Tau-Ken Samruk - Investment Opportunities in Kazakhstan

8/17/2019 Tau-Ken Samruk - Investment Opportunities in Kazakhstan

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Investment opportunities in Kazakhstan’smining sector

National Mining Company“Tau- Ken Samruk” JSC


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Macroeconomic overview

2Investment opportunities in Kazakhstan’s mining sector

The economy of Kazakhstan is the largesteconomy in Central Asia and one of the fastest

growing economy among the former Soviet Unionrepublics.

The mining industry, along with oil and gas,dominates the Kazakhstani economy.

Kazakhstan’s economy is mainly export-oriented.The major export product are natural resources.

The highly developed banking system, stableinstitutions and investment-friendly government

policies further encourage foreign investment.Foreign direct investments (FDI) into Kazakhstanaccount for about 80 % of all capital inflows into theCentral Asian economies.

18 22 25 3143

5781

104127

13,1%11,5% 12,1% 12,1%

13,6%

15,8% 16,1%

14,8%12,5%

2000 2001 2002 2003 2004 2005 2006 2007 2008

GDP, bln USD Mining industry, % of GDP

Nominal GDP growth dynamic, bln. USD

FDI inflows, bln. USD

1 7593 522

5 414 6 6437 5935 177 1 682

2 003

5 050 2 6251 381

1 414

3 206

6 761 9 859

2000 2001 2002 2003 2004 2005 2006 2007 2008

Geol ogic al expl oration Crude oil production Other 73%

15%

4%4%

2% 2%

Mineral resources

Non-precious metals

FMCG

Chemical goods

Other

Equipment

Export breakdown in 2008


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Investment attractiveness of Kazakhstani market


Dynamic economic growth;

Stable political system;

Skilled and relatively cheap labour. Kazakhstan was a “pearl” of mining industry in the former Soviet Union;

Attractive geographical location - close to the large markets of China and Russia;

Kazakhstan is a rich country in terms of volume and variety of mineral resources;

According to the analysis of World Bank and IFC, Kazakhstani tax regime is considered as the most

attractive among other CIS countries.

Kazakhstan Russia Ukraine UzbekistanTax regime attractiveness

In the global ranking 49 134 180 162Tax payments

Number of corporate tax payments in year 16 70 178 179

Time spent on tax complianceNumber of hours spent per year on taxcompliance 111 155 172 68

Total tax rate (for payment of all taxes andduties)

In percent of operating profit 65 123 147 173

Source: “Paying taxes 2009 – The global picture” World bank, IFC


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Metals and Mining industry


Kazakhstan has a long traditions of metals and mining production based on its reach geology. The country isamong the richest countries in terms of the volume and variety of natural resources. In terms of the miningvolumes Kazakhstan takes the 13-th place among the 70 world mining leaders. Kazakhstan possesses one of the world’s biggest reserves of various metals and minerals including copper, iron ore, coal, gold, chromite,lead, zinc, manganese, titanium, cadmium and uranium.

Kazakhstan’s share in the world reserves of metals : Chromite ore - 30% Manganese ore - 25%

Iron ore - 10% Copper - 10% Lead and Zinc - 13%

Currently Kazakhstan takes the 15-th place in theworld in terms of copper production, 7-th place –zinc, 8-th place – lead, 3-rd place – titanium, 13-thplace – iron ore and 35-th place in terms of steelproduction.


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Potential for growth


Kazakhstani metals and mining industry still has considerable potential for further growth. Only 10%-15%of Kazakhstan’s explored reserves are in operation.

Iron ore – only 19 (out of 55) large deposits are in operation;

Manganese ore – only 10 (out of 34) large deposits are in operation;

Chromite ore – only 13 (out of 20) large deposits are in operation;

Gold – only 75 (out of 282) deposits are in operation.

Currently Government is formulating a project of Accelerated Industrial and Innovative Development of Kazakhstan for the period of 2010-2014. According to the program, metals and mining sector of Kazakhstanshould double its production and significantly increase share of value-added products by 2015 . Totalvolume of investments in metallurgical and infrastructural projects could potentially reach 13 bln. USD.


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Tau-Ken Samruk company overview

HistoryJSC “National Mining Company “Tau -Ken Samruk” was established underthe Resolution of the Government of the Republic of Kazakhstan dated15 January 2009 No. 10. Tau-Ken Samruk is a national operator of government assets in the metals and mining industry of Kazakhstan.

Mission statementTo promote the growth of Kazakhstan's economy and its competitivenessthrough participation in exploration, mining and processing of solidmineral resources projects in cooperation with private sector.

Strategic prioritiesImprovement of subsoil use effectiveness by introducing innovative

technologies in exploration, mining and processing of solid mineralresources , including unexplored deposits and technogenetic mineralresources (industrial wastes).

Growth of metals and mining assets by restoration of distressed assetsvalue, costs optimization and use of higher level of mineral resourceprocessing.

Growth of government participation in metals and mining industry.



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Activity instruments


Long-term strategic focus of Tau-Ken Samruk is the creation of vertically integrated national metals andmining holding in Kazakhstan. Status of national company implies Tau-Ken Samruk a number of advantages in operations on the Kazakhstani market.

