Business Plan For The Development of Kogadyr-6 Deposit

Business plan for
the development of Kogadyr-6 deposit
November 2017
Kogadyr-6 deposit
Project summary
Project overview Market factors

The Project provides for the mining of gold ore at Kogadyr-6 deposit in Dzhambul Gold consumption in the world is growing every year. Gold is used in alloys with
Oblast and the increase of processing capacity through the construction of a gold other metals, as well as in the aviation, space and medical industries, in radio
recovery plant (GRP). equipment and electronics. A significant portion of gold is used in jewelry and
According to SRK Consulting (JORC methodology), reserves of Kogadyr-6 deposit plays the role of main currency metal.
amount to 34.9 tonnes of gold. An industrial analysis shows domestic production can not meet the demand for
gold.
Project location
Gold in Kazakhstan is mainly used for the replenishment of the country’s monetary
Kogadyr gold deposit is located 20 km north of Kyrgyzstan and 40 km north of reserves. Gold for this purpose is produced by three refineries using various
Bishkek. refining technologies: Kazzinc in Ust-Kamenogorsk, Kazakhmys in Balkhash and
The nearest village of Kogadyr in Dzhambul Oblast is located 5 km northeast of state-owned plant Tau-Ken Altyn in Astana. The volume of refined gold in
the deposit. The administrative center is the city of Kordai with a population of Kazakhstan grows annually by an average of 10%. Its volumes reached 31 tonnes
about 27,000 people, which is located 22 km south of the deposit. in 2016. According to expert estimates, refining output may reach 80-90 tonnes by
2020.
Project investment attractiveness Domestic refineries pursue an active marketing policy with competitive tariffs for
subsoil users, which helped redirect supplies of gold-bearing rock from other
Index US$ thousands
destinations to Kazakhstan. The total annual production capacity of these refineries
Investment 111,362 makes up 130 tonnes per year.
Project NPV 163,521 Low cost of production is achieved due to cheap raw materials (resources and raw
IRR 53.9% materials account for 69% of total production costs). With an estimated gold
EBITDA return 42% reserves of 1,160 tonnes (1.8% of world reserves) and an ore grade of more than
Payback period, years 3.5 6.3 g/t, Kazakhstan is ranked 10th in the world or 3rd in the CIS (after Russia and
Discounted payback period, years 3.9 Uzbekistan).
© 2017 Deloitte TCF, LLP Business plan for the development of Kogadyr-6 deposit 2
General information and Project
overview
Kogadyr-6 deposit
Project overview and objective
Details Overview
Sector: Mining and smelting The Project provides for the mining of gold ore at Kogadyr-6 deposit in
Activities: Gold ore mining Dzhambul Oblast and the increase of processing capacity through the
construction of a gold recovery plant (GRP).
Originator: Ordabasy Group
The Energy Transmission Line-35 having a length of 12 km, a substation with a
Product: Dore gold
capacity of 2,500 kW, a crushing and agglomeration shop, a repair and
Production process: mechanical shop have been currently commissioned at the deposit. A camp for
1. Mining a hundred residents has been built for employees.
• open mining – development of oxidized zone; One of the foundations for financial soundness of a state is the country’s
reserves, which are mainly concentrated in central banks and where gold plays
• underground mining - development of underlying reserves (mine).
a vital role. There are about 33,426 tonnes of gold in the world, of which
2. Production 10,786 tonnes are concentrated in the Eurozone countries, including the
European Central Bank.
• Processing of gold ores into Dore gold
It is important to note that the demand for gold is currently growing in
3. Gold refinery Kazakhstan and world prices for precious metals are rising. The main gold
• Gold recovery (99.9%) from Dore gold consumer in Kazakhstan is the National Bank, which over the last five years
has been increasing its gold and foreign currency reserves, precious metals in
Project goals:
particular.
Create an effective integrated business to mine and sell gold in Kazakhstan;
According to preliminary data of the National Bank as of the end of May 2017,
Create a high-quality, export-oriented and competitive product through the use the gold portfolio amounted to about 275 tonnes. Participation of the National
of advanced proven production technologies; Bank in the gold market is recognised as a positive factor for domestic
Develop huge export potential of Kazakhstan to make the country a producers as gold production and supplies became continuous.
respectable player in the world gold market, ensuring stable, large-scale The project stipulates open mining of gold ore in the oxidized zone with the
supplies. heap leaching to be used to process oxidized ores;
The business plan covers Project marketing, management and financial
aspects.
Kogadyr-6 deposit
Investment plan
CAPEX and working capital investment for Kogadyr-6 deposit
Index US$ thousands
Capital expenditures (Year 1 + Year 2 + Year 3) 103,700
Gold recovery plant 100,000
Buildings and structures 10,000
Machines and equipment 52,000
Others 38,000
Mining equipment 3,700
Investment in working capital 7,662
Total investment in fixed assets and working capital 111,362
Project implementation timeline for Kogadyr-6 deposit
Year 1 Year 3 Year 13
Average growth rate – 22%

