TNC Kazchrome JSC 2020 ANNUAL REPORT From resilience to SUSTAINABILITY INTRODUCTION MANAGEMENT ABOUT MARKET OVERVIEW STRATEGY OVERVIEW OVERVIEW FINANCIAL REVIEW RISK MANAGEMENT SUSTAINABLE CORPORATE FINANCIAL ANNEXES STATEMENT THE COMPANY OF OPERATIONAL DEVELOPMENT GOVERNANCE STATEMENTS RESULTS REVIEW CONTENTS MANAGEMENT STATEMENT 2 Statement of the Chairman of the Board of Directors 4 Statement of the President ABOUT THE COMPANY 6 General description 8 Key performance indicators 9 Business model MARKET OVERVIEW 15 Macroeconomic situation 15 Ferrochrome market demand and supply and prices overview STRATEGY OVERVIEW 17 Optimisation and growth initiatives OVERVIEW OF OPERATIONAL RESULTS 19 Products, sales, markets and consumers 20 Reserves and resources FINANCIAL REVIEW 23 Preparation principles 23 Statement of profit or loss 25 Capital expenditures 25 Current debt OUR VISION RISK MANAGEMENT An international sustainable, socially responsible and efficient natural 28 Risk management system 29 Key risks and their management resources company. SUSTAINABLE DEVELOPMENT REVIEW 35 Our employees 37 Occupational health and safety 39 Environmental protection OUR MISSION 42 Social investments Be the best at what we do. CORPORATE GOVERNANCE Navigate global change whilst holding true to our values. 45 Share capital and shareholders 46 Subsidiaries and affiliates Responsibly unlock the potential of the Earth and its people, 46 Management structure 50 Key management team ensuring the prosperity of those who rely on us. 52 Data reliability statement FINANCIAL STATEMENTS 56 Independent auditor’s report 64 Consolidated balance sheet 65 Consolidated statement of profit or loss and other TNC Kazchrome JSC is a modern, vertically integrated OUR VALUES comprehensive income company and one of the world’s largest high-carbon 66 Consolidated statement of changes in equity Safety 67 Consolidated statement of cash flows ferrochrome producers. Kazchrome has a unique 68 Notes to the consolidated financial statements resource base and has been a leader in the mining and Unity ANNEXES metals industry of Kazakhstan for 25 years. 92 Annex 1: Оrganisational structure 93 Annex 2: Glossary Efficiency Development Responsibility INTRODUCTION MANAGEMENT ABOUT MARKET OVERVIEW STRATEGY OVERVIEW OVERVIEW FINANCIAL REVIEW RISK MANAGEMENT SUSTAINABLE CORPORATE FINANCIAL ANNEXES STATEMENT THE COMPANY OF OPERATIONAL DEVELOPMENT GOVERNANCE STATEMENTS RESULTS REVIEW Statement of the Chairman of the Board “Stable results, achieved by the Company during this of Directors complex and challenging year, prove that we are TNC Kazchrome JSC successfully implementing our strategy, creating long-term value for all our stakeholders and improving our social responsibility performance. Dear colleagues, partners and the COVID-19 pandemic, the Company We continued to implement projects aimed at condolences to their families and friends. regions of operation. The events of 2020 maintained its performance levels. developing the Company and enabling it to Safety and unity are among the key values highlighted once again the importance of a investors, Nevertheless, the situation certainly had a remain a leader in the ferroalloys industry. shared by all ERG companies, including holistic management approach taking into As we look back on the performance of TNC significant effect on our business, our Thus, in 2021, we will continue to upgrade Kazchrome. Modern and effective preventive account all aspects of the business: Kazchrome JSC (Kazchrome) in 2020, we feel processes and our team. workshops No. 1 and 2 of Aktobe Ferroalloys safety measures enabled us to maintain the operations, finance and sustainable proud. Stable results, achieved by Plant and implement the new Environmental continuity of production processes and, in development. Over the past year, we all the Company during this complex and Given the price volatility of the ferroalloys Strategy, which includes the replacement of doing so, fulfil our financial obligations to our became stronger and gained valuable new th challenging year, prove that we are market, we recorded a decline in key financial wastewater treatment facilities at the 10 stakeholders. experiences, which I believe will benefit successfully implementing our strategy, indicators compared with 2019. However, the Anniversary Mine, an overhaul of gas the future implementation of our plans and creating long-term value for all our pandemic did not impede the scrubbers at Aksu Ferroalloys Plant and filter Over the past year, we made considerable strategy. stakeholders and improving our social implementation of our key strategic projects, upgrades at Aktobe Ferroalloys Plant. progress in the development of digital responsibility performance. In addition, 2020 