Recently Ministry of Energy and Mineral Resources of Kazakhstan has imposed a range of restrictions onsubsoil use rights . Tau-Ken Samruk has Direct negotiations right with a competent body to get explorationand mining rights for deposits that are in the State ownership.

Opportunity to exercise the State priority right to acquire the alienated subsoil use right (or a part

thereof) and (or) interest (block of shares) in legal entities that are subsoil users (according to Article 71 of the Law of the Republic of Kazakhstan “On subsoil and subsoil use”) .

Mandate to work with distressed companies/assets in metals and mining industry.

Management of the transferrable State blocks of shares/interests in metals and mining companies.


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Sources of financing


Tau-Ken Samruk as Kazakhstani National Mining Company and 100% subsidiary of JSC “National Welfare

Fund “Samruk-Kazyna ” has following additional sources of external financing:

Financing from affiliated company – Development Bank of Kazakhstan on favorable conditions;

Direct financing from JSC “National Welfare Fund “Samruk-Kazyna ” on early stages of investment

projects realization;

Attraction of direct investments through participation in authorized capital of subsidiaries of JSC “Tau -

Ken Samruk ”;

Attraction of borrowings for investment projects realization purposes under corporate guarantee of

parental company JSC “National Welfare Fund “Samruk-Kazyna ”.


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Opportunities for cooperation with Tau-Ken Samruk


The main opportunity for cooperation with Tau-Ken Samruk is the mutual realization of mining projects on the basis of free nonoperating deposits in Kazakhstan

Advantages of mutual cooperation: Realization of exploration and exploitation projects on the basis of deposits with high potential of

reserves discovery would allow to provide an additional resource base for current and prospectivemetallurgical production facilities of both parties.

Introduction of new technologies aimed to increase mining and processing operations effectiveness.

Market capitalization growth for both companies .


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Analysis of mineral base


Natural resource

type

Number of free

depositsGold 60

Coal 43

Titanium, zirconium 6

Iron, manganese 38

Bauxite 16

Molybdenum,tungsten 16

Copper 79

Rare metals 16

Barite 5

Vanadium 2

Wollastonite 3

Tin 5

Nephelinic syenite 1

Chrome 10

Nickel 30

Tau-Ken Samruk has carried out an analysis of current situation of

Kazakhstan’s mineral base. As a result, about 330 free non-operating deposits of solid mineral

resources have been defined.

In order to provide more detailed analysis of reserves potentialand geological structure of solid mineral resources deposits, 59geological data packages were purchased from competent authority.

On the basis of current data of mineral base and trends in metalsand mining industry, Tau-Ken Samruk have conducted an analysis of market conditions and prospects of industry development.

For the purposes of potential projects selection the list withproject’s main criteria and requirements have been developed.


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Projects selection criteria


Compliance of the project to the main strategic goals of the

Company;

Availability of required minimum amount of reserves of solid

mineral resources and perspective of their increase;

Availability of industrial infrastructure, favorable geographic

location and economic environment in the deposit area (subsoil

object);

Favorable mining and technical conditions for the deposit

development;

Existence of the necessary financial, technical and labor resources,

high technical and economic parameters of the project.


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Potential partner selection criteria


Requirements

to thepartner

# Criteria

1 Sufficient experience in the metals and mining industry

2 Existence of sufficient financial, production and

technological resources3 Availability of skilled personnel

4 Absence of significant borrowings

5 Lack of trials and collateral

6 Other requirements in accordance with internal acts of“Tau -Ken Samruk” JSC

The following criterias are designed for potential strategic partner (nonfinancial organization)in case of mutual realization of the project


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Project implementation


When specifying the participation structure in the project Tau-Ken Samruk follows the

principle of own interests protection and respect of the interest of a potential partner. Projectparticipation and financing structure is specified on a case-by-case basis.

Realization of metals and mining projects with potential partner could be done under schemeof cooperation, where Tau-Ken Samruk provides subsoil use rights and access to financingsources, while strategic partner contributes to JV necessary funds, equipment andtechnologies, experience and other material and nonmaterial assets.

Tau-Ken Samruk:a) Subsoil use rights

b) Access to financing sources

Potential partner:a) Funds

b) Expertise and technologiesc) Equipment and other assets

JVmetals and mining

project


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Disclaimer and Contacts


Disclaimer

The information contained in this profile isintended to provide prospective investorswith a preliminary understanding of theinvestment opportunity.

Every potential investor must make its ownindependent assessment of this opportunity.

Analytical materials are based on publiclyavailable resources that are believed to bereliable, but we cannot claim that they are

absolutely correct.

We take no responsibility for the use of thisinformation.

Contacts

Mr. Nurlan ZhakupovManaging DirectorJSC National Mining CompanyTau-Ken SamrukPhone: +7 71712 500 651Email: [email protected]

Mr. Yerlan RamazanovHead of Investment and AssetsManagement DepartmentJSC National Mining CompanyTau-Ken SamrukPhone: +7 7172 500 684Email: [email protected]
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Tau-Ken Samruk - Investment Opportunities in Kazakhstan

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