Capital expenditures - Investment in working capital –
US$ 103,700 thousand US$ 7,662 thousand EBITDA return – 42%
Net profit return – 22%
Construction period Production period Sales period
Kogadyr-6 deposit
General information about the Company, an owner of subsoil use rights
Central Asia Gold
100%
Central Asia Gold Corp. Central Asia Gold Production
Deposits
Southern Hub
(Kogadyr) deposit
Kogadyr-5 Kogadyr-6 Kogadyr-7

Karakoz deposit Kurchum deposit
Kogadyr-8 Kogadyr-9 Yuzhny
Central Asia Gold Corp. (CAGC), a subsoil company, has been operating since Central Asia Gold Production (CAGP), a processing company, is an operator of
2013. CAGC is a part of Central Asia Gold Group. The company’s main activity is the existing gold processing complex in Kordai district, Dzhambul Oblast. The
extraction of precious metals and other rare metals. company processes gold ore mined at Kogadyr deposit with subsequent production
As a subsoil company, CAGC owns a subsurface use contract for Kogadyr of Dore gold.
(Southern Hub) gold deposit in Dzhambul Oblast.
Kogadyr-6 deposit
General information about deposit
Resource evaluation
Kogadyr-6 is the only deposit among others where gold ore is mined. The company currently produces Dore bullions at its own processing plant. In
Kurchum and Karakoz deposits were under exploration when we prepared the 2016, the company bought a new crushing unit, which is expected to increase
analysis. The latter was planned to be returned to the State due to the current production capacity of the enterprise.
unsatisfactory geologic exploration activities. In 2016, CAGP produced more than 2 thousand ounces of gold, which is almost 2
Gold ore at Kogadyr-6 deposit is produced through open mining. According to times higher than in the previous period. This increase is attributed to the test
SRK Consulting’s report, the total gold reserves calculated based on JORC commissioning of the new crusher.
method amount to 34.9 tonnes with an average grade of 1.15 grams per tonne The company is currently works to transfer inferred reserves into the category of
of ore. identified reserves.
Status of gold ore and gold reserves of Kogadyr-6 deposit as of May 1, 2017
According to approved data, reserves of gold ore
Ore Au Contained Metal Contained Metal and gold from Kogadyr-6 deposit are sufficient for
Class Type
(Mt) (g/t) (koz Au) (tones Au)
more than 60 years.
Transition
Measured
Fresh
Transition 4.1 0.91 120 3.7
Indicated
Fresh 7.9 0.98 248 7.7
Subtotal Measured + Transition 4.1 0.91 120 3.7

Indicated Fresh 7.9 0.98 248 7.7
Transition 0.7 1.12 25 0.8
Inferred
Fresh 17.7 1.28 730 22.7
Transition 4.8 0.94 145 4.5
Total Measured + Indicated
+ Inferred Fresh 25.6 1.19 978 30.4
Kogadyr-6 deposit
Geographical and economic features of the region
2
Kogadyr-6 deposit Energy supply and gas pipeline in the region
Electricity is generated by Emba Substation (110 kV). The deposit is located
close to the Bukhara-Ural gas pipeline.
3
Water sources
The source of utility and drinking water is a water well located in an
industrial site. Furthermore, water is supplied by Kordai Su.
4
Railway and motor transport
The deposit is located near the Turkestan-Siberian Railway (Turksib),
which is used to transport ore and deliver materials and fuel for production
purposes. Kogadyr-6 mine is located about 22 km north of the city of
Kordai.
Kogadyr gold deposit is located 20 km north of Kyrgyzstan and 40 km north of

Bishkek.
5
The nearest village of Kogadyr in Dzhambul Oblast is located 5 km northeast of the Production enterprises
deposit. The administrative center is the city of Kordai with a population of about Kenen-Atameken-2017, an agricultural production cooperative producing iron
27,000 people, which is located 22 km south of the deposit. ore through open mining, and Aktas LLP, a company mining precious metals
By the nature of mineralization and ore saturation, the deposit has two and ores of rare metals, are operating at Kogadyr deposit.
distinguishing areas: southern and northern.
1 Local climate
The region is characterized by a variable climate with cold winters and hot,
dry summers. Temperature in winter is -10°C, in summer it varies from 6
Human resources
The geographical proximity (25 km from the deposit) of the city of Kordai
with a population of about 27,000 people excludes any difficulties with the
20°C to 30°C, sometimes reaching 40°C. The climate is mild in spring and
autumn. Annual precipitation varies from 450 to 510 mm. employment of personnel.
Kogadyr-6 deposit
Gold (product of the deposit)
Gold
Gold is the 11th chemical element in the
periodic table. It is a yellow metal that Grade of ore
does not interact with most acids and has
a stable isotope. Gold is the basis of the Kogadyr-6 deposit
international monetary system, but at the Gold ore at Kogadyr-6 deposit is produced
same time it is not used as a medium of through open mining. Gold grade is 1.15
exchange. Furthermore, gold is a non- g/t
consumable commodity stable to the
influence of external factors.
Final product
Types of gold ores from given Dore gold is the final product of the
deposit deposit, which is sold to Tau-Ken Altyn
Refinery under the existing agreements.
All the gold mined at Kogadyr-6
deposit is a free gold or gold clusters.
Kogadyr-6 deposit
Production process
Technical process
Given that all deposits of the group have the same material composition and • heap leaching is used to process oxidized ores;
location of ore bodies, the extraction and processing methods are identical for all • construction of a flotation mill will help achieve a gold recovery rate of 90-
potential deposits of Kogadyr: 95% after processing.
• open-pit mining is used to extract oxidized ores;
Development prospects
Receiving hopper Ore Bedding
Crushing&Agglomeration Shop
Warehouse
Flotation Mill
A C H
ore of planned grade