including the capacity expansion of the 10th transformation processes. We moved many marked Kazchrome’s 25th anniversary: a Anniversary Mine at Donskoy Mining and It should also be noted that we owe our areas of our operations on to online quarter of a century that is a major milestone Processing Plant, an increase in the impressive results to the way in which we platforms and these proved viable. on our transformation and development production capacity of smelting shop No. 6 managed to protect our teams and prevent journey. and expansion of the smelting building and widespread outbreaks of the COVID-19 at our During the pandemic, we focused on production sites. It is with great sadness that ensuring the safety of our employees and the finished product warehouse in smelting Serik Shakhazhanov Despite the negative impact of external shop No. 1 at Aksu Ferroalloys Plant. we marked the passing of a number of their families. We also increased financial Chairman of the Board of Directors of factors and the harsh conditions faced by colleagues from the virus, and we send our support provided to local communities in our TNC Kazchrome JSC the entire global community due 2 TNC Kazchrome JSC | 2020 Annual Report TNC Kazchrome JSC | 2020 Annual Report 3 INTRODUCTION MANAGEMENT ABOUT MARKET OVERVIEW STRATEGY OVERVIEW OVERVIEW FINANCIAL REVIEW RISK MANAGEMENT SUSTAINABLE CORPORATE FINANCIAL ANNEXES STATEMENT THE COMPANY OF OPERATIONAL DEVELOPMENT GOVERNANCE STATEMENTS RESULTS REVIEW Statement Safety of the President • We put safety first 2020 was a year of global • We ensure safe labour conditions for TNC Kazchrome JSC “ all our employees and contractors, continuously working to prevent any challenges. But even in the injuries occurring in the workplace midst the global COVID-19 pandemic, Kazchrome Unity • We work together as a team of demonstrated the potential passionate people aiming to achieve our set goals of its team for action, an • We respect the cultural and regional efficient development traditions where we operate strategy and management Efficiency that was both mobile and • We do not work for the sake of it – we are focused on delivering results flexible. • We manage our resources carefully to achieve results • We prioritise the most relevant issues • We minimise tasks that do not add value Development • We appreciate our employees and create conditions for their development • We efficiently implement new technologies and develop as a company • We ensure the sustainable development of the Group Dear partners, colleagues and measures were introduced across all development strategy, which includes Environmental responsibility is a core value zero-tolerance approach to any non- friends, Kazchrome branches to prevent the spread of technical measures aimed at improving for both Kazchrome and ERG, and one which compliance. Responsibility COVID-19. We were also able to quickly furnace productivity. One of the highlights of is increasingly integrated into our operational 2020 was a year of global challenges. But even mobilise our resources and transform those the last year was the completion of a number objectives. Alongside a wide range of During this challenging year, the Company • We fulfil our obligations to our in the midst the global COVID-19 pandemic, processes that had previously involved of projects aimed at increasing high-carbon measures to mitigate the impact of our fulfilled all of its social commitments. employees, their families, customers, Kazchrome demonstrated the potential of its foreign partners in order to complete ferrochrome production. operations, we have also adopted new Moreover, Kazchrome reallocated funds partners, shareholders and society team for action, an efficient development scheduled activities on time without external environmentally friendly technologies. We initially intended for its 25th anniversary • We carefully manage the resources strategy and management that was both assistance. This enabled us to maintain The Company remains committed to make every effort to minimise celebrations towards helping to prevent and and the environment entrusted to us mobile and flexible. During this year, we production levels and fulfil all our financial achieving a stable supply of materials for our the environmental impact of our operations fight against COVID-19. The Company celebrated the 25th anniversary of our commitments. ferroalloy plants. Donskoy Mining and and to reduce slag generation and invested in medical supplies for employees • We build a culture of mutual Company. As we passed this quarter-of-a- Processing Plant, a branch of Kazchrome, is operational waste disposal. Kazchrome works and their families and also delivered confidence and respect in the Group, century milestone, we still