Drilling at South mine at the Zhezkazgan Complex

KEY PERFORMANCE INDICATORS

The Group monitors performance against a set of Key Performance Indicators (KPIs) with the aim of delivering its strategic objectives.

Relevance

This is a measure of the underlying profitability of the Group, widely used in the mining sector.

How we measure

EBITDA is earnings before interest, taxation, the non-cash component of the disability benefits obligation, depreciation, depletion, amortisation and mineral extraction tax, as adjusted for special items.

2015 performance

EBITDA (excluding special items) for 2015 of $202 million declined by $153 million compared to the continuing operations EBITDA in 2014, reflecting the 21% reduction in revenues in 2015. The Group’s realised prices for all metals declined in 2015, including a 22% lower realised price for copper. The decline in revenues was partially mitigated by a 6% decrease in cash operating costs resulting from the ongoing cost control initiatives and the weakening of the tenge in the second half of the year.

Relevance

Monitors Group cash flows used to fund returns to shareholders, reduce debt and invest in the future growth and development of the business.

How we measure

Net cash flow from operating activities before capital expenditure and non-current VAT associated with expansionary and new projects less sustaining capital expenditure.

2015 performance

Group Free Cash Flow for the year was $114 million below 2014 as a $354 million reduction in Group EBITDA, including EBITDA from disposed assets in the prior year, was partially mitigated by $233 million in lower capital expenditure and $48 million and $15 million reductions in MET and income tax paid, respectively. The negative $145 million Free Cash Flow in 2015 is after the deduction of $147 million of interest payments (2014: $150 million) principally incurred financing the development of the major growth project.

Relevance

EPS based on Underlying Profit can be used as an indication of profits available to shareholders for distribution or retention in the business.

How we measure

Profit before special items and other non-recurring or variable non-trading items, and their resulting taxation impact, divided by the weighted average number of ordinary shares in issue during the year.

2015 performance

Underlying EPS from continuing operations was a loss of $0.02 per share. Underlying Profit from continuing operations fell from $86 million in 2014 to a loss of $10 million in 2015, impacted by the lower EBITDA and foreign exchange losses arising from the devaluation of the Kyrgyz som and the Kazakh tenge during 2015. The Group is expected to return to earnings growth in 2016 with the ramp up of operations at Aktogay oxide and Bozshakol sulphide plants.

Relevance

Ore output indicates our ability to maximise production from existing assets and growth projects. This KPI should be considered alongside other measures including production costs and maintenance spend, to ensure extraction is valuable.

How we measure

Kilotonnes of ore extracted from our mining operations.

2015 performance

Ore output in 2015 has seen a three-fold increase compared to output from continuing operations in 2014 as Bozshakol and Aktogay mining operations commenced. There was 3,003 kt of ore extracted at Aktogay oxide and placed on heap leach pads and 7,099 kt from Bozshakol has been stockpiled in 2015 to be processed at the sulphide and clay plants in 2016. Ore extraction at the East Region and Bozymchak mines has remained in line with expectations, but was marginally below extraction from continuing operations in the prior year. Ore output will continue to increase in 2016 with a full year of ore extraction anticipated for Bozshakol and Aktogay oxide.

Relevance

This measures the performance of the Group in maintaining its low-cost base whilst maximising revenues through the sale of by-products.

How we measure

The total of cash operating costs excluding purchased copper products less by-product revenues, divided by the volume of copper cathode equivalent sales.

2015 performance

The cash cost of copper sold after by-product credits for 2015 of 109 USc/lb was above the continuing operations net cash cost in 2014, reflecting the decline in by-product revenues in 2015 resulting from the fall in commodity prices during the year. Excluding the impact of by-product credits, the Group’s gross cash cost in 2015 of 230 USc/lb has reduced compared to 257 USc/lb from the East Region in 2014 or 277 USc/lb in the second half of 2014 when the East Region operated independently of the Disposal Assets. Cost saving initiatives and the beneficial impact of the weakening of the tenge following the currency’s transition to free float in August 2015 have led to a lower gross cash cost.

Relevance

Copper, the Group’s principal product, represents 69% of revenue and is the main operational indicator.