is delivered directly to the
flotation concentrate
Cr2
Crushing&Agglomeration Shop
S
Cr1 - crusher Osborn
Cr2 - crusher Osborn Concentrate Leaching
C C - conveyor
S - screen Workshop
(pressure, biological leaching,
Cr1 H - receiving hopper
A - agglomerator sorption cyanidation,
pyro-metallurgical processing)
Hydrometallurgical Shop
Heap leach pads (HLP)

Gold Refinery
Gold ores
Dore gold
Kogadyr-6 deposit
Production process
Basic machineries and equipment for deposits
Basic machineries and equipment for Kogadyr-6 1

deposit
1. Receiving hopper 2 3
2. Plate feeder PP2 15/30
3. Crusher (Osborn Roller Bearing 3042) 4
5
4. Conveyors SMD 152-50
5. Screen (Osborn 6 x 20)
6. Crusher (Osborn 44 SBS)
7. Belt scales 14
8. Bin (cement dump)
9. Drum granulator OB-22-10
10. Solution feeding tank 6
10
11. Hopper
8
12. Stacker (ore stacker)
13. Ore stockpile
14. Control room
7
Production capacity
9
13
Kogadyr-6 deposit
12
Ore extraction capacity: 1
The company’s production capacity is 300 thousand tonnes 1
of ore per year with a gold grade of 80% in the alloy.
Jubilee deposit
State investment support
State program - Productivity -2020: Export 2020 Development and Promotion

• subsidies to cover costs for the Programme. Compensation of 50% of costs
development or examination of an associated with operations on foreign market:
investment project comprehensive plan; • Arrangement of trade missions, participation in
• subsidies to pay a long-term leasing international exhibitions;
financing; • Arrangement of unified national stand;
• innovation grants. • Trainings on export activity, subcontracting;
• Promotion of domestic trademarks in foreign
markets (goods and services).
Business Road Map-2020:

• Fixed subsidies for 3 years at an annual
rate of 7% of the loan/leasing interest
rate;
• Noble (precious) metal production is
recognised as a priority sector of the
Reimbursement of 50% of costs for advertising
economy for potential program
of domestic products abroad:
participants.
• costs for direct participation in foreign exhibitions;
• development and publication of catalogues;
• support of a representative office, sales outlet, and
warehouse abroad;
• costs for registration of trademarks and products
abroad;
• costs for certification of products abroad.
Source: Baiterek National Holding https://business.gov.kz/ru/
Jubilee deposit
State investment support
Concessions for priority investment projects

Priority investment project is an investment project implemented by a newly Priority investment projects are guaranteed stability in tax laws and laws
established legal entity engaged in certain priority activities and stipulates governing the recruitment of foreign labour.
investment of at least 2 million of monthly calculation indexes valid as of the date
when an investment concession application was filed.
Type of concessions
Equipment and Land plots and

its parts buildings
Concessions
Tax duties and

Grants
import VAT - 0%
Machinery and
Raw materials
equipment
Tax exemption
Land tax Property tax

(up to 10 years) (up to 8 years)
Corporate income
tax
(up to 10 years)
Source: Kazakhstan Entrepreneurial Code dated October 29, 2015, No. 375-V
Macroeconomic section
Investment climate in Kazakhstan
Doing Business 2017 rankings
Doing Business index based on 2016 results

According to annual ranking on the ease of doing business conducted by the World
Doing Business Bank Group, Kazakhstan has taken the lead in the region of Europe and Central
Country Rank change sine 2010
ranking Asia for the second consecutive year in terms of the number of reforms
undertaken to improve the conditions for small and medium-sized businesses.
New Zealand 1 +1 Kazakhstan ranked 35th in the Doing Business global ranking takes the second
position in the list of countries that demonstrated the highest number of
improvements over the last year. Kazakhstan has undertaken reforms in seven of
Singapore 2 -1 ten areas covered by the
Doing Business survey: registering property, dealing with construction permits,
getting electricity, protecting minority investors, trading across borders, enforcing
Denmark 3 +3
contracts, and resolving insolvency.
… … …. The efforts of the Government on fundamental improvement of the business
climate have contributed to Kazakhstan rising in
Japan 34 -19 the Doing Business ranking: measures were taken to improve the business
environment and reduce the administrative pressure on business through
reforming the current legislation, elaborating the regulatory approval system,
Kazakhstan 35 +28 simplifying the procedures for creating a business and optimizing governmental
control and supervisory activities.
Romania 36 +19
… … …
Bulgaria 39 +5
Russia 40 +80
Hungary 41 +6
… … …
Source: World Bank
Market preconditions for the Project implementation
Historical and forecast nominal GDP of Kazakhstan

