KAZAKHMYS PLC TRADING UPDATE
FOR THE YEAR ENDED 31 DECEMBER 2011
This statement provides operational and unaudited financial results for Kazakhmys' managed businesses. The statement excludes the contribution from ENRC PLC, in which Kazakhmys has a 26% shareholding. The consolidated preliminary full year results of Kazakhmys, including the contribution from ENRC, will be released on 27 March 2012.
OPERATIONAL HIGHLIGHTS
· Production of major metals in line with targets set at the beginning of 2011
· Copper cathode production of 301 kt for the full year
· Copper cathode equivalent production from own concentrate of 299 kt
· Silver and gold production ahead of guidance
· Kazakhmys Power continued to benefit from strong demand
· Power generation at Ekibastuz GRES-1 increased by 15% from prior year
· Ekibastuz GRES-1 average realised tariff increased 20% from 2010
· Growth projects
· Bozshakol development commenced in August 2011 and remains on track for first production in 2015
· Aktogay funding secured and feasibility study to complete this year
· Long-lead items ordered for Aktogay
FINANCIAL HIGHLIGHTS
· Copper benefited from continued strong demand with an average realised price of $8,756 per tonne, an increase of 16% on 2010
· Segmental EBITDA (excluding special items and share of associate ENRC) of $1,959 million
· Improved metals prices and contribution from Kazakhmys Power
· Offset by lower copper sales volumes and increased costs
· Net cash costs in line with guidance at 114 USc/lb
· Assisted by firm by-product prices
· Pressure from cost inflation remains
· Balance sheet remains robust
· Balance sheet returned to net funds position for the first time since early 2008
· $1.5 billion of funding secured for Aktogay
· $4.2 billion of long-term funding now secured for growth projects
· ENRC holding valued at $3.7 billion as at 29 February 2012
· $83 million of shares repurchased to date under the share buy-back programme announced in September 2011
· At an average price of 889 pence per share
· Full year dividend increased 27% to 28.0 US cents per share ($149 million)
· A further significant increase, reflecting strong cash flows
· $1,636 million returned to shareholders since Listing in 2005
2012 STRATEGY AND OUTLOOK
· Focus on key priorities and delivery of strategy
· Drive further improvements in health and safety
· Optimise operational efficiency to resist industry cost pressures
· Continue delivery of growth projects and refurbishment at Ekibastuz GRES-1
Dividends
The policy established at the time of Listing was for the Company to maintain a dividend policy which took into account the profitability of the business and underlying growth in earnings of the Group, as well as its cash flows and growth requirements. The Directors would also ensure that 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. Share buy-backs and special dividends have been used in addition to the ordinary dividend to return surplus funds to shareholders.
In the second half of 2011, the Directors announced a share buy-back programme of up to $250 million, the completion of which was subject to market conditions. In 2011, 5.6 million shares were purchased, with a further 0.4 million purchased in early 2012, at a total cost of $83 million, representing 1.1% of the Company's shares in issue at the commencement of the programme. Following the appreciation of the Company's share price in early 2012, the buy-back programme has not made further share purchases. The Company's authority for this share buy-back programme expires in May 2012, and it is unlikely the announced programme will be completed in full.
The Directors recommend a final dividend for 2011 of 20.0 US cents per share, which together with the interim ordinary dividend of 8.0 US cents per share, gives a total full year ordinary dividend of 28.0 US cents per share (2010: 22.0 US cents per share), based on the earnings for 2011. The total dividend reflects an approximate 12% payout ratio of the Group's full year Underlying Profits as adjusted for the removal of ENRC's and Ekibastuz GRES-1's equity accounted earnings but including dividends received from ENRC during the year, plus an additional 5.0 US cents per share or $26.5 million. The additional 5.0 US cents per share to the 12% payout ratio has been recommended by the Directors taking into account that the announced buy-back programme is unlikely to be completed in full and the Group retains its financial strength with available cash and long dated debt facilities in place. The exchange rate to be applied to convert the dividend into UK pounds sterling is £0.63384 to the US dollar and to convert the dividend into Hong Kong dollars is HK$7.75487 to the US dollar. This is based on the average exchange rates for the five business days ending two days before the date of this announcement.
Subject to the approval of the shareholders at the Annual General Meeting to be held on 11 May 2012, the final dividend shall be paid on 15 May 2012.
