annual report 2015preliminary feasibility study report was drawn up in 2015. design capacity is 940...

ANNUAL REPORT

2015

CREATING THE VALUE

TABLE OF CONTENTSOUR ACTIVITY......................................................................................................................... 2CREATING THE VALUE ........................................................................................................... 4OUR PROJECTS ....................................................................................................................... 6KEY PERFORMANCE INDICATORS ....................................................................................... 20Letter from the Chairman of the Board of Directors ....................................................... 22Letter from the Cheif Executive Officer ............................................................................. 24RESULTS OF 2015 ................................................................................................................... 26The key events of the year .................................................................................................... 27Results of Financial and Economic Activity ....................................................................... 28Authorized Capital Structure .............................................................................................. 30Structure of Assets ................................................................................................................ 31REVIEW OF INVESTMENT AND PRODUCTION ACTIVITY .................................................. 32Geological Exploration Projects Implementation ............................................................ 33Results of the Production Projects Implementation ....................................................... 40Production Activity ................................................................................................................ 43Innovative Activity ................................................................................................................. 46CORPORATE GOVERNANCE ................................................................................................. 48Corporate Governance Structure ....................................................................................... 49The Sole Shareholder ............................................................................................................ 51The Board of Directors.......................................................................................................... 51Management Board .............................................................................................................. 62Risk Management System ................................................................................................... 66Internal Audit Service ........................................................................................................... 69SUSTAINABLE DEVELOPMENT ............................................................................................. 70Human Rights......................................................................................................................... 73Human Resources Management Policy ............................................................................. 74Environmental Protection .................................................................................................... 76Occupational Health and Safety ......................................................................................... 77FINANCIAL STATEMENTS FOR 2015 .................................................................................... 80Information on External Audit and All Rendered Services ............................................. 81Audit Company Compensation Information ..................................................................... 82Consolidated Financial Statements .................................................................................... 83

You can get detailed information on activity of Tau-Ken Samruk JSC on the official web-site of the company: www.tsk.kz

ANNUAL REPORT

2015

Astana Semey

PavlodarKokshetau

Petropavl

Oskemen

Karaganda

Taldykorgan

Almaty

TarazShymkent

Kyzylorda

Kostanay

Aktobe

Aktau

Atyrau

Oral

5

6

8

79 9

1

11

10

3

42

2

12

Astana Semey

PavlodarKokshetau

Petropavl

Oskemen

Karaganda

Taldykorgan

Almaty

TarazShymkent

Kyzylorda

Kostanay

Aktobe

Aktau

Atyrau

Oral

SpasskyGeological exploration operations of copper, gold and associated components are underway.10.6 l.km of wells were drilled and 5.7 thous.m3 of trenches were dug in 2015.KZT 516.9 mln. of invested funds was used.

ABOUT COMPANY

Tau-Ken Samruk is a national mining company specializing in mining and production of copper, lead, zinc, gold, iron and rare earth metals and oriented toward developement of minefields in Kazakhstan using the leading-edge technologies.

MISSION

Fundamental improvement of the national mining and metallurgical industry in the Republic of Kazakhstan.

VISION

To become the most extensive national company in the field of mining and metallurgic sector of Kazakhstan economy introducing advanced technologies and best world practices.

GOAL

Our objective is to achieve the brand new level of the national mining and metallurgical industry development through stepping up the geological exploration activity, implementation of development programs and efficient operation of assets.

OUR STRATEGY

Starting from 2013, the Company has been carrying out its activity in accordance with the strategy approved by the Sole Shareholder.

Tau-Ken Samruk JSC task is to develop into a large-scale national mining and metallurgical company of the Republic of Kazakhstan involved in production and processing of the priority group of metals. We are going to produce 110 thousand tons of zinc concentrate, 59 thousand tons of lead concentrate, 20 thousand tons of pure goldand 23.9 thousand tons of technical silicon by 2020.

In 2015, we gained a significant momentum in achievement of our strategic tasks, namely:

• Actively explored 7 objects of subsoil use; • Completed remedial maintenance works of the main facilities of

Shalkiya deposit; • Started designing of Alaigyr Mine and Concentration Plant construction; • Currently completing preliminary development at 2 mining projects –

Massalsky and the Northern Katpar; • Completed recovery of project facilities at Silicon Production Plant; • Increased gold production output of the refinery; • Increased our assets 1.6 times, including acquisition of new companies.

Shokpar and Gagarinskoye depositsProspect evaluation survey of gold-bearing deposit is underway. 13.3 l.km of wells were drilled and 9.7 thous. samples were taken in 2015. KZT 443.2 mln. of invested funds was used.

OUR ACTIVITYMassalsky Mining and Processing Plant (MPP) Titanomagnetite ore field. Ferrum content - 15.7%Titanium dioxide content - 2%Vanadic pentoxide content - 0.1%Production research of ore processing was carried out and a preliminary feasibility study report was drawn up in 2015.Design capacity is 940 thousand tons of rolled products.Over the reporting period, KZT 400 mln. of invested funds was used.

1 Refinery Gold refinery. The refinery employs 74 people. 10.1 tons of gold and 2.3 tons or silver were produced in 2015. Silver vacuum distillation facilities were put into operation during the year. KZT 160 mln. of invested funds was used and KZT 1.8 bln. of profit was earned over the reporting period.

2 Silicon Production PlantTechnical silicon production plant. The plant employs 375 people. 11.2 thousand tons of technical silicon and 14 thousand tons of microsilica were produced by the plant in 2015. The second ore thermal furnace was put into operation during the year. KZT565.5 mln. of invested funds was used and KZT133 mln. of income was earned over the reporting period.

3 4

South-Moiynty AreaProspect evaluation survey of gold-bearing deposit is underway. 481.7 l.km of wells were drilled and 40.8 thous. samples were taken in 2015. KZT 117.4 mln. of invested funds was used.

8

9

Tuyuk-TemirlikGeological exploration operations of copper, lead and barium sulfate are underway.5.1 l.km of wells were drilled and 3.5 thous. samples were taken in 2015. KZT 303.8 mln. of invested funds was used.

7

Predgorny KetmenProspect evaluation survey of gold-bearing deposit is underway. 1.6 l.km of wells were drilled and 3.2 thous. samples were taken in 2015. KZT 115.3 mln. of invested funds was used.

6

Progress depositProspect evaluation survey of gold-bearing deposit is under way.3.1 l.km of wells were drilled and 1.7 thous. samples were taken in 2015.KZT 76.3 mln. of invested funds was used.

5

AlaigyrPolymetallic ore field. Lead content - 5.4%Silver content - 26.27 g/tIn 2015, the total volume of stripping work amounted to 911 thousand m3.Design capacity is 64 thousand tons of lead concentrate.Over the reporting period, KZT 660 mln. of invested funds was used.

10ShalkiyaPolymetallic ore mine. Zinc content - 4.27%Lead content - 1.28%In 2015, mining footage amounted to 61 thousand m3.Design capacity is 230 thousand tons of zinc concentrate and 66 thousand tons of lead concentrate per a year.Over the reporting period, KZT 5.3 bln. of invested funds was used.

11

Northern KatparTungsten-and-molybdenum ore deposit.Tungsten trioxide content - 0.23%.Molybdenum content - 0.04%.Bismuth content - 0.01%Scope of quarry reclamation work was assessed in 2015. Design capacity is 4.6 thous. t. of tungsten concentrate, 0.6 thous. t. of molybdenum concentrate and 9.6 thous. t. of copper concentrate per a year. KZT 4.8 mln. of invested funds was used.

12

32 ANNUAL REPORT 2015

CREATING THE VALUE Currently, the Company is implementing the first stage of Development Strategy. Our short-range plans are as follows: completion of geological exploration works at the objects of subsoil use; launching Shalkiya and Alaigyr projects; bringing the production of the refinery and silicon plants to the designed output level.

The way we are going to continue to pursue our Development Strategy 1. Development of the resource base for the priority commercial minerals;2. Implementation of the production projects and mastering and development of new production areas;3. Strengthening and expanding the Company’s human workforce potential; 4. Development of an innovative and technological potential of the Company;5. Acquisition of new assets and further handling the industry companies’ share packages transferred to the Company.

Geological exploration of copper, lead, zinc, gold, ferrum and manganese deposits at 6 objects of subsoil use was started.

Registration procedures of the site allocated for mining operations are completed and mine works were started.

Refinery was commissioned.

Decision was made by the Company to participate in recovery of the silicon production plant.

29.82% share of participation in Kazzinc LLP was transferred into the authorized capital of the Company.

Geological exploration and evalution works at 9 objects of subsoil use;

Completion of Bankable feasibility study (BFS),construction of tailings impoundment and infrastructure facilities of the Shalkiya project.

Designing of concentration plant and outset of infrastructure facilities for concentration plant at Alaigyr project.

Development of BFS, starting the construction of the MPP and metallurgical plant construction under the Massalsky project.

Open pit dewatering and drawing of samples from the Northern Katpar project.

Production of 12 tons of gold, 4 tons of silver and 19.2 thousand tons of technical silicon.

Geological exploration of copper, lead, zinc, gold, ferrum and manganese was conducted at 8 objects of subsoil use.

Ore beneficiation process for regulations were developed and feasibility study of a mining Processing plant (MPP) construction for the Alaigyr project was commenced.

Development of technology processfor ore processing of Massalsky deposit was started.

Approximately 6.3 tons of gold and 2 thousand tons of technical silicon were produced.

The first ore thermal furnace was put into operation at the technical silicon production plant.

100% shares of “ShalkiyaZinc LTD” JSC was transferred into the authorized capital of the Company; the existing infrastructure was inspected and restored,mine footage works got started.

Geological exploration and evaluation works at 8 objects of subsoil use;

Design development and commencement of construction of MPP and completion of external infrastructure facilities construction of the Shalkiya project;

Completion of infrastructure facilities and Processing plant construction and putting Alaigyr project facilities into operation;

Development of design of MPP and metallurgic plant under the Massalsky field development project;

Development of the process regulations for ore processing of the Northern Katpar deposit.


Geological exploration and evaluation works were carried out at 7 objects of subsoil use;

Ore beneficiation process regulations were developed,repair and restoration operations were completed at the main facilities of the mine within the Shalkiya project.

Feasibility studies for construction of the GOK and estimates for the mine complex project Alaigyr.

Preliminary feasibility study of MPP and metallurgic plant under Massalsky project was completed.

Subsoil use rights were acquired for the Northern Kaptar deposit.

10.1 tons of gold, 2.25 tons of silver and 11,2 thousand tons of technical silicon were produced.

The second ore thermal furnace was put into operation at the technical silicon production plant.

Geological exploration and evaluation works at 7 objects of subsoil use;

Completion of Processing plant construction and putting MPP into operation under the Shalkiya project;

Achieving the designed capacity of the Alaigyr project;

Commencement of construction works at the Massalsky project;

Completion of BFS development for the Northern Katpar project;


2013 20162014 20172015 2018


OUR PROJECTSCommercial Development of Shalkiya Polymetallic Ore Deposit in the Kyzylorda Region and Construction of Processing Plant

Commissioning in 2018

Shalkiya mine was first put into operation in 1993 and was purchased by the Company in 2014 after 6 years of downtime. Shalkiya deposit is located in the south of Kazakhstan in Kyzylorda region. Estimated investments in restoration of the mine and construction of a processing plant amount to KZT 162.8 bln.

The deposit contains 127.5 mln. tons of ore with an average zinc content of 4.27% (5.5 mln. tons) and lead content of 1.28% (1.6 mln. tons). It is expected to the existing mine’s annual output up to 4 mln. tons of ore and construction of a processing plant for production of zinc and lead concentrates. Selective floatation flow scheme will be used for processing of the lead and zinc sulfide ores. The mine operation period is 32 years.

OUTPUT TARGETS

• Extraction of 4 million tons of ore per year. • Production of 230 thousand tons of zinc concentrate per year. • Production of 66 thousand tons of lead concentrate per year.

PROJECT DEVELOPMENT

ELECTRIC POWER SUPPLY • Electric power supply from HVL-

220kV of “Kentau-RU-6”. • Construction of a combined cycle

(gas-steam) thermal power plant of 75 to 80MW capacity is planned to reduce power costs.

LOGISTICS • Railway line connecting the site

with the national railway network. • Concentrate packed into big bags

will be loaded into open-sided (gondola) railway cars directly at the finished product workshop.

• Delivery of the finished products to China, CIS and other countries.

WATER SUPPLY • Water supply from drainage water

and ground water pumped out of drilled wells.

• 70-75% of process technical water will be reused by the processing plant.

PERSONNEL • 956 workers in the period of

construction. • 1,300 workers in the period of

operation. • 100% local personnel.

2014 (May)

2015 2016

2017 2018 2019

Asset acquisition

Conclusion of a supplementary to the subsoil use contract.

Diagnostics and commencing restoration of the existing infrastructure of the mine.

Mining footage of the 2 thousand cubic meters volume.

Mining footage exceeding the volume of 60 thousand cubic meters.

Development of the process regulations for ore processing.

Completion of restoration works on the basic facilities.

Beginning of the internal infrastructure facilities designing process.

Development of BFS.

Development of external infrastructure facilities design.

Construction of tailing impoundment and other facilities of the internal infrastructure.

Development of processing plant design.

Completion of external infrastructure facilities construction.

Construction of processing plant.

Putting into operation.

Reaching the designed production capacity level.

Zn

Pb


Polymetallic Ore Production at the Alaigyr Deposit in Karaganda Region


Alaigyr is a new project aimed at development of polymetallic ore deposit located at the boundary of Karkaralinskiy and Shestskiy districts of Karaganda region. Anticipated investments in the first stage of the project amount to KZT 35.8 bln.

The deposit contains 18.5 mln. tons of ore with an average lead content of 5.4% (1 mln. tons) and silver content of 26.3 g/tons (483 mln. tons). The project provides for construction of a mine and a processing plant for production of lead and silver concentrates. For the purpose of complex (sulphide-oxide) lead ore processing, combined floatation process will be used for sulphide and oxidized lead minerals to produce saleable lead concentrate. The mine operation period is 24 years.

OUTPUT TARGETS

• Extraction of 900 thousand tons of ore per year. • Production of 64 thousand tons of lead and silver concentrate

including 34 thousand tons of lead in concentrate and 15 tons of silver in concentrate per year.

PROJECT DEVELOPMENT

ELECTRIC POWER SUPPLY • 110kV power transmission line from

Akchatau substation in Karaganda region.

• Reduction of electric power cost to the competitive level is currently negotiated.

LOGISTICS • Graded road. • Construction of railway line is

planned. • Concentrate packed into big bags

will be loaded into open-sided (gondola) railway cars at a railway terminal.

• Delivery of the finished products to Kazzinc and other consumers.

WATER SUPPLY • Water supply will be ensured

through the use of ground water pumped out of drilled wells.

• 60% of process water will be reused by the processing plant.

PERSONNEL • 545 workers in the period of

construction. • 700 workers over the period of

operation. • 100% local personnel.

2013(February) 2014 2015

2016 2017 2018

Conclusion of a subsoil use contract.

Registration of subsoil use license for mining operations.

Stripping and mining works in the volume more than 250.3 thousand cubic meters.

Development of the process regulations for ore processing.

Development of Bankable feasibility study for MPP.

Construction of graded road.

Stripping and mining operations in the volume of approximately 40 thousand cubic meters.

Stripping and mining works in the volume more than 910 thousand cubic meters.

MPP Bankable feasibility study expert examination.

Development of external power supply line design.

Development of the mine design.

Start of design development of the processing plant and internal infrastructure facilities.

Start of the mine construction.

Completion of the design development of the processing plant also construction of infrastructure facilities and commissioning of the project.


OUR PROJECTS

Pb

Ag


Construction of a Mining and Smelting Enterprise (MSE) at the Massalsky Iron Ore Deposit in Akmola Region

Commissioning in 2021.

In accordance with the decree of the Republic of Kazakhstan government, Massalsky deposit was categorized as strategic one. It is located at the center of Kazakhstan in Zharkainskiy district of Akmola region. The asset was acquired by the Company in 2014. Anticipated investments in the first stage of the project amount to KZT 485.3 bln.

The deposit contains 729.2 mln. tons of ore with an average ferrum content of 15.73% (115.4 mln. tons), titanum oxide content of 2.05% (14.6 mln. tons) and vanadium pentaxide content of 0.11% (0.9 mln. tons). It is planned to build a mining-and-processing plant and a metallurgical plant. Multi-stage magnetic separation process will be used for processing of titanium-magnetite ores at the ore processing stage. Agglomeration and blast-furnace process will be used at the iron reduction stage. Conversion production will be used at the steel smelting stage and two continuous rolling lines will be used at the rolling stage. Mine opeation period - 67 years.

OUTPUT TARGETS

• Extraction of 10.5 million tons of ore per year. • Production of 1,206.8 thousand tons of iron ore concentrate

per year. • Production of 500 thousand tons of profiled steel rolled

products per year. • Production of 440 thousand tons of profiled steel rolled

products per year.

PROJECT DEVELOPMENT

ELECTRIC POWER SUPPLY

• Electric power supply over the HVL-220kV from Yessil substation.

LOGISTICS

• Construction of the railway line connecting the site with the national railway network.

• Rolled products will be loaded into open-sided (gondola) railway cars directly at the finished product workshop.

• Supply of the finished products to the domestic market of the country.

WATER SUPPLY

• Construction of a water supply line from Ishim River.

• 60% of process water will be reused by the project facilities.

PERSONNEL

• 900 workers over the period of construction.

• 3,119 workers of the period of operation.

• 100% local personnel.

2014 2015 2016

2017 2018–2021 2022

Asset acquisition.

Conclusion of a supplementary to the subsoil use contract.

Start of the ore processing technology development.

Laboratory study of ore processing was completed.

Preliminary feasibility study of the mining and processing plant and metallurgical plant construction project was concluded.

Call-off agreement for funding of the project was signed with Eximbank and a call-off EPC contract was signed with CNTIC Corporation.

Development of the BFS.

Conclusion of EPC contract with China corporation CNTIC and contract with Eximbank of China for project financing.

Beginning of design development for mining and processing plant and metallurgical plant.

Design development of mining and processing plant and metallurgical plant.

Construction of mining and processing and metallurgical plant.



OUR PROJECTS

Fe


Production of Tungsten-and-Molybdenum Ore at the Northern Katpar Deposit in Karaganda Region


The Northern Katpar deposit is located at the center of Kazakhstan in Karaganda Region. The asset was acquired by the Company in 2015. Anticipated investments in the project amount to KZT 42.1 bln.

The deposit contains 40.2 mln. tons of ore with an average tungsten trioxide content of 0.23% (90.3 thous. tons) and molybdenum content of 0.04% (13.9 thous. tons), bismuth content of 0.01% (5.8 thous. ton) and copper content of 0.00014% (57 thous. ton). It is planned to build a mining-and-processing plant within the framework of the project. Combined gravity floatation process may be applied for processing of tungsten and molybdenum ore. The mine operation period is 28 years.

OUTPUT TARGETS

• Extraction of 1,64 millon tons of ore per year. • Production of 4.6 thousand tons of tungsten ore concentrate

per year. • Production of 0.6 thousand tons of molybdenum ore

concentrate per year. • Production of 9.6 thousand tons of copper ore concentrate per

year.

PROJECT DEVELOPMENT

ELECTRIC POWER SUPPLY

• Construction of 220kV power transmission line from Kairakty substation.

LOGISTICS

• Restoration of a railway line connecting the site with the national railway network.

• Supply of the finished products to China and Russia.

WATER SUPPLY

• Restoration of a water supply line from Nura.

• Process water will be recirculated and reused.

PERSONNEL

• 500 workers in the period of construction.

• 670 workers over the period of operation.

• 100% local personnel.

2015 2016 2017

2018

2022

2019 2019–2021

Asset acquisition.

Scope of surface mine drainage work was assessed.

Surface mine draining and sampling.

Commencement of bankable feasibility study.

Development of the process regulations for processing of the field’s ore.

Commencement of bankable feasibility study.

Beginning of design development for mining and processing plant.

Completion of development of bankable feasibility study report.


Start of design development for mining and processing plant.

Start of the mining and processing plant construction.

Construction of the mining and processing plant.


OUR PROJECTS

W

Mo


Refinery in Astana

Reaching the designed production capacity level in 2019

Refinery of Tau-Ken Altyn LLP is located in the center of Kazakhstan in Astana. The refinery got started to operate in 2013. KZT 6.1 bln was invested in the project. New investments in the project amounted to KZT 301.6 mln.

Hydrological gold precipitation technology will be provided by the project. Currently, a synthesis of electrochemical method with an innovative method of acidless separation is applied in the refinery. The enterprise employs 74 people.

THE DESIGN PRODUCTION CAPACITY

• 25 tons of gold per year • 50 tons of silver per year

PROJECT DEVELOPMENT

2013 2014 2015

2016

2019

2017 2018

Commissioning. Production of 6.3 tons of gold. Implementation of silver vacuum distillation technology.

Production of 10.1 tons of gold and 2.25 tons of silver.

Profit of KZT 1.8 bln. was earned.

Implementation of gold hydroprecipitation technology.

Production of 12 tons of gold, 4 tons of silver.

Reaching the designed gold production capacity level.

Production of 25 tons of gold and 5 tons of silver.



OUR PROJECTS

Au


Silicon Plant in Karaganda Region

Reaching the designed production capacity level in 2018

The enterprise is located in the center of Kazakhstan in Bukharzhirau district of Karaganda Region. The enterprise was put into operation in 2014. KZT 1.85 bln was invested in the project. New investments in the project amounted to KZT 1.73 bln.

To improve the manufactured products quality, restoring mechanical, power supply and gas supply auxiliary systems of the ore thermal furnaces as well as building certain infrastructure facilities including a chemical laboratory are planned to perform.

The enterprise employs 375 people.

THE DESIGN PRODUCTION CAPACITY

• Annual production of 23.9 thousand tons of technical silicon.

PROJECT DEVELOPMENT

2014 2015 2016

2017 2018

Restoration works of ore-thermal furnace No.1 were performed.

Commissioning.

Approximately 2 thous. tons of technical silicon was produced.

477 tons of finished product were supplied to Europe and 440 tons to USA.

Restoration works of ore-thermal furnace No.2 were performed.

Establishment of a sub-area No.1 “Silicon Valley” of a special economic area

“Saryarka” and obtaining a status of SEZ member.

Production of 11.2 thousand tons of technical silicon and 14 thousand tons of microsilica.

10.9 tons of silicon and 650 tons of microsilica were sold.

Profit of KZT133 mln. was earned.

Restoration works on auxiliary systems of ore-thermal furnaces and development of a chemical laboratory design.

Production of 21 thousand tons of technical silicon and 17.6 thousand tons of microsilica.

Restoration works on auxiliary systems of ore-thermal furnaces and development of a chemical laboratory design.

Production of 21.9 thousand tons of technical silicon and 18.4 thousand tons of microsilica.

Reaching the designed technical silicon production capacity level.

Production of 23.9 thousand tons of technical silicon and 20,1 thousand tons of microsilica.

OUR PROJECTS

Si


Geological Exploration Works

The Company carries out exploration works of gold and copper deposits. During the year, the Company continued exploring four subsoil use objects (Spassky copper mineralization zone (CMZ), Tuyuk-Temirlik ore district, Predgorny Ketmen site and South Moiyntinskiy site) and assessment operations at three deposits (Shokpar, Gagarinskoye and Progress).

Based on the year results, geological exploration works were completed and the reserves of Zhaksylyk deposit in Akmola region were entered into the state register of mineral reserves.

Exploration works of titanum and magnetite ore at the Western Sayak deposit in Karaganda region were also completed.

Total investments in the geological exploration activity (for geological exploration works and for registration of subsoil use license) during 2015 amounted to KZT 1.87 bln.

OUR PROJECTS ACTIVITY DEVELOPMENT

2013 2014 2015

2016 2017 2018

Geological exploration works at the Zhaksylyk, Western Sayak and Predgorny Ketmen sites.

Subsoil use license registration and getting permission to use of land, and exploration works were commenced at Spassky CMZ and Tuyuk-Temirlik ore deposit.

Signing the contract on Gagarinskoye deposit.

Start of the process of getting subsoil use license for the Tuyuk deposit.

Field works at the Western Sayak were completed.

Geological exploration works were carried out at the Spassky CMZ, Tuyk-Temirlik, Predgorny Ketmen.

Signing the contract on Shokpar, Progress and Kostanai area deposits.

Feasibility study was conducted for Zhaksylyk deposit.

Geological exploration works were carried out at the Spassky CMZ, Tuyuk-Temirlik, Predgorny Ketmen, Progress, Shokpar and Gagarinskoye deposits.

Subsoil use license of Kostanai area was sold.

Registration process of getting subsoil use license for the South Moiyntinsky area.

Beginning of the process of getting subsoil use license for Upper Kairakty deposit .

Registration of reserves in the State register of mineral reserves, completion of works at Zhaksylyk deposit.

Compleion of titanium-magnetite ores exploration under the Contract related to Western Sayak deposit.

Completion of getting subsoil use license process for the Upper Kairaktinskoye deposit.

Exploration works at the Spassky CMZ, Tuyuk-Temirlik, South Moiyntinsky, Progress, Shokpar and Gagarinskoye deposits.

Registration of reserves into the State register of mineral reserves, completion of works at Predgorny Ketmen.

Registration of Khajikogan reserves within Spasskaya COZ into the State register of mineral reserves .

Geological exploration works at Progress, Tuyuk and Upper Kairaktinskoye, Spassky CMZ and the South Moiyntinsky areas.

Registration of Gagarinskoye reserves into the State register of mineral reserves.

Geological exploration works at Progress, Tuyuk and Upper Kairaktinskoye and the South Moiyntinsky sites.

Registration of Shokpar deposit reserves into the State Register of mineral reserves.


KEY PERFORMANCE INDICATORS

RelevanceGold is the core commodities produced by the Company and it accounts for almost 95% of profit from total products sold.

Measurement of the indexTotal volume of fine gold in the form of bullion bars of high purity grade (99.99%) produced over a year.

Results for year 2015In 2015, volume of refined gold production increased by 1.6 times comparing to 2014. The total volume of refined gold produced by the refinery.

RelevanceIndicates the changes in the geological exploration activity of the Company.

Measurement of the indexTotal amount of the Company’s funds invested in geological exploration activity.

Results for year 2015In 2015, volume of investments in GEW in creased by 17% comparing to 2014.

RelevanceExploration wells drilling is one of the main ways of searching and prospecting of commercial minerals’ deposits.

Measurement of the indexTotal depth of drilled wells in linear meters.

Results for year 2015In 2015, volume of investments in GEW increased by 22%.

RelevanceTechnical silicon is one of the main commodities produced by the Company.

Measurement of the indexVolume of the metal silicon in the form crashed chunks produced over a year.

Results for year 2015In 2015, the volume of technical silicon production increased by 5.6 times comparing to 2014. The entire volume of produced technical silicon was produced by the silicon plant.

Au

Si0

2

4

6

8

10

12

2

11.25

201520140

1

2

3

4

5

6 5,63

Technical silicon production, thous. tons

RelevanceIndicates the change in Company’s investment activity in all business areas.