250 7
Since independence, Kazakhstan has seen stable economic growth and an influx of
foreign investment. State policy of updating economic structure, diversifying and
6.0
6 ensuring competitiveness, together with a favourable investment climate and
200
4.8
growth in demand for raw materials, have secured economic growth.
5 Slowdown of GDP growth in 2015-2016 was due to the fall in global oil prices. Oil
4.2 3.7 3.9
US$ billions
150 3.8 exports are the main component in Kazakhstan GDP. According to Global Insight,
4
total exports from Kazakhstan fell by 20% in this period.
2.8 2.7
100
3 Exports are expected to grow at an average of 9.8% per annum over the following
five years. Growing exports and projected rise in oil prices are expected to push
1.2
2 real GDP growth upward from 2017.
50 1.0
1
KZT devaluation and transition to a floating KZT exchange rate in 2015 also
contributed to the slowdown of GDP growth. Still, it is expected that the budget
208 237 221 184 135 164 178 200 220 237
0 0 revenues will increase due to exports of raw materials sold in US dollars as a result
2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F of KZT devaluation.
The new rate helps balance trade, gradually stimulates exports and puts pressure
Nominal GDP, US$ billions Real GDP growth, %
on consumerism, mostly imports such as vehicles, domestic appliances and others.
Kazakhstan historical and forecast exports and imports Devaluation will also help the development of domestic production in light industry
342
90 320 323 324 323 324 350 and catering, as imports become more expensive.
80
300
70
223 250
60
US$ billions
50 200
KZT/US$
149 152
40 179 150
30
100
20
50
10
49
35
87
49
86
51
80
44
47
34
37
28
44
30
52
38
56
42
60
45
0 0
2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F
Exports, US$ billions Imports, US$ billions Average KZT/US$ rate
Source: Global Insight
Market preconditions for the Project implementation
Historical and forecast average monthly salaries Conclusion

