgements are prudent and 
appropriate, significant differences in 
actual experience may materially affect  
the Group’s future tax obligations. 
As the tax system and legislation in 
Kazakhstan have been in force for only  
a relatively short time, uncertainties 
regarding tax liabilities are substantially 
greater than typically found in countries 
with more developed tax systems. The 
uncertainty of application and the 
evolution of tax laws results in significant 
interpretations and judgements being 
applied when determining the Group’s  
tax liabilities.
Contingencies
Material contingencies facing the Group 
are set out in note 33 of the financial 
statements. A contingent liability arises 
where:
a past event has taken place for which 
the outcome will be confirmed only by 
the occurrence or non-occurrence of 
one or more uncertain events outside of 
the control of the Group; or
a present obligation exists but is not 
recognised because it is not probable 
that an outflow of resources will be 
required to settle the obligation.
A provision is made when a loss to the 
Group is likely to crystallise. The assessment 
of the existence of a contingency and its 
likely outcome, particularly if it is 
considered that a provision might be 
necessary, involves significant judgement 
taking all relevant factors into account.  
As laws and regulations in Kazakhstan are 
continuing to evolve, particularly in the 
areas of taxation, the environment and 
subsoil rights, uncertainties regarding 
contingencies are greater than typically 
found in countries with more developed 
legal and regulatory frameworks.
•
•
As laws and regulations in Kazakhstan are continuing to evolve, 
particularly in the areas of taxation, the environment and subsoil 
rights, uncertainties regarding contingencies are greater than 
typically found in countries with more developed legal and 
regulatory frameworks.
Financial Review  
– Critical accounting policies
Critical accounting policies 3 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
Kazakhmys has a strong commitment to its employees  
and the inhabitants of the communities in which it 
operates. The Group owns and maintains a number of 
recreational, medical and educational facilities both in 
various parts of Kazakhstan and outside the country. 
Kazakhmys in the Community
$ .3 
million
We invested $6.3 million in our hospital and  
medical centres in Kazakhstan in 2005.
We sponsored the construction of four 
mosques and churches in Kazakhstan.
An operation at our hospital in Zhezkazgan A church funded by Kazakhmys in Zhezkazgan
4 37 Kazakhmys PLC
Annual Report & Accounts 2005
The mosque at Satpaev
For the benefit of the local communities 
where it operates, Kazakhmys supports  
a number of cultural and religious activities. 
It has constructed mosques and churches in 
Zhezkazgan, Satpaev and Ust-Kamenogorsk.
$3.4 
million
We made a contribution of $3.4 million to a 
number of kindergartens and schools.
Activities at one of our kindergartens in Satpaev 38 Kazakhmys PLC
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
The welfare of children is a high priority for the 
Group and our contributions in this area range 
from educational facilities to providing recovery 
centres for those who are sick. 
Kazakhmys in the Community continued
Our community
Kazakhmys has a strong commitment to 
its employees and the inhabitants of the 
communities in which it operates. The 
Group owns and maintains a number of 
recreational, medical and educational 
facilities both in various parts of 
Kazakhstan and outside the country. The 
Group is committed to developing and 
contributing to these projects. In total, 
the investment and maintenance costs 
associated with these facilities amounted 
to just under $20 million in 2005; a similar 
figure was contributed in 2004.
The provision of education is a priority 
for the Group, which supports 36 infant 
schools. Besides providing computer, 
sports and music facilities, the children are 
taught not only how to read, write, sing 
and dance but also about the culture of 
Kazakhstan. In addition, each kindergarten 
has well-equipped physiotherapy rooms,  
run by qualified paediatricians and nurses.
The Group also supports a number of 
recovery centres for children. These take the 
form of summer camps where children can 
recuperate from illnesses through outdoor 
excursions and a variety of leisure activities. 
These centres are usually located in rural 
areas in the country and have full healthcare 
provided as well as leisure facilities including 
computer rooms, libraries and playrooms. 
Each year, over 16,000 children benefit from 
these eight centres.
One of the Group’s most successful 
projects has been the construction of 
a new hospital in Zhezkazgan. We also 
contribute to high quality dental care. 