Measurement of the indexThe amount of money for the purchase, development and maintenance of the production and non- production fixed assets and intangible assets.

Results for year 2015In 2015, the total volume of the Company’s investments increased by 3.7 times comparing to 2014. The reason for such a significant increase in investments was the increase in the Company’s investment into production and processing projects as well as increase in investments into obtaining the subsoil use rights.

Investments in GEW, KZT bln.

Exploration drilling, l. m

RelevanceIt determines the basic profitability of the Company and is widely used in the mining industry.

Measurement of the indexThis index is indicative of earnings before interest, depreciation, taxes and amortization, non-monetary liability of the Company in respect of social payments because of loss of labour capacity, deterioration, depletion, amortization and tax on production of commercial minerals adjusted for special items.

Results for year 2015In 2015, this index increased by 1.2 times comparing to 2014. The main reason for the given index increase consisted in the gross earnings due to securing an additional income from sales of refined gold produced from raw materials purchased before transfer of the national currency to a floating exchange rate.

RelevanceIndicates intensification of investment activity of the Company correspondingly affects on the number of employed people.

Measurement of the indexIt is determined as a sum total of an annual average manning table of the Company and its subsidiaries.

Results for year 2015In 2015, the Company’s average headcount increased by 1.5 times comparing to 2014. The main reason for increase consisted in increase in the personnel of silicon production plant due to putting the second ore thermal furnace into operation.

RelevanceIndicates the Company’s growth in value by the results of investment activity.

Measurement of the indexAssets minus long-term and short-term liabilities.

Results for year 2015In 2015, the owner’s equity of the Company increased by 1.6 times comparing to 2014.

Increase in the owner’s equity was due to the contribution made by Samruk-Kazyna JSC into the authorized capital of the Company for investment purposes and also due to recalculation of the reporting currency of investment into Kazzinc LLP.

0

2

4

6

8

10

12

6.3

10.1

201520140,0

0,5

1,0

1,5

2,0

1,6

0

2 000 000

4 000 000

6 000 000

8 000 000

10 000 000

2,419,600

8,915,682

201520140,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0 3,68

Gold production, tons

Total amount of investments, KZT thousand

0,0

0,5

1,0

1,5

2,0

1.591.87

20152014

0

5

10

15

20

25

30

35

27.87

34.19

20152014

-2 000

-1 500

-1 000

-500

0

500

-160 2

272.3

201520140,0

0,5

1,0

1,5

2,0

1,72

-2,061

EBITDA, KZT mln.

0

200

400

600

800

1000

633

959

201520140,0

0,5

1,0

1,5

2,0

1,52

Average staff number, per.

0

100

200

300

400

500

600

313,5

503.6

201520140,0

0,5

1,0

1,5

2,0

1,61

Owner’s equity, KZT bln.


Meeting the shareholder’s expectations, the Company conducted assessment of its compliance with the renewed principles of corporate management and prepared and has approved the plan of actions aimed at implementation of the new corporate management code by the group of companies.

Human Resources Related Issues. Over the whole 2015, we were paying special attention to development of our personnel and improvement of our processes in order to enhance efficiency of our team work.

Development of our employees’ potential should not be behind the Company’s development and, therefore, we will be paying much attention to the further activities aimed at development, motivation and assessment of our personnel performance. We are planning to introduce a labour remuneration system in a step-by-step manner, which is based on graded assessment of positions, assessment of employee’s performance efficiency using the competence model, for all companies members of the group. We will adopt a policy for social support of our employees using industry experience and regional specifics.

We believe that the policy of investment in Tau-Ken Samruk JSC pursued by the government and Samruk Kazyna JSC, involvement in development of new deposits, development of new production facilities and further joint activity will give us opportunity to improve our financial and operational results (indices) and will allow us to reach the level of similar indices of the largest mining and metallurgical companies of the world.

On behalf of Tau-Ken Samruk JSC Board of Directors, I would like to express our appreciation to the management, staff and the Sole shareholder for combined efforts aimed at development and improvement of the Company.

Kuanysh Bektemirov

Chairman of the Board of DirectorsTau-Ken Samruk JSC

In the address by the Head of the state “100 Concrete Steps” made public in May 2015 the task was set to implement the “National Champions” initiative for the purpose of acceleration of the national industrialization pace.

Development of Tau-Ken Samruk JSC into a large-scale national leader was also included into our strategy and the work conducted in the past year was aimed at achievement of this task.

The main event for the Company in 2015 was acquisition of the following two new assets: the Northern Katpar LLP and Silicon of Kazakhstan LLP and conclusion of agreement for acquisition of Silicon Mining LLP.

Results of Operating Activity. In 2015, the Company was carrying out an active geological exploration activity and the total amount of investments into this activity was almost KZT 1.9 bln.

The Company set very complex and ambitious tasks for itself, namely: involvement in industrial development of technologically complex minefields with significant reserves of commercial minerals such as Shalkiya, Alaigyr, Massalsky and the Northern Katpar fields.

In 2016, we need to ensure increase in the output of silicon plant and refinery, to introduce gold hydroprecipitation technology and to discover new deposits of commercial minerals.

Results of Financial Activity. In our activity aimed at achievement of our objectives and tasks we managed to increase our authorized capital by 6% to KZT 244 bln. and the owner’s equity by 65% to KZT 504 bln. This increase, as good as it was, would have been impossible without support on the part of Samruk-Kazyna JSC, government and well-coordinated work of all members of our team.

Corporate Management. We are continuously improving our corporate management system. New Corporate Governance Code was approved in the reporting period. The changes were aimed at improvement of corporate management quality, which, instead of a formal compliance with efficiency criteria, should demonstrate real results, i.e. high quality of management and control over activity of organizations, thus ensuring rise in their value and their sustainable development. This principle shall be integrated in all processes.

Kuanysh Bektemirov

Chairman of the Board of DirectorsTau-Ken Samruk JSC

LETTER FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS


Results of Financial Activity. Based on the year results, we managed to cut our losses from operating activity by KZT 2.7bln.

HR Management. Our Company was dynamically developing throughout the last year. According to the year results, average number of the group’s employees increased almost by 34% and reached 959 people.

In general, despite complex economic conditions both in our country and on the global scale, drop in the prices for the products manufactured by our Company, we keep on working on achievement of all objectives specified in our development strategy and on implementation of the complex investment projects creating new jobs. We feel confident about our future.

I would like to thank our staff and partners for joint fruitful efforts. I wish you further success and achievement all the goals!

Mazhit Turmagambetov

Chief Executive Officer Tau-Ken Samruk JSC

Despite the crisis of prices at the global raw-materials market and cutting of their investment programs by many largest mining and metallurgical companies of the world, we were pursuing an active investment policy. The Company was actively investing funds into its development including geological exploration, design development, construction and production projects. The total amount of invested funds allocated to implementation of various projects amounted almost to KZT 9bln.

Geological Exploration Activity. We continued to perform search and exploration works at 7 subsoil use objects (Spasskaya copper ore area, Tuyuk-Temirlik ore area, Predgorny Ketmen site and South Moiyntinskiy site, Shokpar, Gagarinskoye and Progress). Based on the year results, the discovered and confirmed reserves of the Zhaksylyk deposit were included in the national Register of Reserves. We obtained the subsoil use right for prospecting for gold at the Southern Moiyntinskiy site.

Results of the Production Projects Implementation. In 2015, we continued preproduction mining and capital mining operations under the Shalkiya and Alaigyr projects. During the year, feasibility study report was approved for the Alaigyr project and now it is at the stage of development. In 2016, we are planning to set about development of the mining and beneficiation integrated works design. In 2015, we conducted repair and restoration of production facilities under the Shalkiya project. We also conducted the necessary preparation work under the Massalsky and the Northern Katpar deposits development projects.

Production Activity. In 2015, we continued our activity at the refinery facilities and silicon production plant. According to the year results, 10.1 tons of gold, 11.25 thousand tons of technical silicon and 2.2 tons of silver and 14 thousand tons of microsilica were produced. Both enterprises shipped finished products to their customers at the rate exceeding 90% of their production output and earned KZT 1.7 bln. and 0.13 bln.,respectively.

Stable supply of raw materials and improvement of rise in production profitability still remain the key issues of the enterprises development. In this regard, the enterprises implemented investment programs aimed at restoration and improvement of its production facilities. Putting the second ore thermal furnace into operation at the silicon production plant and introduction of silver vacuum distillation technology at the Astana refinery were the most significant events.

Mazhit Turmagambetov

Chief Executive OfficerTau-Ken Samruk JSC

LETTER FROM THE CHEIF EXECUTIVE OFFICER


RESULTS OF 2015

THE KEY EVENTS OF THE YEAR

• Production of 10.1 tons of gold by the refinery of

Tau-Ken Altyn LLP.

• Putting the second ore thermal furnace into

operation at the silicon production plant and its

inclusion into the Saryarka special economic zone.

• Mining operations exceeded the volume of 61

thousand cubic meters and an exploration well

was drilled for the shaft of Ventilyatsionnaya

mine under the Shalkiya project. Ore processing

process regulations were drawn up and repair and

restoration operations were completed at the main

facilities of the mine within the Shalkiya project.

• Stripping and mining operations in the volume

exceeding 911 thousand cubic meters were

carried out under the Alaigyr project. State expert

examination conclusion was obtained for the

feasibility study of the MPP project and process

regulations were developed for ore processing.

• The Northern Katpar LLP and Silicon of Kazakhstan

LLP were purchased and an agreement for acquisition

of Silicon Mining LLP was concluded.

• Two call-off agreements were concluded with

China companies for attraction of investments

and technologies for the Massalsky project

implementation purpose.

• The owner’s equity of the Company increased 1.6

times over the year from KZT 313.5 bln to 503.6 bln.

• Average number of the group’s employees increased

almost by 34% and reached 959 people over the year.

27ANNUAL REPORT 2015

In accordance with 2015 results, consolidated income from products sale amounted to KZT 97.4 bln. including the main part of income from sales that gold is accounted for making 94.7% or KZT 92.2 bln. and metallic silicon with 5.3% or KZT 5.2 bln.

It is expected that in 2016 gold will be sold to the amount of KZT 136.5 bln to the volume of 385.8 thousand ounces and technical silicon will be sold to the amount of KZT 13.1 bln. to the volume of 21.0 thousand tons.

Breakdown by the types of products:

Description 2015 2016 2017 2018 2019 2020Fact, % Forecast, %

Refined gold 94.7 90.7 85.2 76.5 75.9 71.8

Refined silver 0.0 0.4 0.3 0.2 0.2 0.2

Metallic silicon 5.3 8.7 7.3 4.9 4.0 3.9

Other 0.0 0.2 7.3 18.4 19.9 24.1

Over the period of 2017–2020, it is planned to sell lead and zinc concentrate due to putting into operation of mining-and-processing integrated works at Alaigyr and Shalkiya deposits.

According to the 2015 year results, the owner’s equity of the Company increased by 61% and amounted to KZT 503.6 bln. Increase in the owner’s equity by KZT 190.1 bln. comparing to the results of 2014 was due to the contribution made by Samruk-Kazyna JSC in the authorized capital of the Company in the amount of KZT 13.5 bln. for investment purposes, due also to recalculation of the reporting currency of investment in Kazzinc LLP to the amount of KZT 195.0 bln. as of the reporting dated with due account for the change in the national currency exchange rate and reduction of undistributed profit by KZT 18.4 bln. which resulted from the loss got by Kazzinc LLP in the reporting period.

The Company’s Owner’s Equity Dynamics, KZT bln.

Our plans for 2016 are as follows:

— achievement of the target values of financial corporate performance efficiency: ROACE - no less than 2.2%; EBITDA - no less than 0%.

— ensuring 100% implementation of investment projects and 100% financing of the projects using the funds provided by Samruk-Kazyna JSC and the borrowed funds.

— ensuring funds saving in electronic procurement no less than by 10% of the approved Plan.

0

100

200

300

400

500

600

1.8 5.6

214.2

313.5

503.6

20152014201320122011

RESULTS OF FINANCIAL AND ECONOMIC ACTIVITY

Key production indicators

In 2015, production volume increased, namely: gold output by 1.6 times, from 202.5 to 324.8 thousand ounces, technical silicon by 5.6 times, from 2 to 11.2 thousand tons, comparing to the results of 2014. Wherein, gold refining labour efficiency increased by 1.5 times from 2.93 to 4.45 thousand ounces per a person.

According to the results of 2015, the target of gold production and technical silicon production was 101% and 102%, respectively.

Description Unit 2014 2015 % Compared to the previous Year

Gold refining thousand of ounces ton

202.56.3

324.810.1

160.4

Technical silicon production ton 2 000 11 249 562.5

Labour efficiency in terms of refined gold thous. ounces/person 2.93 4.45 151.9

Key Financial indicators

According to the year results, change in the “Increase in the Company’s Value” index made 137% (vs. the planned one of 16.6%) or from KZT 158.5 bln. in 2014 to KZT 375.6 bln. in 2015. This index increase was mainly due to adjustment of planned figures for the investment projects that had been calculated with the exchange rate of KZT 400.00 per USD and 9.67% discounting rate. The second growth factor is the use of actualized (updated) indicators of financial and economic models of Massalsky deposit development as well as Alaigyr, the Northern Katpar deposits development and implementation of the metallic silicon production plant construction project.

Over the reporting period, EVA indicator amounted to KZT -13.1 bln. at the planned value of KZT 20.0 bln. This index increase by KZT 6.9 bln. was mainly due to reduction of net operating loss minus adjusted tax (NOPLAT) by KZT 2.3 bln. due to increase in the gross profit.

Over the reporting period, the target value of Increased Dividends index was reached, i.e. KZT 22.1 mln. was paid to the Sole shareholder, which makes 15% of the consolidated net income of the Company as per the results of 2014.

Revenue from sale forecast, KZT bln.

0

100

200

300

400

500

97.38

150.42

207.96

314.96

396.91419.38

202020192018201720162015

Fact Forecast

2928 ANNUAL REPORT 2015RESULTS OF 2015

STRUCTURE OF ASSETSThe Company’s assets structure in 2015 comprised 17 subsidiary company, 1 joint venture and 1 associated company.

Information on the sized of shareholdings or participation interest

Changes in the Company’s assets structure within 2015:

• 100% participation interest in the Northern Katpar LLP was purchased on June 8; • Agreement for sale and purchase of 50% participation interest in Tau Gold Copper JV LLP

was concluded on October 28; • Agreement for sale of 100% participation interest in TKS-Zhaksylyk LLP was concluded on

November 18; • 100% participation interest in Silicon of Kazakhstan LLP was purchased and agreement

for purchase of 90.1% participation interest in Silicon mining LLP was concluded on December 2.

Masalskoe MPP LLP 93%

Tau-Ken Temir LLP 100%

Northern Katpar LLP 100%

Silicon KazakhstanLLP 100%

Tau Gold Copper LLP JV 50%

Kazzinc Holdings LLP 29,97%

TKS-Zhaksylyk LLP 100%

Таu Ketmen LLP 100%

Shokpar Gagarin LLP 100%

Tau-Ken Progress LLP 100%

Tau-Ken Altyn LLP 100%

Tau-Ken Mining LLP 100%

Tau-Ken Project LLP 100%

TKS-Kostanay LLP 100%

ShalkiyaZinc LTD JSC 100%

Logic Invest Capital LLP 100%

Alaigyr JV LLP 100%

Investment House Dana LLP 100%

Logic Business LLP 100%

ASSOCIATESJOINTLY CONTROLLED COMPANIES

SUBSIDIARIES

DivisionsLead, zincGoldCopperIronMetallurgical (grade) silicon Tungsten, Rare earth metals

AUTHORIZED CAPITAL STRUCTUREOwnership structure of the Company is as follows:

— Samruk-Kazyna JSC is the Sole shareholder of the Company, which directly owns 100% of the Company’s shares;

— all shares of the Company are common ones; rights of shareholders are in line with requirements of the Article 14 of the RK Law No.415-II “On Joint Stock Companies” dated May 13, 2003. Shareholders of the Company have a preemptive right for the property of the Company;

— members of the Board of Directors and Management of the Company as well as the key managerial employees of the Company are not its shareholders.

Qnty, pcs. Nominal Value, KZTAuthorized Shares 400,981 1000

Outstanding Shares 292,787

Unallocated Shares 108,194

As of December 31, 2015, Authorized capital of the Company amounted to KZT 243,901,772,000.00 and its owner’s equity amounted to KZT 503,606,782,000.00.

3130 ANNUAL REPORT 2015RESULTS OF 2015

GEOLOGICAL EXPLORATION PROJECTS IMPLEMENTATION

Conclusion of Subsoil use Contracts

In January 2015, the Company conducted direct negotiations with the Ministry of Investments and Development of the Republic of Kazakhstan for obtaining the right for joint exploration and production of tungsten and molybdenum ore at the Upper Kairaktinskoye deposit located in Karaganda region.

In February 2015, the Company concluded a contract for subsoil use with the Ministry of Investments and Development of the Republic of Kazakhstan under the project of Gold Prospecting at the South Moiyntinskaya area of Karaganda region.

In June 2015, the Company conducted direct negotiations with the Ministry of Investments and Development of the Republic of Kazakhstan for obtaining the subsoil use right for production of brown coal at the Kushmurun deposit (strip mine No.3) located in Kostanai region.

Currently, finalizing the procedures of conclusion of a contract for production of barium-sulfate and polymetallic ores and silver at the Tuyuk deposit located in Almaty region.

Application of funds under the concluded contracts on subsoil use operations

Project name KZT mln. Projects to subsoil use right

Upper Kairaktinskoye deposit in Karaganda Region 83.4

Tuyuk deposit in Almaty region 31.3

Kushmurun deposit in Kostanai region 154.3

TOTAL 269.1

In 2016, the Company is planning to get right for subsoil use of two deposits - Upper Kairaktinskoye and Tuyuk.

REVIEW OF INVESTMENT AND PRODUCTION ACTIVITY


the larger bodies of copper at the deeper levels, downward sloping wells drilling of 800 to 1,000 meters was planned. The works will be continued in accordance with a new technical project.

All contractual works at Koktas-Sharyktinskiy area were completed including exploration (1,527 l.m.) and special drilling operations (94 l.m.) for the purpose of the deposit map compilation. Ore zones were detected on the area, which should be drilled additionally to evaluate commercial value. The works will be continued in accordance with a new project.

The whole complex of planned geological and exploration works at the Saryadyrskiy ore cluster were completed. Monitoring and adjustment of new research plans will be conducted depending on the obtained plans. The forecasted time of work completion is November 2016.

Scope of work executed at Saryadyrksiy ore cluster:

Exploration drilling 2,140 l.m

Drilling for compilation of the deposit map 336 l.m

Trenching 2,540 m3

Electric exploration 128.75 l.km

Magnetic exploration 128.75 l.km

Planning survey for the purpose of land plot and its engineering systems plotting. 0.95 km2

The whole complex of geological exploration works were completed at Burnakskiy ore cluster with the total forecasted completaion deadline of exploration period in November 2016.

Scope of work completed at Burnakskiy ore cluster was as follows:

Exploration drilling 900 l.m

Trenching 3,113.4 m3

Routes passed including all geologic data recording. 86 l.km

Electric exploration 14 l.km

Magnetic exploration 47.6 l.km

Planning survey for the purpose of land plot and its engineering systems plotting. 1.4 km2

For the purpose of determining promising sites, new (geochemcial) method of new copper ore deposits exploration was implemented in 2015. Field sampling was completed and now laboratory analysis is underway.

In general, based on the results of work carried out at Spasskiy copper ore zone, new ore bodies were identified and additional geological data was obtained. In connection with this, the development of Addenda to the Spasskaya area development project was started in 2015, which imply in-depth study of its western and eastern parts. In order to ensure an adequate complete assessment of the given area, new geological exploration research was provided.

Application of funds allocated for development of Spasskaya copper ore area in 2015 amounted to KZT 516.9 mln. (excluding VAT).

Geological Exploration Activity

During the year the Company continued search operations at four sites of subsoil use (Spasskaya, Tuyuk-Temirlik, Predgorny Ketmen site and South Moiyntinskiy site) and geological exploration work at three deposits (Shokpar, Gagarinskoye and Progress).

Based on the year results, geological exploration work was completed and the reserves of Zhaksylyk deposit in Akmola region were entered into the national register of reserves. In May of the past year, the subsoil use rights for exploration of non-ferrous metals at the Kostanai area sites were sold to Kazgeologiya JSC.

In accordance with the decree issued by the government on the plan of privatization for the period of 2016-2020, for the purpose of participation of government in economy, preparation to the Company’s IPO was commenced including activity on liquidation of TKS-Kostanai LLP and sale of 50% participation interest in Tau Gold Copper LLP to the second member of Algold LLP.

Copper Market

Totally, 18.7 million tons of copper ore were produced throughout the world. According to the SNL Metals and Mining data, the global volume fine copper production over the year amounted to 22.1 mln. tons resulting in excess of copper of 289 thous. tons.

In 2015, fall of copper prices continued and the price reached the level of USD 5,177.00 per a ton, which was the lowest price since June 2009. Analysts forecast copper price growth by 2019 (maximum evaluation of Macquarie Group Ltd. - approximately USD 8,300.00 per a ton).

Prospecting for Copper, Gold and Associated Components at the Spasskaya Copper Ore Area in Karaganda Region.

The project is implemented by subsidiary company Tau-Ken Project JV LLP. According to the concluded contract, geological exploration work will be completed by 2019. A number of specialized organizations were involved to provide geological research by the subsidiaries.

Based on the year results, geological explorations at Hadjikonganskiy and Altyntobinskiy ore clusters Spasskaya Copper Ore Area were completed. Reports on the results of conducted work at the Altyntobe deposit was drawn up as well as the report with evaluation of reserves of Hadjikongan deposit. Within an additional scope of work at the Hadjukongan deposit, field works were conducted and processing characteristics of ores were studied. Technical and economic substantiation (feasibility) is developed for calculation the reserves. After drawing up of reports, materials will be sent to the State Reserves Commission of the Republic of Kazakhstan for consideration.

Geological exploration works executed at Hadjikonganskiy and Altyntobinskiy ore clusters were as follows:

Exploratory drilling –1,050 l.m

Process (technological) drilling –500 l.m

Complex of geological works and technological research were completed.

All contractual works including exploration drilling in the volume of 3,358 l.m. was completed at the Shokaiskiy ore cluster. Conducted geological exploration revealed the presence of copper and molybdenum mineralization in igneous rocks. The report was received on preliminary geological and economic evaluation of the facility. Estimated reserves make 40 thousand tons of copper (0.3%); initial reserves make 85 thousand tons. For the purpose of prospecting for

Cu

3534 ANNUAL REPORT 2015OVERVIEW OVERVIEW OF INVESTMENT AND PRODUCTION ACTIVITY

Completed scope of work included the following:

Marking of exploration lines and snapping of mining and drilling operations

Mining work (prospecting holes) 29 l.m

Drilling 1 573 l.m

Sampling 3,204 samples

Sample processing 2,642 samples

Laboratory analysis 1,300 samples

In the course of field work results processing, boundaries of gold alluvial deposits at the Predgorny Ketmen were outlined. Thickness of ore bearing sands varied within the range of 0.5 to 2.5m. Average gold content is 0.1–0.3 g/m3.

At the third stage, additional exploration operations at Shalkudessu River area are conducted for outlining gold-bearing site. Final outlining of the gold-bearing site boundaries will be performed after completion of all drilling operations and obtaining the results of laboratory analysis.

Application of funds allocated for development of Pregorny Ketmen area in 2015 amounted to KZT 115.3 mln. (excluding VAT).

Prospecting for Gold at the Shokpar and Gagarinskoye Deposits in Zhambyl Region

The project is implemented by subsidiary company Shokpar-Gagarinskoye LLP. Completion of geological exploration work under the contracts at Shokpar deposit is expected in 2018 and at Gagarinskoye deposit in 2017. A number of specialized organizations were involved by the subsidiary for GEW execution purpose.

Currently geological exploration works are performing at Shokpar deposit for evaluation of gold reserves, 41 wells are drilled. 21 wells are drilled at Gagarinskoye deposit.

The scope of work performed at Shokpar deposit include the following:


Drilling 6,700 l.m

Geophysical survey operations 18,400 l.m

Laboratory analysis 2,261 analysis

The scope of work performed at Gagarinskoye deposit include the following:

Prospecting traverses 38 l.km

Mining work 2,259 m3


Drilling 6,600 l.m


Prospecting for Copper, Lead and Barium Sulfate within Tuyuk-Temirlik ore areain Almaty Region

The project is implemented by subsidiary company Tau-Ken Mining LLP. Completion of geological exploration work under the contract is expected in 2019. A specialized organization was involved by the the subsidiary for geological research purposes.

The main part of work in 2015 was conducted at the Western Tuyuk and Kinovarny sites. Central part of Tuyuk deposit was studied in detail and its flanks and deep horizons are the most promising as regards increase of reserves. Thus, the results of exploratory wells drilling clearly show continuation of copper ore body. Prospects of Tuyuk deposit are connected with exploration of deep horizons of 400m and evaluation of copper ore bodies in the southern block.

Completed scope of work:

Topographic survey operations 47.67 otr. per a month

Filling of mines 2,221.18 m3


Drilling 5,090 l.m



Laboratory investigation 3,796 analyses

In October 2015, the decree of Almaty region management on allocation of a land plot from the national forest fund for geological exploration work of Tau-Ken Mining LLP was obtained. Taking into account all previous agreements and approvals by executive bodies, terms of drilling operations were postponed till 2016.

Currently, the Company has started procedures of procurement of services for prospecting and estimation as per the alterations made in the Contract. In this connection, the decision on additional funding of geological and exploration work within given area was made last year.

Application of funds allocated for development of Tuyuk-Temirlikskiy ore area in 2015 amounted to KZT 303.8 mln. (excluding VAT).

Prospecting for Gold and Copper at the Yeshkeolmes Deposit in Akmola Area

The project was implemented by the subsidiary - Tau Gold Copper JV LLP. In the second half of 2015, 50% participation interest in the authorized capital of Tau Gold Copper JV LLP was sold to Algold LLP.

Prospecting for Gold at the Predgorny Ketmen site in Almaty Region

The project is implemented by subsidiary company Tau-Ketmen LLP. Completion of geological exploration works under the contract are expected in 2016. A number of specialized organizations were involved by the subsidiary for geological research purposes.

Implementation of the project provides a sequence of works execution subject to the availability of positive results after each stage. Works of the 1st stage was completed in 2015 and such works results confirmed gold content prospects in the area. Taking into account limited time and weather conditions, along with the 2nd stage works (technological research) the Company approved continuation of geological exploration works of the 3rd stage connected with assessment of industrial significance of the site.


Prospecting for Gold at the Southern Moiyntinskaya Area of Karaganda Region

In 2015, the project was implemented by the Company without setting-up a subsidiary. Completion of geological exploration works under the contract is expected in 2021. A specialized organization was involved for geological exploration purposes.