in Kazakhstan
Fall in global oil prices in 2015-2016 has led to significant slowdown in real GDP
800 14.2 20 growth, falling exports and real income
11.6
8.7 15
700 6.8 Subject to increase in oil prices up to US$ 60-70 per barrel, the Kazakhstan
4.6 3.3 10
600 2.7 economy is expected to go back to growth in the medium term.
5
500 -6.0 0 According to Global Insight, 2017–2021 will see the annual GDP growth at 2.5–
-5 3.9%, recovering customer demand and other macroeconomic indicators.
US$
400 -15.3 -10 The reason for the high dependence of the Kazakhstan economy on oil and gas
300 -15 revenues is insufficient diversification of the economy. OECD estimates that
-29.5
200 -20 about 80% of foreign direct investment in Kazakhstan falls on the oil and gas
-25 industry. To strengthen the economy, it is necessary to develop various
100
684 716 673 570 402 459 474 487 520 565 -30 industries. In this regard, the government has initiated a number of programs
0 -35 aiming to support business development and attract investment.
2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F
Average monthly salary, US$ Growth, %
According to EIU, the average monthly salary in Kazakhstan in 2016 was US$
402, showing a 29.5% decrease compared to the previous year.
Decrease in salaries denominated in dollars is largely due to
KZT devaluation.
EIU analysts expect that the average salary will rise by 13% in 2017 (up to US$
459 per month) and continue rising at a moderate rate of 5.4% per annum
(2017−2021 CAGR).
Source: Global Insight, Economist Intelligence Unit
Marketing section
Project market assumptions
Production (fine gold) With an estimated gold reserves of 1,160 tonnes (1.8% of world reserves) and an
ore grade of more than 6.3 g/t, Kazakhstan is ranked 10th in the world or 3rd in the
40 CIS (after Russia and Uzbekistan).
31.0
30 26.7 26.9 In 2013-2016, production of raw gold, semis or gold powder rose from 42.6 to
23.2
63.7 tonnes per year. Over the last 4 years, gold production grew by an average of
tons
20 13% annually until 2016. In the first half of 2017, gold production increased by
10 17% compared to the same period last year.
0
2013 2014 2015 2016
Development of Prices In 2015-2016, there was a 29% increase in prices for 1 kilogram of gold in
KZT mln/kg
Kogadyr-6 deposit Kazakhstan. Furthermore, in the first 6 months of 2017, the average price for 1
kilogram of gold was KZT 12.7 million as compared to KZT 12.0 million (6%) in the
6 months of 2017 12.7 same period of 2016.
6 months of 2016 12.0 Over 35 out of more than 80 registered gold deposits are currently operating in
2016 12.8 Kazakhstan. The quality and grade of ore do not require substantial costs to
2015 9.9 process ore into raw materials suitable for refining (content of precious metals
varies from 10 to 98%).
0 5 10 15
Sales market Kazakhstan is currently the only sales market for gold mining enterprises, where a
gold refinery serves as a gold receiving center. Kazakhstan has three gold
receiving plants, such as Kazakhmys Corporation, Kazzinc, Tau-Ken Altyn. The
total annual production capacity of these refineries makes up 130 tonnes per year.
Tau-Ken Altyn
Overview of gold industry in Kazakhstan
Gold reserves in Kazakhstan
Kazakhstan is ranked 10th in the world for gold reserves, which is 1.8% of world Given the current pace of development, gold reserves in Kazakhstan are
reserves. The country’s estimated gold reserves amount to 1,160 tonnes with an sufficient for more than twenty years.
ore grade of more than 6.3 g/t. Kazakhstan is ranked 3rd in the CIS, after Russia At least 60% of reserves are concentrated in ore veins and 38% are a part of
and Uzbekistan. polymetallic rocks. Most of the gold is currently extracted as a by-product in
The industry is characterized by small and medium-sized deposits, low-grade ore copper mining. According to various estimates, only 40% of gold deposits in
and a significant proportion of refractory (sulfide) ores. Gold deposits are Kazakhstan are economically viable. The country’s government increases
discovered practically in all oblasts of the country, but many of them are not production up to 50 tonnes per year, but the industry requires a capital
developed due to small volumes. Major gold reserves in Kazakhstan are investment of US$ 1.5-2.0 billion in mining and heap leaching technologies.
concentrated in 190 deposits (40% - in complex gold deposits, mostly pyrite Below is the list of the country’s largest deposits.
deposits, and 60% - in gold deposits), of which only 75 deposits are currently
developed commercially.
Reserves Resources
Deposit Company Status
(thousand ounces) (thousand ounces)
Varvarinskoye Polimetal PJSC 1,300 3,100 production
Bakyrchik Ivanhoe Mines 5,760 8,800 development
Akbakay AK Altynalmas JSC 3,320 production
Zholymbet Polyus Zoloto (KazakhGold) 259 2,382 production
Aksu Polyus Zoloto (KazakhGold) 1,801 4,850 production
Bestobe Polyus Zoloto (KazakhGold) 834 1,595 production
Vasilkovskoye KazZinc 7,734 15,992 production
Maleevsky KazZinc 770 1,891 production
Ridder-Sokolny KazZinc 149 995 production
Tishinsky KazZinc 1,000 1,538 production
Kengir Central Asia Resources 127 exploration
Altyntas Central Asia Resources 600 exploration
Kepken Central Asia Resources 411 exploration
Uzboi Alhambra Resources 140 1,160 production
Sekisovskoye Hambledon Mining 116 1,927 production
Suzdal Severstal/NordGold 486 1,401 production
Central region (Abyz, Nurkazgan, Akbastau, Sayak, Shatyrkol) Kazakhmys plc 2,740 11,748 production
Eastern region
(Nikolaev, Artemevo, Irtysh, Belousov, Orlov, Yubileino-Snegirkhinsky, Mizek, Kazakhmys plc 1,010 17,900 production
Mukur)
Source: Kazakhstan Statistics Committee
Gold production in Kazakhstan
During the last five years, Kazakhstan is rapidly increasing gold production in the Output and growth of gold production (raw, semis and powder) in
country. Kazakhstan, 2012-2016
The country’s National Bank replenishes its assets (precious metals), increasing
80 30.0%
the share of precious metals in its gold and foreign currency reserves like Russia, 26.4%
which is among top 10 gold producers. 70
25.0%
The current favourable situation in the gold market makes production of refractory 60 18.3%
sulfide ores commercially viable given the cost of new equipment and existence of
17.1% 20.0%
new biological leaching technologies. Gold production in Kazakhstan is increasing 50
amid the development of major gold deposits.
40 15.0%
30 8.3% 10.0%
6.6%
20
5.0%
39.9
42.6
50.3
63.6
74.6
10
0 0.0%
2012 2013 2014 2015 2016
Total tonnes Annual growth
Production of gold (raw, semis and powder) in Kazakhstan
Kazakhstan is among top 20 gold mining and producing countries. Gold is mined
2016 in Kazakhstan both at primary gold deposits and concurrently as a component of
polymetallic raw materials in the production of non-ferrous metals;
35% 74,737 kg Akmola (35%) and East-Kazakhstan Oblasts (31%) are leaders in the production
26,076 kg
+2.24% +17.5% of raw gold and gold powder;
4%
2,807 kg 31% The rest of production is distributed among Karaganda (11%), Kostanai (4%) and
-0.90% 23,039 kg
-2.87%
Dzhambul (3%) Oblasts;
11%
8,234 kg In 2015-2016, gold production increased by 17.5% or 11,123 kg;
+0.47%
3%
1,909 kg 2015
+0.40%
63,614 kg
Source: Kazakhstan State Revenue Committee
Gold production in Kazakhstan
Overall production of gold ore in Kazakhstan for 2013 - 6 months of 2017, thousands of tonnes
25,000 30% In 2013-2016, the average production of gold ore in
25% Kazakhstan amounted to 16 million tonnes per year.
25% According to Kazakhstan Statistics Committee,
19,049
20,000 overall production of gold ore is constantly growing.
20%
15,897
However, production slightly fell (4%) in 2014-
15,215 2016. 2016 is marked by a maximum increase in
15,000 13,973 15%
the production of gold ore (19 million tonnes per
14% 10% year).
10,000 8,897 8,733
5%
5%
0%
5,000
-5%
-4%
0 -10%
2013 2014 2015 2016 6 m. 2016 6 m. 2017
Total tonnes Annual growth
Overall production of fine gold in Kazakhstan for 2013 - 2016, kg

