29 Copper Cu 63.546 14 Silicon Si 28.086 26 Iron Fe 55.847 30 Zinc Zn 65.370 79 Gold Au 196.967 Annual Report 2017 ELEMENTS OF SUCCESS ANNUAL REPORT | 2017 TABLE OF CONTENT Statement of Chairman External environment analysis Sustainable development report Information on internal audit of the Board of Directors 36 76 96 2 Legislative environment About the Report Information on external auditor Statement of Chairman 37 77 98 of the Management Board 3 Brief metals marker overview Stakeholder engagement Annexes 38 81 About the Company 1. Report on adherence 4 Innovation activity Economic aspects of sustainable to the principles of the Corporate 44 development Governance Code Strategic Report 85 102 6 Corporate governance 46 Environmental responsibility 2. Consolidated financial statements Business model 86 120 8 Sole Shareholder 49 Social responsibility 3. Table of GRI Content Index Key events of the year 89 174 9 Activity of the Board of Directors 49 Business ethics in the Company 4. Glossary Geography of operations 95 180 10 Activity of the Management Board 63 Contact information Operating activity review 181 14 Organizational structure 66 Production 15 Risk management and internal control Mining 68 20 Geological exploration 24 Information on the Company’s major transactions 29 Report on financial and economic performance results 30 Key performance indicators 31 Capital adequacy ratios 33 1 TAU-KEN SAMRUK NMC JSC ANNUAL REPORT | 2017 STATEMENT OF STATEMENT OF CHAIRMAN CHAIRMAN OF THE OF THE MANAGEMENT BOARD OF DIRECTORS BOARD Dear colleagues, partners, investors! Dear Ladies and Gentlemen! It is a great honor for me to address you as the Chairman in the sphere of sustainable development and continuous We present you the Annual Report of Tau-Ken Samruk already provides more than 550 jobs, and upon completion of the Board of Directors of the National Mining Company improvement. National Mining Company JSC for 2017. of commissioning the total number of employees will of JSC OGK Tau-Ken Samruk! amount to 1,540 people. Taking into account the new Development Strategy of The past year was quite rich in the events. We managed to The company is confidently moving up the set trajectory. Samruk-Kazyna JSC for 2018-2028, the Company faces achieve our goals and progress to new stages in terms of In 2017, semi-industrial tests were completed under This applies to both the investment and operational serious challenges. The key priorities are to improve individual indicators. Masalsky Project, based on which technological activities of the Company. This made it possible to profitability, exit from non-core and non-strategic assets, regulations were developed. mobilize investments in the most important projects. So, as well as increase the level of corporate governance and At the end of 2017, overfulfillment of gold production in 2017 the Company concentrated on the implementation sustainable development. indicators was noted. Our subsidiary Tau-Ken Altyn LLP The main noteworthy events of 2017 also include the of significant projects - Shalkiya and Alaygyr, where all the exceeded the planned targets for refined gold production completion of construction of power facilities under preparatory work was completed. The company moved to In general, the Company’s activities in 2018 will be aimed and sales – the output amounted to 18 tons instead of Alaigyr Project and completion of the feasibility study for the active phase of construction and installation works at at finding and attracting strategic investors, as well as planned 15 tons. The increase in production was achieved Masalsky Project. these sites. further investing in the construction of significant projects. due to growth in the volume of chemically pure metal in The Board of Directors of the Company together with the gold-bearing raw materials delivered to the refinery in the In 2018, we are planning to conclude an EPC contract In terms of achieving production indicators, one of the management of the Company will make every effort and reporting period. for the construction of a beneficiation plant and sign a most important results of 2017 is the production of 18 take the necessary measures to increase the shareholder contract for the expansion of Shalkiya mine. The Company tons of refined gold. Thus, the share of LLP “Tau-Ken value of the Company. In 2017, we signed an agreement with the European Bank is also planning to complete the construction of main Altyn” in processing gold was about 40% of all produced in for Reconstruction and Development with a view to support facilities of the production complex under Alaigyr Project. Kazakhstan affined gold. The entire volume of affined gold Summing up the foregoing, on behalf of the Board of a large-scale project for Shalkiya deposit development At the same time, the refinery is planning to obtain a Good is aimed at replenishing the country’s gold and currency Directors of the Company, I express my gratitude to in Kyzylorda region. A syndicated loan was granted