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Investment opportunities in Kazakhstan’smining sector
National Mining Company“Tau- Ken Samruk” JSC
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Macroeconomic overview
2Investment opportunities in Kazakhstan’s mining sector
The economy of Kazakhstan is the largesteconomy in Central Asia and one of the fastest
growing economy among the former Soviet Unionrepublics.
The mining industry, along with oil and gas,dominates the Kazakhstani economy.
Kazakhstan’s economy is mainly export-oriented.The major export product are natural resources.
The highly developed banking system, stableinstitutions and investment-friendly government
policies further encourage foreign investment.Foreign direct investments (FDI) into Kazakhstanaccount for about 80 % of all capital inflows into theCentral Asian economies.
18 22 25 3143
5781
104127
13,1%11,5% 12,1% 12,1%
13,6%
15,8% 16,1%
14,8%12,5%
2000 2001 2002 2003 2004 2005 2006 2007 2008
GDP, bln USD Mining industry, % of GDP
Nominal GDP growth dynamic, bln. USD
FDI inflows, bln. USD
1 7593 522
5 414 6 6437 5935 177 1 682
2 003
5 050 2 6251 381
1 414
3 206
6 761 9 859
2000 2001 2002 2003 2004 2005 2006 2007 2008
Geol ogic al expl oration Crude oil production Other 73%
15%
4%4%
2% 2%
Mineral resources
Non-precious metals
FMCG
Chemical goods
Other
Equipment
Export breakdown in 2008
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Investment attractiveness of Kazakhstani market
3Investment opportunities in Kazakhstan’s mining sector
Dynamic economic growth;
Stable political system;
Skilled and relatively cheap labour. Kazakhstan was a “pearl” of mining industry in the former Soviet Union;
Attractive geographical location - close to the large markets of China and Russia;
Kazakhstan is a rich country in terms of volume and variety of mineral resources;
According to the analysis of World Bank and IFC, Kazakhstani tax regime is considered as the most
attractive among other CIS countries.
Kazakhstan Russia Ukraine UzbekistanTax regime attractiveness
In the global ranking 49 134 180 162Tax payments
Number of corporate tax payments in year 16 70 178 179
Time spent on tax complianceNumber of hours spent per year on taxcompliance 111 155 172 68
Total tax rate (for payment of all taxes andduties)
In percent of operating profit 65 123 147 173
Source: “Paying taxes 2009 – The global picture” World bank, IFC
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Metals and Mining industry
4Investment opportunities in Kazakhstan’s mining sector
Kazakhstan has a long traditions of metals and mining production based on its reach geology. The country isamong the richest countries in terms of the volume and variety of natural resources. In terms of the miningvolumes Kazakhstan takes the 13-th place among the 70 world mining leaders. Kazakhstan possesses one of the world’s biggest reserves of various metals and minerals including copper, iron ore, coal, gold, chromite,lead, zinc, manganese, titanium, cadmium and uranium.
Kazakhstan’s share in the world reserves of metals : Chromite ore - 30% Manganese ore - 25%
Iron ore - 10% Copper - 10% Lead and Zinc - 13%
Currently Kazakhstan takes the 15-th place in theworld in terms of copper production, 7-th place –zinc, 8-th place – lead, 3-rd place – titanium, 13-thplace – iron ore and 35-th place in terms of steelproduction.
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Potential for growth
5Investment opportunities in Kazakhstan’s mining sector
Kazakhstani metals and mining industry still has considerable potential for further growth. Only 10%-15%of Kazakhstan’s explored reserves are in operation.
Iron ore – only 19 (out of 55) large deposits are in operation;
Manganese ore – only 10 (out of 34) large deposits are in operation;
Chromite ore – only 13 (out of 20) large deposits are in operation;
Gold – only 75 (out of 282) deposits are in operation.
Currently Government is formulating a project of Accelerated Industrial and Innovative Development of Kazakhstan for the period of 2010-2014. According to the program, metals and mining sector of Kazakhstanshould double its production and significantly increase share of value-added products by 2015 . Totalvolume of investments in metallurgical and infrastructural projects could potentially reach 13 bln. USD.
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Tau-Ken Samruk company overview
HistoryJSC “National Mining Company “Tau -Ken Samruk” was established underthe Resolution of the Government of the Republic of Kazakhstan dated15 January 2009 No. 10. Tau-Ken Samruk is a national operator of government assets in the metals and mining industry of Kazakhstan.
Mission statementTo promote the growth of Kazakhstan's economy and its competitivenessthrough participation in exploration, mining and processing of solidmineral resources projects in cooperation with private sector.
Strategic prioritiesImprovement of subsoil use effectiveness by introducing innovative
technologies in exploration, mining and processing of solid mineralresources , including unexplored deposits and technogenetic mineralresources (industrial wastes).
Growth of metals and mining assets by restoration of distressed assetsvalue, costs optimization and use of higher level of mineral resourceprocessing.
Growth of government participation in metals and mining industry.
6Investment opportunities in Kazakhstan’s mining sector
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Activity instruments
7Investment opportunities in Kazakhstan’s mining sector
Long-term strategic focus of Tau-Ken Samruk is the creation of vertically integrated national metals andmining holding in Kazakhstan. Status of national company implies Tau-Ken Samruk a number of advantages in operations on the Kazakhstani market.