Further health and diagnostic centres 
are supported in Balkhash, Karaganda 
and Almaty and sanatorium facilities are 
available in Almaty, Zheleznovodsk and 
Karkaralinsk, which treat and rehabilitate 
more than 10,000 patients a year. 
Taekwondo session at our fitness complex in Satpaev 39 Kazakhmys PLC
Annual Report & Accounts 2005
These medical facilities provide a valuable 
service to the local community and are also 
available at no cost or at subsidised rates 
to Group employees and their dependants, 
as the maintenance of the health and 
welfare of our employees is an important 
objective for the Group. This focus on 
providing high quality healthcare to its 
employees is also extended to members  
of their families and pensioners.
nutrition is an important part of healthcare 
and a Group-wide system has been set up 
consisting of canteens that serve healthy 
food to contribute to the workers’ diet. 
This service is supported by a greenhouse 
complex of 372.6 hectares which provides 
a variety of fruit and vegetables for this 
purpose.
In Zhezkazgan and Balkhash, Kazakhmys 
has handed over ownership of the heating 
distribution system to the local community 
but continues to provide the hot water 
from its heating plants at favourable rates 
and maintain the systems. Kazakhmys also 
performs much of the road maintenance in 
both towns. 
The Group also uses its own aircraft to 
operate a regular commercial service 
between Almaty and Zhezkazgan. 
Furthermore, under certain subsoil 
contracts the Group has an obligation  
to invest in training the local workforce.
In support of the local communities where 
it operates, Kazakhmys supports a number 
of cultural and religious activities. It has 
constructed both churches and mosques 
in Zhezkazgan and Satpaev.
One of the main areas where Kazakhmys 
benefits the community is that of sport. 
The Group owns seven major sports 
complexes that are visited by about 
500,000 people per year. These provide 
facilities for local people to play ice hockey, 
football, basketball, tennis, track and field 
athletics, martial arts and swimming, 
among others.
We intend to maintain and improve our 
current contributions to the community 
and if we expand into new regions in 
the future, we aim to encourage these 
communities, with our support, to become 
self-sufficient.
Our employees
Kazakhmys LLC has approximately 
63,000 employees each with 
individual employment agreements in 
Kazakhstan. The Group also negotiates 
collective employment agreements, 
primarily covering social benefits, with 
representatives of its trade union, which 
represents nearly all employees.
Number of employees
Location 
 
Zhezkazgan Complex   31,679
Balkhash Complex  12,211
East Region  11,661
Karaganda  7,473
PLC  24
MKM  1,042
Total  4,090
Breakdown of employees
Function
 
Mining and production  51,204
Engineers and technical specialists 6,238
Management  5,891
Clerical/Administrative  757
Total  4,090
Our healthcare facilities include dental clinics   
The swimming pool at one of our sports 
complexes in Zhezkazgan
Employee training 40
Annual Report & Accounts 2005
Job:	 6828	Kazakhmys_AR05_FRONT.indd	 Proof:	 10
Operator:	Dave	 Date:	 31/03/06
Server:	 Studio	l	 Set-up:	 Tracy
The Company recognises the importance of 
independent advice combined with sector 
expertise at the highest level in our organisation 
and our Board membership reflects this.
Board of Directors
 Executive Directors (right to left)
vladimir Kim
yong Keu Cha
Oleg novachuk
2 Non-executive Directors (right to left)
David Munro
James Rutland
Lord Renwick of Clifton, kcmg vladimir ni (not pictured)
 2
Kazakhmys PLC 4 Annual Report & Accounts 2005
Board of Directors 
Vladimir Kim (45)
Executive Chairman
Mr Kim joined the Group in 1995, when 
he was appointed Managing Director 
and Chief Executive Officer of JSC 
Zhezkazgantsvetmet. He was elected 
Chairman of the board of directors in 
December 2000. Mr Kim graduated from 
the Alma-Ata Architectural Institute in 1982 
and holds both a Ph.D. and an MBA.
Yong Keu Cha (49)
Chief Executive
Mr Cha has served on the board of 
directors of Kazakhmys LLC since 2000. 
He was formerly an Executive Managing 
Director of Samsung Corporation, as well 
as President of Samsung Kazakhstan and 
General Manager of Samsung Deutschland. 