According to Kazakhstan Statistics Committee,
overall gold production in Kazakhstan has been
growing over the last five years. Production grows
annually by an average of 13.5%. A total of 21.1
tonnes was produced for the first 6 months of 2017
as compared to 23.2 tonnes for the whole 2013.
This means the same volume was produced just for
6 months in 2017 as for the whole 2013. This is due
23.2 26.7 26.9 31.0 21.1 17.1 to the decision of the National Bank to increase the
share of gold in its gold and foreign currency
reserves. The National Bank’s portfolio amounted to
281 tonnes as of June 1, 2017. Since October 2012,
the bank has increased its gold reserves by 167.5
2013 2014 2015 2016 6 m. 2016 6 m. 2017 tonnes.
Changes in average annual prices for gold in Kazakhstan
Changes in average annual prices for gold in Kazakhstan for 2013 - 6 months of 2017, KZT thousands/kg
16,000 350
13,859
13,493
14,000
12,684 12,670 300
12,531
12,000 11,416
250
9,785
KZT thousands/kg
10,000
200
7,917
8,000 7,303 7,442 7,443 7,399
6,820 7,020 7,049 6,946 186
6,657 6,715 183
176
163 166 150
159
6,000 150
126
100
4,000 101
100 97
85 91 90 91 91
78 77
50
2,000
0 0
QI QII QIII QIV QI QII QIII QIV QI QII QIII QIV QI QII QIII QIV QI QII
2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017
Kazakhstan Gold spot price index
Gold prices are dependent both on the US interest rate and the dollar exchange In Q3 2015-Q3 2016, there was a 53% increase in prices for 1 kilogram of gold
rate. Strong US dollar usually leads to a fall in gold prices, depreciating this safe in Kazakhstan. Furthermore, in the first 6 months of 2017, the average price for
asset and making primary commodities more expensive for holders of other 1 kilogram of gold was KZT 12.7 million as compared to KZT 12.5 million (1.6%)
currencies. The interest rate affects the attractiveness of gold, increasing the in the same period of 2016.
opportunity cost of non-profit assets, such as precious metals.
Analysis of historical prices and formation of gold prices
As an exchange commodity, gold has its own

OHLC (OPEN, HIGH, LOW, CLOSE) DIAGRAM OF HISTORICAL PRICES standard code: XAU. Major stock exchanges are the
London Metal Exchange and the New York Stock
FOR GOLD SHARES IN US$ Exchange. The diagram shows historical prices for
the last 10 years. The reference price for gold is
2500 defined by the London Bullion Market Association
(LBMA) in US dollars per troy ounce (31.1035
2000 grams). Since March 20, 2017, the reference price
for gold bullion in London is determined by ICE’s
electronic auction.
1500 Forecasted prices for XAU are calculated based on
technical analysis, cyclical price changes and a
1000 general trend in this market. The high volatility of
this metal is expected in 2018-2022, since the
market is now close to the equilibrium point with no
500 obvious signs of any emerging trend.
0
1997
1999
2001
2003
2005
2007
2010
2012
2014
2016
1996
1998
2000
2002
2004
2006
2008
2009
2011
2013
2015
2017
2018*
2020*
2022*
2024*
2026*
2028*
2030*
2019*
2021*
2023*
2025*
2027*
2029*
Formation of prices
Prices for Dore, cathode, and bullion gold are based on gold quotations at the As the research showed, raw gold is sold at a discount from gold quotations, as
London Metal Exchange. The price for non-refined gold varies depending on the it requires further melting and processing. The size of the discount depends on the
concentration of precious metals in bullions/concentrates. composition of alloy/concentrate.
Source: FX Group Ltd., CNBC
Kazakhstan gold imports and exports in 2016
Russia
Exports
Great Britain US$ 14,144 thousand
487 kg
Imports
Exports US$ 15,780 thousand
US$ 22,000 401 kg
128 kg
UAE
Imports
US$ 4,058 thousand
126 kg
Gold imports to Kazakhstan, 2016 Gold export from Kazakhstan, 2016
In 2016, 1,054 kg of gold for US$ 39,679 thousand was imported to Kazakhstan. In 2016, Kazakhstan exported gold for a total of US$ 28,331 thousand (1,229 kg).
The United Arab Emirates (US$ 4,058 thousand/126 kg) and Russia (US$ 15,780 The main countries importing Kazakh gold were Russia (US$ 14,144
thousand/401 kg) are main gold suppliers to Kazakhstan. A small amount of thousand/487 kg) and Great Britain (US$ 22 thousand/128 kg).
gold was imported from France, Germany, Italy and Japan. Furthermore, in 2016 the country extracted 74.6 tonnes of gold, of which 37.7
tonnes were processed by refineries. The rest of gold ore is exported.
* Import - export of raw gold, semis or powder gold
Source: Kazakhstan Statistics Committee, State Revenue Committee
Analysis of gold imports in neighboring countries
Gold imports by countries
193,909
200,000
142,299
US$ thousands
150,000
89,929,762
65,597,526
78,976,975
63,984,721
100,000
24,723
50,000
19,172
17,356
15,552
6,018
4,152
732
402
169
54
0
0
0
0
0
2013 2014 2015 2016
China Russia Kyrgyzstan Kazakhstan Mongolia Uzbekistan
Analysis of gold imports in countries neighboring Kazakhstan shows a great China imports up to 1,590 tonnes of gold annually. Russia reduced its purchases of
demand for gold in many countries, China in particular. gold since 2016.
Gold imports (kg)
Year China Russia Kyrgyzstan Kazakhstan Mongolia Uzbekistan
2013 1,891,000 1,300 268 8,440 0 0
2014 1,635,000 5,760 414 0 1 0
2015 2,082,903 6,111 379 2 0 0
2016 1,590,307 575 459 128 1 0
Source: UN COMTRADE Statistics
Export potential
China Russia
In 2016, gold imports amounted to 1,590 tonnes In 2016, gold imports amounted to 575 kg.
Gold imports to China, 2016 Gold imports to Russia, 2016
USA Singapore Italy Others