Laying out and determining the special survey sites 201.32 km2

Prospecting survey traverses 65 l.km

Mining work 550 m3

Drilling 481.7 l.m


Well logging 481.7 l.m


Laboratory analysis 40,326 analyses

Geological exploration is going to be carried out on a stage-by-stage basis. If the 1st stage results are positive, remaining work under the project will be continued within the framework of the 2nd stage with full assessment of the contract territory prospects. Completion of mining and drilling works and special survey of the area under the 1st stage of project implementation is expected by December 2016.

In 2015 the application of funds allocated for development of the Southern Moiyntinskaya area amounted to KZT 117.4 mln. (excluding VAT).

In 2016, the Company is expecting to perform 100% of geological and exploration plan at all objects of subsoil use and to arrange for inclusion of prospected and confirmed reserves into the State register of mineral reserves: Hadjikongan and Predgorny Ketmen.

Last year, decision was made to allocate additional fund for geological and exploration work within given area.

In 2015 the application of funds allocated for development of Shokpar and Gagarinskoye deposits amounted to KZT 443.2 mln. (excluding VAT).

Prospecting for Manganese Ore at the Zhaksylyk Site in Akmola Region

The project was implemented by the subsidiary - TKS-Zhaksylyk LLP. In 2015, after completion of geological exploration works and inclusion of the discovered reserves into the national register of reserves, the Board of Directors of the Company made decision on sale of 100% participation interest in the subsidiary interest.

In 2015 the application of funds allocated for development of Zhaksylyk site amounted to KZT 24.4 mln. (excluding VAT).

Prospecting for Gold at the Progress Deposits of Karaganda Region

The project is implemented by subsidiary company Tau-Ken Progress LLP. Completion of geological exploration work under the contract was planned for 2019. A specialized organization was involved by the above specified subsidiary for geological research purpose.

In April of the reporting year, development of a business-plan and investment memorandum for independent implementation of the project was completed and the issue of funds raising for geological and exploration work from Samruk-Kazyna JSC was solved. Subsoil use rights were transferred to the subsidiary.

In May, the Company obtained the permission for geological and exploratory works at the deposit from Karkaralinskiy district administration of Karaganda region.

The whole complex of planned geological and exploration works at the deposit were completed.


Marking of exploration lines and snapping of mining and drilling operations 6.4 km2

Drilling 3,077.5 l.m

Geophysical survey operations 2,769.8 l.m



Laboratory analysis 2,006 samples

Results of geological and exploration works in 2015 indicaed the need for additional exploration of the deposit in order to confirm previously explored and newly identified ore bodies at the northern and southern sites.

In 2015 the application of funds allocated for development of Progress deposit in 2015 amounted to KZT 76.3 mln. (excludingexcluding VAT).


Lead Market

Totally, 4.7 million tons of lead ore were produced globally in 2015. According to information provided by ILZSG, the global volume of refined lead production amounted to 10.8 mln. tons resulting in overproduction of 63 thousand tons.

In 2015, price for lead reduced by 27.2% and amounted to USD 1,797.00 per a ton. as of December 31. Analysts forecast lead price appreciation by 2019 (maximum evaluation of Macquarie Group Ltd. - approximately USD 2,100.00 per a ton).

Polymetallic Ore Production at the Alaigyr Deposit in Karaganda Region

Stripping operations of the total volume of 911 thousand cubic meters were carried out and geological engineering survey was completed and the rights for the lands plots allocated for construction of a production site were obtained. State expert examination opinion was obtained for the feasibility study of the mining and processing plant construction project and design development was commenced for construction of mine and processing plant. Process regulations for ore processing were developed and project paper for geological and economic reestimation of reserves were worked out, external power supply scheme and a shift camp layout were prepared. The project of the electric power transmission lines is currently in the middle of state examination.

The registered reserves of C1+C2 - 18.5 mln. tons of ore at an average lead content of 5.4% and silver content of 26.27%.

In 2015 the application of funds allocated for development of Alaigyr deposit amounted to KZT 660.3 mln. (excluding VAT).

Plans for 2016 are as follows: — development of a design and estimate documentation for construction of mine, processing

plant and railway siding; — revaluation of reserves in accordance with JORC standard; — construction of electric power transmission lines and 110kV substation as well as the first

stage of a shift camp.

Iron Market

In accordance with the US Geological Survey, Global volume of iron ore production in 2015 was 2.21 bln. tons. The global production of cast iron in 2015 amounted to 1.18 bln. tons; the volume of the global production of raw steel reduced by 0.6% to 1.64 bln. tons.

In 2015, iron ore price reduction made 38% and as of January 1, 2016, iron ore (Fe content of 62%) price amounted to USD 43.4 per a ton. The analysts forecasted an insignificant appreciation of the iron ore price by 2020 (maximum estimate of the Economist - USD 56 per a ton).

Zn

Pb

Fe

RESULTS OF THE PRODUCTION PROJECTS IMPLEMENTATION

Zinc Market

Totally, 13.4 million tons of zinc ore were produced in 2015.1 According to ILZSG2 the global volume of fine zinc production in 2015 amounted to 14 mln. tons and consumption of zinc metal amounted to 13.9 mln. tons, which resulted in its excessive quantity of 100 thousand tons.

In 2015, price for zinc dropped by 26% to USD 1,461.00 per a ton, which is considered to be the lowest price since 2008. Analysts forecast zinc price appreciation by 2020 (maximum estimate of Societe Generale - USD 2,200.00 per a ton).

Commercial Development of Shalkiya Polymetallic Ore Deposit at the Kyzylorda region and Construction of Processing Plant

Mining operations were executed in the volume of 61 thousand cubic meters and an exploration well was drilled for the shaft of Ventilyatsionnaya mine. Technological survey was conducted and a process regulations were developed for ore processing. Repair and restoration works were completed at all basic facilities of the mine and engineering survey operations for the project of processing plant and tailings impoundment were completed too; excavation works were commenced. A bankable feasibility study is under development and design works for construction of the processing plant, external and internal infrastructure facilities are in progress.

Registered commercial reserves of B+С1+С2 category amounted to 127.5 mln. tons of ore, zinc - 5.4 mln. tons (average zinc content - 4.27%); lead - 1.6 mln. tons (average lead content - 1.28%).

In 2015 the application of funds allocated for development of Shalkiya deposit amounted to KZT 5,258.6 mln. (excluding VAT).

Plans for 2016 are as follows: — completion of Bankable Feasibility study development; — beginning of design development for the main facilities of the mining and processing

integrated works and its infrastructure; — conclusion of EPC-contract for construction of processing plant; — mining capital works and mining work at the -20 and +40 horizons; — excavation works under the project of processing plant and tailings impoundment

construction; — construction of office and utility premises as well as a dormitory, beginning of a

Ventilation shaft construction.

1 Note: Wood Mackenzie.2 ILZSG – International Lead and Zinc Study Group.


PRODUCTION ACTIVITY

Gold Market

Totally 3 thousand tons of gold were produced globally by the gold mines in 2015 (increase by 0.3%). China is the leading global producer of gold; over the past year, production output of Chinese plants increased by 8.2%.

Gold production is still expected to grow. With putting into operation of new production facilities of gold refining plants, global production of gold may increase in 2016 by 78 tons and in 2017 – by 179 tons.

In 2015, gold price dropped by 19.2% to USD 1,051.00 per a troy ounce, which is almost equal to the minimum cost of 2010. Reduction of price for gold futures at LME happened because of reduction of global prices for oil and copper as well as due to slowdown in the pace of the China economy development. Generally, banks forecast gold price appreciation until 2019 (maximum estimate of Macquarie Group Ltd - USD 1,500.00 per a troy ounce).

The primary market for sale of the Company’s fine gold is the domestic market of the country. The whole volume of the products manufactured by the Company is sold to the National Bank of the Republic of Kazakhstan.

The following three companies: Kazzinc LLP, KAZMinerals Plc and Tau-Ken Altyn LLP, produce fine gold in the domestic market of the country. In 2015, share of the Company in the domestic market of the country was 32.6% (10.1t of 30.98t.).

Results of Tau-Ken Altyn LLP Activity

According to the year results, refinery of Tau-Ken Altyn produced of 10.1 tons of gold and 2.25 tons of silver. 10 tons of gold were sold to the National Bank of the Republic of Kazakhstan, which is in line with the required minimum annual production output of fine gold within three-year period to meet the requirement of the international Gold Delivery standard of the London Bullion Market Association. According to the year results, the company’s income amounted to KZT 1.8 bln.

During the year, due to the lack of own raw material base, provision of gold-containing raw materials remained the key issue relating to the plant operations. In order to solve this problem, the Company signed 31 contracts with potential suppliers, under which raw materials containing 9.6 tons of gold and 2 tons of silver were supplied to the Company and the law restricting export of unprocessed precious metals out of the country was proposed.

As the part of investment activity, the Company launched production facilities of silver vacuum distillation, which will allow for expansion of the range of processable gold-bearing raw materials with various contents of metal and admixtures.

KZT 159.6 mln. (excluding VAT) was applied forsilver vacuum distillation technology introduction by the refinery.

Plans for 2016 are as follows: — production of 12 tons of gold and 4.4 tons of silver; — ensuring supply of 14.5 tons of gold-bearing raw materials by the external suppliers; — introduction of new gold hydroprecipitation technology; — reduction of production cost at the rate of no less than 5% of the planned one.

Construction of a Mining and Metallurgical Integrated Works at the Massalsky Deposit in the Akmola Region

The Company carried out laboratory analysis of ore processing and selection of samples were taken for pilot tests; as well as works on filing of application for allocation of land plots for production sites and infrastructure facilities were performed. The Supplement to the contract was signed, which allows to launch production stage, and Land Allocation Certificate for the mining operations was obtained. Land usage plan was developed as well as a preliminary feasibility study and environmental impact assessment. Over the year, active negotiations were conducted with China partners on cooperation the ended upon conclusion of a framework agreement for funding of the project was concluded with Eximbank and a framework EPC contract was concluded with CNTIC corporation.

Registered reserves of the deposit are as follows: C1+C2 category reserves – 729.2 mln. tons of ore (average content of iron – 15%).

In 2015 the application of funds allocated for development of Massalsky deposit amounted to KZT 400.5 mln. (excluding VAT).

Plans for 2016 are as follows: — development of Bankable feasibility study and process regulations for ore processing; — conduct of pilot tests and development of external infrastructure facilities’ design;

allocation of land plots for the facilities; — conclusion of EPC contract and an agreement for financing of the project by the

Chinese counterparties.

Production of Tungsten-and-Molybdenum Ore at the Northern Katpar Deposit in Karaganda Region

Taking into account the fact that the asset was acquired in the middle of the year, governance body of the company was set up in the second half of 2015; scope of work for drainage of open pits was assessed; sampling and sample analysis operations were started.

Registered reserves of primary ore of the deposit within the boundaries of the open pit are as follows: С1 category – 40.2 mln. t. of ore; WO3 – 90.3 thous. t (WO3 – 0.225%), molybdenum – 13.9 thous. t. (MoS2 – 0.035%), bismuth – 5.8 thous. t. (0.014%), copper – 57.0 thous. t. (0.00014%).

In 2015 the applicationof funds allocated for development of the Northern Katpar deposit amounted to KZT 4.8 mln. (excluding VAT).

Plans for 2016 are as follows: — surface mine draining and sampling; — conduct of laboratory and pilot plant study of ore processing.

Au


Results of Tau-Ken Temir LLP Activity

Tau-Ken Temir LLP’s silicon production plant produced 11.2 thousand tons of technical silicon. Technical silicon sales volume was 10.9 tons. According to the year results, the company’s income amounted to KZT 133.0 mln.

The main concern of the company in the past year was ensuring profitability of the production enterprise. The following work was performed for this purpose:

1. Improvement of production process, including the use of graphitized electrodes with the longer shelf life and other measures aimed at increase of production output and reduction of repair work;

2. Increase of production output through putting the second ore thermal furnace into operation;3. Becoming a participant of Saryarka SEZ for the purpose of reduction of tax burden;4. Negotiation with the raw materials suppliers on the issue of cost reduction and ensuring timely

supply allowing for reduction of production cost.

The application of funds allocated for the project implementation amounted to KZT 565.5 mln. (excluding VAT).

Plans for 2016 are as follows: — ensuring the production of 21 thousand tons of technical silicon and 17,6 thousand tons of

microsilica; — construction of a chemical laboratory; — ensuring reduction of production cost at the rate of no less than 5% of the planned one; — ensuring stable level of extraction at the rate of 75% upon silicon production.

Technical Silicon Market

In accordance with the information of the US Survey, global volume of technical silicon production amounted to 3.2 mln. tons in 2015 and increased substantially as compared with 2014 (2.4 mln. tons). In accordance with Bloomberg and British Geological Society, China was the leading manufacturer of technical silicon in 2015 with its share in global market of 71.6% followed by Russia – 7.6%, the USA – 6.4% and Norway – 3.7%, the other – 10.7%.

Use of silicon as an alloying element in aluminum is the main sphere of technical silicon consumption, which is accounted for 45% of the total consumption volume. Chemical industry, mainly production of silicon, consumes 35% more. The other consumers of silicon are as follows: producers of solar panels – 12%; producers of semiconductors – 3%; other – 5%.

Ten countries account for production of approximately 80% of the global demand market; thereat, the USA, China, Germany and Japan are the main consumers. The forecast was that consumption of technical silicon will annually be increasing on average by 3.9% till 2019.

In 2015, spot market of the USA was experiencing heavy pressure because of the high volume of supply and absence of demand that resulted in significant drop of silicon prices. Thus, as of December 5, 2015, CIF price of technical silicon (grades 5-5-3) in the market of the USA amounted to USD 2,161.00 per a ton (source: Platts).

Over the first half of 2015 price remained unchanged in the European market and then plummeted due to supply of large volume of cheap silicon from China. In accordance with the data of Asian Metal, DDP price of technical silicon (grade 4-4-1) in the European market at the end of 2015 amounted to EUR 1,980.00 per a ton.

The main markets for the Company produced technical silicon are as follows: USA, Russia and European Union countries (Great Britain, Germany, Holland, etc.). Share of the Company’s market in the global market of technical silicon makes 0.35% (11.25 thousand tons of 3,209.32 thousand tons).

Si


INNOVATIVE ACTIVITYIn 2015, the Company developed its innovative production strategy till 2022 in accordance with the industrial and innovative policy of Samruk-Kazyna JSC.

Within the research and development activity, the following studies were conducted:

Massalsky MPP LLP: — technological research at Massalsky deposit (processing); — technological research of pelletization; — technological research of metallization and smelting;

ShalkiyaZinc LTD JSC: — comparative laboratory tests of raw ore of delivered mine and mature ore taken from

the Shalkiya deposit; — production of combined lead and zinc concentrate in subcommercial conditions from

the Shalkiya deposit ore; — preliminary gravity processing of crushed polymetallic ore of Shalkiya deposit; — scientific research for development of technology for preliminary processing of

Shalkiya deposit ores;

Processing laboratory of Kazmehanobr company’s branch conducted laboratory analysis of production properties of copper oxidized and sulfide of Hadjikongan deposit located in the Spasskaya copper ore area.

The company performed analysis of production solutions in the hydrometallurgy and bioleaching sphere to be applied at the Spasskaya copper ore zone and Tuyuk-Temirlik area deposits.

In 2015, the Company signed a number of agreements with national and foreign specialized organizations on research and development works; specialists of the Company took part in sectorial exhibitions and conferences and also completed trainings under the professional certification programs according to individual development programs.

Generally, in 2015 the Company was actively investing in geological exploration, production and processing operations. Over the year, the Company worked on 15 investment projects with the total planned amount of investments of KZT 11.5 bln. In point of fact, KZT 8.9 bln. or 77% of the total planned amount was used.


CORPORATE MANAGEMENT

CORPORATE MANAGEMENT STRUCTUREIn accordance with the company’s Charter, approved by the sole shareholder bodies of the Company are as follows:1. Supreme body – the Sole Shareholder;2. Governance Body – Board of Directors;3. Executive Body – the Executive Management.

Corporate Governance Structure of Tau-Ken Samruk National Mining Company JSC

SOLE SHAREHOLDER

BOARD OF DIRECTORS CORPORATE SECRETARY SERVICE INTERNAL AUDIT SERVICE

STRATEGIC PLANNING COMMITTEE AUDIT COMMITTEE

NOMINATIONS AND REMUNERATION

COMMITTEE

GOVERNANCE

HR POLICY COMMITTEE

RISK (MANAGEMENT) COMMITTEE

COUNCIL FOR SCIENCE AND ENGINEERING

COUNCIL FOR INVESTMENTS AND

INNOVATIONSBUDGET COMMITTEE

Supreme Body

Strategic Management Service

Collective Executive BodyManagement Committees and Councils

Board of Directors Committees

4948 ANNUAL REPORT 2015CORPORATE GOVERNANCE

THE SOLE SHAREHOLDERThe Company is a vertically integrated company established in accordance with the Republic of Kazakhstan government’s Decree dated January 15, 2009.

Samruk-Kazyna Sovereign Wealth Fund JSC is the Sole shareholder of the Company.

THE BOARD OF DIRECTORSThe Board of Directors is responsible for general management of the Company, except for the issues referred by the Law “On Joint Stock Companies” and the Company’s Charter to the exclusive competence of the Sole shareholder and executive body.

The Board of Directors consists of four directors. Members of the Board of Directors are elected by the Sole shareholder.

In accordance with the best practice of corporate management, directors should be independent from the Sole shareholder and management of the Company in order to ensure an unbiased decisions making to the best possible interests of the Company. In accordance with the Republic of Kazakhstan Law “On Joint Stock Companies”, number of independent directors shall make no less than one third of the total number of the Board of Directors members.

Criteria of independence are determined by the RK legislation, the Charter and the regulations on Board of Directors of the Company.

Board of Directors Members as of December 31, 2015:

The current members of the Board of Directors of Tau-Ken Samruk JSC were reelected by the decision of the Management of Samruk-Kazyna JSC dated January 29, 2015 for another term of 3 (three) years:

1. Bektemirov Kuanysh Abdugaliyevich Representative of the Sole shareholder, General Director of Asset management for Samruk-Kazyna SWF JSC.

2. Turmagambetov Mazhit Abdykalikovich Chief Executive Officer of Tau-Ken Samruk JSC

3. Argingazin Arman Anuarbekovich Independent Director

4. Arslanova Zarina Fuatovna Independent Director

Organizational structure of the Company’s central office was approved by the decision of the Board of Directors made on April 1, 2015.

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Graduated from the Moscow Higher Technical College named after N.E. Bauman in 1984, mechanical engineer.

1984. Foreman, Deputy head of a workshop of the Machine Plant named after S.M. Kirov, Almaty.

1989. Deputy Director of Damis SE.

1991. Deputy Executive Secretary of Kazakh Central Real Estate Exchange JSC.

1992. General Director of Damis-93.

1996. Deputy General Director of Almaz Jewelry Corporation JV.

1997. Deputy Director of Industry Department of the Republic of Kazakhstan Ministry Economy and Trade.

1998. Deputy Chairman; Chairman of the Committee for the State Control over Production and Turnover of Alcohol Products under the Ministry of Finance of the Republic of Kazakhstan, Ministry of Economy and Labour of the Republic of Kazakhstan and the State Revenue Ministry of the Republic of Kazakhstan.

2001. Vice-minister of the Republic of Kazakhstan Ministry of National Resources and Environmental Protection.

2003. Deputy Chief Executive Officer of Innovative Fund JSC.

2004. Deputy Chief Executive Officer of AstanaEnergoService JSC.

2006. Executive positions in commercial companies.

2008. Director of Maximum Regional Investment Center LLP (South Kazakhstan Region).

2008. Deputy Head of South Kazakhstan region.

2009. Vice-minister of the Republic of Kazakhstan Environmental Protection Ministry.

Since January 2012 to the present day. Chief Executive Officer of Tau-Ken Samruk National Mining Company JSC

Member of the Board of Directors of Kazatomprom NNC JSC and Kazzinс Holdings LLP.

Does not own the Company’s and its suppliers’ or competitor’s shares.

Information about the Board of Directors Members

Bektemirov Kuanysh Abdugaliyevich

Chairman of the Board of Directors

General Director of Asset management for Samruk-Kazyna SWF JSC.

First election data: January 31, 2012, by the decision of the Company’s management.

Citizenship: Republic of Kazakhstan.

Date of birth: May 24, 1970.

Graduated from Kazakh State University named after Al-Farabi in 1993, physicist.

Graduated from Kazakh National Agricultural University in 2004, electrical engineer.

1993–1999. Atameken Corporation, Almaty; Altyn JSC, Tekeli, Almaty region; Vostok Service LLP, Taldykorgan.

1999–2000. Deputy Director General of Taldykorgankommunenergo GKPO.

2000–2004. First Deputy Head of Taldykorganteploservice GGKP

2004. Deputy Chief Executive Officer of Astanaenergoservice JSC, Astana.

2004–2008. Director of Astanaenergosbyt LLP, Astana.

2008–2009. Head of the South Kazakhstan Region’s Power and Utility Services Office PE.

2009–2010. Deputy General Director, First Deputy General Director of Kazgidromet RGP.

2011–2012. General Director of Astanaenergocontract.

January 2012. Managing Director of Samruk-Kazyna Sovereign Wealth Fund JSC.

Samruk–Kazyna SWF JSC assets management Chief Director, Chairman of the Board of Directors of Samruk-Energo JSC and KEGOC JSC and a member of the Board of Directors of Kazatomprom NNC JSC.


Turmagambetov Maxhit Abdykalikovich

Chief Executive Officer, Member of the Board of Directors.



Date of birth: February 1, 1961.


Graduated from the Kazakh State University named after S.M. Kirov in 1983, specialization – economist, PhD candidate.

1992. Studied at the University of Kentucky with specialization in financial analysis;

1992–1996. Studied at the Institute of Economic Education of the World Bank;

1996. Studied in the Cooperative Vienna Institute with specialization in corporate management: functions of public and private sector;

1998. Studied at the Asian Productivity Organization, Tokyo, specializing in production efficiency and decision-making process;

1999. Studied at the Private Enterprise Support Center under the US CCI with specialization in corporate management.

1992. President of the International Business University;

2002. President of IBS Consulting;

2005. Educational Issues Vice-president of Kazakhstan-Britain University;

2007. President of AXIS Corporation;

2009. Managing partner of RKF Astana LLP.

Independent director of the Board of Directors of Kazatomprom NNC JSC and International International Technologies Institute JSC.


Argingazin Arman Anuarbekovich

Managing Director of UBS in Kazakhstan, independent director. Chairman of the Nominations and Remuneration Committee, Member of the Strategic Planning and Audit Committees.



Date of birth: December 1, 1978.

Arslanova Zarina Fuatovna

Managing partner of RKF Astana LLP, independent director of the Board of Directors. Chairwoman of Audit Committee and Strategic Planning Committee, member of the Nominations and Remuneration Committee of Tau-Ken Samruk JSC.

First election date: August 7, 2012, decision by the Company’s management.


Date of birth: December 22, 1962.

Graduated from the Boston University, USA in 2000, Bachelor’s degree in business administration.

Received an additional training in ABN AMRO academy over the period of 2002–2010.

2000–2004. Financial analyst of Halyk Savings Bank of Kazakhstan. Worked for HSBC Kazakhstan as a credit officer for quite a long time.

2004–2012. Worked for ABN AMRO Bank of Kazakhstan in different positions including that of the head of the Mining and Metals Department and director of Astana branch.

In 2012, appointed to the position of Director of USB Company in Kazakhstan.

Is not a member of the board of directors of any other organizations.



Additionally, assessment of Tau-Ken Samruk JSC’s Internal Audit Service and its head performance was conducted in July; changes were made in the Charter of Tau-Ken Altyn LLP and Tau-Ken Temir LLP and report on transparency and efficiency of information disclosure processes of Tau-Ken Samruk JSC for the first half of 2015 was considered.

In August, report on the results of Tau-Ken Samruk JSC Plan of Development of the period of 2015-2019 implementation during the 1st half of 2015 was considered; new version of Tau-Ken Samruk JSC Environmental Protection Policy and Occupational Health and Safety Policy were approved; Tau-Ken Samruk JSC retaining ability in 2015 was approved; withdrawal by Tau-Ken Samruk JSC from the “Manganese Ore Prospecting at the Zhaksylyk Site of Akmola Region” by means of alienation of the 100% participation interest in the authorized capital of TKS-Zhaksylyk LLP was approved.

In September, decision was made on placement (distribution) of authorized shares of Tau-Ken Samruk JSC was made; Tau-Ken Samruk JSC Development Plan for the period of 2015-2019 was approved; Director General of the Northern Katpar LLP was elected and new version of its Charter was approved; the issue of approval of changing the size of an additional limit of Eurasian Bank JSC was also considered.

In November, the Board of Directors of the Company approved Tau-Ken Samruk JSC Development Plan for the period of 2016-2020 and considered the issue of selecting an audit company for audit of consolidated and separate financial statements of Tau-Ken Samruk JSC for the years 2016, 2017 and 2018 as well as the size of compensation for such company’s services; the Board of Directors also considered the issue of approval of acquisition of metallic silicon production asset portfolio located in Karaganda region. Information on expectations of the sole shareholder of Tau-Ken Samruk JSC for 2015 was taken into account; Tau-Ken Samruk JSC register and map of risks for 2016 were approved.

In December, decision was made on placement (distribution) of authorized shares of Tau-Ken Samruk JSC and on approval of the Tau-Ken Samruk JSC Board of Directors activity plan for 2016 as well as the risk appetite of Tau-Ken Samruk JSC for 2016. The Board of Directors of the Company considered its Internal Audit Service’s plan of annual audit of Tau-Ken Samruk JSC for 2016.

The Board of Directors submitted the Tau-Ken Samruk JSC’s annual report and financial statements for 2014 to the Sole shareholder of the Company for consideration and approval.

Additional information about decisions made by the Company’s Board of Directors in 2015 is available at the Company’s web-site: www.tks.kz.

Information on remuneration of the Members of the Board of Directors

In accordance with the applicable provisions of the Company’s Charter, determining of the size and conditions of remuneration payment to the members of the Board of Directors falls within the exclusive terms of reference of the Sole shareholder of the Company.

Payment of remuneration to the independent directors of the Company shall be made based on the and in accordance with the Rules of Remuneration and Compensation of Costs to the independent directors of the Company.

In accordance with the above mentioned Rules, payment of remuneration to the independent directors of the Company shall be made provided the following requirements are satisfied: 1. Discharge by the members of the Board of Directors of their respective duties in good faith using the

methods that are in the best interests of the Company; 2. Adherence to the applicable provisions of the RK current legislation, the Company’s Charter and

by-laws in the decision-making process; 3. Participation in the Board of Directors meetings except for the cases of sickness, vacation or a business

trip

Information on the Board of Directors and Its CommitteesNumber of the Board of Directors Meetings

2015 2014Number of meetings 14 13

Attendee meeting 12 9

Absentee meeting 2 4

Attendance by the members of the Board of Directors2015 2014

Bektemirov Kuanysh Abdugaliyevich 13 13

Turmagambetov Mazhit Abdykalikovich 14 13

Argingazin Arman Anuarbekovich 13 11

Arslanova Zarina Fuatovna 14 13

During the year the issues such as budget adjustments, investment projects, evaluation of performance by the management, reports of the management and Internal Audit Service, changes in the membership of committees and management of the Company were considered on a periodic basis at the meetings of the Board of Directors.