He holds a bachelors degree in business 
management from Seo Kang University in 
South Korea.
Oleg Novachuk (35)
Finance Director
Mr novachuk joined the Group in 2001 and 
was appointed Finance Director in 2005. Mr 
novachuk was formerly vice President of 
Financial Projects for Kazakhmys LLC and 
the Financial Adviser to the President of 
Kazakhmys LLC. Mr novachuk was formerly 
Chairman of the board of directors of JSC 
Kazprombank. He graduated with honours 
from Kazakh State University with a masters 
degree in applied mathematics. 
Vladimir Ni (73) 
non-executive Director
Mr ni has been Chairman of the board of 
directors of Kazakhmys LLC since February 
2006, and was previously vice Chairman. 
He is also a director of TOO HOZU 
Corporation. He graduated from the Kazakh 
Mining Metallurgical Institute. Mr ni is a 
mining engineer by profession.
David Munro (51)
non-executive Director
Mr Munro was formerly responsible for 
Billiton’s global aluminium and base metals 
businesses prior to its 2001 merger with 
BHP . His last position in the new BHPBilliton 
was as Chief Development Officer, 
responsible for strategy and acquisitions. 
In January 2004 he became Chief Executive 
of RMC Group plc, an international 
construction materials company, holding 
this position until RMC’s acquisition by 
Mexico’s Cemex in 2005. Mr Munro is a 
mining engineer by profession and also 
holds an MBA. Mr Munro acts as Chairman 
of the HSE Committee of the Company.
James Rutland (61)
non-executive Director
Mr Rutland has held a number of positions 
in Investors in Industry plc and represented 
that company on the board of several small 
oil companies. In 1985 he joined James 
Capel’s corporate finance group and moved 
to head up Hongkong Bank’s resource 
lending group in London. From 1993 to 2001 
he served as Finance Director of Energy 
Africa Limited. He now acts as a consultant. 
He attended the College of Law, London 
and was admitted as a solicitor in 1967. 
Mr Rutland acts as Chairman of the Audit 
Committee of the Company and is  
the senior independent Director. 
Lord Renwick of Clifton, kcmg (68)
non-executive Director
Lord Renwick served as British Ambassador 
to the United States and to South Africa 
and is vice Chairman, Investment 
Banking of JPMorgan Europe and vice 
Chairman of JPMorgan Cazenove. He 
also serves on the boards of Compagnie 
Financière Richemont, Fluor Corporation 
and SABMiller plc. Lord Renwick acts as 
Chairman of the Remuneration Committee 
of the Company. 
Senior Management
Ruslan Yun (52)
Chief Executive Officer of Kazakhmys LLC
Mr yun started his career at Kazakhmys LLC 
in 1975 as a miner and served in various 
technical, managerial and executive roles 
until he became Chief Executive Officer in 
november 2001. Mr yun gained a Doctorate 
of Technical Sciences from the Karaganda 
Polytechnic Institute in 1975 specialising in 
‘Technology and Integrated Mechanisation 
of Underground Development of Minerals’.
Alexandr Yun (50)
vice Chairman of Kazakhmys LLC
Mr yun was appointed Chief Engineer and 
director of the South Zhezkazgan Mine in 
1997 and served as Managing Director-First 
Deputy General Manager between 2000 
and 2004 becoming director of Zhezkazgan 
Complex in 2004. Mr yun graduated from 
the Karaganda Polytechnic Institute in 
1977 as a mining engineer, specialising in 
‘Technology and Integrated Mechanisation 
of Underground Development of Minerals’ 
and from Irkuts Institute of national 
Economy (Russia) in 1992 specialising 
in mining business administration and 
technical sciences.
Gafura Ibraeva (46) 
Chief Financial Officer of Kazakhmys LLC
Mrs Ibraeva was appointed Head of the 
Planning Economics Department of 
Kazakhmys LLC in 1994 and became Deputy 
Managing Director of Economy and Finance 
in October 1995. She was appointed Chief 
Financial Officer in 2004. She graduated 
from the Almaty Institute of national 
Economy in 1981, specialising in production 
planning.