Recently Ministry of Energy and Mineral Resources of Kazakhstan has imposed a range of restrictions onsubsoil use rights . Tau-Ken Samruk has Direct negotiations right with a competent body to get explorationand mining rights for deposits that are in the State ownership.
Opportunity to exercise the State priority right to acquire the alienated subsoil use right (or a part
thereof) and (or) interest (block of shares) in legal entities that are subsoil users (according to Article 71 of the Law of the Republic of Kazakhstan “On subsoil and subsoil use”) .
Mandate to work with distressed companies/assets in metals and mining industry.
Management of the transferrable State blocks of shares/interests in metals and mining companies.
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Sources of financing
8Investment opportunities in Kazakhstan’s mining sector
Tau-Ken Samruk as Kazakhstani National Mining Company and 100% subsidiary of JSC “National Welfare
Fund “Samruk-Kazyna ” has following additional sources of external financing:
Financing from affiliated company – Development Bank of Kazakhstan on favorable conditions;
Direct financing from JSC “National Welfare Fund “Samruk-Kazyna ” on early stages of investment
projects realization;
Attraction of direct investments through participation in authorized capital of subsidiaries of JSC “Tau -
Ken Samruk ”;
Attraction of borrowings for investment projects realization purposes under corporate guarantee of
parental company JSC “National Welfare Fund “Samruk-Kazyna ”.
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Opportunities for cooperation with Tau-Ken Samruk
9Investment opportunities in Kazakhstan’s mining sector
The main opportunity for cooperation with Tau-Ken Samruk is the mutual realization of mining projects on the basis of free nonoperating deposits in Kazakhstan
Advantages of mutual cooperation: Realization of exploration and exploitation projects on the basis of deposits with high potential of
reserves discovery would allow to provide an additional resource base for current and prospectivemetallurgical production facilities of both parties.
Introduction of new technologies aimed to increase mining and processing operations effectiveness.
Market capitalization growth for both companies .
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Analysis of mineral base
10Investment opportunities in Kazakhstan’s mining sector
Natural resource
type
Number of free
depositsGold 60
Coal 43
Titanium, zirconium 6
Iron, manganese 38
Bauxite 16
Molybdenum,tungsten 16
Copper 79
Rare metals 16
Barite 5
Vanadium 2
Wollastonite 3
Tin 5
Nephelinic syenite 1
Chrome 10
Nickel 30
Tau-Ken Samruk has carried out an analysis of current situation of
Kazakhstan’s mineral base. As a result, about 330 free non-operating deposits of solid mineral
resources have been defined.
In order to provide more detailed analysis of reserves potentialand geological structure of solid mineral resources deposits, 59geological data packages were purchased from competent authority.
On the basis of current data of mineral base and trends in metalsand mining industry, Tau-Ken Samruk have conducted an analysis of market conditions and prospects of industry development.
For the purposes of potential projects selection the list withproject’s main criteria and requirements have been developed.
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Projects selection criteria
11Investment opportunities in Kazakhstan’s mining sector
Compliance of the project to the main strategic goals of the
Company;
Availability of required minimum amount of reserves of solid
mineral resources and perspective of their increase;
Availability of industrial infrastructure, favorable geographic
location and economic environment in the deposit area (subsoil
object);
Favorable mining and technical conditions for the deposit
development;
Existence of the necessary financial, technical and labor resources,
high technical and economic parameters of the project.
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Potential partner selection criteria
12Investment opportunities in Kazakhstan’s mining sector
Requirements
to thepartner
# Criteria
1 Sufficient experience in the metals and mining industry
2 Existence of sufficient financial, production and
technological resources3 Availability of skilled personnel
4 Absence of significant borrowings
5 Lack of trials and collateral
6 Other requirements in accordance with internal acts of“Tau -Ken Samruk” JSC
The following criterias are designed for potential strategic partner (nonfinancial organization)in case of mutual realization of the project
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Project implementation
13Investment opportunities in Kazakhstan’s mining sector
When specifying the participation structure in the project Tau-Ken Samruk follows the
principle of own interests protection and respect of the interest of a potential partner. Projectparticipation and financing structure is specified on a case-by-case basis.
Realization of metals and mining projects with potential partner could be done under schemeof cooperation, where Tau-Ken Samruk provides subsoil use rights and access to financingsources, while strategic partner contributes to JV necessary funds, equipment andtechnologies, experience and other material and nonmaterial assets.
Tau-Ken Samruk:a) Subsoil use rights
b) Access to financing sources
Potential partner:a) Funds
b) Expertise and technologiesc) Equipment and other assets
JVmetals and mining
project
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Disclaimer and Contacts
14Investment opportunities in Kazakhstan’s mining sector
Disclaimer
The information contained in this profile isintended to provide prospective investorswith a preliminary understanding of theinvestment opportunity.
Every potential investor must make its ownindependent assessment of this opportunity.
Analytical materials are based on publiclyavailable resources that are believed to bereliable, but we cannot claim that they are
absolutely correct.
We take no responsibility for the use of thisinformation.
Contacts
Mr. Nurlan ZhakupovManaging DirectorJSC National Mining CompanyTau-Ken SamrukPhone: +7 71712 500 651Email: [email protected]
Mr. Yerlan RamazanovHead of Investment and AssetsManagement DepartmentJSC National Mining CompanyTau-Ken SamrukPhone: +7 7172 500 684Email: [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]