More detailed information on the most important issues considered by the Company’s Board of Directors at the meetings during the year is given below.

In February, Tau-Ken Samruk JSC Board of Directors elected the Board of Directors Chairman by the secret ballot vote; experts of the Board of Directors’ committees were reelected; Corporate Secretary was appointed and the Company’s development plan for the period of 2015-2019 was adjusted.

In March, the Company’s Board of Directors approved Innovative Technology Strategy of Tau-Ken Samruk JSC for the period of 2014-2022; it considered information on transactions in conclusion of which the Company was interested; it also considered the report on monitoring of implementation of Tau-Ken Samruk JSC investment program for 2014 and the report on implementation of Tau-Ken Samruk JSC’s plan of action for meeting the expectations of the Sole shareholder.

In April, the Board of Directors approved preliminarily the annual financial statements of Tau-Ken Samruk JSC for 2014, reviewed the Annual Audit Plan of the Internal Audit Service of Tau-Ken Samruk JSC for 2015 and the Annual Report of the Board of Directors for 2014, approved the organizational structure of Tau-Ken Samruk JSC and considered a number of quarterly reports. Besides, in April the Board of Directors agreed preliminarily upon an issue relating to purchase of 100% interest in the authorized capital of Northern Katpar LLP by Tau-Ken Samruk, approved preliminarily the Annual Report of Tau-Ken Samruk JSC for 2014, carried out performance appraisal of members of the Executive Management of Tau-Ken Samruk JSC with regard to achievement of the key performance indicators in 2014, and re-elected members of the Executive Management of Tau-Ken Samruk JSC.

In May, decision was made to approve an independent implementation of geological exploration works under the investment project “Gold-bearing Ore Prospecting at the South-Moiyntinskaya area in Karaganda region” and business plan and investment memorandum of “Choice” stage were approved; changes were introduced in Tau-Ken Project JV LLP charter and risk register and risk map of Tau-Ken Samruk JSC for 2015 were approved; acquisition of 100% participation interest in the Northern Katpar LLP by Tau-Ken Samruk JSC was approved.

In July, decisions were made on approval of the revised Audit Services Procurement Policy of Tau-Ken Samruk National Mining Company JSC; decision was also made on approval of a an independent implementation of the 1st stage of “Karaganda Region Alaigyr Deposit’s Polymetallic Ore Production and Processing” project; decision was made on entering into transaction, in which Tau-Ken Samruk JSC was interested, and for approval of an independent execution of geological exploration work under the “Gold Prospecting at the Shokpar and Gagarinskoye Deposits of Zhambyl Region” investment project and also a decision was made on approval of a business plan and investment memorandum on placement (distribution) of authorized shares of Tau-Ken Samruk JSC.


8. Consideration of the report on the results of audit “Analysis and Assessment of Efficiency Investment Project “Polymetallic Ore Production at the Alaigyr Deposit of Karaganda Region” Management”. Assessment of internal audit system and risk management system in the course of investment project implementation;

9. On approval of new version of Tau-Ken Samruk National Mining Company JSC Risk Management Rules (Corporate Standard);

10. On approval of Tau-Ken Samruk National Mining Company JSC Investment Risks Assessment and Management draft rules;

11. On preliminary approval of Tau-Ken Samruk JSC register and map of risks for 2016;12. On determining an audit organization carrying out audit of consolidated and separate financial

statements of Tau-Ken Samruk JSC for 2016-2018 and amount of payment for rendered services;13. On approval of Tau-Ken Samruk JSC risk appetite for 2016;14. On approval of Tau-Ken Samruk National Mining Company Joint Stock Company’s Board of Directors

Audit Committee Plan of Action for 2016; 15. On approval of Tau-Ken Samruk JSC annual audit plan of the Internal Audit Service for 2016.

More detailed information on the issues considered by the Audit Committee is available on the corporate web-site of Tau-Ken Samruk JSC in the section of Corporate management.

Nominations and Remuneration Committee

Nominations and Remuneration Committee is an advisory and deliberative body of the Board of Directors set up for giving recommendations on appointment of the Board of Directors’ members, determining a size and conditions of remuneration and bonuses payment to the Board of Directors members and the Corporate Secretary as well as qualification requirements to the Board of Directors, Members of the Management Board and Corporate Secretary.

Members of the Nominations and Remuneration Committee under the Board of Directors are as follows: — Argingazin Arman Anuarbekovich – Independent Director, member of Tau-Ken Samruk JSC‘s Strategic

Planning and Investments Committee under the Board of Directors; — Arslanova Zarina Fuatovna – Independent Director, Chairwoman of Tau-Ken Samruk JSC ‘s Audit

Committee; — Sagadibekov Almaz Boranbaiuly – chief expert of the Director of Mining-and-Metallurgic and Electric

Power Assets Directorate of Samruk-Kazyna JSC (was elected as a member of the Audit Committee on 26 February 2015, No.01/15).

Number of Meetings of Nominations and Remuneration Committee



Over the reporting period, the Nominations and Remuneration Committee held 8 attendee meetings that addressed and recommended 24 issues suggested for cooperation by the Board of Directors of the Company.

Membership of the Board of Directors

For the purpose of proper maintenance of the Board of Directors activity, the below listed committees have been set up in the Company. Terms of reference of such committees include considering issues and working out of recommendations on one issue or another within the scope of their functionality:

• the Audit Committee; • the Nomination and Remuneration Committee; • the Strategic Planning and Investments Committee.

In accordance with the regulations on the committees under the Board of Directors, each of committees shall submit its report on performed work to the Board of Directors on a weekly basis.

Number of Considered Issues at the Meetings by Committees2015 2014

Audit Committee 61 47

Nominations and Remuneration Committee 24 22

Strategic Planning and Investments Committee 31 12

Audit Committee

Audit Committee is an advisory and deliberative body of the Board of Directors set up for analysis and working out of recommendations on the issues of internal and external audit, internal audit system as well as the risk management system.

Members of the Audit Committee under the Board of Directors are as follows:

— Arslanova Zarina Fuatovna – Independent Director, Chairwoman of Tau-Ken Samruk JSC ‘s Audit Committee;

— Argingazin Arman Anuarbekovich – Independent Director, member of Tau-Ken Samruk JSC‘s Strategic Planning and Investments Committee under the Board of Directors;

— Sagadibekov Almaz Boranbaiuly – chief expert of the Director of Mining-and-Metallurgic and Electric Power Assets Directorate of Samruk-Kazyna JSC (was elected as a member of the Audit Committee on 26 February 2015, No.01/15).

Number of Audit Committee Meetings2015 2014

Number of meetings 10 9


Over the reporting period, the Audit Committee held 10 attendee meetings and addresses and recommended 61 issues proposed by the Company’s Board of Directors.

In particular, the Audit Committee considered the following issues:1. On consideration and approval of the Report on implementation of the plan of actions aimed at

improvement of Tau-Ken Samruk JSC internal audit system over the period of 2014-2015 based on the results of 2014;

2. On consideration and approval of the Report on implementation of the plan of actions aimed at improvement of Tau-Ken Samruk JSC corporate risk management system over the period of 2013-2015 based on the results of 2014;

3. Consideration of the report on Tau-Ken Samruk JSC’s internal audit service activity in 2014;4. Approval of the annual separate and consolidated financial statements of Tau-Ken Samruk JSC for 2014;5. Consideration of the report on the results of processing of request that was sent to the Hot Line of

Tau-Ken Samruk JSC;6. On preliminary approval of an additional limit of Bank of Astana JSC and introduction of changes in the

size of an additional limit of Eurasian Bank JSC;7. Consideration of the candidates for vacant position of Tau-Ken Samruk JSC’s internal audit service head;


7. Considering a roadmap for 2015-2016 for implementation of Tau-Ken Samruk National Mining Company JSC development strategy over the period of 2013-2022;

8. On acquisition by Tau-Ken Samruk JSC of 100% participation interest in the authorized capital of the Northern Katpar LLP;

9. On approval of an independent execution of geological and exploration work under the project of gold prospecting at the Progress deposit in Karaganda region and financing of the related expenses, on approval of business plan and investment memorandum of “Choice” stage of the project of gold prospecting at the Progress deposit in Karaganda region;

10. On considering of the report on implementation of the Strategy of Tau-Ken Samruk National Mining Company JSC development in 2014;

11. On approval of an independent execution of geological and exploration work under the project of gold-bearing ore prospecting at the South Moiyntinskydeposit in Karaganda region and financing of the related expenses and on approval of business plan and investment memorandum of “Choice” stage of the given project;

12. Approval of business plan for the project of prospecting for copper, lead and barium sulfate within Tuyuk-Temirlikskiy ore area of Almaty region;

13. Approval of an independent implementation of the project of Alaigyr deposit polymetallic ore production and processing in Karaganda region;

14. On approval of an independent execution of geological and exploration work under the project of gold prospecting at the Shokpar and Gagarinskoye deposits in Zhambyl region and approval of business plan and investment memorandum for the given project;

15. Approval of an additional funding of the prospecting and assessment stages of the geological exploration work under the project of prospecting for copper, lead and barium sulfate within Tuyuk-Temirlikskiy ore area of Almaty region;

16. Withdrawal from the further implementation of the project under the contract of prospecting for titanium and magnetite ore at the Western Sayak deposit in Karaganda region;

17. Approval of withdrawal from the project of prospecting for and production of gold and copper at the Yeshkeolmes deposit in Akmola region by means of alienation of 50% participation interest of Tau-Ken Samruk JSC in authorized capital of Tau-Gold Copper Joint Venture LLP;

18. Approval of withdrawal from the project of prospecting for manganese ore at the Zhaksylyk deposit in Akmola region by means of alienation of 100% participation interest of Tau-Ken Samruk JSC in authorized capital of TKS-Zhaksylyk LLP;

19. Consideration of the report on monitoring of the project “Construction of refinery in Astana” project implementation in 2014;

20. Withdrawal by Tau-Ken Samruk JSC from implementation of some projects of gold and copper prospecting in Zhambyl and Karaganda regions;

21. Approval of an investment project and an investment offer “Acquisition of an asset portfolio for production of technical silicon in Karaganda region”;

22. Approval of Tau-Ken Samruk National Mining Company Joint Stock Company’s Board of Directors Strategic Planning and Investments Committee Plan of Action for 2016;

More detailed information on the issues considered by the Strategic Planning and Investments Committee is available on the corporate web-site of of Tau-Ken Samruk JSC in the “Corporate Management” Section.

There is also the following information available on the Tau-Ken Samruk JSC web-site in the “Corporate Management” Section:.

• Procedure of meeting convening by the Sole Shareholder; • Criteria of independence of the members of the Board of Directors; • Overlapping of the positions of the Board of Directors Chairman and the CEO. • Procedure of candidates nomination to the Board of Directors; • The procedure for submitting proposals to the agenda of the meetings of the Board of Directors • Procedure of decisions making on determining the size and payment of compensation to the Board of Directors

members.

In particular, the Nominations and Remuneration Committee considered the following issues:1. On considering the report on the issues of Tau-Ken Samruk JSC HR Policy pursuing over the 2014-2022

period for 2014;2. On appointment of Tau-Ken Samruk JSC Corporate Secretary;3. Consideration of the Report on activity of Tau-Ken Samruk JSC ‘s Nominations and Remuneration Committee

in 2014;4. Approval of qualification requirements to the position of Chief Executive Officer of Tau-Ken Samruk JSC;5. On considering M.A. Turmagambetov as a candidate for the position of Chief Executive Officer of Tau-Ken

Samruk JSC6. On re-election of Tau-Ken Samruk JSC management board members;7. Assessment of Tau-Ken Samruk JSC Management Board members’ performance in 2014 based on the KPI

figures;8. Assessment of performance of managing directors - members of Tau-Ken Samruk JSC by the level of

achieving the set KPI in 2014;9. Considering the candidates for vacant position of Tau-Ken Samruk JSC’s internal audit service head;10. On approval of revised key performance indicators of Tau-Ken Samruk JSC Management Board members’

for 2015;11. On approval of Tau-Ken Samruk National Mining Company Joint Stock Company’s Nominations and

Remuneration Committee Plan of Action for 2016.

More detailed information on the issues considered by the Nominations and Remuneration Committee is available on the corporate web-site of Tau-Ken Samruk JSC in the section on Corporate management.

Strategic Planning and Investments Committee

The Strategic Planning and Investments Committee is an advisory and deliberative body of the Board of Directors. It was set up for provision of recommendations on strategic issues of the Company’s activity.

Strategic Planning and Investments Committee membership is as follows: — Arslanova Zarina Fuatovna – Independent Director, Chairwoman of Tau-Ken Samruk JSC ‘s Audit

Committee; — Argingazin Arman Anuarbekovich – Independent Director, member of Tau-Ken Samruk JSC‘s Strategic

Planning and Investments Committee under the Board of Directors; — Repin Alexey Yuriyevich – Deputy CEO of Samruk-Kazyna JSC assets management (was elected as a

member of the Nominations and Remuneration Committee on 26 February 2015, No.01/15).

Number of Strategic Planning and Investments Committee Meetings 2015 2014

Number of meetings 10 4


Over the reporting period, the Strategic Planning and Investments Committee held 10 attendee meetings that addressed and provided recommendations on 31 issues suggested for consideration by the Board of Directors of the Company.

In particular, the Strategic Planning Committee considered the following issues:1. Preterm termination of the contract for exploration of titanium and magnetite ore at the Western Sayak

deposit; 2. Transfer of subsoil use rights under the contract for gold-bearing ore prospecting at the Progress deposit in

Karaganda area of the Republic of Kazakhstan as a contribution into authorized capital of Tau-Ken Progress LLP.

3. Consideration of the draft innovative and production strategy of Tau-Ken Samruk JSC for 2014-2022;4. Consideration of the Report on activity of Tau-Ken Samruk JSC ‘s Strategic Planning Committee under the

Board of Directors in 2014;5. Approval of withdrawal from the project of non-ferrous metals (save for bauxites) prospecting in the

Kostanai region by means of alienation of subsoil use right;6. Considering the report on monitoring of Tau-Ken Samruk JSC investment program implementation over 12

months of 2014;


Izbashanov Kylyshbek Satylganovich

Deputy CEO for Production Activities

The range of issues, for which he is responsible in the Company: formation and implementation of innovative technological development policy including coordination and supervision of the design development processes, production and processing of mineral raw materials, transfer and introduction of new technologies.


Date of birth: October 26, 1952.

Graduated from the Kazakh Polytechnic Institute named after V.I. Lenin in 1975, metallurgical engineer.

1975. Fireman at the Ust-Kamenogorsk lead-and-zinc production plant.1976. Rose from smelter to smelting workshop superintendent of Chimkent Lead Plant.1985. Director of Chimkent Lead Plant.1991. Chairman of the RK State Committee of the Public Property.1993. President of the Public Holding Company.1996. Deputy head of South Kazakhstan region administration.1997. Head of South Kazakhstan region administration.1999. Director of South Kazakhstan Office of the RK Agency for Regulation of National Monopolies, Protection of Competition and Small Business Support.

2000. Deputy head of South Kazakhstan region administration.2002. Executive director of Kazakhstan Temir Zholy NC JSC.2006. Vice-president of Kazakhstan Engineering JSC.2009. Director for Samruk-Kazyna SWF JSC industrial assets management.2009. Managing director of Tau-Ken Samruk JSC for production and engineering.Starting from November 2014 – Deputy CEO for Production Activities.

Is not an employee or a member of the board of directors of any other organization.


MANAGEMENT BOARD Management of the Company is a collective executive body that is entitled to make decisions on any issues pertaining to the Company’s activity that are not referred to the exclusive terms of reference of the Sole shareholder and the Board of Directors by the applicable provisions of the current legislation of the Republic of Kazakhstan and the Board of Directors and is accountable to the Sole shareholder and the Board of Directors for proper discharge of its functions.

Management Board of the Company1. Turmagambetov Mazhit Abdykalikovich Chief Executive Officer, member of the Board of Directors

2. Izbashanov Kylyshbek Satylganovich Deputy CEO for Production Activities

3. Bigozhin Talgat Zhanbolatovich Economy and Finance Deputy CEO

4. Izhanov Aibek Baldayevich Geology and Subsoil use Managing Director

5. Karim Damir Amangeldyuly Strategy and Business Transformation Managing Director

Information about the Management Board Members

Turmagambetov Maxhit Abdykalikovich

Chief Executive Officer, Member of the Board of Directors

The terms of reference: management of daily affairs of the Company, control over activity aimed at execution of decisions made by the sole shareholder and the Board of Directors of the Company.

Citizenship: Republic of Kazakhstan

Date of birth: February 1, 1961

Graduated from the Moscow Higher Technical College named after N.E. Bauman in 1984, mechanic engineer.

1984. Foreman, deputy workshop superintendant of the machine-building plant named after S.M. Kirov, Alma-Ata. Starting from 1989. Deputy Director of Damis SE.1991. Deputy Executive Secretary of Kazakh Central Real Estate Exchange JSC.1992. General Director of Damis-93. 1996. Deputy General Director of Almaz jewelry corporation JV. 1997. Deputy Director of Industry Department of the Republic of Kazakhstan Ministry Economy and Trade.1998. Deputy Chairman; Chairman of the Committee for the State Control over Production and Turnover of Alcohol Products under the Ministry of Finance of the Republic of Kazakhstan, Ministry of Economy and Labour of the Republic of Kazakhstan and the State Revenue Ministry of the Republic of Kazakhstan.

2001. Vice-minister of the Republic of Kazakhstan Ministry of National Resources and Environmental Protection. 2003. Deputy Chief Executive Officer of Innovative Fund JSC. 2004. Deputy Chief Executive Officer of AstanaEnergoService JSC. 2006. Executive positions in commercial companies. 2008. Director of Maximum Regional Investment Center LLP (South Kazakhstan Region). 2008. Deputy head of South Kazakhstan region.2009. Vice-minister of the Republic of Kazakhstan Environmental Protection Ministry. Starting from 2012 and till the present time – CEO of Tau-Ken Samruk JSC.

Member of the Board of Directors of Kazatomprom NNC JSC and Kazzinс Holdings LLP.


Bigozhin Talgat Zhanbolatovich

Economy and Finance Deputy CEO

The range of issues, for which he is responsible in the Company: ensures formation and implementation of the Company’s investment policy and is in charge of its relations with financial institutions.


Date of birth: August 16, 1974.

Graduated from the Karaganda State University in 1996 with specialization in finance and loans.

1991. Worked for the Tokyrauynskiy district Tax Inspectorate of Karaganda region.1995. Worked in different positions for Balhash Office of Tsvetmetbank, Balhash branch of Halyk Bank, Kazakh Altyn JSC, AOOT CGHK, Progress JSC. 2000. Head of Finance and Planning Department, Head of retail business department of Akmola region Branch of Halyk Bank of Kazakhstan.2001. Employee of Kazakhstan Development Bank CJSC.2003. Chief Financial Officer of Golden Grain Group Corporation CJSC, Agro-M-holding LLP. 2004. Advisor to the CEO, Deputy CEO for Finance, Procurement and General Support of AstanaEnergoService JSC.

2006. Advisor of Astanaenergosbyt LLP director.2008. Worked for Kazakhstan Development Bank JSC in different positions, for KazMunaiGas Trading House JSC, Kazaeroservice JSC, Kazgidromet NSRE, Astanaenergocontract LLP and Prodcorporation NC JSC.2012. Deputy CEO of Tau-Ken Samruk JSC for finance and monitoring. Starting from 2015 – Deputy CEO of Tau-Ken Samruk JSC for economy and finance.




Information about Management BoardNumber of Meetings of the Management Board of the Company


Number of Considered Issues 410 483

Management Board Members Remuneration

Management Board members Remuneration Policy is pursued in accordance with the rules of assessment of activity and remuneration of managerial and executive employees of Tau-Ken Samruk JSC developed in accordance with legislation of the Republic of Kazakhstan, policy of assessment of activity and remuneration of managerial employees of Samruk-Kazyna JSC companies.

The given rules determine terms and procedure of performance assessment and payment of compensation to managerial and executive employees of the Company.

Assessment of performance of the members of the Managerial Board based on the motivation key performance indices of activity (hereinafter referred to as KPI), characterizing efficiency of financial and economic activity of the Company and degree of achievement by the members of the Management Board of high performance results.

Based on the results of KPI achievement by the Management Board members, remuneration is paid to them in accordance with the amount calculated with due account for the amount allocated for remuneration payment.

Izhanov Aibek Baldayevich

Geology and Subsoil use Managing Director

The range of issues, for which he is responsible in the Company: management of the Company’s activity of formation and implementation of its policy in the sphere of geology and subsoil use.


Date of birth: August 8, 1976.

Graduated from the National Technical University named after K.I. Satpayev in 1998, mining engineer.

Graduated from the International Academy of Business, MBA, specialization in management, 2011.

1999. Drilling foreman, Head of transportation and drilling workshop of Centrgeolsurvey JSC, city of Karagana.2001. Maintenance manager, Deputy Head of the Logistics Department of Zhairemskiy MPP JSC, Karaganda region.2002. Senior specialist, Head of the Subsoil use Department under the RK Ministry of Energy and Mineral Resources.2007. Director of Subsoil use Department of Saryarka JV NC JSC, city of Astana.

2009. Director of Subsoil use Department, Managing Director, Chief Geologist, Geology and Subsoil use Director of Tau-Ken Samruk JSC.Since November 2014 – Member of Tau-Ken Samruk JSC Management Board, Geology and Subsoil use Director.



Karim Damir Amangeldyuly

Strategy and Transformation Managing Director

The range of issues, for which he is responsible in the Company: management of activities aimed at development and implementation of the Group of Companies transformation program.


Date of birth: November 20, 1972.

Graduated from the Karaganda State Technical University in 1997, mining engineer-economist. 2011. Kazakh State Law Academy, lawyer.2015. Karaganda State Technical University, bachelor degree in techniques and technology.1997. Economist in Alash JSC, Karaganda.2002. Leading economist in charge of planning and analysis, Kazchrome TNC JSC.2004. Head of planning and economic bureau, Head of Budget Planning of Kazmarganets RU of Kazchrome TNC JSC.2008. Senior manager of Samruk-Kazyna SWF JSC.2009. Director of Budget Planning and Treasury Department, Managing Director of Finance Department of Tau-Ken Samruk JSC.

November 2014 – member of Tau-Ken Samruk JSC Management Board, Finance Director.Since May 2015 – member of Tau-Ken Samruk JSC Management Board, Strategy and Business Transformation Director.

Member of the Board of Directors of Kazzinc Holdings JSC.



Risk of non-confirmation of forecasted resources and content of metal in ore is the main risk for the Company’s activity. The below listed external and internal factors have effect on this risk occurrence:

• Failure to submit to the competent governmental authorities of all geological information on the subsoil use projects;

• Low or incomplete degree of the deposit exploration degree; • Low quality of geological exploration work; • Improper analysis of geological exploration work results.

Information on Observance by the Company of the Corporate Management Principles

In accordance with the Corporate Governance Code of “Samruk-Kazyna” JSC approved by the Management of Samruk-Kazyna SWF JSC, requirement on mandatory disclosure of information about the facts and causes of non-observance of the given Code provisions in the annual report of the Company has been applied since 2017.

At the same time, in 2015 the Company performed works on improvement of certain subsystems of corporate management, updated a number of by-laws on corporate management, risk and personnel management, paperwork, information disclosure etc.

For the purpose of verification of new Code provisions compliance with the implementation practice, the Company conducted analysis of the basic deviations from the Code provisions (GAP-analysis), which was considered and approved by the Board of Directors of the Company.

Based on the results of conducted analysis, midterm program for Tau-Ken Samruk JSC group of companies corporate management system improvement for 2016–2018 was developed and approved by the decision of the Company’s Board of Directors.

Measures provided for by the Program are aimed at introduction of corporate management system into practical activity of the Company and its group of companies to ensure proper management and control over activity of such companies and also aimed at the increase in the long-term value and sustained development.

In accordance with expectations of the Sole shareholder of the Company for 2015, plan of actions for the corporate management Code introduction by the Company’s subsidiaries was developed.

Information on the nature of state impact including the list of issues that are to be approved by the competent authorities

Republic of Kazakhstan Law “On Subsoil” governs the Company’s activity as a national subsoil use company with the right of direct negotiations for obtaining the right of subsoil use and preemptive right for acquisition of alienated subsoil use right (objects to which the subsoil use right applies).

Therefore, Ministry of Investments and Development of Republic of Kazakhstan may influence activity of the Company as regards its status and powers by means of initiation of alteration of the current legislation of the Republic of Kazakhstan or by managerial decisions making.

Competent governmental authorities may exert effect on activity of the Company in accordance with the provisions of the current legislation of the Republic of Kazakhstan governing business activity of legal entities.

RISK MANAGEMENT SYSTEM Risk management system is an integral part of the Company’s activity and is intended for identification, assessment and monitoring of all substantial risks as well as taking measures for mitigation of risks that may have negative effect on value and reputation of the Company and its subsidiaries.

In the course of its activity, the Company faces various risks that have effect to one extent or another on the planned indices and objectives, efficiencies of decisions made and efficiency of the Company’s activity on the whole. Therefore, the Company realizes an importance of risk management as key component of corporate management system aimed at identification and measures taking for mitigation of risk level that may have negative effect on financial and economic activity and reputation.

Introduction of the corporate risk management system by the Company is performed within the framework of carrying out the recommendations of the Sole shareholder, in accordance with which introduction of the corporate risk management shall be in accordance with the COSO (The Committee of Sponsoring Organizations of the Treadway Commission) concept of the Risk Management System.

Risk management process is implemented by the Company in accordance with the by-laws on risk management approved by the Board of Directors of the Company.

Risk management policy determines the risk management system’s structure, main components of the risk management process and ensures systematic and consistent approach to implementation of the risk management process by the Company and its subsidiaries.

Identified risks shall assessed by the degree of effect, probability of occurrence and time of effect. Risk shall be included in the Company’s risk map.

Critical (key) risks that may have negative effect on the Company’s financial results and image are as follows:

Strategic Risks: — risk of reducing precious metals prices; — risk of rise of raw materials (solid minerals, metals, etc.) prices; — risk of fall in finished products prices; — risk of projects underfunding; — risk of failure to implement the financially promising projects; — risk of the initial budget overrun.

Investment Risks: — risk of non-confirmation of forecasted resources and content of metal in ore; — risk of examination of inferior quality and development of project documents; — risk of strategic partner participation; — risk of untimely commissioning of the project.

Operational Risks: — procurement process violation risk.


INTERNAL AUDIT SERVICEInternal Audit Service (hereinafter referred to as the Service) is a body of the Company organizationally subordinate to and functionally accountable to the Board of Directors of the Company. The Service’s activity is supervised by the Audit Committee under the Board of Directors of the Company.

The mission of the Service is to provide necessary assistance to the Board of Directors and the Management Board in the fulfilment of their duties in achieving the strategic goals of the Company.

The main objective of the Service’s activity is to provide the Board of Directors with independent and objective guarantees and advices aimed at improvement of risk management system, internal control and corporate management systems of the Company.