Askar Dussembaev (44)
vice Chairman of Kazakhmys LLC 
Mr Dussembaev joined Kazakhmys LLC 
in 1984 and was appointed Director for 
Material-Technical supply in 1995. He 
served subsequently as an Executive 
Director of JSC Zhezkazgantsvetmet, and 
as an Executive Director of Kazakhmys LLC, 
with responsibility for investment, capital 
construction, and the administration of 
the board of directors. Since 2004 he has 
served as vice Chairman of Kazakhmys LLC 
on investment and construction issues. Mr 
Dussembaev graduated from Karaganda 
Polytechnic Institute in 1984 and the 
Eurasian Institute of Marketing in 1997.
Vladimir Malyshev (58)
Head of Administration of Kazakhmys LLC
Mr Malyshev joined Kazakhmys LLC in 
1967 as a miner and served in various 
roles. In 1993 he was appointed vice 
President of Kazakhmys LLC then Executive 
Director and General Director of Balkhash 
Complex. In 2001 he was appointed Deputy 
Chairman of Kazakhmys LLC. Mr Malyshev 
qualified in technical sciences, having 
graduated from Karaganda Polytechnic 
Institute, Almaty Institute of Political 
Science and Moscow Academy of Labour 
and Social Relations.
Kazakhmys PLC 42 Kazakhmys PLC
Annual Report & Accounts 2005
Introduction
Kazakhmys PLC listed its shares on the London Stock Exchange in October 2005 and was the first company with its major operations  
in Kazakhstan to do so. Its listing in London has enabled Kazakhmys to access the leading centre for financial capital for mining in the 
world and it is anticipated that this will enable the Company to consolidate its position as a major international mining company and 
further develop its presence in Central Asia. 
In the period leading up to Listing, the Board implemented a number of changes to the corporate governance of the Company. These 
changes were designed to give confidence to shareholders and others associated with the Company that it seeks to be well managed 
in a manner comparable to other international mining companies listed on the London Stock Exchange, whilst taking cognisance of  
the unique circumstances behind the growth and development of the Group. The Board is committed to high standards of corporate 
governance and this report outlines how the provisions of the Combined Code have been applied by the Company since Listing, thus 
demonstrating its commitment to adhere to the Combined Code on the same basis as all other UK listed companies. 
Statement of Compliance
Since Listing, the Company has complied with Section 1 of the Combined Code, save in the following respects:
The Chairman was not independent at the time of his appointment. Mr Kim joined the Group in 1995 and has made a major 
contribution to its development into an international FTSE 100 company. He has been responsible for leading the Group to strong 
profitability and cash flows. The Board considers that Mr Kim’s continued involvement in an executive capacity is vitally important  
to the Company at the present stage of its development. 
The number of non-executive Directors determined by the Board to be independent is less than half of the Board. The Company has 
four non-executive Directors, three of whom are judged by the Board to be independent. It intends to appoint a further UK-based 
independent non-executive Director as soon as possible.
The Audit Committee has only two members. Only two non-executive Directors were initially appointed as members of the Audit 
Committee because the Board wanted to ensure that the Audit Committee was fully independent and consisted of the most 
appropriate Directors for its role. With the appointment of a further independent UK-based non-executive Director, the Company 
intends to appoint a third member to the Audit Committee.
Board evaluation has not yet been undertaken. Most of the Directors were only appointed between September and December 2005 
and, in view of this, the Board believes that a meaningful evaluation can only take place once the new Board has had a reasonable 
amount of time to work together. An evaluation process will be developed and implemented before the end of 2006.
The Board did not initially appoint a senior independent Director. The Board stated at the time of Listing that it intended to appoint  
a senior independent Director and Mr James Rutland, an independent non-executive Director, has now been appointed to that role.
The Board
The Board is responsible for approving and implementing Group strategy. It is also responsible for providing leadership and support  
to the executive management team in achieving sustainable added value for shareholders, together with delivering the expected 
shareholder returns. It is also responsible for ensuring the appropriate allocation of financial resources. To this end, the knowledge and 
experience of the non-executive Directors in the UK quoted company environment means that they are able to make a significant 
contribution to the Board by providing assistance and guidance to the executive Directors in developing Group policies and strategy. 
