KAZ Minerals reports solid Q3 and 9M 2020 production results

l  Operational highlights

§ All metals on track to achieve or exceed full year production guidance, assuming no new material Covid-19 impact

§ Copper production1 of 76.2 kt (Q2 2020: 78.9 kt), on track for top end of full year guidance of 280-300 kt

§ Gold production2 of 50.7 koz (Q2 2020: 54.3 koz), forecast to reach top end of 180-200 koz guidance range

§ Group silver production2 guidance increased to c.3,500 koz and zinc in concentrate guidance to 45-50 kt

l  Aktogay

§ Copper production1 in Q3 of 31.7 kt, below previous quarter (Q2 2020: 34.3 kt), as throughput reduced by scheduled maintenance

§ Average copper grade in Q3 of 0.56% (Q2 2020: 0.55%) higher than expected due to positive variance against the mine plan

§ Full year copper production1 on track to achieve upper end of guidance range of 120-130 kt

l  Bozshakol

§ Copper production2 of 30.3 kt (Q2 2020: 30.6 kt), as higher ore throughput was offset by lower copper grades and recoveries   

§ Gold production2 reduced to 37.0 koz (Q2 2020: 41.0 koz) due to expected lower average gold grades and recoveries

§ On track to achieve full year copper production2 guidance of 110-120 kt and the upper end of gold production2 guidance of 140-150 koz, with mill maintenance deferred from earlier in the year scheduled to take place in Q4

l  East Region and Bozymchak

§ Copper production2 of 14.2 kt (Q2 2020: 14.0 kt), on track to achieve full year guidance of c.50 kt

§ Gold production2 of 13.7 koz (Q2 2020: 13.3 koz), could exceed full year guidance of 40-50 koz

§ Silver production2 full year guidance increased to c.2,000 koz, following strong Q3 output of 554 koz

§ Strong zinc in concentrate output, benefiting from higher grades, with 15.7 kt produced in Q3 (Q2 2020: 14.8 kt). Full year zinc in concentrate guidance increased to 45-50 kt

§ Achieving top end of gold guidance is dependent on the restart of the Bozymchak mine in Q4, where production has been temporarily suspended since 7 October, to ensure employee safety following recent political instability in Kyrgyzstan

l  Covid-19

§ Ensuring the safety, health and wellbeing of employees and contractors is the Group’s first priority

§ Comprehensive measures remain in place to protect staff and mitigate the risk of disruption to operations

§ There has been no major impact to the Group’s operations or sales in Q3

§ Reported Covid-19 infection rates in Kazakhstan reduced to a low level during the quarter, but the risk of new restrictions in Q4 remains

Andrew Southam, Chief Executive Officer, said: “KAZ Minerals has delivered strong production in Q3 and the nine months to September 2020, despite the challenges posed by Covid-19. Copper output from our mines in Kazakhstan has been uninterrupted in 2020, with year to date copper volumes maintained at a similar level to 2019 whilst by-product output is significantly ahead. Whilst maintenance is scheduled for Q4, we are on track to achieve the upper end of our copper and gold guidance ranges and have increased production guidance for silver and zinc.”

KAZ Minerals PLC (“KAZ Minerals” or “the Group”) is a high growth copper company focused on large scale, low cost, open pit mining in Kazakhstan, Russia and Kyrgyzstan. It operates the Aktogay and Bozshakol open pit copper mines in the East Region and Pavlodar region of Kazakhstan, three underground mines and associated concentrators in the East Region of Kazakhstan and the Bozymchak copper-gold mine in Kyrgyzstan. In 2019, total copper production was 311 kt with by-products of 201 koz of gold, 3,382 koz of silver and 38 kt of zinc in concentrate. The Group acquired the Baimskaya project in the Chukotka region of Russia in January 2019, one of the world’s most significant undeveloped copper assets, with the potential to become a large scale, low cost, open pit copper mine.

The Group’s major operations at Aktogay and Bozshakol have delivered industry leading production growth and transformed KAZ Minerals into a company dominated by world class, open pit copper mines.

Aktogay is a large scale, open pit mine with a remaining mine life of around 25 years (including the expansion project) at an average copper grade of 0.35% (oxide) and 0.33% (sulphide). Aktogay commenced production of copper cathode from oxide ore in December 2015 and copper in concentrate from sulphide ore in February 2017. The operating sulphide concentrator has an annual ore processing capacity of 25 million tonnes and the sulphide processing capacity is expected to be doubled to 50 million tonnes with the addition of a second concentrator by the end of 2021. Aktogay is competitively positioned on the global cost curve and is expected to produce an average of 100 kt of copper per year from sulphide ore until 2021, increasing to 170 kt per year from 2022 to 2027, after the second concentrator commences operations. Copper production from oxide ore is expected to be in the region of 20 kt per annum until 2024.

Bozshakol is a first quartile asset on the global cost curve with an annual ore processing capacity of 30 million tonnes and a remaining mine life of c.40 years at an average copper grade of 0.36%. The mine and processing facilities commenced output in 2016 and is expected to produce an average of 100 kt of copper production and 120 koz of gold in concentrate per year over the first 10 years of operations.

The Peschanka deposit within the Baimskaya licence area in Russia has JORC resources of 9.5 Mt of copper at an average grade of 0.43% and 16.5 Moz of gold at an average grade of 0.23 g/t. The project is located in a region identified by the Russian Government as strategically important for economic development and is expected to benefit from the construction of state-funded power and transport infrastructure and the provision of tax incentives. The estimated capital budget for construction is around $7 billion, with c.10% to be incurred after the commencement of production.

KAZ Minerals is listed on the London Stock Exchange and the Kazakhstan Stock Exchange and employs around 15,755 people, principally in Kazakhstan.

Recommended Offer:1 On 28 October 2020, the board of Nova Resources B.V. (“Nova”) and the Independent Committee of KAZ Minerals announced that they have reached agreement on the terms of a recommended cash offer to be made by Nova for the entire issued and to be issued share capital of KAZ Minerals (“the Acquisition”). Under the terms of the Acquisition, KAZ Minerals Shareholders will be entitled to receive 640 pence in cash for each KAZ Minerals Share. The Independent Committee, which has been so advised by Citigroup and UBS as to the financial terms of the Acquisition, considers the terms of the Acquisition to be fair and reasonable and intends unanimously to recommend that KAZ Minerals Shareholders vote in favour of the Scheme. The Acquisition is currently expected to become Effective in the first half of 2021, subject to the approval of the KAZ Minerals Shareholders, receipt of the relevant antitrust clearances and regulatory approvals and the sanction of the Scheme by the Court.

1 Unless otherwise defined, capitalised terms shall have the meanings given to them in the ‘Recommended Cash Acquisition of KAZ Minerals PLC by Nova Resources B.V.’ announcement, released on 28 October 2020.

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