Upon development of an annual plan of audit, the Service applies risk-oriented approach.

Audits are conducted based on the annual audit plan approved by the Audit Committee and by the Board of Directors of the Company.

In accordance with the basic objectives and tasks set by the Board of Directors of the Company for the Service, the following work was performed in 2015:

• audit of merger/takeover transactions management; • iT systems audit; • audit of investment project “Polymetallic Ore Production at the Alaigyr Deposit of Karaganda

Region” management; • audit of investment project “Preparatory Work and Commissioning of Metallurgic Silicon

Production Plant in Karaganda Region” management; • audit of the investment project “Production and Processing of Iron Ore of Massalsky Deposit

of Akmola Region” management.

Based on the results of audits, the Service gave recommendations on the further improvement of the above specified corporate systems.

In 2015, monitoring of implementation of the recommendations given by the Service and an independent auditor was conducted on a quarterly basis.

For the purpose of coordination of activity ensuring proper coverage and minimization of redundant operation, the Service provides information on the system of internal audit of the Company to the independent auditor.

In order to ensure continuous professional development, permanent improvement of knowledge, skills and competences over the reporting period, employees of the Service took part in educational seminars.

Over the reporting period, systematic work was conducted for introduction and improvement of internal regulatory documents governing activity of the Service. Job descriptions were provided for employees of the Internal Audit Service and the Program of the Service Quality Improvement was development.

The Audit Committee and the Board of Directors of the Company conducted internal audit of the Service activity efficiency in 2015.

Over the reporting period, the Service conducted unscheduled inspections based on 4 applications filed with the hot line of the Board of Directors. The above specified applications were related to observance of procurement procedures and conditions of concluded agreements.

The results of the conducted audits were considered by the Audit Committee and the corresponding decisions were made.

Information on availability of the Code of Business Conduct and mechanisms aimed at ensuring compliance with the Code of Business Conduct

The Company has its own Code of Ethics approved by the the Board of Directors.

Business Ethics Code was developed in accordance with applicable provisions of the Republic of Kazakhstan current legislation with due account for requirements of the World Labour Organization, Charter, Corporate Management Code and other by-laws of the Company and represents a collection no rules and principles that all employees of the Company should abide by.

The objective of the Business Ethics Code is to develop corporate culture of the Company and to establish effective relations with interested persons/entities by means of business behavior practice implementation.

Mechanisms of the Company aimed at ensuring the observance of the Business Code Ethics are listed below:1. For the purpose of ensuring confidentiality of information, the Company has its instruction

on protection of official and commercial secret. Additionally, each employee upon employment shall sign a non-disclosure agreement.

2. The Company has its own policy for settlement of conflicts of interests. 3. For the purpose of counteraction to corruptive and any other illegal actions, the Company

adopted the Policy of notification on alleged breaches of law. 4. The Company developed its code of conduct in order to ensure observance of the corporate

culture rules and regulations. 5. Occupational safety, labour protection and environmental protection are governed by the

Policy in the sphere of labour safety and protection as well as environmental protection policy.

6. In the sphere of public relations, the Company operates in accordance with its Information Policy provisions.

7. For the events of business ethics violation in the company, the Company has also established an ombudsman institution that is governed by the regulations on the ombudsman. The company has its own corporate web-site: www.tks.kz. Hot line: +7 (7172) 55-93-30.

8. Control measures system provides for consideration of any events of business ethics violation and taking the corresponding measures at the level of the HR Policy Committee under the Management and the Board of Directors of the Company.

9. Interested persons have the right to notify the Board of Directors on illegal and unethical acts on the part of the Management through the Corporate Secretary of the Company and such interested parties’ rights shall not be prejudiced in the event of such notification. The Board of Directors shall regularly revise and improve provisions of the Code and analyze to which degree it is practically implemented and, if necessary, makes necessary alterations and/or addenda thereto.

10. Every employee of the Company shall bear responsibility for observance of ethical rules within the framework of his/her conduct. Observance of the Code is mandatory for all officials and employees of the Company. Violation of the Code entails disciplinary responsibility in accordance with the established procedure.


The main lines of sustainable development of the Company consist in implementation of the programs in:

• social sphere; • occupational health, safety and environmental protection; • satisfaction of personnel demands and improvement of their health; • development of human resources and effective investments in

development of production.

The top priority of the Company’s social policy is health and safety of employees and their families.

Additionally, one of the main tools ensuring high standard of living of the Company’s employees and those of its subsidiaries consist in social payments and bonuses. Thus, in 2015, the main components of the social support were as follows: insurance of employees against accidents in the course of discharge of their job duties, annual medical examination of employees, payment of sick leaves, maternity leave (up to 3 years), lump-sum aid for recreational purposes, medical insurance and treatment, financial aid in the event of an occupational injury.

Various sports and recreational events are held on an annual basis by the Company for improvement and maintaining healthy life style of the personnel, such as sports competitions, team buildings, celebration of Nauryz (Oriental new year), professional holiday (Day of Metallurgist).

Employees of the Company and its subsidiaries and branches are awarded with the state awards, certificates of merit of Samruk-Kazyna SWF JSC, letters of gratitude of the CEO of the Company as a non-financial recognition of their fruitful work and high achievements in work and high professionalism in implementation of certain production projects.

Employees that combine work with study in educational institutions are provided with additional vacations for the period of examinations or training sessions, preparation and defense of graduation project (work) and passing for graduation examination.

SUSTAINABLE DEVELOPMENT


HUMAN RIGHTSThe main strategic capital and the main value of the Company are its personnel resources, effective performance of which enables the Company to resolve successfully and achieve its objectives.

The human right issues are the key one in the labour relations between the Company and its employees. So, both policy and procedures are developed in Tau-Ken Samruk JSC group of companies with due account for rights of its employees, customers and business partners. Fundamental principles and requirements in the field of human rights are guaranteed by the basic regulatory documents of the Company such as: Business Ethics Code, Labour Contracts, Code of Conduct, procedure for granting vacations to employees and regulations on business trips of the employees.

Ombudsman of the Company was appointed for registration of employees’ complaints. Hot line and special complaints and suggestions boxes practice has been implemented by Tau-Ken Samruk JSC group of companies.

In addition, the Company respects religious beliefs and political preferences of its employees provided they do not conflict with the current legislation of the Republic of Kazakhstan. The Company does not prevent their employees from participating in political, religious and social activity as individuals during off time.

The fact that the Group of companies of Tau-Ken Samruk JSC does not have regulations that govern the appraisal of suppliers and contractors for respect of human rights does not preclude the Company from doing business in a responsible manner.

• The Company’s activities are based on legislative requirements for avoidance of any forms of human rights violation;

• In 2015, Tau-Ken Samruk JSC group of companies did not report any incident connected with violation of human rights;

• In 2015, Tau-Ken Samruk JSC group of companies did not report any incident connected with the use of forced or mandatory labour;

• In 2015, Tau-Ken Samruk JSC group of companies did not report any incident connected with violation of any rights of indigenous people or minorities. The Company recognizes the principle of equal rights and opportunities. All employees of the Company have the right for freedom of association and conduct of collective negotiations within the limits of the current legislation of the Republic of Kazakhstan;

• The Company and all its subsidiaries and associates support abolition of forced child labour. There is no activity in the Company that would be connected with the use of these types of labour.

Payments and benefits provided to the employees working on full-time terms, which are not provided to temporary or part-time employees, are broken down by the types of key activity.

Parameter Full-time EmployeesTemporary or Part-time Employees

Payments and benefits to Employees

Life insurance Provided Provided

Health care (medical insurance) Provided Provided

Temporary/permanent labour incapacity Provided Provided

Maternity leave Provided Provided

Pension (one-time payment upon retirement) Provided Not provided

Transfer of the Company’s shares into ownership Not provided Not provided

Other (sanatorium-resort therapy, material aid connected with the birth of a child, medical treatment of family members, recreation)

Provided Not provided

7372 ANNUAL REPORT 2015SUSTAINED DEVELOPMENT

The basic advantages of PRP are as follows: • Long-term security of Tau-Ken Samruk JSC group of companies as regards availability of

required candidates for management positions and succession of management; • Maximum use of highly qualified personnel potential for achievement of strategic tasks and

objectives of Tau-Ken Samruk JSC group of Companies; • Possibility of development and carrier progress serves as motivation for Tau-Ken Samruk JSC

group of companies’ employees; • Formation of an attractive image of the Company as an employer attracting and retaining

highly qualified employees by means of ensuring possibilities for development and career progress.

Current PRP consist of 18 employees, 2 of which are representatives of subsidiary and 16 are employees of the Company. Out of 16 candidates, 1 has already been promoted.

As part of PRP implementation, candidates training is being carried out in accordance with individual training plans. The Company is monitoring vacant managerial positions in Tau-Ken Samruk JSC group of companies in order to consider candidates from the pool of candidates in the order of priority as per the career development plans.

Number of Employees

At the end of 2015 actual number of employees of Tau-Ken Samruk JSC group of companies amounted to 1,001 employees.

Most of the employees of Tau-Ken Samruk JSC group of companies are involved full time and under permanent contract terms in production sector of the group. High level of full time employees working at production facilities of the group of companies is indicative of an effective use of workforce.

Most employees of Tau-Ken Samruk JSC group of companies are men due to specifics of its activity.

According to the results of analysis, employees at the age of 26 to 45 years make the largest part of Tau-Ken Samruk JSC group of companies’ employees, which is indicative of an optimum ratio allowing for maintaining an optimum balance of young and experienced employees.

• Average age of the Company’s employees is 40 years old. Men make 79.4% and women 20.6% of the total number of Tau-Ken Samruk JSC group of companies’ personnel.

• As for the corporate center, 100% of employees have higher education diploma, among which 16% got their education abroad and approximately 40% of employees have industry specific education and experience in mining and metallurgic field, 9% of employees have different academic degrees in geology, economy, engineering, chemistry and other fields.

HUMAN RESOURCES MANAGEMENT POLICY

Competitive Selection

Introduction of a transparent procedure of competitive selection of candidates for vacant positions and provision of equal opportunities to all candidates is the strategic objective in the sphere of the Company’s employees selection and employment.

For this purpose of achievement this objective, testing for knowledge of the state English languages, if necessary, was introduced as the mandatory stage of the competitive candidates selection procedure in the Company.

Options of automated recruiting process integration into the corporate web-site are considered together with Information Technologies Service of the Company.

Totally 32 employees were employed by the Company through the competitive selection procedure in 2015.

Development and Advance Training of Personnel

Deficit of employees having the necessary knowledge, qualification and skills results in significant economic losses manifesting both in restriction of production development and in increase in labour costs. Shortage of qualified personnel was determined as a risk preventing the rise in value and improvement of production efficiency of the Company. Therefore, creation of an efficient system of professional development of the Company’s employees is intended for meeting the Company’s demand for qualified personnel, which is among its top priorities.

Tau-Ken Samruk JSC group of companies’ system of employees professional development includes both off-site and online professional training providing for participation by employees in professional advance training courses, practical training and conferences held in the main lines of its production activity.

In 2015 the Company arranged 34 short-term training events as the part of professional development program including professional training of 30 employees, corporate training by means of 4 training events as well as a year-through English language teaching for 51 employees.

Therewith, as a solution for HR management tasks and to pursue strategic targets, in 2016 the company is planning to introduce leadership competence model for employment, assessment and development of human resources of the Company, achieve 74% of planned personnel involvement and introduce alterations into wage system with due account for the grade of evaluation.

Formation and Development of the Pool of Candidates

The main objective of development and implementation of the Personnel reserve program (hereinafter referred to as the PRP) is to ensure consistent and systematic training of future managers for smooth succession and to provide the best employees with opportunity of career development in Tau-Ken Samruk JSC group of companies.


External Environmental Services Cost

Expenses on the external services related to environmental protection include environmental project development (obtaining permission for emission, etc.), environmental insurance, production environmental control, collection and disposal of wastes and other costs related to environmental protection activity.

External Environmental Services Costs in 2015:

Service DescriptionNumber of Objects (S&A)

Cost(KZT thous.)

Environmental planning and rate setting documents drawing up. 4 objects 25 235,972

Industrial environmental monitoring 4 objects 6 739,234

Environmental insurance of activity 10 objects 2 031,435

Removal and disposal of industrial wastes 3 objects 3 474,298

Other 1 object 1 078,680

Total: 38 559,619

OCCUPATIONAL HEALTH AND SAFETYIt should be noted that currently:

• Tau-Ken Temir LLP and Tau-Ken Altyn LLP are at the stage of operation; • ShalkiyaZinc Ltd. JSC and Alaigyr JV LLP are at the stage of design development and construction; • Massalsky MPP LLP and Northern Katpar LLP are at the stage of paper studies; • Tau-Ken Project JV LLP, Shokpar-Gagarinskoye LLP, Tau-Ken Progress LLP, Tau-Ketmen LLP and

Tau-Ken Mining LLP carry out geological exploration operations.

Occupational injury and man-caused emergency situations at the currently operated industrial sites

Description ShalkiyaZinc LTD JSC Tau-Ken Temir LLP Tau-Ken Altyn LLPNumber of group accidents 0 0 0

Number of fatal accidents 0 0 0

Number of accidents resulted in loss of working time

0 0 0

Number of contractor accidents 0 0 0

Number of registered traffic accidents 0 0 0

Number of man-caused emergency situations (uncontrolled explosion, fire, emission or leakage of highly toxic substances (HTS))

0 1 0

ENVIRONMENTAL PROTECTIONBeing one of the largest mining companies in the Republic of Kazakhstan, Tau-Ken Samruk JSC fully realizes its role in the processes of sustainable development of society. Environmental protection and prudent management of resources play an important part in activity of the Company and its subsidiaries and associates.

Tau-Ken Samruk JSC group of companies is consistent in reduction of harmful effect of production activity on environment through introduction of new technologies.

Below specified is information on environmental protection activity of the Tau-Ken Samruk JSC group of companies.

Environmental Payments in the Sphere of Environmental Protection

Natural resources management is performed based on the permission for emissions issued by the competent authority for a definite period (3-5 years). Currently, the following four subsidiaries of the Company: ShalkiyaZinc Ltd JSC, Tau-Ken Temir LLP, Tau-Ken Altyn LLP and Alaigyr JV LLP, have valid permissions for environmental emissions.

Environmental pollution payments are made in accordance with the approved rates and within the time specified in the permissions. Payments for atmospheric air pollution with emissions and discharges from stationary sources are made based on actual emission/discharge volume calculation or based on the results of production environmental monitoring. Payments of atmospheric air pollution with emissions generated by motor vehicles are made based on the results of actual fuel consumption calculation.

The following subsidiaries of Tau-Ken Samruk JSC made environmental emission payments in 2015: ShalkiyaZinc Ltd JSC, Tau-Ken Temir LLP, refinery of Tau-Ken Altyn LLP and Alaigyr JV LLP.

Total amount of payments was KZT 19,699,869.00.

Payments for Environmental Emissions in 2015:

Subsidiary NamePayments for Allowed Emission (KZT thous.)

Payments for Excess Emission (KZT thous.)

Total Amount (KZT thousand)

ShalkiyaZinc LTD JSC 11 832,173* 6 258,141 18 090, 314

Tau-Ken Temir LLP 1 491,583 0 1 491,583

Tau-Ken Altyn LLP 39,114 0 39,114

Alaigyr JV LLP 78,858 0 78,858

* Excess emission payments by ShalkiyaZinc Ltd JSC were duet to excessive content of sulfates in the mine water as compared to the one specified in permission for environmental emission. Excessive actual content was due to the fact that upon development of the maximum permissible emissions project the contractor had not take into account the results of many years of production monitoring. Water of the given mine was known for its naturally high mineralization. So, having this in mind, ShalkiyaZinc Ltd JSE made necessary adjustments in the maximum permissible emission project with due account for the data of production monitoring and obtained positive conclusion of the environmental expert examination. Currently, the work is being done on preparation of a package of documents necessary for issue of new permission for environmental emissions.


Measures Taken by Subsidiaries and Associates (S&A) of the Company for Industrial Accidents Prevention

The following measures are taken by all S&As for reduction and prevention of industrial injuries:1. Circumstances and causes of industrial accidents are communicated to all employees;2. Unscheduled briefings are held for all production personnel;3. Unscheduled examinations of technical operation knowledge as well as that of occupational

safety and instruction on safety and labour protection for the employees of those departments where an accident occurred are arranged;

4. Occupational safety days with participation of the company management are held on a monthly basis. Based on the results of such occupational safety days, measures are developed for elimination of detected violations;

5. Safety and labor protection services arrange for integrated inspection of equipment, buildings, structures and work places. Based on the results of such integrated inspections, a plan of measures is developed, which shall specify deadlines and responsible persons;

6. Scheduled replacement of equipment with expired service life and posing a serious threat to production personnel is carried out;

7. Training of all employees is carried out in accordance with the training regulations and the rules of briefing and examination of personnel knowledge of the issues of safety and labour protection;

8. Assessment of labour conditions at work places is carried out at the Company’s enterprises no less than once in five years;

9. All S&As arrange for seminars and meetings with engineering and technical employees of business units having the right to issue work orders to act as supervisors and executors of work with practical exercises on correct leave of a team of workers for work and proper execution of a work order.

External regulatory bodies’ orders

Sphere of Activity ShalkiyaZinc LTD JSC Tau-Ken Temir LLP Tau-Ken Altyn LLPEnsuring industrial safety 2 0 0

Expenses related to payment of fines imposed as a result of inspections conduced by regulatory bodies

Sphere of Activity Penalties ShalkiyaZinc LTD JSC Tau-Ken Temir LLP Tau-Ken Altyn LLP

Industrial safety

Officals (KZT thous.)

19.7 0 0

Legal entities (KZT thous.)

198.2 0 0

Expenses on purchase of overalls, special footwear and other individual protective means

Description ShalkiyaZinc LTD JSC Tau-Ken Temir LLP Tau-Ken Altyn LLPPlanned expenses (KZT thous.) 13 435.71 19 152.54 8857.47

Actual expenses (KZT thous.) 16 684.22** 8116.62*** 8857.47

Average costs per an employee (KZT thous.)* 40.01 22.96 119.69

* Average costs per an employee are specified only in dependence to (based on) staff size and disregarding the mode of work, stock inventory, quality of individual protection equipment and quality of maintenance having effect on its wear and tear.

** Increase in expenses on purchase of overalls, special footwear and other individual protective means was due to increase in the number of employees.

*** Budget was cut for the purpose of optimization.

The Company’s employees are fully provided with all the necessary overalls, special forward and other individual protective means.

The results of production facilities labour conditions attestation confirmed 100% equipping the company’s employees with individual protective equipment.

Cost of an annual mandatory regular medical examination provided for by the requirements of the RK Labour Code (LC)

Description ShalkiyaZinc LTD JSC Tau-Ken Temir LLP Tau-Ken Altyn LLPPlanned expenses (KZT thous.) 3946 558 251.6

Actual expenses (KZT thous.) 1,600.8 563.53 0*

Average costs per an employee (KZT thous.) 7.61 1.92 0

* Mandatory annual regular medical examination was not conducted in Tau-Ken Altyn LLP; so, there is risk of vocational diseases because of untimely medical examination and probability of abrupt health condition deterioration.


FINANCIAL STATEMENTS FOR 2015

INFORMATION ON EXTERNAL AUDIT AND ALL RENDERED SERVICES

Ernst & Young network of companies (hereinafter referred to as EY) acts as the Company’s external auditor over the period of 2009 through 2015.

EY renders services of audit, tax and consulting services aimed at increase in its customers’ business value.

EY is the leading company rendering its services to transnational petroleum and gas and electric power companies. Integration of products and resources into an integrated practice focused on the given industry allows for rendering services of the top quality and attaching an additional value to the customers’ activity. EY attracts global resources so that they would be available for its customers and that they would be able to take advantage of their knowledge and practices and to use it all in their everyday activities.

Additionally, the company carries out its activity in the following localities of the Central Asia region: Baku (Azerbaidjan), Yerevan (Armenia), Tbilisi (Georgia), Bishkek (Kyrgyzstan), Tashkent (Uzbekistan), Ashkhabad (Turkmenistan) and Ulan-Bator (Mongolia).

EY is the leading supplier of audit and advising services to the Kazakhstan mining and metallurgic sector. EY works with the major Kazakh mining and power companies. It has been rendering them services of audit of financial statements prepared in accordance with IFRS provisions.


CONSOLIDATED FINANCIAL STATEMENTSfor the year ended on December 31, 2015, with the independent auditor report

Consolidated financial statements of the Company were approved by the decision of Samruk-Kazyna JSC Management on May 16, 2016.

CONTENT

Independent Auditor Report 84

Consolidated Financial Statements

Consolidated income statement 85

Consolidated statement of financial standing 86–87

Consolidated statement of cash flows 88–89

Consolidated Financial Statement Of Changes In Equity 90

Notes to the consolidated financial statements 91–126

AUDIT COMPANY COMPENSATION INFORMATION External Auditor Compensation Amount:

Period Service Description Amount of Compensation, VAT incl., KZT2009 Audit of annual financial statements 3,290,000

2010 Audit of annual financial statements 2,744,000

2011 Audit of annual financial statements 2,676,800

2012 Audit of the annual separate and consolidated financial statements

3,073,000

2013 Audit of the annual and review of 6-month separate and consolidated financial statements

9,490,000


9,490,000


9,490,000

Total: 40,253,800

Amount of compensation due to EY for the training (non-audit) services:

Period Service Description Amount of Compensation, VAT incl., KZT2009 - -

2010 Training services 2,584,012.48





2014 Advisory services 246,400.00


Total: 11,756,017.68

Amount of compensation due to EY for the rendered advisory services:

Period Service Description Amount of Compensation, VAT incl., KZT2009–2012 No advisory services were rendered -

2013 Advisory services 24,864,000.00



Total: 43,163,000.00

Tau-Ken Samruk JSC policy in the sphere of audit services procurement is posted at the Tau-Ken Samruk JSC corporate web-site.

8382 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditor Report

Attention of: sole shareholder and Management of Tau-Ken Samruk National Mining Company JSC

We have audited the accompanying consolidated financial statements of the Tau-Ken Samruk National Mining Company JSC and its subsidiaries (hereinafter referred to as the Group) consisting of consolidated financial standing statement as of December 31, 2015, consolidated statement of consolidated income, consolidated statement of changes in equity and consolidated cash flow statement for the year ended on the date specified above and the notes to the financial statements, including a summary of the significant accounting policies and other explanatory information.

Responsibilities of Management for Financial Statements

Management of the Group is responsible for the preparation and fair presentation of the above specified consolidated financial statements in accordance with the International Financial Reporting Standards and for such internal control system as the Management determines is necessary to enable the preparation of financial statements that are free from any material misstatement, whether due to fraud or error.

Responsibilities of Auditors

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the International Audit Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from any material misstatements.

The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and true and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the accompanying consolidated financial statements give a true and fair view of the state of the Tau-Ken Samruk National Mining Company JSC and its subsidiaries’ affairs as at 31 December 2015 and of its consolidated financial results and cash flows for the year then ended in accordance with the International Financial Reporting Standards.

Bahtiyer EshonkulovAuditor/Audit Partner

Yevgeni ZhemaletdinovDirector General

Ernst & Young LLP

Certificate of the Auditor Competence No. MF-0000099 dated August 27, 2012

State License for Audit Activity in the territory of the Republic of Kazakhstan Series MFY-2 No.0000003 issued by the Republic of

Kazakhstan Ministry of Finance on July 15, 2005.

March 4, 2016

CONSOLIDATED INCOME STATEMENT

For the year ended on December 31, 2015

2014KZT, thous. Note 2015 (recalculated)*

Continuing operationsRevenue from products sale 6 97.379.655 42.426.298

Prime cost of products sold 7 (95.181.150) (42.291.899)

Gross Profit 2.198.505 134.399.

General administrative costs 8 (2.255.539) (1.955.170)

Transportation and distribution costs (357.241) (16.719)

Operating costs – (242.191)

Operating loss (414.275) (2.079.681)

Financial income 9 1.754.145 655.390

Financial costs (108.935) (17.921)

Share in (loss)/income of a joint venture and

an associated company 14 (16.340.246) 1.988.232

Profit from a good bargain of a subsidiary company 4 464.338 266.417

Other non-operating income 700.526 315.858

Other non-operating costs (963.136) (974.753)

Foreign exchange gain 1.003.834 1.124

(Loss)/profit before taxesfrom continuing operations (13.903.749) 154.666

Income tax costs 10 (119.898) –

(Loss)/Income for the year from continuing operations (14.023.647) 154.666

Discontinued operationsNet profit/(loss) after taxes for the year from

discontinued operations 5 6.423 (7.555)

Net (loss)/Income for the year (14.017.224) 147.111

Loss attributable to:Parent company shareholders (14.016.647) 147.111

Uncontrolling participation interest (577) –

Other comprehensive income - reporting currency reculculation 14 194.960.348 37.130.163

Total comprehensive income for the year less taxes 180.943.124 37.277.274

Related to:Parent company shareholders 180.943.701 37.277.274

Uncontrolling participation interest (577) –

* Some amounts specified in this column do not correspond to the consolidated financial statements for 2014 since they reflect performed recalculations, which are explained in detail in the Notes 4 and 5.

Managing Finance Director

Ainabekov B.A.

Chief Accountant

Seitova A.B.



Current liabilitiesAccounts payable 19 5.620.171 1.948.888

Tax payable 163.526 78.663

Payables to employees 228.048 181.198

Provisions for subsoil use contract liabilities 55.655 36.534

Other current liabilities 123.231 17.4476.190.631 2.262.730

Liabilities directly connected with assets

intended for sale 5 1.888 –

Total liabilities 23.860.465 10.759.330

Total Liabilities and Equity 527.467.247 324.241.742

* Some amounts specified in this column do not correspond to the consolidated financial statements for 2014 since they reflect performed recalculations, which are explained in detail in the Notes 4 and 5. .


Ainabekov B.A.

Chief Accountant

Seitova A.B.