The Board has also delegated authority to:
the Audit Committee, to oversee the development of an appropriate system of financial control and to monitor the integrity of the 
financial reporting by the Company, to oversee the establishment and development of the Group’s internal audit function including 
internal control and risk management, and to oversee the relationship with the external auditor; 
the Remuneration Committee, to set the remuneration policy for executive Directors and senior management;
the Nomination Committee, to consider and recommend to the Board potential Board appointments and to assess the development 
of Directors including induction, training and succession planning; and
the Health, Safety and Environment (‘HSE’) Committee, to formulate and recommend to the Board the Group’s policy for HSE and to 
ensure that an effective system of HSE standards, procedures and practices is in place at each of the Group’s operational sites.
The membership of each of these committees is as follows:
Audit Remuneration Nomination HSE
James Rutland (Ch) Lord Renwick (Ch) Vladimir Kim (Ch) David Munro (Ch)
David Munro David Munro Lord Renwick Yong Keu Cha
  James Rutland David Munro James Rutland
•
•
•
•
•
•
•
•
•
Corporate Governance Report 43 Kazakhmys PLC
Annual Report & Accounts 2005
Between Listing and 31 December 2005, the Board met three times, the Audit Committee twice and the Remuneration Committee 
once. The Nomination Committee did not meet during this period but has met twice since then. Attendance of members at Board and 
committee meetings is set out below.
Current Directors      Board
1
 Audit Remuneration
Vladimir Kim      3/3  
Yong Keu Cha      3/3  
Oleg Novachuk      3/3  
David Munro
2
      3/3 2/2 
Vladimir Ni
2
      1/3  1/1
James Rutland
2
      3/3 2/2 1/1
Lord Renwick
3
      1/1  1/1
1 Excluding Board committee meetings associated with the Listing.
2  Appointed 23 September 2005.
3 Appointed 1 December 2005.
There is an agreed schedule of matters reserved to the Board and all Board committees have approved terms of reference. Board 
operating procedures are currently being developed. Directors receive a full Board pack of papers for consideration in advance of
each Board meeting, together with monthly reports on the Group’s operations, to ensure that they remain briefed on the latest 
developments to allow them to make fully informed decisions in the best interests of the Company. 
There is an agreed procedure by which members of the Board, if they require to do so in the furtherance of their duties, may take 
independent professional advice at the Company’s expense. 
The Company Secretary may only be appointed and removed by the Board and he is responsible for the provision of administration 
and other services to the Board. He is also available to the Directors for consultation on matters relating to company law and  
Directors’ responsibilities.
Board membership
The Board consists of three executive Directors – the Executive Chairman, Mr Kim; the Chief Executive, Mr Cha and the Finance 
Director, Mr Novachuk; and four non-executive Directors. Mr Rutland is the senior independent Director. The other non-executive 
Directors are Messrs Munro, Ni and Lord Renwick. 
Board balance and independence
Of the non-executive Directors, Mr Vladimir Ni was appointed as Chairman of Kazakhmys LLC – the Company’s main operating 
company in Kazakhstan – with effect from 1 January 2006. He is therefore no longer considered by the Board to be independent  
under the provisions of the Combined Code. 
The independent non-executive Directors are: 
Mr David Munro was an executive director of Billiton plc, Chief Development Officer of BHPBilliton plc and Chief Executive of 
RMC Group plc and has strong credentials within the international mining industry. Mr Munro received a fee of £400,000 for his 
assistance in helping to prepare the Company for the IPO on the London Stock Exchange which he immediately invested 
(after tax) in shares of Kazakhmys PLC. This was a payment relating to services prior to joining the Board.
Lord Renwick of Clifton serves on the boards of SABMiller plc, Fluor Corporation and Compagnie Financière Richemont. He served 
previously on the boards of British Airways plc, BHPBilliton plc and Liberty International plc. Lord Renwick is Vice-Chairman of 
JPMorgan Cazenove, who are brokers and financial advisers to the Company. Lord Renwick has no involvement in the provision 
of broking or financial services to the Company. 