to Delivery certificate from the LBMA in 2018. reserves. the members of the Board of Directors, our partners, our subsidiary ShalkiyaZinc LTD JSC with the aim of the Management Board, the staff of JSC OGK Tau-Ken expanding the mining operations at the existing Shalkiya The successful work of our staff makes us sure that this We focus on safety and labor protection issues. Care for Samruk, and its subsidiaries for their contributions to the lead-zinc mine and constructing a beneficiation plant at goal will be achieved and allows us to accept confidently people and the world around us is the foundation of our Company. the facility. Shalkiya lead-zinc deposit is one of the largest the challenges of the upcoming year of 2018. business. We take care of natural resources. Taking into in Kazakhstan and is included in the state industrialization account the high value of the water resources of the arid program of Kazakhstan. Today, this is a key project of the Kyzylorda region, the circulating water use system is Alik Serikovich Company, which also has a huge social and economic Kanat Zhakypuly being introduced at the Shalkiya field. We will continue to Aidarbayev importance for the whole region. The deposit is expected follow these principles, follow the policy of human capital to produce 4 million tons of ore per year. The Company is Kudaibergen development, environmental management, taking into Chairman of the Board of Directors planning to introduce the latest technologies in the field of Acting Chairman of the Management Board account the increasing demands and dynamic changes of Tau-Ken Samruk NMC JSC extraction and production, including a vertical ore hoisting of Tau-Ken Samruk NMC JSC conveyor, which is innovative for our region. The enterprise 2 3 TAU-KEN SAMRUK NMC JSC ABOUT THE COMPANY ANNUAL REPORT | 2017 National Mining Company Tau-Ken Samruk Joint-Stock ► effective management of stocks of shares transferred by ► attraction of investment in the mining and metals industry; Company (hereinafter – the Company) was founded pursuant to ore mining and smelting enterprises to the Company; ► realization of the state commercial interests in the the Resolution of the Government of the Republic of Kazakhstan ► development and introduction of new knowledge intensive exploitation and development of solid mineral deposits; No. 10 dated January 15, 2009. The sole shareholder of the and efficient technologies in the mining and metals industry; ► realization of the state strategic interests in the development Company (hereinafter – the Sole Shareholder) is Samruk- ► reproduction of the mineral and raw materials base of the of the mineral resources sector, including the provision of Kazyna JSC. Republic of Kazakhstan. optimal strategic reserves for the main types of minerals. ABOUT THE In accordance with the above mentioned Resolution, the In accordance with the Company’s Charter, the main objectives As of December 31, 2017, the Company’s assets amounted to Company carries out the following main activities: of its activities are: 618.3 billion tenge, and the net profit at the end of 2017 reached ► ensuring effective subsoil use operations in the field of ► net income generation; the level of 56.6 billion tenge. The average headcount of the exploration, development, production, processing and sale ► ensuring the growth of the market value of the Company’s Company, including all subsidiaries, was equal to 1,233 people. COMPANY of solid minerals; assets; 4 5 TAU-KEN SAMRUK NMC JSC ABOUT THE COMPANY ANNUAL REPORT | 2017 Strategic Report STRATEGIC GOAL: In 2017, the Board of Directors of the Company (hereinafter – the Board of Directors) made a resolution to update the Development SUSTAINABLE GROWTH OF THE COMPANY THROUGH REINVESTMENT Strategy of Tau-Ken Samruk NMC JSC for 2017–2026. The Company significantly revised its mission and vision, strategic goals and objectives. Strategic objectives Work performed Plans for 2018 Achieving the planned 18 tons of refined gold were produced. Production of 20 tons of refined gold. The Company’s mission is development of mining and metals sector in the Republic of Kazakhstan through successful operational efficiency of launched 15.7 thousand tons of metallurgical silicon were Production of 20.6 thousand tons of implementation of investment projects and efficient operation of priority solid minerals assets based on sustainable development investment projects. principles. produced. metallurgical silicon. Search for promising deposits Criteria for selection of promising deposits were Detailed analysis of the prepared list Vision determines the Company as a driver of mining and metals industry development in the Republic of Kazakhstan, where of priority solid minerals with updated; a list of promising deposits was drawn up with the aim of discovering promising meaningful and complex deposits are developed with involvement of best technologies and partners. a sufficient degree of explored in accordance with the approved criteria.