CONSOLIDATED STATEMENT OF FINANCIAL STANDING

As of December 31, 2015


AssetsLong-term AssetsFixed assets 11 24.654.013 18.228.078

Intangible assets 12 52.669.419 42.744.622

Exploration and assessment assets 13 4.055.998 2.367.773

Investments in joint venture and associated company 14 410.903.918 234.169.197

Prepaid income tax 369.911 136.164

Tax receivable 1.480.628 1.098.001

Other long-term assets 321.979 214.139

494.455.866 298.957.974

Current AssetsInventories 15 11.704.188 9.890.919

Accounts receivable 16 3.626.221 2.341.626

Downpayments made 452.649 321.277

Other current assets 771.467 54.848

Short-term deposits 2.082.088 745.336

Cash and equivalents 17 14.201.847 11.929.76232.838.460 25.283.768

Assets intended for sale 5 172.921 –

Total assets 527.467.247 324.241.742

Liabilities and EquityEquityAuthorized capital 18 243.901.772 230.386.253

Retained profit 26.052.495 44.403.415

Other equity components 14 233.232.318 38.271.970

Equity attributable to the parent company’s shareholder 503.186.585 313.061.638

Non-controlling participation interest, % 18 420.197 420.774

Total equity 503.606.782 313.482.412

Long-term LiabilitiesLoans received from shareholder 4 2.707.686 –

Accounts payable for acquisition of a subsidiary 4 4.719.995 –

Deferred tax liability 10 10.126.538 8.448.350

Other long-term liabilities 113.727 48.250

17.667.946 8.496.600

Current LiabilitiesShort-term accounts payable 19 5.620.171 1.948.888



Acquisition of other long-term assets 621 (93.905)

Acqusition of subsidiaries minus received

cash 4 (13.451.134) (3.044.219)

Dividends received from an associated company 14 1.882.401 1.861.159

Contribution into an authorized capital of an associated company 14 – (300)

Bank deposits (24.492.268) (745.336)

Funds withdrawal from bank deposits 23.684.804 190.500

Net use of cashin investment activity (20.522.721) (4.599.173)

Financial Activity Cash FlowsIssue of shares 18 13.515.519 22.981.327

Acquisition of controlling participation interest – (221.044)

Procurement of loans from the parent company 4 7.733.640 –

Dividends 18 (22.067) (250.458)

Net Inflow of Cash from financing Activity 21.227.092 22.509.825

Net increase in cash and equivalents 1.920.812 5.341.043

Foreign exchange gain 351.273 –

Opening cash and equivalents 17 11.929.762 6.588.719

Closing cash and equivalents 17 14.201.847 11.929.762

* Some amounts specified in this column do not correspond to the consolidated financial statements for 2014 since they reflect performed recalculations, which are explained in detail in the Notes 4 and 5.


Ainabekov B.A.

Chief Accountant

Seitova A.B.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended on December 31, 2015


Operating Cash Flows(Loss)/profit before taxes from continuing

operations (13.903.749) 154.666

Profit (loss) after taxes from discontinued

operations 5 6.423 (7.555)

(Loss)/profit before taxes (13.897.326) 147.111

Adjustment for:Depreciation and ammortization 11, 12 771.372 274.526

Financial income 9 (1.754.145) (655.390)

Financial costs 108.935 –

Share in loss/(income) of a joint venture and

an associated company 14 16.340.246 (1.988.232)

Profit from a profitable acquisition of a subsidiary company 4 (464.338) (266.417)

Free-of-charge acquisition of a participation interest in a

joint venture – (220.582)

Net movement of provision for outdated and illiquid inventories 15 402.050 430.153

Recoverable VAT value diminution 189.061 291.351

Foreign exchange gain, net (1.003.849) –

Other (31.259) 157.314660.747 (1.830.166)

Changes in inventories (1.820.275) (8.385.053)

Changes in accounts receivable (1.072.418) (2.240.679)

Changes in downpayments made (131.372) (303.874)

Changes in other current assets (576.762) 30.541

Changes in recoverable taxes (571.688) (535.023)

Changes in other long-term assets (89.943) –

Changes in accounts payable 577.035 117.130

Changes in taxes payable 84.863 12.698

Changes in payables to employees 20.883 6.895

Changes in other current liabilities (104.431) 6.836

Changes in other long-term liabilities 55.401 –

(2.967.960) (13.120.695)

Interest received 1.745.849 648.169

Income tax paid 2.438.552 (97.083)

Net cash inflow from / (use in) operating activity 1.216.441 (12.569.609)

Investment Cash FlowsFixed assets acquisition (6.443.518) (1.311.838)

Intangible asset acquisition (58.986) (7.318)

Exploration and assessment assets acquisition (1.969.854) (1.447.916)

Fixed assets sale proceeds 310.787 –

Exploration and assessment assets sale proceeds 14.426 –


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION АJoint Stock Company “Tau-Ken Samruk” National Mining Company” (hereinafter referred to as the “Tau-Ken Samruk” or the Company) was established in accordance with the Republic of Kazakhstan government’s Decree No.10 of January 15, 2009 and was registered as a joint stock company on February 2009. The Company’s office is located at the following address: Block B, 8 Dinmukhamed Kunayev Str., Astana, Republic of Kazakhstan.

Samruk-Kazyna Sovereign Wealth Fund JSC (hereinafter referred to as the Samruk-Kazyna) is the sole shareholder of the Company. Government of the Republic of Kazakhstan is the sole shareholder of Samruk-Kazyna.

The present consolidated financial statements include financial statements of the Company and its subsidiaries (hereinafter collectively referred to as the Group) (Note 2).

The main lines of the Group’s activity, among other, include the following: • Activity in the field of exploration, prospecting, production, processing and sales of solid commercial minerals; • Replacement of the mineral raw material base of the Republic of Kazakhstan; • Development of Kazakhstan mining industry potential by means of introduction of new technologies and improvement

of efficiency of government participation in subsoil use projects.

The enclosed consolidated financial statements of the Group were approved by the Finance Managing Director and Chief Accountant of the Company on March 4, 2016.

2. BASICS OF CONSOLIDATED FINANCIAL STATEMENTS PREPARATION

Responsibility Statement

The given consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (hereinafter referred to as IFRS) as issued by the International Accounting Standards Board (hereinafter referred to as the IASB).

The consolidated financial statements have been prepared on a historical cost basis, except for the facts specified in the accounting policy and the notes to the given consolidated financial statements.

The given consolidated financial statements are presented in tenge and all values are rounded to the nearest thousand (KZT000), except when otherwise indicated.

Foreign Currency Translation

The present consolidated financial statements are presented in tenge (KZT). Tenge is a functional currency and the currency of the Group’s consolidated financial statements presentation.

Transactions in foreign currency are first accounted in the functional currency at the spot rate valid on the transaction date. Monetary assets and liabilities expressed in foreign currencies are translated into the functional currency at the exchange rate valid on the reporting date. All differences shall be specified in the comprehensive income statement.

Non-monetary assets and liabilities shall be included in the items estimated at historic cost and shall be translated at the exchange rate valid on the date of original transaction.

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2. BASICS OF CONSOLIDATED FINANCIAL STATEMENTS PREPARATION (continued)

Foreign Currency Translation (Continued)

Basics of Consolidation

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries.

As of December 31, 2015 and 2014, the following companies were the subsidiaries of the Group:

December 31 December 31Company Type of Activity Region 2015 2014

Logic Business LLP Managment of investment

into Kazzinc LLP Astana 100% 100%

Logic Invest Capital LLP Managment of investment

into Kazzinc LLP Astana 100% 100%

Investment House LLP Managment of investment

Dana into Kazzinc LLP Astana 100% 100%

ShalkiyaZinc LTD JSC Exploration, production and

processing of complex Kyzylorda

lead-and-zinc ore region 100% 100%

Tau-Ken Altyn LLP Coordinator of investmen

project “Establishment of

Refinery and Provision of Raw

Materials Base” Astana 100% 100%

Massalsky MPP LLP Devlopment and production Akmola

of iron ore region 93% 93%

Northern Katpar LLP Tungsten production Karaganda

region 100% –

Silicon of Kazakhstan LLP Production of

metallurgic silicon Karaganda

and by- products region 100% –

Tau-Ken Mining LLP Exploration of the deposits of Almaty

non-ferrous metals region 100% 100%

Tau-Ken Temir LLP Production of

metallurgic silicon

and by- products Astana 100% 100%

Alaigyr JV LLP Production of Karaganda

polymetallic ore region 100% 100%

Tau-Ken Project JV LLP Prospecting for copper, gold and Karaganda

associated components region 100% 100%

Tau Ketmen LLP Exploration of the deposits of Almaty

gold bearing ores region 100% 100%

TKS-Zhaksylyk LLP Exploration of the deposits of Almaty

mangangese ores region – 100%

Shokpar-Gagarinskoye LLP Exploration of the deposits of Zhambyl

gold bearing ores region 100% 100%

Tau-Ken Progress LLP Exploration of the deposits of

non-ferrous metals Astana 100% 100%

TKS-Kostanai LLP Exploration of the deposits of

non-ferrous metals Astana 100% 100%

Average weighted exchange rates set by the Kazakhstan Stock Exchange (hereinafter referred to as KASE) shall be used as official exchange rates in the Republic of Kazakhstan.

As of December 31, 2015, KASE set exchange rate was equal to KZT 340.01 per a USD (2014: KZT 182.35 per a USD). This exchange rate was used for translation of monetary assets and liabilities expressed in USD as of December 31, 2015.

Summary of significant accounting policies

Preparation of the consolidated financial statements in accordance with the IFRS requires of the management to use the estimates and assumptions that have effect on the value of assets and liabilities reported as of the date of the financial statements preparation and also on the amounts of income and expenses reported over during the reporting period. Actual results may differ from these estimates.

The basic assumptions related to the future and other main sources of uncertainty of estimates as of the reporting date, that pose a significant risk of major adjustments of the book value of assets and liabilities over the next financial year are given below:

TaxationIn assessment of taxation risks, management considers as possible those spheres of tax code violation that cannot be contested by the Group or in respect of which the Group does not have reasonable confidence that it would be able to contest it successfully if any additional taxes are charged by the tax authorities. This definition requires critical accounting estimates and it depends on determining the expected outcomes of the pending tax proceedings and the results of the compliance inspection that may be carried out by tax authorities (see also Note 21).

Deferred Tax AssetsDeferred tax assets are recognized for all unused tax losses, accrued liabilities and taxes to the extent that there is significant probability of taxable profit against which the deductable temporary differences can be setoff. Significant management estimates are required for assessment of deferred tax assets that can be recognized based on the planned level and time of income as well as successful implementation of tax planning strategy (see also Note 10).

Non-financial Assets ImpairmentImpairment takes place if book value of an asset or a business unit generating cash flows surpasses its recoverable value, which is the highest of the following values: fair value less sale costs and its value in use. Calculation of fair value less sale costs is based on available information on the binding commercial transactions for sale of the similar assets and on the observed market prices less additional costs borne due to the asset retirement. Calculation of the value in use is based on the discounted cash flow model.

Non-financial assets of the Group mainly comprise its fixed assets, intangible assets, exploration and assessment assets and investments in joint ventures and associated company.

As of December 31, 2015 and 2014, management of the Group has not found any signs of non-financial assets impairment.

Fair Value of the Financial InstrumentsIf it is impossible to determine fair value of financial assets and liabilities due to absence of an active market for the given instruments, fair value of financial assets and liabilities shall be determined using the measurement methods such as, among other, expected discounted cash flow model.

Market data shall be used as an input data for the model as far as possible; in the absence of the market data, accounting estimates are necessary for fair value measurement. The judgments include liquidity risk, credit risk and volatility. Changes in estimates and judgments may have effect on fair value of financial instruments.

9392 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended on December 31, 2015

2. BASICS OF CONSOLIDATED FINANCIAL STATEMENTS PREPARATION (continued)

Business CombinationBusiness combination is accounted using acquisition method. Acquisition cost is accounted as a sum of provided compensation measured at fair value on the acquisition date and non-controlling participation interest in acquired company. For each business combination, the Group evaluates a non-controlling participation interest in the acquired company prorata share in identified net assets of the acquired company. Costs connected with acquisition are included in the total and administrative costs at the moment of their actual incurrence.

If the Group acquires a business, it shall classify and designate the acquired financial assets and undertaken liabilities depending on terms and conditions of the corresponding agreement, economic situation and the corresponding conditions on the acquisition date. Analysis of the need for the acquired company to separate derivative instruments embedded into the basic agreements is also included.

In the event of a step-by-step business combination, fair value of the participation interest in the acquired company that previously belonged to the buyer shall be revaluated at the fair value at the date of acquisition and difference shall be attributed to the profit or loss.

Conditional compensation that shall be paid by the buyer shall be recognized at fair value on the date of acquisition. Conditional compensation classified as an asset or a liability and being a financial instrument and subject to the effect of IAS 39 “Financial instruments: recognition and evaluation” shall be measured at fair value and changes in fair value shall be recognized either as profit or as a loss or as change in the other comprehensive income. If the conditional compensation does not come under effect of IAS 39, it shall be measured in accordance with any other applicable IFRS. If the contingent consideration is classified as equity, it shall not be revaluated and its settlement is recognized in equity.

Goodwill is initially measured at its original value determined as excess of the sum of provided consideration and recognized non-controlling participation interest and participation interests previously owned by the buyer over the sum total of net identified assets purchased by the Group and undertaken liabilities. If fair value of the acquired net assets exceeds the sum of the transferred consideration, the Group shall analyze correctness of measurement of all acquired assets and liabilities undertaken again as well as all procedures used for determining the amounts that shall be recognized on the acquisition date. If the given consideration happens to be less than the fair value of the acquired net assets after the repeated analysis, profit from beneficial acquisition shall be recognized in the profit or loss.

Later on, goodwill shall be evaluated at the original (acquisition) value minus accumulated impairment loss. For the purpose of checkup of goodwill, acquired through business combination, for impairment, starting from the date of subsidiary acquisition by the Group, goodwill shall be distributed over every member of the Group that generates cash flows that, is assumed, will benefit from business combination irrespective of whether or not any other assets or liabilities of the subsidiary relate to any such member.

If the goodwill makes a part of any such business unit generating cash flows and a part of this business unit is disposed of, goodwill related to the disposed operation shall be included into book value of this operation upon determining profit or loss from its disposal. Under these conditions, goodwill shall be measured based on the ratio of the disposed operation value to the value of the remaining part of the business unit generating cash flows.

Business Combination under Common ControlAccounting of subsidiaries acquisition from the entities being under common control (enterprises, controlled by the final shareholder) shall be maintained using the method of interest pooling.

Assets and obligations of the acquired subsidiary being under common control shall be specified in the given consolidated financial statements at its book value specified in the financial statements of the transferring company (previous owner) as of the date of transfer. Goodwill created at the initial acquisition of the company by its previous owner shall also be recognized in the given consolidated financial statements. Difference between total book value of net assets including goodwill of the previous owner and total amount paid shall be accounted in the given consolidated financial statements as equity adjustment.

The present consolidated financial statements were prepared in such a way as if the subsidiary were acquired by the Group on the date of the initial acquisition by the previous owner.

SubsidiariesSubsidiaries are entities controlled by Group. Control is achieved when the Group has the power to control an entity’s financial and operating policy directly or indirectly thus, benefiting from its activity. Save for acquisition through transaction between the companies being under the common control subsidiaries are consolidated from the moment of their acquisition, which is the date of gaining control by the Group over such companies and until the date of such control loss by the Group. In the event of subsidiary acquisition, cost of acquisition is transferred to the assets and liabilities based on the fair value as of the acquisition date. Financial statements of the subsidiary organizations shall be prepared for the same reporting period as the financial statements of the Company in accordance with the provisions of the agreed accounting policy.

All intra-group transaction balances and transactions, including unrealized profit arising from intra-group transactions, have been completely excluded from the consolidated financial statements. Unrealized losses have been excluded in the same manner as the unrealized profit except that such losses are excluded only to the extent that there is no evidence of impairment.

Investments in Joint Ventures and Associated CompaniesThe Group has participating interest in joint ventures in the form of jointly controlled companies, in which the members of joint activity entered into agreement establishing joint control over economic activity of the companies. The Group also has participation interest in associated companies, on the activity of which it has significant effect. The Group’s investments in joint ventures and associated companies are accounted at the equity method.

In accordance with the equity method, investments in a joint venture/associated company are accounted in the consolidated financial standing statement at the initial cost plus changes that happened after acquisition, in the net assets of the joint venture/associated company owned by the Group. Goodwill related to the joint venture/associated company shall be included in the book value of investment and shall not be depreciated and shall not be inspected separately for depreciation.

Consolidated income statement reflects a share of financial results a joint venture/associated company activity. If there was a change that was recognized directly in equity of a joint venture/associated company, the Group shall recognize its share in such change and shall disclose this fact, if and when applicable, in consolidated statement of changes in equity. Unrealized profit and loss arising from the Group’s transactions with joint venture/associated company are excluded to the extent the Group has participation interest in such joint ventures/associated company.

Share in the joint ventures/associated companies’s profit is presented directly in the consolidated statement of comprehensive income. It represents profit attributed to the members of a joint venture/associated company and, therefore, is determined as profit after accounting of taxes and non-controlling participation interest in subsidiaries of joint ventures/associated companies.

Financial statements of a joint venture/associated company shall be prepared for the same period as the consolidated financial statements of the Group. If necessary, it may be adjusted to bring accounting policy in compliance with that of the Group.

After application of the equity method, the Group determines the need for recognition of an additional impairment loss for the Group’s investments into joint ventures/associated companies. At each reporting date, the Group establishes whether or not there are objective evidences of impairment of investment in joint ventures/associated companies. Should there be any such evidences, the Group calculates an impairment amount as difference between recoverable value of investment in joint venture/associated company and its book value and recognizes this amount it its consolidated statement of comprehensive income.

In the event of loss of common control over a joint venture and significant influence on an associated company, the Group shall valuate and recognize the remaining investments at fair value. Differences between book value of investment into a joint venture/associated company as of the moment of common control or significant influence loss and fair value of the remaining investments and disposal proceeds is recognized in profit or loss.


Fixed Assets (Save for Mining Assets)

Fixed assets shall be accounted at its acquisition cost minus accumulated depreciation and impairment loss, if any. This value includes cost of equipment parts replacement and costs on loans in the event of long-term construction projects provided capitalization criteria are met. Should there be a need for replacement of major components at regular intervals, the Group shall recognize such components as separate assets with the corresponding individual useful life periods and shall depreciate them accordingly. Likewise, in the event of a major technical inspection, the costs associated with it shall be recognized in the book value of fixed assets as an equipment replacement provided all recognition criteria are met. All other costs related to repair and technical maintenance shall be recognized as profit or loss when incurred. Discounted value of expected costs of an asset retirement shall be included into initial value of the corresponding asset provided that all criteria of future costs reserve recognition are met. Depreciation is calculated on a straight-line basis over the useful life of fixed assets. Estimated useful life of some assets is specified below:

Year

Buildings and structures 20

Computers 5

Machines and equipment 3–10

Other 5–10

Upon sale or disposal of assets, their value and accumulated depreciation shall be removed from financial statements and any income or loss arising out of such assets retirement shall be included in the consolidated statement of comprehensive income.

Costs incurred after putting the fixed assets into operation, such as current repair and maintenance costs are usually attributed to the costs of the period when such costs were incurred. The costs leading to increase in the anticipated future economic benefits from the use of a fixed asset above its initially estimated parameters (extension of useful life, power, etc.) shall be capitalized as an additional value of fixed assets.

Disposal value, useful life period and fixed asset depreciation method shall be reviewed at the end of each financial year and adjusted should there be a need.

3. SUMMARY OF SIGNIFICANT ASPECT OF ACCOUNTING POLICY

Mineral Resources Exploration and Assessment Assets

Subsoil use rights acquisition costsSubsoil use (exploration and production) rights acquisition costs include subscription bonuses, historic (past) costs, mandatory expenses on environmental protection and social programs and shall be capitalized as the subsoil use rights to be applicable to a deposit at the stage of exploration and assessment and shall be classified as intangible assets.

Accounting of subsoil use rights acquisition costs shall be maintained in the context of deposits each deposit shall be considered on an annual basis for impairment. If now work is to be done at the deposit in the future, the remaining balance of the subsoil use rights acquisition costs shall be written off. Since the moment of commercial production commencement at a deposit, subsoil use right shall be depreciated using production method in accordance with actual production output based on the total amount of proven reserve of mineral resources.

Exploration and assessment costsExploration and assessment costs shall be included in geological and geophysical costs; costs directly connected with drilling work; stripping work; administrative and other assessment costs that may be attributed to a particular field. Such costs shall include salary, materials and fuel cost of drilling rigs rent and payments to contractors. If no mineral resources are discovered, this may be a sign of impairment. All capitalized costs are subject to technical, commercial and managerial inspection at leas once a year in order to confirm intention of commercial development or any other way of deriving benefit from discovery. Otherwise, the costs shall be written off as period expenses.

Once the mineral resources reserves have been proven and decision is made to continue development, the corresponding costs shall be transferred into mining assets used in development..

Development and production costsProduction and development costs include previously capitalized (and reclassified in the beginning of development) costs of subsoil use rights and exploration and assessment costs; construction of grounds; construction surface structures necessary for production, collection and preparation of mineral resources at the deposits; other costs incurred in the course of arranging for commercial production at a deposit; capitalized discounted costs of mine conservation and sites reclamation. Development and production costs shall be capitalized as part of the fixed assets (mining assets) and they shall be accounted for deposits.

Mining assets depreciation (as part of fixed assets and intangible assets)Mining assets shall be depreciated using production method of depreciation based on the actual volume of production starting from the moment commercial production commencement at the deposit. Subsoil use rights acquisition costs including discounted cost of deposits putting out of operation shall be depreciated based on the total volume of proven reserves. The other costs related to deposits development shall be depreciated based on the proven developed reserves.


3. SUMMARY OF SIGNIFICANT ASPECT OF ACCOUNTING POLICY (continued)

Further MeasurementFurther measurement of financial assets in the following way depends on their classification:

Category “financial assets revaluated at fair value through profit or loss” includes financial assets intended for trade, financial assets included into the category of assets revaluated at fair value through profit or loss at the initial recognition. Financial assets are classified as intended for trade if they have been acquired for sale in the immediate future. The given category includes derivative instruments in respect of which the Group is a party to an agreement and which have not been determined as hedging instruments in hedging operation in accordance with the IAS 39 definition.

Financial assets revaluated at fair value through profit or loss are recognized in consolidated statement of financial standing at fair value and net changes in fair value are recognized in financial costs (negative net changes in fair value) or in financial income (positive net changes in fair value) in consolidated statement of comprehensive income. Financial assets determined at the initial recognition as revaluated at fair value through profit or loss are included into this category on the date of initial recognition subject only to meeting the IAS 39 criteria. The Group does not have any financial assets determined at the initial recognition as revaluated at fair value through profit or loss.

The Group analyses its financial assets intended for trade, different from derivative instruments, for relevance of assumption that there is intent to sell any such assets in the immediate future. If, in certain rare cases, the Group cannot trade these assets due to absence of active markets for them and initial intent of the management to sell such assets has changed, the Group can make decision on reclassification of the given assets. Reclassification of such assets into the category of loans and receivables, instruments available for sale or financial instruments held to maturity depends on the nature of assets. The conducted analysis does not have any effect on financial assets classified as revaluated at fair value through profit or loss due to the possibility for the Group to use accounting at fair value since those instruments cannot be reclassified after the initial recognition.

The Group does not have any financial assets determined by it at the initial recognition as revaluated at fair value through profit or loss.

The derivative instruments embedded into the main agreements shall be accounted as separate derivative instruments and shall be recognized at fair value if their inherent economic characteristics and risks are not closely related with risks and characteristics of the main agreements and those basic agreements are not intended for trade and are not classified as revaluated at fair value through profit or loss. Embedded derivative instruments of this type are measured at fair value and changes in the fair value are recognized in consolidated statement of comprehensive income. Revision of the accounting procedure may happen only in the event of change in terms and conditions of the corresponding agreement leading to significant changes in cash flows that would otherwise be needed.

Loans and receivables represent non-derivative financial assets with set or definite payments that are not listed in the active market. After the initial recognition, financial assets of this type are measured at deprecated value determined using the effective interest rate method minus impairment loss. Depreciated value is calculated with due account for discounts or bonuses upon acquisition as well as any commission fee or costs that make and integral part of an effective interest rate. Depreciation of an effective interest rate is included in financial income in the consolidated statement of comprehensive income. Costs caused by depreciation shall be recognized in consolidated statement of comprehensive income as financial costs.

Non-derivative financial assets with fixed or define payments and fixed maturity time shall be classified as investments held to maturity when the Group is committed and able to hold such assets till the maturity time. After the initial recognition, financial assets held to maturity shall be measured at deprecated value determined using the effective interest rate method minus impairment loss. Depreciated value is calculated with due account for discounts or bonuses upon acquisition as well as any commission fee or costs that make and integral part of an effective interest rate. The Group did not have any investments held to maturity over the year ended on December 31, 2015.

Financial investments available for sale include equity securities and debt securities. Equity investments classified as available for sale are the investments that have been classified neither as intended for trade nor as revaluated at fair value through profit or loss. Equity securities of the given category as the securities that the Group is intended to hold within an indefinite period of time and that can be sold in order to ensure liquidity or in response to changes in market conditions.

Non-financial Assets Impairment

On each balance-sheet date, the Group shall determine whether there are any indications of possible impairment of its asset or not. If there are any such indications, or if an asset shall be inspected for the indications of impairment on an annual basis, the Group shall estimate the asset’s recoverable value. Recoverable value of an asset or a business unit generating cash flows (BUGC) is the highest of the following: fair value of an asset (BUGC) less sale costs and its value in use.

Recoverable value is determined for a separate asset save for the events when an asset does not generate inflow of cash that, mostly, are independent of inflows generated by other assets or groups of assets. If book value of an asset or a business unit generating cash flows surpasses its recoverable value, the asset is considered to be impaired and shall be written off to its recoverable value. Upon estimation of value in use, the future cash flows shall be discounted at the discount rate before taxes, which reflects current market value of the time value of money and risks inherent to the asset. Upon measurement of fair value minus sales cost, the corresponding valuation method is applied. These calculations shall be confirmed by market coefficients, price quotations for the freely floating shares of subsidiaries or using any other available indicators of fair value.

Loss from continued operation impairment shall be recognized in consolidated report in comprehensive income as a part of the categories that meet the functions of the impaired asset.

On each balance-sheet date, the Group shall determine whether there are any indications that the previously recognized loss from asset impairment is there no more or significantly reduced. If there is any indication, the Group shall calculate recoverable value of the asset or a business unit generating cash flows. Previously recognized loss from impairment shall be recovered only if there was a change in estimation that was used for the purpose of the asset recoverable value measurement from the moment of the last recognition of impairment loss. Recovery is limited in such a way so that the book value of asset would not exceed its recoverable value and could not exceed its book value minus depreciation at which the given asset would have been recognized if no impairment loss had been recognized in the past years. Such value recovery shall be recognized in consolidated statement on comprehensive income.

Financial Assets

Initial Recognition and MeasurementFinancial assets, to which the provisions of IAS 39 apply, are classified correspondingly as financial assets revalued at fair value through profit or loss, loans and receivables, investments held to maturity, financial assets available for sale, derivative instruments determined as hedging instruments for effective hedging. The Group determines the classification of its financial assets at their initial recognition.

Financial assets are initially recognized at their fair value increased in the event of investments not revaluated through profit and loss attributed directly to the costs of transaction.

All transactions of financial assets purchase or sale requiring delivery of the asset in certain time set by the applicable legislation or rules adopted by a certain market (standard conditions trade) shall be recognized on the transaction date, i.e. on the date of undertaking by the Group of liability to buy or sell an asset.

Financial assets of the Group include cash and equivalents, short-term deposits and receivables.



Financial Assets (Continued)

Further Measurement (Continued)

Financial Assets ImpairmentThe group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization. Additionally, evidence of impairment may include observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in areas or economic conditions that correlate with defaults. Reversal of previously recognized loss from impairment is recognized when impairment loss reduction may be objectively connected with an event that occurred after the impairment. Such reversal of the previously recognised impairment loss is recognised in the consolidated income statement as an income.