Mr James Rutland has held a number of positions in Investors in Industry plc and in banking with James Capel’s corporate finance 
group and Hongkong Bank’s resource lending group in London. He has served as Finance Director of Energy Africa Limited and now 
acts as a consultant. Mr Rutland also received payment for his services as Chairman designate of the Audit Committee during the 
months immediately prior to the Listing. This payment related solely to services prior to joining the Board and is not linked to any 
additional duties as a non-executive Director. 
As required by the Combined Code, the Board has considered the independence of these three Directors and has concluded that they 
are independent in character and judgement.
As a newly listed company, the Company has sought to recruit to its Board experienced non-executive Directors who are well known 
to, and highly regarded by, the market. The Directors believe that the presence of all three independent non-executive Directors will 
add considerably to the Board’s ability to oversee and grow the Group’s operations. 
The Board has announced its intention to recruit a further UK-based independent non-executive Director and anticipates being able to 
announce that appointment as soon as possible. 
•
•
• 44 Kazakhmys PLC
Annual Report & Accounts 2005
The non-executive Directors have held informal discussions with the Chairman from time to time without the other executive Directors 
being present. 
Mr James Rutland has been appointed as senior independent Director and his principal duty in this capacity is to be available to talk to 
major shareholders if their concerns have not been resolved by the Chairman or executive Directors.
Chairman and Chief Executive
The roles of Chairman and Chief Executive are clearly divided and their responsibilities have been set out in writing, agreed by the 
Board as follows:
The Chairman, Mr Kim, is responsible for the strategic direction of the Company, overseeing operational management and running 
the activities of the Board
The Chief Executive, Mr Cha, is responsible for sales and marketing, the operation of the London office, the recruitment of staff and 
establishment of processes to enable the Company to fulfil the obligations arising from its status as a FTSE 100 company, for 
example, investor relations and financial reporting.
Board appointments
The Board appointed Mr David Munro, Mr James Rutland and Mr Vladimir Ni as non-executive Directors on 23 September 2005 and 
Lord Renwick as a non-executive Director on 1 December 2005. 
These appointments were made following consultations with the Company’s advisers and display a blend of skill and experience which 
allows them to work well together and with the executive Directors. Letters of appointment have been entered into with all of the  
non-executive Directors and are available for inspection at both the registered office of the Company and at the offices of Linklaters  
at One Silk Street, London EC2Y 8HQ, United Kingdom during usual business hours on any weekday (public holidays excluded) and will 
also be placed on the Company’s website shortly.
As indicated in the Directors’ Report on pages 48 to 53, the executive Directors and the Company have entered into a relationship 
agreement to regulate the ongoing relationship between them. Under the terms of that agreement, the executive Directors have 
undertaken to use their voting rights, where necessary, to ensure that the Board and the Nomination Committee will at all times 
comprise a majority of independent non-executive Directors and that the Remuneration and Audit Committees shall at all times 
consist only of non-executive Directors. 
Professional development of the Board 
The Board intends to establish formal induction training for new Directors based on recommendations prepared by the Company 
Secretary. The Board has only recently been established with its current membership and it would be premature to conduct any 
evaluation of the Board until it has been in place for one year. It is therefore intended that the Board will undergo a formal evaluation of 
performance and effectiveness of the Board as a whole and of its committees and individual Directors towards the end of 2006. The 
senior independent Director, Mr Rutland, together with the other non-executive Directors, will undertake an evaluation of the Chairman. 
Since Listing the Directors have been guided and instructed by advisers where necessary. The Board undertook a tour of some of the 
Group’s operations in Kazakhstan in October 2005. All of the Directors were briefed on their responsibilities as directors of a UK quoted 
company by the Company’s legal advisers as part of the Listing process.
Re-election of Directors
The Board can appoint Directors either to fill a vacancy or as an addition to the existing Board. The articles of association of the 
Company require that any Director so appointed shall retire at the annual general meeting following his appointment and may offer 
himself for election by shareholders. In addition, under the current articles of association, one third of the Directors retire by rotation 
each year. This ensures that each Director is re-elected at least every three years.
All Directors were re-elected pursuant to the Company’s articles of association at the annual general meeting of the Company held  
on 16 December 2005 and, in accordance with the current articles of association of the Company, one third of the Directors are now 
standing for re-election.