4% 3% 4% 3%
Others
5% Belorussia
7%
Australia
10%
1,590,307 kg Switzerland 575 kg

South 49%
Africa
13%
Kazakhstan
Hong Kong 86%
16%
In 2016, China was ranked second in the world for gold imports (15%) after Kazakhstan is currently one of the main gold exporters in the Russian market
Switzerland (25%); (86%). However, this index is insignificant;
The main supplier of gold in China is Switzerland, which accounted for 49% of the Belarus, Italy and many other countries are also among exporters. However,
market or 778 tonnes in 2016; similar to Kazakhstan, their exports are insignificant;
Hong Kong is the second important player in the market, which accounts for 16% Given the proximity of our states and loyal customs relations, in contrast to other
of all gold imports; countries, Kazakhstan has a huge potential for selling Kazakh gold in the Russian
In addition to the population, industrial enterprises manufacturing gold-based market.
products are main consumers of gold in China;
A strong demand is expected in the gold market of China, as well as all over the
world. Given the proximity of our states, Kazakhstan can become a serious player
in the Chinese market.
* Import of raw gold, semis or powder gold
Export potential
Kyrgyzstan Mongolia
In 2016, gold imports amounted to 459 kg. In 2016, gold imports amounted to US$ 10,915 (less than 1 kg).
Kyrgyzstan is rich in gold ore Like any other state, Mongolia needs
resources and has its own production; resources, such as gold;
France Germany
0% However, Kyrgyzstan doesn’t use its 17% In 2016, gold was imported by
sale potential due to a number of Switzerland (83%) and Germany
reasons, and Kazakhstan can (17%);
contribute to the development of the The sale of gold by Kazakhstan, which
neighboring state through the export is neighboring Mongolia, will
459 kg US$
of necessary resources. significantly reduce the cost of gold for
10,915
the Mongolian population.
Kazakhstan Switzerland
100% 83%
Uzbekistan Turkmenistan
In 2016, gold imports amounted to US$ 4,690 (less than 1 kg). In 2016, gold imports amounted to US$ 798 (less than 1 kg).
Similar to Kyrgyzstan, Uzbekistan is
rich in gold ore resources and has its In 2016, gold was imported to
own production; Turkmenistan only from Turkey;
However, Uzbekistan doesn’t use its Kazakhstan has a potential to export
sale potential, and Kazakhstan can products to Turkmenistan given the
contribute to the development of the relative proximity of our states.
US$ 798
neighboring state through the export
US$ 4,690
of necessary resources.
Russia Turkey
100% 100%
* Import of raw gold, semis or powder gold

Changes in gold ore imports and exports in Kazakhstan
Changes in gold ore imports and exports in Kazakhstan, 2010-2016

160,000
139,255
140,000
120,000
104,168
100,000
84,277
80,000
60,000 54,728
40,000 31,918 31,771

23,488 24,787 22,856
17,520
20,000 9,691 11,397
0 1,818
0
2010 2011 2012 2013 2014 2015 2016
Import, tonnes Export, tonnes
Ore imports to Kazakhstan Ore exports from Kazakhstan

Gold ores are the main raw material for the production of Dore or cathode gold. Kazakhstan along with other CIS countries has a developed gold mining industry,
The diagram above shows the imports increased by an average of 93% per year sufficient reserves of gold ore and an excellent sale base, which enable the
from 2010 to 2014. However, during this period 80% of ore was delivered from country to export small amounts of ore. In 2010-2014, ore exports from
Kyrgyzstan due to its huge resources (3rd among the CIS countries), and Kazakhstan increased by an average of 39% per year. This trend changed with
relatively low prices for ore. In 2014-2016, there was decrease in imports, for the commissioning of state-owned refinery Tau-Ken Altyn on December 19,
which the main reason may be the decision of the Kyrgyz Government to 2013. The decisive factor preventing gold ore exports from Kazakhstan is the
replenish its gold reserves. Law on Precious Metals and Precious Stones signed by the President of
Kazakhstan on January 14, 2016. The law specifies main concepts, ‘investment
gold’ in particular, and encourages gold mining companies to process gold at
domestic refineries and replenish the country’s national reserves.
Changes in gold ore imports and exports in Kazakhstan
Kazakhstan National Bank’s priority right of redemption
One of the foundations for financial soundness of a state is the country’s