As regards the financial assets recognized at depreciated value, the Group first assesses whether there are any objective evidences of impairment of individually important financial assets or for all assets not being of an individual importance. If the Group determines that there are no any objective evidences of impairment of an individually assessed financial asset, irrespective of its importance, it includes the given asset into the group of financial assets with similar credit risk characteristics and then considers the given assets for the evidences of impairment as a group. Assets that are assessed for impairment, for which impairment loss is either recognized or is being recognized, shall not be included in the aggregate assessment for impairment.

If there is an objective evidence of impairment loss, the amount of loss shall be determined as a difference between the asset book value and discounted value of the anticipated future cash flows (net of future anticipated credit loss that has not been suffered yet). The discounted value of estimated future cash flows shall be discounted at the original effective interest rate applicable to the financial asset. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

Book value of an asset shall be reduced by means of the contingent fund and the loss shall be recognized in the profit or loss. Accrual of interest income on the reduced book value is continued based on the interest rate used for future cash flows discounting for the purpose of impairment loss measurement. Interest income shall be recognized as financial income in the consolidated income statement as the comprehensive income. Loans, along with the corresponding provisions, shall be written off the consolidated statement of financial standing if there is a realistic prospect of their repayment in the future and all available security has been either sold or transferred to the Group. If over the following year the amount of estimated loss from impairment increases or decreases because of any event that may occur after impairment recognition, the amount of previously recognized impairment loss will increase or decrease as a result of adjustment of the reserve account. If the previously written-off financial instrument is later restored, the amount of restoration will be recognized as reduction of financial costs in the consolidated statement of comprehensive income.

As for the financial instruments available for sale, at the end of each reporting period the Group shall assess whether there is objective evidence that an investment or a group of investements is impaired.

In the event of investments into equity instruments classified as available for sale, the objective evidences shall include significant or a long-term reduction of fair value of investments below the level of their initial value. Significance is assessed in comparison with initial cost of investments and duration is assessed in comparison with the period, over which fair value was below the initial value.

If there are evidences of impairment, comprehensive loss amount measured as difference between acquisition cost and current fair value minus the impairment loss previously recognized in consolidated statement of comprehensive income, shall be excluded from the other comprehensive income and recognized in profit and loss. Equity instruments investments impairment loss shall not be recovered through profit or loss; increase in the fair value after impairment shall be recognized directly as other comprehensive income.

In the case with equity instruments classified as available for sale, impairment is measured based on the same criteria as used for financial assets carried at depreciated value. Nevertheless, the amount of recognized impairment loss is an accumulated loss measured as difference between depreciated value and the current fair value minus the impairment loss for the given investments that was previously recognized in consolidated statement of comprehensive income.

After the initial measurement, financial assets available for sale are measured at fair value and unrealized profit or loss related to it shall be recognized as its comprehensive income making a part of provision for revaluation of instruments available for sale; all the way up to the moment of investment derecognizing, in which accumulated profit or loss are reclassified from instruments available for sale into profit or loss, and recognized as financial costs.

The Group assesses its financial assets available for sale for the fair assumption on possibility and presence of intent to sell them in the immediate future. If the Group cannot trade these assets due to absence of active markets for them and initial intent of the management to sell such assets has changed, the Group can make decision on reclassification of the given assets.

Reclassification into loans and receivables category is allowed if an asset meets definition of loans and receivables; thereat, the Group is able and intends to hold the given assets in the foreseeable future or till maturity. Reclassification into the instruments held to maturity is allowed only if the Group is able and intends to hold a financial asset till maturity. The Group has not acquired any assets available for sale over the year ended on December 31, 2015.

DerecognizingFinancial asset (or a part of financial asset or a part of a group of similar financial assets, when and if applicable) is derecognized in consolidated statement of financial standing if: • term of the right to the cash flows generated by the asset has expired; • The Group transferred its rights to cash flows from the asset or undertook obligation of payment to a third party the expected

funds in full and without any delay under “transit” agreement; or if (a) the Group transferred practically all risks and benefits from the asset or (b) the Group has not transferred but retains practiclaly all risks and benefits from the asset but transferred control over the given asset.

The Group transferred all its rights to cash flows from the asset or entered into a transit agreement and, at that has not transferred but, thereat, has not retained practically all risks and benefits from the asset and also has not transferred control over the asset; new asset shall be recognized to the extent, to which the Group kept its participation in the given asset.

In this particular case, the Group shall also recognize the existing obligation. Transferred asset and the corresponding obligation shall be measured on the basis reflecting rights and obligations reserved by the Group.

Ongoing participation that takes the form of guarantee for the transferred asset shall be recognized at the lowest of the following values: initial book value of the asset or the maximum amount payment of which may be required by the Group.

Cash and EquivalentsCash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of 3 (three) months or less . Short-term bank deposits include the deposit with the original maturity exceeding 3 (three) months but no more than 1 (one) year.



Financial Assets (Continued)

Financial Assets Impairment (Continued)

DerecognitionFinancial liability recognized in consolidated statement of financial standing shall be derecognized if the liability has been extinguished, cancelled or expired. If the existing financial liability is replaced with another liability to the same creditor but with significantly different conditions or if the conditions of the existing liability have been seriously changed, such replacement or change shall be carried as derecognition of initial liability and recognition of new one and difference in their book values shall be recognized in consolidated statement of comprehensive income.

Financial Instruments Setting Off

Financial assets and financial liabilities shall be subject to setting off and the resulting net amount shall be registered in the consolidated statement of financial standing when there is currently enforceable legal right to set off the recognized amounts and there is an intent to carry out such set-off on net basis and to sell assets and simultaneously extinguish existing liabilities.

Fair value of the financial instruments traded in the active markets on each reporting date shall be determined based on the market quotations or those of dealers (bid quotations for long positions and ask quotations for the short positions) without deduction of transaction costs.

As regards financial instruments that are not traded in the active markets, fair value shall be determined by means of implementation of the corresponding valuation methods. These methods may include the use of prices of recent commercial transactions, the use of current fair value and similar instruments, discounted flows analysis or any other valuation methods.

Inventories

Inventories are accounted at the lowest value of cost or net realizable value. Inventories writing-off is determined using the method of weighted average cost.

Construction in progress is a set of partially finished products that have not gone through a complete production cycle that is necessary for the products to be ready for supply to a customer, to a market for sale, ship from the finished products warehouse, as well as a set of products rejected by a customer, auxiliary production orders residues and unfinished work.

Provisions

Provisions are recognized if the Group has current liability (legal or constructive) that arose as a result of some past event; outflow of economic benefits that would be necessary for this liability extinction is probable and a reliable estimate of such liability amount can be determined. If the Group hopes for refund of some or all of its provisions, for example, under an insurance agreement, such refund shall be recognized as a separate asset but only if such refund is sure. Costs related to the provisions shall be recognized in the consolidated statement of comprehensive income.

Accrual of interest on the reduced book value of an asset shall be continued based on the interest rate used for future cash flows discounting for the purpose of impairment loss measurement. Interest income shall be included in financial income in the consolidated statement of comprehensive income. Should fair value of an equity instrument increases during the next year, the given increase may be objectively connected with an event that will have occurred after recognition of the impairment loss, the impairment loss shall be recovered through consolidated statement of comprehensive income

Financial Liabilities

Initial Recognition and MeasurementFinancial liabilities, to which the provisions of IAS 39 apply, are classified correspondingly as financial liabilities revalued at fair value through profit or loss, loans and borrowings or derivative instruments determined as hedging instruments for effective hedging. The Group classifies its financial assets at their initial recognition.

Financial liabilities are initially recognized at their fair value increased, in the event of loans and borrowing, by the cost of transaction directly connected to them.

Financial liabilities of the Group mainly include accounts payable, payables for purchase of subsidiary and loans received from the Shareholder.

Further MeasurementFurther measurement of financial liabilities depends on their classification, namely:

Category “financial liabilities revaluated at fair value through profit or loss” includes financial liabilities intended for trade and financial liabilities included into the category of liabilities revaluated at fair value through profit or loss at their initial recognition.

Financial liabilities are classified as intended for trade if they have been acquired for sale in the immediate future. The given category includes derivative instruments in respect of which the Group is a party to an agreement, and which have not been determined as hedging instruments in hedging operation in accordance with the IAS 39 definition. Dedicated embedded derivatives are also classified as held for trade unless they are determined to be effective hedging instruments.

Income and loss related to liabilities intended for trade shall be recognized in consolidated statement of comprehensive income.

Financial liabilities determined at the initial recognition as revaluated at fair value through profit or loss shall be included into this category on the date of initial recognition subject only for the purpose of meeting the IAS 39 criteria. The Group does not have any financial liabilities determined at the initial recognition as revaluated at fair value through profit or loss.

After the initial recognition, interest loans and borrowings shall be measured at deprecated value determined using the effective interest rate method. Income and cost under such financial liabilities shall recognize as income or loss upon their derecognizing and also in proportion to depreciation accrued using an effective interest rate.

Depreciated value is calculated with due account for discounts or bonuses upon acquisition as well as any commission fee or costs that make and integral part of an effective interest rate. Depreciation of an effective interest rate is included in financial costs in the consolidated statement of comprehensive income.



Book value of the deferred tax assets shall be reconsidered on each reporting date and reduced to the degree, to which earning of a sufficient taxable profit allowing for the use of a part or all deferred tax assets, is considered as unlikely. Unrecognized deferred tax assets shall be reconsidered on each reporting date and recognized to the degree that there is substantial probability that the future taxable profit will allow for the use of a part or all deferred tax assets.

Deferred tax assets and liabilities shall be measured at the tax rates that, as expected, will be used in the corresponding reporting year of the asset disposal and the liability extinguishment, based on the tax rates (and tax legislation), that, as of the reporting date, were practically adopted.

Deferred tax related to the items recognized not as a part of profit or loss, shall not be recognized in the profit or loss too. Deferred tax items shall be recognized in accordance with underlying transactions or as a part of other comprehensive income or directly in equity.

Deferred tax assets and liabilities shall be mutually set-off if there is a legal right of the current tax assets and liabilities setoff and deferred taxes relate to the same taxable company and tax authority.

Tax benefits acquired within the framework of business combination but not meeting the criteria for separate recognition on the given date shall be recognized later if new information on changes in the facts and circumstances is obtained. Adjustment is recorded as reduction of goodwill (if it does not exceed the size of the goodwill) if it had been made before initial accounting of the business acquisition; otherwise it shall be recognized in profit or loss.

Value Added Tax

Tax authorities allow paying VAT on sales and acquisition on a net basis.

VAT PayableVAT shall be paid to the tax authority after collection of accounts payable from buyers; VAT on acquisitions, for which payments were made on the reporting date, shall be deducted from the amount payable.

Additionally, VAT related to the sales, payments for which have not been completed on the reporting date, shall also be included in the amount of payable VAT. If a provision for doubtful debts is formed, impairment loss shall be recognized for the total amount of debt, including VAT. The corresponding VAT liability shall be recognized in the statement before receivables writing off for taxation purposes.

Recoverable VATRecoverable VAT relates to acquisitions not paid on the reporting date. Recoverable VAT is subject to return by means of setoff against VAT liability amount related to acquisitions not paid for on the date of acquisition.

Contingent Assets and Liabilities

Contingent assets shall not be recognized in consolidated financial statements. When income realization is indisputable, then the corresponding asset is not a contingent one and is recognized in a proper way.

Contingent liabilities shall not be recognized in consolidated financial statements. They shall be disclosed only if the possibility of resources outflow connected with securing an economic benefit becomes probable and amount of liabilities become significant.

Disclosure of Information on Related Parties

Related parties include the key management personnel of the Group, organizations, the major part of voting shares in which is held directly or indirectly by the key management personnel of the Group, a company of Samruk-Kazyna Group as well as an organization controlled by the government.

Recognition of Income and Costs

Income shall be recognized if economic benefits obtaining by the Group is estimated as probable and if income can be reliably measured irrespective of time of payment. Income shall be measured at fair value of the obtained or to-be obtained consideration with due account for terms of payment specified in the agreement less taxes or duties. The Group shall analyze the agreements it enters in that provide for earning of income in accordance with certain criteria in order to determine of whether it acts as a principal or as an agent thereunder.

Interest Income Income shall be recognized upon accrual of interests using the effective interest rate method, i.e. at the rate that discounts approximate future cash proceeds over the period of expected term of a financial instrument circulation to the net book value of a financial asset. Interest income shall be included in the financial income in the consolidated statement of comprehensive income.

ExpensesExpenses shall be recognized at the moment of actual receipt of the corresponding goods or services irrespective of when cash or equivalents were paid and shall be specified in the financial statement in the period to which they belong.

Income Tax

Tax assets and liabilities of the current income tax for the current period are estimated by the amount of expected refund by the tax authorities or payment to tax authorities. Tax rates and legislation used for calculation of the given amount represent rates and taxes that were effective or practically legitimized in the Republic of Kazakhstan on the reporting date.

The current income tax related to the items recognized directly in equity shall be recognized in the capital and not in the consolidated statement on comprehensive income. Management of the Group shall regularly assess the items of the tax return in respect of which tax legislation may be interpreted in various ways and establish reserves as far as necessary.

Deferred tax

Deferred tax is calculated by the liability method by means of determining temporary differences between the assets and liabilities taxation base for the purpose of financial reporting on the reporting date.

Deferred tax liabilities shall be recognized for all taxable temporary differences save for the events when: • deferred tax liability arises as a result of initial recognition of goodwill, asset or a liability, in the transaction not being a business

combination and impacts neither accounting earnings nor taxable income or loss; • As regards taxable temporary differences connected with investments into subsidiary organizations and associated companies,

as well as with the participation interests in joint activity, if temporary difference reduction in time can be controlled and there is substantial probability that the temporary difference will not reduce in the foreseeable future.

Deferred tax assets shall be recognized for all deducted temporary differences, unused tax benefits and tax losses to the extent that there is substantial probability that there will be taxable profit against which the deductable temporary differences, unused tax benefits and tax losses can be set-off, save for the events when: • deferred tax asset related to the deductable temporary difference arises as a result of initial recognition of asset or liability that

occurred not as a result of business combination and that at the moment of transaction closing did not impact accounting earnings or taxable income or loss;

• As regards deductable temporary differences connected with investments into subsidiary organizations and associated companies, as well as with the participation interests in joint activity, deferred tax assets shall be recognized to the extent only that there is substantial probability that the temporary differences will be used in the foreseeable future and there will be taxable income against which the temporary differences may be used.



IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible assets”The amendment is applied retrospectively and clarifies in IAS 16 and IAS 38 that an asset may be revaluated by means of gross carrying value of the asset adjustment to the market value or by means of determining market value corresponding to the carrying value of the asset and prorata adjustment of gross carrying value in such a way so that the resulting carrying value would be equal to the market value. In addition, it was clarified that accumulated depreciation is a difference between gross and carrying value of the asset.

IAS 24 “Disclosure of Information on Related Parties”The amendment is applied retrospectively and clarifies that the managing company (organization rendering key management personnel services) is a related party, to which the requirement of related party’s information disclosure is applied. Organization that uses the services rendered by the management organization shall disclose information on its expenses incurred in connection with payment to the management companies for their services.

Amendment to IFRS 13 “Fair Value Management”The amendment is applied prospectively and clarifies that exclusion in respect of portfolio in IFRS 13 may be applied not only to financial assets and financial liabilities but also to other agreements that are subject to the IAS 9 provisions (or IAS 39, if applicable).

IAS 40 “Investment Property”Description of additional services in IAS 40 defines the difference between investment property and the property taken by the owner (i.e. property, plant and equipment). The amendment is applied prospectively and clarifies that IFRS 3 and not description of additional services in IAS 40 is used for determining of whether a transaction is that of an asset acquisition or business combination. The Group does not apply this IAS 40.

4. BUSINESS COMBINATION 2015

Acquisition of Silicon of Kazakhstan LLPRecalculation of the previously provided data due to acquisition of the company being under common control

In accordance with the agreement for sale and purchase of 100% of participation interest in the authorized capital of Silicon of Kazakhstan LLP, entered into by and between Tau-Ken Samruk NMC JSC and Investment Fund of Kazakhstan JSC on December 25, 2015, the Group obtained control over the megallurgical silicone and by-products manufacturing plant. The transaction value amounted to KZT 13,607,532,000.00 and has been being paid by installments until December 31, 2024. As of December 31, 2015, the Group paid KZT 5,307,732,000.00 and the remaining amount of KZT 8,299,800,000.00 was recognized at fair value in the amount of KZT 4,714,661.000.00 determined based on the rate varying within the range of 5.41% to 7.91% as a part of accounts payable for acquisition of a subsidiary in the consolidated statement on financial standing. As of December 31, 2015, discount amortization amounted to KZT 5,334,000.00 and was recognized in financial costs of the consolidated statement of comprehensive income.

Since sale and purchase of Silicon of Kazakhstan LLP is a business combination under common control, the given consolidated financial statements were prepared using the accounting method of the predecessor company. Correspondingly, the given consolidated financial statements is presented in such a way as if sale and purchase of Silicon of Kazakhstan LLP happened on the date of earlier period presented in the statements, and, as a result, comparative information for the past period was recalculated.

Events After the Reporting Date

Events after the reporting date that provide additional information on the consolidated financial standing of the Group as of the reporting date (corrective events) shall be registered in the consolidated financial statements. Post-reporting date events that are not corrective or new shall be disclosed in notes if they are of any interest.

New Standards, Explanations and Amendments to the Existing Standards and ExplanationsIn 2015, the Group for the first time implemented some new standards and amendments to the existing standards that come into effect in respect of the annual periods beginning on January 1, 2015 or after the date. The nature and effect of these changes are considered herein below:

Amendments to IAS 19 “Fixed Payment Programs: Employee Contributions“According to IAS 19, upon accounting of the fixed payment programs, a company shall take into account contributions made by employees and third parties. If such contributions are connected with services rendering, they shall be recognized in the periods of actual rendering of such services as a negative consideration. The given amendment did not have any effect on the consolidated financial statements of or accounting policy of the Group.

Annual Improvement of IAS over the Period of 2010–2012Save for the amendment related to the IFRS 2 “Share-based Payments”, which is applied to the share-based payments with the date of submission of July 1, 2014 or after the date, all the other amendments come into effect for the reporting periods that start on July 1, 2014 or after this date. The nature and effect of these amendments are shown below:

IFRS 2 “Share-based Payment”This amendment is applied prospectively and clarifies the issues related to definition of the conditions of the results achievement and period of service rendering that are the vesting preconditions.

Explanations are in line with the method used by the Group in the past periods for determining the conditions of the results achievement and period of service rendering, which are the vesting preconditions. Additionally, the Group did not pay any considerations in the second half of 2014. Therefore, the given amendment did not have any effect on the consolidated financial statements of or accounting policy of the Group.

IFRS 3 «Business Combinations»The amendment is applied prospectively and clarifies that all contingent consideration agreements classified as liabilities (or assets) occurred as a result of business combination shall later be measured at fair value through profit or loss irrespective or whether on not they fall within the sphere of IAS 3 application. This amendment is in line with the current accounting policy of the Group and, therefore, does not have any effect thereon.

IFRS 8 «Operating Segments»Amendments are applied retrospectively and clarify that: • An entity shall only to disclose the judgments made by management in applying the aggregation criteria described in the clause 12

of IFRS 8 including brief description of aggregated operating segments and economic characteristics (for example: sale and gross margin) used in assessment of segments “similarity”.

• An entity shall provide reconciliations of the total of the reportable segments’ assets to the entity’s assets and information on liabilities related to the segment only if reconciliation is provided to the management making operating decisions.

The Company has not applied aggregation criteria from the clause 12 of IFRS 8.


4. BUSINESS COMBINATION (continued)2015 (Continued)

Acquisition of Silicon of Kazakhstan LLP (Continued)Recalculation of the previously provided data due to acquisition of the company being under common control (продолжение)

Acquisition of Northern Katpar LLPOn June 26, 2015, the Group acquired 100% participation interest in the authorized capital of the Northern Katpar LLP from three individuals: K.Y. Aubakirov, A.Y. Chi and G.Y. Zhumabekova. The core activity of the Northern Katpar LLP consists in production of tungsten under the contract for tungsten production at the Northern Katpar deposit in Karaganda region concluded by and between the Republic of Kazakhstan Ministry of Energy and Mineral Resources and the Northern Katpar LLP. Value of the transaction was KZT 7,733,640,000.00, which was paid in full as of December 31, 2015.

For the purpose of acquisition of 100% participation interest in the authorized capital of the Northern Katpar LLP, the Company concluded agreement with Samruk-Kazyna for accommodation of loan to the total amount of KZT 7,770,000,000.00 with maturity period of 20 (twenty) years from the date of a lump-sum tranche. Tranche in the amount of KZT 7,733,640,000.00 was received by the Company on July 7, 2015. Interest rate for the given loan is 0.1% per annum within 10-year grace period and upon expiration of this period it will be 2% per annum. Fair value of the procured loans amounted to KZT 2,614,162,000.00 determined at the rate of 6.93%. Difference between the face value and fair value in the amount of KZT 5,118,478,000.00 was recognized as transactions with shareholder in the consolidated statement of changes in equity. Discount amortization for 2015 and consideration receivable as of December 31, 2015 amounted to KZT89,735,000.00 and KZT 3,771,000.00 and, correspondingly, were recognized in financial costs of the consolidated statement of comprehensive income.

Acquisition of the participation interest in the Northern Katpar LLP was accounted using the acquisition method. Information on the fair value of the identifiable assets and liabilities of the Northern Katpar LLP as of the acquisition date is given below:

KZT, thous. Fair Value as of the Date of Acquisition

AssetsFixed assets (Note 11) 21.582

Intangible assets (Note 12) 9.878.507

Other current assets 89

Cash and equivalents 1

9.900.179LiabilitiesDeferred tax liability (Note 10) (1.646.418)

Current Liabilities (55.783)

(1.702.201)Total Identifiable Net Assets Measured at Fair Value 8.197.978Compensation provided upon acquisition (7.733.640)

Profit from a beneficial acquisition 464.338Net cash acquired with subsidiary 1

Compensation in the form of cash paid (7.733.640)

Net cash outflow (7.733.639)

The above specified fair value of the acquired intangible assets in the amount of 9,878,507,000.00 mainly includes the Northern Katpar deposit’s subsoil use right.

Profit from the beneficial acquisition in the amount of KZT 646,338,000.00 was due to the fact that the Group acted on behalf of the Republic of Kazakhstan government and, correspondingly, had the right to act as the main buyer when the owners sell their subsoil use rights.

From the acquisition date, contribution of the Northern Katpar LLP into the Group’s revenue amounted to zero (0.00) tenge and its net loss amounted to KZT 13,304,000.00. If the acquisition had occurred in the beginning of the year, the Group’s revenue would not change due to the absence of revenue from the Northern Katpar LLP, and a net loss from continuing operations of the Group during the period would amount to KZT 14,219,206,000.00.

KZT, mln

Aspresented

before

Consolidation ofFinancial

Statementsof Silicon of

Kazakhstan LLPCurrent

presentation

Effect on the Consolidated Statement ofFinancial Standing as of December 31, 2014Fixed assets 10.131.995 8.096.083 18.228.078

Cash and equivalents 11.929.578 184 11.929.762

Change in the total amount of assets 8.096.267

Change in the net assets 8.096.267

KZT, thous. December 31,

2014

CurrentValue

as of theAcquisition Date

December 31,2015

AssetsFixed assets 8.096.083 590.709 8.686.792

590.706Fair Value of the Consideration (10.022.393)Attributed to Capital (9.431.684)

On January 15, 2014, Investment Fund of Kazakhstan JSC (hereinafter referred to as the IFK) and Tau-Ken Samruk NMC JSC entered into cooperation agreement in accordance with the Republic of Kazakhstan government instructions. This agreement was concluded by IFK and Tau-Ken Samruk NMC JSC to joint its efforts for launching and commissioning of metallurgic silicon production at the Aktas gangue quartz field in Karaganda region.

On February 17, 2014, IFK and Tau-Ken Temir LLP entered into agreement for property storage, in accordance with which Tau-Ken Temir LLP shall take measures for proper maintenance of the plant’s property and production of metallurgical silicon.

For the purpose of further management of the metallurgical silicon plant, IFK made decision to set up a subsidiary - Silicon of Kazakhstan LLP and it was registered by the competent governmental authority on October 22, 2014.

On October 30, 2014, decision was made to replenish the authorized capital of the Silicon of Kazakhstan LLP by additional contribution of IFK in the form of movable and immovable property to the total amount of KZT 8,096,083,000.00.

On November 14, 2014, Silicon of Kazakhstan LLP registered its title right to the property of the metallurgic silicon production plant.

On April 16, 2015, decision was made to replenish the authorized capital of the Silicon of Kazakhstan LLP by an additional contribution of IFK in the form of movable property.


4. BUSINESS COMBINATION (continued) Profit from the beneficial acquisition equal to KZT 266,417,000.00 was earned due to the following: • The Group acted on behalf of the Republic of Kazakhstan government and, correspondingly, had the right to act as the main buyer

when the owners sell their subsoil use rights; • There were some other potential buyers in the market besides Tau-Ken Samruk JSC, which allowed for the Group to reduce the

purchase price after negotiations with the seller; • The previous owner of the MMPP put the asset for sale due to the absence of the necessary funds for MMPP operation financing.

On June 1, 2014, the Group acquired 30% participation interest in Massalsky Mining and Processing Plant LLP from Yessil SPK National Company JSC resulting in increase of the Group’s participation interest in MMPP up to 93%. The Group paid in cash KZT 221,044,000.00 to the non-controlling members for this participation interest. The below table contains information on the effect of this participation interest in MMPP acquiring:

KZT, thous. As of the Date of

Acquisition

Cash consideration paid to the non-controlling members 221.044

Carrying value of the additional participation interest in MMPP (Note 18) (1.803.318)

Difference recognized in the retained profit (1.582.274)

Acquisition of ShalkiyaZinc LTD JSCOn July 11, 2014, the Group issued additional 200 common shares at the offer price of KZT 160,828.00 per a share to the total amount of KZT 32,165,669,000.00 that were bought by Samruk-Kazyna JSC in exchange for common shares of ShalkiyaZinc LTD JSC (hereinafter referred to as ShalkiyaZinc) in the number of 417,610,000pcs. representing 100% of the total number of authorized and placed shares of ShalkiyaZinc. Exploration, production and processing of complex lead-and-zinc ore at the Shalkiya deposit located in Zhanakorgan district of Kyzylorda region of the Republic of Kazakhstan is the core activity of ShalkiyaZinc LTD JSC.

Information on the fair value of the identifiable assets and liabilities of the ShalkiyaZinc as of the acquisition date is given below:

KZT, thous. Fair Value as of the Date of Acquisition

AssetsFixed assets (Note 11) 2.978.301


Other long-term assets 386.768

Other current assets 113.059

Cash and equivalents 65.965


Current Liabilities (48.250)

(7.382.017)Total Identifiable Net Assets Measured at Fair Value 32.165.669Compensation provided upon acquisition 32.165.669

The above specified fair value of the acquired intangible assets in the amount of KZT 36,003,593,000.00 mainly includes the Shalkiya deposit’s subsoil use right.