Directors retiring and standing for re-election at this year’s annual general meeting are Messrs Cha and Rutland. Biographical details  
of these Directors are set out on page 41.
The Board remains satisfied that each Director proposed for re-election continues to be fully competent to carry out his responsibilities 
as a member of the Board. 
Audit Committee
The role of the Audit Committee is to monitor the integrity of financial reporting by the Company, to review the Group’s internal control 
and risk management systems, to monitor the effectiveness of the Group’s internal audit function and to oversee the relationship with 
the external auditor.
•
•
Corporate Governance Report  
continued  45 Kazakhmys PLC
Annual Report & Accounts 2005
The Audit Committee was established on 23 September 2005. The Audit Committee is chaired by Mr James Rutland who, as indicated 
above, has gained relevant financial experience whilst holding positions with James Capel, Hongkong Bank and Energy Africa Limited. 
Only two members of the Audit Committee were initially appointed because the Board wanted to ensure that the Audit Committee was 
comprised only of independent Directors who were the most appropriate Directors for that role. Following the appointment of a further 
UK-based independent non-executive Director, it is intended to appoint a third member to the Audit Committee.
The lead partner of the external auditor, the Finance Director and the Head of Internal Audit attend each Audit Committee meeting by 
invitation. At least twice a year, the Audit Committee meets with the external auditor without executive management being present. 
The Audit Committee also meets in private session with the Head of Internal Audit. 
Under its terms of reference the Audit Committee is required to meet at least three times a year at appropriate times in the reporting 
and audit cycle. Given the systems and controls being put in place by the Group, the Audit Committee has met more frequently than 
this and intends to continue to do so for the foreseeable future. The Audit Committee reports on its activities to the next Board 
meeting following its meetings. 
Messrs Rutland and Munro met as the prospective Audit Committee prior to Listing. The Audit Committee has since met on four 
occasions. During that time the Audit Committee has carried out, inter alia, the activities described below in accordance with the 
responsibilities set out in its terms of reference (a copy of which is available on the Company’s website):
Financial reporting: The Audit Committee reviewed both the 2004 and 2005 Annual Report and Accounts before recommending 
their respective publication. As part of these reviews, the Audit Committee reviewed accounting policies, estimates and 
judgements that had been applied in preparing these reports and accounts, and the transparency and clarity of disclosures 
contained within them. The Audit Committee also received reports on specific matters including tax exposures. 
Internal control: The Audit Committee reviewed the development of the monthly management accounts process and resourcing 
within the financial control function. It also reviewed plans for further development of the internal reporting process, the adequacy 
of the IT systems within the financial control function and performed an initial review of the Group’s treasury and hedging 
arrangements. 
Internal audit and risk management: A high level review of major risks faced by the Group was conducted in October 2005 in order 
to identify the areas on which risk management and internal audit should be focused. Processes for more detailed identification, 
evaluation and management of risks are under review. The Audit Committee considered alternative proposals for resourcing 
internal audit. A Head of Internal Audit was appointed and given the task of establishing the internal audit function within the Group. 
The Audit Committee received the first report from the internal audit department in early 2006. A review of the Group’s insurance 
requirements was also initiated. 
External audit: The Audit Committee considered the re-appointment of the Company’s external auditor before making a 
recommendation to the Board to be put to shareholders. The Audit Committee oversees the relationship with the external auditor. 
As part of this responsibility, the Audit Committee has reviewed the findings of the external auditor, reviewed management 
representation letters, approved audit plans, reviewed and agreed audit fees in respect of the 2005 year-end audit, and reviewed 
policies on the independence of the external auditor and the provision of non-audit services. Prior to recommending the 
appointment of Ernst & Young LLP at the forthcoming AGM to the Board, the Audit Committee conducted a review of the 
independence of Ernst & Young LLP.
Whistleblowing: The Audit Committee has considered the arrangements by which staff may, in confidence, raise concerns about 
possible improprieties in matters of financial reporting or other matters. That review has not yet been concluded. The Audit 
Committee is committed to putting appropriate arrangements in place in the UK, Kazakhstan and Germany which enable 
proportionate and independent investigation of any improprieties with suitable follow-up action. 
