• HLH

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Posts: 261
Opinion: Buy
Posted: December 21, 2017

KAZ AKTOGAY EXPANSION PROJECT APPROVED

21 December 2017

AKTOGAY EXPANSION PROJECT APPROVED

· $1.2 billion expansion project approved to double sulphide ore processing capacity at Aktogay from 2021

· Annual copper production from sulphide ore to increase to 170 kt from 2022 to 2027 and 130 kt thereafter

· Net cash cost guidance to 2027 maintained at 100-120 USc/lb

· Capital investment supported by strong cash flows from Bozshakol and Aktogay

KAZ Minerals PLC ("KAZ Minerals" or "the Group") announces a planned expansion of its processing facilities at the Aktogay copper mine in the East Region of Kazakhstan. Following the achievement of commercial production at the Aktogay sulphide concentrator in October 2017, the Board has approved the construction of a second concentrator which will double the current sulphide ore processing capacity from 25 million to 50 million tonnes per annum.

The expansion represents a low risk growth project, being a duplicate of the sulphide processing facilities successfully commissioned at Bozshakol and Aktogay. Construction will be managed by the KAZ Minerals projects division which delivered the original project, with contracts to be tendered in 2018. The capital budget for the expansion project is expected to be in the region of $1.2 billion with approximately $200 million to be invested in 2018. The remaining expenditure will be incurred from 2019 to 2021. The mining fleet will be upgraded to support the higher ore throughput.

Output from the new concentrator is expected to commence in the second half of 2021 with the facility ramping up during 2022. Copper production from sulphide ore at Aktogay will increase by 80 kt to an average of around 170 kt per annum from 2022 to 2027, supported by higher copper grades. Over the remaining life of the mine, when copper grades will be in line with the average resource grade of 0.34%, the Aktogay expansion will add 60 kt per annum, increasing annual production to around 130 kt. Due to higher processing volumes the life of the sulphide ore body will reduce from over 50 years to approximately 28 years. Copper cathode production from oxide ore at Aktogay will be unchanged at the current level of around 20 kt per annum for the remaining eight year life of the oxide deposit.

Net cash cost guidance to 2027 following the expansion is unchanged at 100-120 USc/lb in 2017 US dollar terms with efficiency gains from larger scale mining operations offsetting the effect of accelerated grade decline as processing volumes are brought forward. Sustaining capital expenditure will increase from $30-$40 million to $50-$60 million per annum from 2022 onwards. The expansion is expected to generate a return in excess of the Group's cost of capital in the analyst consensus copper price scenario.

Oleg Novachuk, Chief Executive, said: "I am pleased to announce the planned expansion of our second major growth project, Aktogay, which will double its processing capacity from 2021. This expansion represents an opportunity for our proven project team to deliver a strong return on investment from an asset we know well by replicating the existing sulphide plant. Our outlook for copper remains positive and this development will help us to continue to grow in a tightening market. The capital expenditure over the period to 2021 for the expansion will be supported by strong cash flows from our new, low cost operations at Bozshakol and Aktogay."

A call for analysts will be held at 10:00am UK time. To participate in the call in listen-only mode please use the following dial-in details:

Conference call dial in: +44 (0) 20 3003 2666

Password: KAZ Minerals

Webcast: http://view-w.tv/834-1089-19140/en

Presentation download: http://www.kazminerals.com/investors/presentation-library/