2014

Acquisition of Massalsky Mining and Processing Plant LLPOn June 24, 2014, the Group acquired 63% participation interest in Massalsky Mining and Processing Plant LLP (hereinafter referred to as the MMPP) from Mining Bureau LLP. The core activity of the MMPP is exploration and assessment of the iron or at the Massalsky deposit in the Zharkainskiy district of Akmola region. Total value of the transaction amounted to KZT 3,520,550,000.00, of which KZT 3,110,550,000.00 the Group paid in cash and the remaining amount of KZT 410,000,000.00 was recognized on December 31, 2014 as an account payable for acquisition of a subsidiary in the consolidated statement of financial standing.

Information on the fair value of the identifiable assets and liabilities of the MMPP as of the acquisition date is given below:

KZT, thous.Fair Value Recognized

upon Acquisition

AssetsFixed assets (Note 11) 1.420.889


Tax receivable 47.286

Other long-term assets 31.938

Cash and equivalents 182


Long-term accounts payable (1.096.450)

Current Liabilities (28)

(2.211.061)Total Identifiable Net Assets Measured at Fair Value 6.011.059Non-controlling participation interest (Note 18) (2.224.092)

Profit from a beneficial acquisition (266.417)

Total Value of Acquisition 3.520.550Net cash acquired with subsidiary 182

Paid cash (3.110.550)

Net cash outflow (3.110.368)

The above specified fair value of the acquired intangible assets in the amount of KZT 6,721,825,000.00 mainly includes the Massalsky deposit’s subsoil use right. Fair value of the long-term account payable in the amount of KZT 1,096,450,000.00 represents a lump-sum financial aid that shall be repaid by the Company in accordance with the right cession agreement concluded by the Company, Mining Bureau LLP and MMPP on December 30, 2014. In accordance with right cession agreement, Mining Bureau LLP conceded its right to the Company under the temporary financial aid agreements concluded by and between Mining Bureau LLP and MMPP to the total value of KZT 1,096,450,000.00 at the same time, the Company undertook obligation to repay this amount.

The given agreement came into effect after signing of the agreement for sale and purchase participation interest in authorized capital of MMPP dated June 24, 2014, correspondingly, the Group recognized this amount as accounts payable in its consolidated statement of financial standing. As of December 31, 2014, the given amount was completely repaid by the Company.


Tau Gold Copper JV LLP activity results are given below:

KZT, mlnYear Ended on

December 31, 2015Year Ended on

December 31, 2014Share in (loss)/income of a joint venture (1.239) 55

(Loss)/profit before taxes from discontinuedoperations (1.239) 55

Income tax costs – –

Net (loss)/income from discontinued activity (1.239) 55

Categories of assets and liabilities of Tau Gold Copper JV LLP as of the date of retirement are given below:

KZT, mlnAssets and Liabilities as of the

Date of RetirementAssets intended for sale 1.741Net assets 1.741

6. REVENUE FROM SOLD PRODUCTS KZT, thous. 2015 2014

Fine gold sale (Note 20) 92.200.032 42.425.044

Silicon sales 5.179.108 1.254

Refining services 515 –

97.379.655 42.426.298

7. PRIME COST OF SOLD PRODUCTS KZT, thous. 2015 2014

Raw materials 94.676.720 41.703.911

Salary and the corresponding deductions 735.585 193.674

Depreciation and ammortization 626.021 191.122

Other 362.772 203.192

Changes in finished product and in production in progress (1.219.948) –

95.181.150 42.291.899

8. GENERAL ADMINISTRATIVE COSTS KZT, thous. 2015 2014

Salary and the corresponding deductions 1.512.839 1.241.133

Rent costs 188.719 139.405

Professional and advisory services 130.829 250.269

Business trip costs 116.594 74.746

Depreciation and ammortization 60.590 44.367

5. DISCONTINUED ACTIVITY TKS-Zhaksylyk LLP

In accordance with the agreement for sale and purchase of 100% participation interest in the authorized capital of TKS-Zhaksylyk LLP entered into by and between Tau-Ken Samruk NMC JSC and KazCuprum LLP on November 18, 2015, TKS-Zhaksylyk LLP was recognized as discontinued activity.

Results of TKS-Zhaksylyk LLP are given below:



December 31, 2014General and administrative costs (23) (7.645)

Operating Activity Loss (23) (7.645)

Financial income 43 35

Other non-operating income 7.642 –

Profit/(loss) before taxes from discontinuedoperations 7.662 (7.610)

Income tax costs – –

Net income/(loss) from discontinued activity 7.662 (7.610)

The basic categories of assets and liabilities of TKS-Zhaksylyk LLP as of the date of retirement are specified below:

KZT, mlnAssets and Liabilities

as of the Date of RetirementAssetsExploration and assessment assets 158.357Other long-term assets 1.564Other current assets 19Cash and equivalents 11.240Assets intended for sale 171.180LiabilitiesOther current liabilities (1.888)Liabilities directly connected with the assets intended for sale (1.888)

Net assets 169.292

Net cash flows of TKS-Zhaksylyk LLP are given below:



December 31, 2014Operating activity (410) (598)

Investment activity (32.786) (10.849)

Financing Activity 44.298 11.585

Net Inflow of Cash 11.102 138

Tau Gold Copper JV LLP

In accordance with the agreement for sale and purchase of 50% participation interest in the authorized capital of Tau Gold Copper JV LLP entered into by and between Tau-Ken Samruk NMC JSC and Algold LLP on October 28, 2015, Tau Gold Copper JV LLP was recognized as discontinued activity.


As of December 31, components of deferred income tax assets and liabilities are represented as follows::

KZT, thous. 2015

Attributed toConsolidated

StatementComprehensive

Income2014

(recalculated)*

Attributed toConsolidatedStatement on

ComprehensiveIncome 2013

Deferred Tax AssetsCarrying tax loss 647.639 (519.938) 1.167.577 406.584 760.993

Accrued liabilities inrespect of employees

13.887 (5.877) 19.764 (8.715) 28.479

Doubtful debt provision – – – (12.987) 12.987

LCU accrued liabilities 11.131 11.102 29 (1.904) 1.933

Audit services accrued liabilities 929 34 895 (244) 1.139

Tax receivable 48.595 (10.686) 59.281 59.281 –

Other assets 75.851 36.054 39.797 39.797 –

798.032 (489.311) 1.287.343 481.812 805.531

Deferred tax liabilitiesFixed assets (31.770) (31.770) – 2.029 (2.029)

Intangible assets measurementat fair value

(10.094.768) – (8.448.350) – –

Other liabilities – – – 189 (189)

(10.126.538) (31.770) (8.448.350) 2.218 (2.218)

Minus: unrecognized deferred tax assets

(798.032) 489.311 (1.287.343) (484.807) (802.536)

Deferred tax asset impairment

– – – 777 (777)

Net deferred tax liabilities (10.126.538) (31.770) (8.448.350) – –

Reconciliation of deferred tax liabilities, net

KZT, thous. 2015 2014

(recalculated)*

As of January 1 8.448.350 –

Tax cost for the period recognized in loss 31.770 –

Deferred taxes acquired within the framework of business combination

(Note 4) 1.646.418 8.448.350

As of December 31 10.126.538 8.448.350

Deferred tax related to intangible assets measurement at fair value is a deferred tax acquired within the framework of the following businesses acquisition: ShalkiyaZinc, MMPP and Northern katpar LLP.

As of December 31, 2015, unrecognized deferred tax assets in the amount of KZT 798,032,000.00 (2014: 1,287,343,000.00) were mainly attributed to the carrying tax loss for 2015 and 2014. Those tax losses may be used within 10 (ten) years. Because of uncertainty in respect of probability of securing the taxable income in the future against which the given losses may be used, the corresponding differed tax asset was not recognized.

KZT, thous. 2015 2014

Other services 42.877 49.575

Utility services 39.534 31.877

Communication services 15.210 13.874

Taxes 6.871 47.495

Meals and entertainment expenses 6.397 4.013

Provisions – (64.935)

Other 135.079 123.351

2.255.539 1.955.170

9. FINANCIAL INCOME As of December 31, 2015, short-term bank deposits were opened for different terms from 3 (three) months to 1 (one) year depending on the Group’s demand for cash. Short-term deposits were opened in the national (Kazakhstan) second-tier banks at the weighted average interest rate of 10% per annum (as of December 31, 2014: 8% per annum). Interest accrued on the bank deposits for the year ended on December 31, 2015, amounted to KZT 1,754,145,000.00 (as of December 31, 2014: KZT 655,390,000.00) and was recognized in financial income in the consolidated statement of comprehensive income. .

10. INCOME TAX As of December 31, 2015 and 2014, the Group pays corporate income tax at the official rate of 20%.

KZT, thous. 2015 2014

Current income tax (85.379) –

Adjustment of the current income tax of the past year (2.749) –

Deferred income tax (31.770) –

(119.898) –

Given below is a reconsiliation of income tax costs applicable to inocme before taxes at the official income tax rate with the income tax costs for the years ended on December 31, 2015 and 2014:

KZT, thous. 2015 2014

(Loss)/profit before taxes (13.903.749) 154.666

Official tax rate 20% 20%

(Saving)/expenses connected to the income tax charged at the official rate (2.780.750) 30.933

Changes in unrecognized defferend tax assets (489.311) 481.812

Share in (loss)/income of joint ventures and associated company 3.268.049 (397.646)

Other (117.886) (115.099)

Income tax costs (119.898) –

8. GENERAL ADMINISTRATIVE COSTS (continued)


12. INTANGIBLE ASSETSKZT, thous

Subsurface ResourcesManagement Right Other Total

Initial (acqisition) valueAs of January 1, 2014 – 26.699 26.699

Proceeds – 7.318 7.318

Acquisition of subsidiaries (Note 4) 42.723.214 2.204 42.725.418

As of December 31, 2014 (recalculated)* 42.723.214 36.221 42.759.435

Proceeds – 57.059 57.059Acquisition of subsidiaries (Note 4) 9.878.507 – 9.878.507As of December 31, 2015 52.601.721 93.280 52.695.001Accumulated depreciationAs of January 1, 2014 – (9.291) (9.291)

Year deductions – (5.522) (5.522)

As of December 31, 2014 – (14.813) (14.813)

Year deductions – (10.769) (10.769)As of December 31, 2015 – (25.582) (25.582)Residual valueAs of December 31, 2014 42.723.214 21.408 42.744.622

As of December 31, 2015 52.601.721 67.698 52.669.419

13. EXPLORATION AND ASSESSMENT ASSETSKZT, thous

Assets Exploration and Assessment

Carrying Value as of January 1, 2015 2.367.773Proceeds 1.870.839Retirements (182.614)Carrying Value As of December 31, 2015 4.055.998

As of December 31, exploration and assessment assets were as follows:

KZT, thous 2015 2014

Geological and geophysical operations 3.484.434 2.087.022

Subscription bonus 275.446 55.118

Preliminary project documentation drawing-up services 81.831 57.454

Salary and deduction costs 65.774 45.900

Contributions for social and economic development of region and its infrastructure 43.016 31.165

Geological information 12.882 7.992

Other 92.615 83.122

4.055.998 2.367.773

11.

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15. INVENTORIES As of December 31, inventories were as follows:

KZT, thous. 2015 2014

Production in progress 3.478.889 6.048.345

Finished products 7.158.393 3.900.340

Raw materials 1.070.075 273.623

Commodities 193.405 98.764

Minus: provision for outdated and illiquid inventories (196.574) (430.153)

11.704.188 9.890.919

Changes in the provisions for inventories impairment are presented as follows:

KZT, thous. 2015 2014

As of January 1 430.153 –

Charged 402.050 430.153

Used (635.629) –

As of December 31 196.574 430.153

16. RECEIVABLESAs of December 31, receivables were as follows:

KZT, thous. 2015 2014

Accounts receivable from related parties (Note 20) 2.923.454 2.320.280

Accounts receivable from third parties 702.767 21.346

3.626.221 2.341.626

17. CASH AND EQUIVALENTS As of December 31, cash and equivalents were as follows:

KZT, thous. 2015 2014

Bank accounts, in KZT 8.270.232 11.822.788

Bank accounts, in USD 5.738.811 15.117

Bank accounts, in EUR 87.118 91.780

Bank accounts, in other currencies 1.731 45

Cash in transit 102.518 –

Cash on hands 1.437 32

14.201.847 11.929.762

As of December 31, 2015, short-term deposit accounts were opened in the national (Kazakhstan) second-tier banks at the weighted average interest rate of 10% per annum (as of December 31, 2014: 8%).

14. INVESTMENTS INTO JOINT VENTURE AND ASSOCIATED COMPANY

As of December 31, investments into joint venture and associated company were as follows:

2015 2014KZT, thous. Share Amout Share Amout

Joint venturesTau Gold Copper JV LLP. – – 50% 2.980

Associated companyKazzinc LLP 29,822% 410.903.918 29,822% 234.166.217

410.903.918 234.169.197

Changes in investments in joint venture and associate are as follows:

KZT, thous. 2015 2014

Balance as of January 1 234.169.197 199.896.444

Share in income of joint ventures and associated company (16.340.246) 1.988.232

Increase of investment in Kazzinc – 300

Dividends (1.882.401) (1.861.159)

Reclassification of investments into JV in the assets intended for sale (2.980) –

Share in the other changes in equity of the associated company – (2.966.934)

Retirement – (17.849)

Other comprehensive income - reporting currency reculculation 194.960.348 37.130.163

Balance as of December 31 410.903.918 234.169.197

Kazzinc LLP

In accordance with the decision made by the general meeting of members of Kazzinc LLP on April 16, 2015, procedure of Kazzinc LLP net income, earned in 2014, distribution was approved. Total value of the announced dividends payable to the members of Kazzinc LLP amounted to KZT 6,312,100,000.00, of which KZT 1,882,401,000.00 was allocated to the Group (2014: KZT 1,861,159,000.00).

On November 26, 2014, Kazzinc LLP acquired a non-controlling interest in the capital of Orion Minerals LLP. Acquisition value amounted to KZT 10,909,536,000.00 and consisted of cash consideration of KZT 6,601,755,000.00 and 100% participation interest in Raigorodok LLP which was under the complete control of Kazzinc LLP, net assets of which amounted to KZT 4,307,781,000.00 as of the retirement date. The Group’s share in the given change of the associated company’s capital amounted to KZT 2,966,934,000.00 was recognized as reduction of retained income in consolidated statement of changes in equity.

Given below is general financial information about the associated company and comparison of this information with the carrying value of investments specified in financial statement:

KZT, thous. 2015 2014December 31, 2015Current Assets 294.221.137 202.032.589Long-term Assets 1.503.257.029 857.651.611Current Liabilities (168.414.600) (146.189.995)Long-term Liabilities (251.208.568) (128.281.219)Equity 1.377.854.998 785.212.986Carrying value of investments 410.903.918 234.166.217Revenue 495.309.015 448.254.895Net (loss)/Income (54.792.591) 6.662.189The Group’s share in net (loss)/profit for year (16.340.246) 1.986.798


19. ACCOUNTS PAYABLEAs of December 31, accounts payable were as follows:

KZT, thous. 2015 2014

Accounts payable to thrid parties 3.103.752 577.575

Accounts payable to related parties (Note 20) 2.516.419 961.313

Accounts payable for acquisition of a subsidiary (Note 4) – 410.000

5.620.171 1.948.888

20. RELATED PARTIES TRANSACTIONS Related parties include the key management personnel of the Group, organizations, the major part of voting shares in which is held directly or indirectly by Samruk-Kazyna as well as the government (hereinafter referred to as the organizations under common control).

Regulations and Conditions of Transactions with Related Parties

Transactions with related parties were conducted under conditions agreed upon by the parties and not necessarily were carried out at market rates.

Main transactions with related parties carried out during the years ended on December 31, 2015 and 2014 as well as such transactions’ balances are specified below:

KZT, thous. As of December 31, 2015 As of December 31, 2014Sales to related partiesOrganization under control of the governmentNational Bank of the Republic of Kazakhstan (Note 6) 92.200.032 42.425.044Kazgeologiya JSC 12.880 –

92.212.912 42.425.044KZT, thous As of December 31, 2015 As of December 31, 2014Purchase from related partiesOrganizations under control of Samruk-KazynaSamruk-Energo JSC 979.944 –KEGOC JSC 330.715 66.374KazMunaiGas NC JSC 206.585 146.836Kazakhstan Temir Zholy NC JSC; 24.983 4.871Samruk-Kazyna Contract LLP 21.667 12.700KazPost JSC 20.780 14.987Kazakhtelecom JSC 16.693 10.109Kazatomprom NNC JSC 2.059 1.297Organization under control of the governmentKazgeologiya JSC – 5.694Associated company of the GroupKazzinc LLP 45.830.870 24.593.751

47.434.296 24.856.619KZT, thous As of December 31, 2015 As of December 31, 2014Accounts receivable from related parties Organization under control of the governmentNational Bank of the Republic of Kazakhstan 2.923.454 2.320.280

2.923.454 2.320.280

18. EQUITYAuthorized capital

Changes in the authorized capital are as follows:

Common SharesKZT, thous. Qnty Amount

As of January 1, 2014 292.291 175.239.257

Issue of shares 326 55.146.996

As of December 31, 2014 292.617 230.386.253

Issue of shares 170 13.515.519As of December 31, 2015 292.787 243.901.772

Authorized capital of the Company consists of common shares. One common share gives one vote in voting.

2015 In 2015, the Company issued additional 170 common shares to the total amount of KZT 13,515,519,000.00 that were offered and purchased by Samruk-Kazyna. Payment for these additionally issued shares was by cash.

2014In 2014, the Company issued additional 326 common shares to the total amount of KZT 55,146,996,000.00 that were offered and purchased by Samruk-Kazyna. Of the total number of those shares, 126 were paid for by cash to the amount of KZT 22,981, 327,000.00. As for the other 200 shares of the nominal value of KZT 160,828.00 per a share and the total offering value of KZT 32,165,669,000.00, they were bought by Samruk-Kazyna JSC in exchange for common shares of ShalkiyaZinc LTD JSC (Note 4).

Dividends

2015According to the results of 2014, the Group announced Samruk-Kazyna dividends distribution at the rate of 15% of the net consolidated income in the amount of KZT 22,067,000.00. Based on 2014 results, amount of dividends per a common share of the Group was KZT 75.41. As of December 31, 2015, the Group has paid Samruk-Kazyna dividends in full.

2014According to the results of 2013, the Group announced Samruk-Kazyna dividends distribution at the rate of 15% of the net consolidated income in the amount of KZT 250,458,000.00 that were paid in full within 2014. Based on 2013 results, amount of dividends per a common share of the Company was KZT 857.00

Non-controlling Participation Interest in Massalsky MPP LLP

KZT, thous. 2015 2014

As of January 1 420.774 –

Acquisition of subsidiary (Note 4) – 2.224.092

Acquisition of a non-controlling participation interest (Note 4) – (1.803.318)

Total comprehensive loss for the period attributed to non-controlling participation interest

(577) –

As of December 31 420.197 420.774


20. RELATED PARTIES TRANSACTIONS (continued) Terms and Conditions of Transactions with Related Parties (continued)

21. CONTRACTUAL AND CONTINGENT LIABILITIES Taxation

Provisions of various tax legislative and regulating acts are not always concisely worded and their interpretation depends on opinion of tax authority inspectors and officials of the Republic of Kazakhstan Ministry of Finance. Instances of confrontation of opinions of local, regional and national tax authorities are quite frequent.

The system of penalties and fines for detected violations currently applied based on the tax legislation of the Republic of Kazakhstan is quite severe. Penalty sanctions include penalties, as a rule charged at the rate of 50% of additionally accrued taxes and a fine at the refinancing rate set by the National Bank of the Republic of Kazakhstan multiplied by 2.5. As a result, amount of penalty sanctions plus fine may be way above the amount of the taxes that are to be additionally charged.

The Group believes that it has paid all applicable taxes. In ambiguous situations, the Group calculates its tax liabilities based on the substantiated estimates of its management. The Group’s policy provides for calculation of potential liabilities in the reporting period, in which there is probability of such additional expenses, amounts of which may be determined with sufficient degree of accuracy.

Due to uncertainty inherent to the national taxation system, potential amount of taxes, penalty sanctions and fines may exceed the amount attributed to costs up to the dated and accrued as of December 31, 2015. Despite the possibility of such amounts charging and their potentially significant nature, management of the Group believes that they are unlikely or cannot be estimated or both.

Changes in the political situation in Kazakhstan may have effect on activity and financial standing of the Group, including application of the current and future legislation and regulatory legal acts in the sphere of taxation. The Group believes that these potential liabilities in respect of its activity are of no more importance than potential liabilities of the similar companies in Kazakhstan.

Management believes that as of December 31, 2015, its interpretation of the applicable legislation is correct and there is probability that the Group’s view of taxes will be supported.

Environmental Protection Issues

The Group’s management believes that the Group observes all existing laws and regulatory acts of the Republic of Kazakhstan related to the environmental protection. Nevertheless, in the event of any change in the national laws and regulatory legal acts on environmental protection, the Group cannot forecast time and extent of their change and its impact on its consolidated financial statements.

Lawsuits and Claims

In the course of its ordinary activity, the Group may be a party of various lawsuits and claims. Management of the Group thinks that the maximum liability, if any, connected with any such lawsuit or claim will not have any significant negative effect neither on its consolidated financial statement nor on the consolidated financial results of the Group in the Future.

KZT, thous. As of December 31, 2015 As of December 31, 2014

Accounts payable to related partiesOrganizations under control of Samruk-Kazyna

KazMunaiGas NC JSC 15.477 12.284

Kazakhtelecom JSC 1.588 918

Samruk-Kazyna Contract LLP 785 –

KazPost JSC 471 1.738

Kazatomprom NNC JSC 218 211

Associated company of the Group

Kazzinc LLP 2.497.880 946.162

2.516.419 961.313

KZT, thous. As of December 31, 2015 As of December 31, 2014

Downpayments madeOrganizations under control of Samruk-Kazyna

Samruk-Energo JSC 61.595 –

KEGOC JSC 9.136 10.756

Kazakhstan Temir Zholy NC JSC; 2.180 2.265

Samruk-Kazyna Contract LLP 142 –

KazPost JSC 34 13

73.087 13.034

Remuneration of the Key Management Personnel

As of December 31, 2015, the key management personnel comprise 28 people including two independent directors (2014: 25 people including two independent directors). In 2015, total amount of remuneration to the key management personal was equal to KZT 259,834,000.00 (2014: KZT 196,718,000.00) and it consisted of salary, annual bonuses and other short-term considerations making a part of general administrative costs in the consolidated statement of comprehensive income.


21. CONTRACTUAL AND CONTINGENT LIABILITIES (continued)

22. FINANCIAL INSTRUMENTS, OBJECTIVES AND POLICY OF FINANCIAL RISKS MANAGEMENT

Market Risk

Market risk is the risk that fair value of future cash flows generated by financial instrument will vary due to changes in market prices. Market prices include four types of risk, namely: rick of interest rate change, currency exchange rate, risk of change of commodity prices and other price risks, for example: risk of changes in the prices for equity instruments. Financial instruments exposed to the market risk usually include loans and borrowings, deposits, investments available for sale and derivative financial instruments.

Liquidity Risk

Liquidity risk is the risk of any difficulties that the Group may have with obtaining the funds for extinguishment of its liabilities connected with financial instruments. Risk of liquidity may occur as a result of impossibility to monetize a financial asset quickly at the price close to its fair value.

The Group regularly monitors its need for liquid funs and the Group’s management ensures availability of funds in the volume sufficient for extinguishment of any liabilities as they become mature.

Credit Risk

The Group is exposed to credit risk connected with other financial assets comprising cash and equivalents, short-term deposits and receivables. The Group’s risk is connected with possibility of default of counterparty; thereat, maximum risk is equal to the carrying value of the given instruments.

Foreign Exchange Risk

Foreign exchange risk is the risk that fair value of future cash flows generated by a financial instrument will vary due to changes in exchange rates.

Fair Value of the Financial Instruments

The carrying value of financial instruments is approximately equal to their fair value due to the short term nature of these instruments.

Capital Management

The Group manages its capital in order to continue to abide by the going concern principle along with maximization of income for interested parties by means of optimization of debt and capital balance.

The Group’s capital management depends strongly on Samruk-Kazyna capital management strategy. Most part of capital management decisions are made after approval by the corresponding committees of the shareholder. In order to maintain or adjust capital structure, Samruk-Kazyna may make contributions into capital of the Group, accommodate loans or authorize the Group for raising borrowed funds from third parties and to provide security for all loans granted to the Group by third parties.

Subsoil use Contract Liabilities

As of December 31, 2015, the Group has the following liabilities under the subsoil use contracts:

KZT, thous.

Fulfillment of Liabilitiesfor the Year Ended on

December 31, 2015 2015 2016 2017

Alaigyr Deposit 778.801 14.482.008 7.557.600 10.451.100

Gagarinskoye Deposit 298.558 − 610.708 371.058

Predgorny Ketmen deposit 129.033 126.041 29.356 −

Spasskaya MOZ deposit 1.164.713 1.074.874 698.190 561.880

Tuyuk-Temirlik Deposit 344.085 59.089 2.556.439 2.406.802

Shokpar Deposit 309.192 − 614.703 310.587

Progress Deposit 76.393 − 210.553 254.029

South-Moiyntinskoye Deposit area 139.704 148.736 249.688 302.018

Northern Katpar deposit 29.781 72.302 153.593 313.711

Massalsky Deposit 499.928 − 1.811.000 17.256.000

In accordance with the working program under the Shalkiya deposit subsoil use contract, ShalkiyaZinc LTD JSC has the following contractual liabilities::

KZT, thous.Working Program

Period yearMinimum Scope

for the period

Outstanding Part of the Minimum Working

Program as of December 31, 2015

Scope to BeExecuted

2016–2046

Subsoil use contract

Shalkiya 2002–2046 16.965.335 16.344.152 16.344.152

As of December 31, 2015, ShalkiyaZinc LTD JSC failed to execute the minimum scope of its working program and, correspondingly, violated the conditions of Shalkiya deposit development contract.

Activity of the Group is the object of inspections by the governmental authorities as regards observance of subsoil use contracts. Management cooperates with the governmental agencies in coordination of corrective measures necessary for solution of issues identified in the course of such inspections. Failure to observe the terms and conditions of subsoil use contract may result in penalties, fines, restrictions, suspension or termination of the contract. Management of the Group believes that any issues related to the breach of contracts may be solved by means of negotiations or corrective measures and will not have any material effect on consolidated financial statements of the Group.


23. EVENTS AFTER THE REPORTING DATE At the regular meeting of the Group’s Board of Directors held on January 28, 2016, decision was made to reorganize Silicon of Kazakhstan LLP by means of its consolidation with Tau-Ken Temir LLP.

On February 17, 2016, TKS-Zhaksylyk LLP was re-registered in the name of new founder - KazCuprum LLP, by the Astana Department of Justice. Thus the Group completed transaction of sale and purchase of 100% participation interest in TKS-Zhaksylyk LLP.

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