How we measure

Copper cathode equivalent produced from own ore either as refined copper cathodes or as recoverable copper in concentrate or residues sold.

2015 performance

Cathode equivalent production in 2015 was consistent with production from continuing operations in 2014. The first production from Aktogay oxide was received in December 2015 with a contribution of 0.4 kt of cathode. Bozymchak produced 2.2 kt of copper cathode, with the project achieving commercial production on 1 July 2015. East Region cathode output has fallen by 6% from 83.5 kt in 2014 to 78.5 kt in 2015 with capacity constraints at the Balkhash smelter leading to a build-up of work in progress at the end of the year.

Relevance

Indicates how much cash flow is required to maintain current output and how efficient we are at controlling capital expenditure.

How we measure

Sustaining capital expenditure for our mining operations, divided by copper cathode equivalent production volumes.

2015 performance

Maintenance spend per tonne of cathode has increased by $196 per tonne compared to continuing operations maintenance spend in 2014. East Region and Bozymchak sustaining capital expenditure of $67 million increased by $14 million compared to 2014, but was below the guided range of $80 million to $100 million. The downturn in commodity prices has resulted in capital expenditure being deferred where possible. Work has continued on two significant optimisation projects: the modernisation of the Nikolayevsky concentrator, expected to be completed in the first half of 2016, and construction of a railway line between the Artemyevsky mine and the Nikolayevsky concentrator, which is expected to be finished in 2017.

Relevance

A key measurement of the Group’s operational health and safety performance.

How we measure

The number of employee and contractor fatalities directly occurring from an occupational injury or disease at the Group’s operations during the year. The definition of an occupational fatality is taken from the ICMM health and safety performance indicators published in January 2014, which the Group has adopted in 2015 to further align its health and safety performance KPIs with those of its peers.

2015 performance

Three fatalities occurred in 2015, one of which involved an employee in the East Region and two involved contractors, one in the East Region and the second at the Aktogay project. Three fatalities in 2015 compares to seven fatalities in the continuing operations in 2014, and 14 for the full Group in 2014*. KAZ Minerals considers all fatalities to be avoidable and has a target of zero fatalities. The reduction in fatalities for continuing operations has occurred in a period in which the number of man-hours worked increased by 78%, from 23 million in 2014 to 41 million in 2015. The rate of fatal incidents per million hours worked in the continuing operations has therefore reduced from 0.29 in 2014 to 0.07 in 2015, which compares to the ICMM average fatality rate per million hours worked for 2014 of 0.02.

*2014 Annual Report and Accounts stated six fatalities from continuing operations and 13 in the full Group. One fatality in 2014 had been initially assessed as due to natural causes but has been subsequently reclassified as work-related.

Relevance

TRIFR measures the frequency of occupational injuries occurring at the Group’s operations and is therefore a key indicator of our health and safety performance.

How we measure

The number of Total Recordable Injury (TRI) cases occurring for every million man-hours worked during the year. The definitions of TRI and TRIFR are taken from the ICMM health and safety performance indicators published in January 2014 which include new injury cases of sufficient severity that require medical treatment beyond first aid or result in the worker’s inability to perform his or her routine work function on the next calendar day. Historically, the Group reported injury rates as LTIFR (lost time injury frequency rate). Following the adoption of the ICMM indicators, the Group has restated its injury statistics for 2014 to TRIFR. The definition of injuries under TRIFR is wider than under LTIFR as it includes injuries which did not result in lost time, resulting in a higher rate under the new KPI.

2015 performance

There were 51 TRI cases in 2015, a reduction of 36% compared to 80 in 2014 from continuing operations. The TRIFR has fallen significantly from 3.48 for the continuing operations in 2014 to 1.25 in 2015 as the reduction in the absolute number of injuries has been achieved in a year in which there has been a 78% increase in the number of man-hours worked.

2 ICMM definitions for TRIFR were adopted by the Group in 2015. The 2014 TRIFR for continuing operations has been estimated by applying the new injury definition to available historic data.

13C represents continuing operations only in 2013

14C represents continuing operations only in 2014