Internal control
The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. The review should cover all 
material controls, including financial, operational and compliance controls as well as risk management systems.  
The processes the Board has used to assess the effectiveness of internal control include:
Review of budgets and reporting on operational and financial performance against budgets
Consideration of the risks likely to be faced by the Group in achieving its strategic plans and objectives
Reviews by specialist advisers, for example, on health & safety and environmental matters
Audit Committee and management review of internal audit processes across the Group
Audit Committee review of accounting and financial reporting processes.
•
•
•
•
•
•
•
•
•
• 46 Kazakhmys PLC
Annual Report & Accounts 2005
In October 2005, the Audit Committee reviewed the key risks that were identified by the Board and senior management. It is 
anticipated that an embedded risk management process will be developed across the Group during the next 12 months, and the 
following actions are planned to facilitate that process:
Appointment of a risk coordinator within the Internal Audit function who will work alongside financial and operational management 
in identifying Group level risks that need to be actively managed
Identify existing mitigating controls for these identified risks, or where none exist, design and implement internal controls to assist 
in managing such risks
Develop a system of reporting of these identified risks and mitigating controls to the senior management team, and thereafter to 
the Audit Committee
Seek continuous improvement in the risk management processes in the Group’s businesses, with particular emphasis on extending 
and embedding these processes into newly acquired businesses, as and when necessary.
Since Listing, the Audit Committee has also reviewed the internal control environment existing at Group level, particularly relating to 
financial reporting, health, safety and environment, and compliance with applicable laws and regulations. The Audit Committee is 
satisfied that the internal controls in place at the operational level within Kazakhmys LLC are commensurate with, or in places exceed, 
those found in other large mining businesses located in Kazakhstan, but acknowledges that the Group has yet to develop the more 
advanced Board-level internal controls that would be typically found in other UK listed companies. 
The Board, in conjunction with management, has agreed a number of activities to further develop the internal control environment, 
and progress on these initiatives, alongside the development of risk management processes, is being made. Details of initiatives in the 
area of financial risk management can be found on pages 32 and 33 within the Financial Review, and initiatives in the areas of health & 
safety and the environment can be found on pages 50 and 51 within the Directors’ Report.
Overall, the Board acknowledges the measures that have already been implemented to initiate a risk management framework 
appropriate to the Group’s circumstances. The Board also notes the significant progress that management has achieved since Listing 
in improving the internal financial control environment from that which met the needs of a business operating exclusively within 
Kazakhstan to an internal financial control environment expected of UK listed companies that meets shareholder expectations and  
the more rigorous regulatory environment. The Board will focus on replicating this across all aspects of internal control over the  
next 12 months.
The Board is committed to making further progress in these areas with a view to achieving comparable levels of risk management and 
an internal control environment with other international mining companies listed on the London Stock Exchange.
Going concern
In presenting the annual and interim financial statements and similar significant publications, the Board aims to present a balanced and 
understandable assessment of the Company’s position and prospects based on the funding plans produced at the time of Listing and 
subsequently updated as part of the 2006 corporate plan and budget. The Directors confirm that they are satisfied that the Company 
has sufficient resources to continue in operation for the foreseeable future. Accordingly, the Board has adopted the going concern 
basis in preparing the financial statements. 
Nomination Committee
The Nomination Committee was established on 23 September 2005. The Nomination Committee is chaired by Mr Vladimir Kim. Its 
other members are Lord Renwick and Mr David Munro who are deemed by the Board to be independent in character and judgement, 
thus ensuring that the Nomination Committee complies with the recommendation of the Combined Code as to membership. 
The Nomination Committee has met twice since the Listing to review the appointments of new non-executive Directors, to 
recommend to the Board a nomination for senior independent Director and to make recommendations to the Board concerning 
membership of the Board committees. 
The Nomination Committee reports on its activities at the next Board meeting following its meetings.
Remuneration Committee
The role of the Remuneration Committee and further details of the Group’s remuneration policy are set out in the Directors’ 
Remuneration Report on pages 54 to 57. 
•
•
•
•
Corporate Governance Report  
continued