reserves, which are mainly concentrated in central banks and where gold plays a
vital role. There are about 33,426 tonnes of gold in the world, of which 10,786
tonnes are concentrated in the Eurozone countries, including the European
Central Bank. According to the World Gold Council, the world leaders in gold
reserves are the USA (8,134 tonnes), Germany (3,377 tonnes), Italy (2,452
tonnes), France (2,436 tonnes), China (1,843 tonnes) and Russia (1,687
tonnes). The International Monetary Fund has 2,814 tonnes of gold.
According to preliminary data of the National Bank as of the end of May 2017,
the gold portfolio amounted to about 275 tonnes.
In 2011 the National Bank of Kazakhstan was granted a priority right to purchase
fine gold in order to replenish its assets denominated in precious metals. This
assumes that all entities involved in the production of precious metals and
persons, who have become owners of fine gold after processing (in other words,
producers), should first offer gold to the National Bank, which in turn approves
its purchases for the coming half-year based on the fine gold production and
sales forecast. Furthermore, the priority right enables producers to supply fine
gold to the National Bank with the prepayment for future supplies.
Since the exercise of the priority right, the National Bank has bought about 157
tonnes of fine gold from domestic producers. The priority right allows to
accumulate gold as an asset within the country, while before the most of gold
was exported from the country. Participation of the National Bank in the gold
market is recognised a positive factor for domestic producers as gold production
and supplies became continuous.
Sales market
Potential suppliers and buyers
Refineries Sale of bullions to the population
Given the specifics of the market and product, the only consumer of raw, cathode In 2017, the National Bank of Kazakhstan announced a program to sell and
and bullion gold are refining enterprises, which in turn produce refined bullions or repurchase gold weighted bullions for the population.
coins. Kazakhstan currently has three refineries that practice different refining Gold bullions are sold through second-tier banks - Halyk Bank of Kazakhstan,
methods to process gold and silver. Eurasian Bank and Tsesnabank. The initial stage of the program covers only four
cities, where it is possible to buy and sell bullions. They are Astana, Almaty, Ust-
KazZinc (Ust-Kamenogorsk) Kamenogorsk and Atyrau. The main factor ensuring the liquidity of the gold
bullions market is the possibility of their repurchase by second-tier banks with the
payment on the same day.
Tau-Ken Altyn (Astana)
Kazakhmys Corporation (Balkhash)
Convenient geographic location of refineries significantly reduces logistics costs for

mining companies.
Sales market
Gold Refinery
Tau-Ken Altyn (Astana) KazZinc (Ust-Kamenogorsk) Kazakhmys Smelting (Balkhash)

Method: Method: Method:
electrochemical method; chloride technology based on chlorazotic acid; Miller method;
Production capacity: Production capacity: Production capacity:
With the sufficient volume of raw materials, the Over the last 5 years, KazZinc has increased capacity The estimated capacity of Kazakhmys’s refinery is
production output of refined precious metals can of its refinery up to 52 tonnes of gold. about 50 tonnes of gold.
reach 70 tonnes per year. Types of commodities containing precious Types of commodities containing precious
Current output – 18 tonnes of gold. metals: metals:
Types of commodities containing precious non-refined precious metals (including Dore bullions, non-refined precious metals (including Dore bullions,
metals: cathode metals), zinc sediments; scrap jewellery; cathode metals), zinc sediments; scrap jewellery;
non-refined precious metals (including Dore bullions, precious metal ores and concentrates; non-ferrous precious metal ores and concentrates; non-ferrous
cathode metals), zinc sediments; scrap jewellery metal ores, concentrates and ashes, semi-finished metal ores, concentrates and ashes, semi-finished
non-ferrous products containing precious metals. non-ferrous products containing precious metals.
Source: Adilet Information and Legal System
Environmental analysis
Resources
Largest deposits Company Status
(thousand ounces)
Kazakhstan
Eastern region
(Nikolaev, Artemevo, Irtysh, Belousov, Orlov, Yubileino-Snegirkhinsky, Mizek, Kazakhmys Corporation 17,900 Production
Mukur)
Vasilkovskoye KazZinc 15,992 Production
Central region
Kazakhmys Corporation 11,748 Production
(Abyz, Nurkazgan, Akbastau, Sayak, Shatyrkol)
Bakyrchik Polimetal PJSC 8,800 Pending operation
Kazakhaltyn Mining and
Aksu 4,850 Production
Metallurgical Company
Akbakay AK Altynalmas JSC 3,320 Production
Varvarinskoye Polimetal PJSC 3,100 Production
Zholymbet 2,382 Production
Sekisovskoye Hambledon Mining 1,927 Production
Maleevsky KazZinc 1,891 Production
Bestobe 1,595 Production
Tishinsky KazZinc 1,538 Production
Suzdal Severstal/NordGold 1,401 Production
Uzboi Alhambra Resources 1,160 Production
Ridder-Sokolny KazZinc 995 Production
Altyntas Central Asia Resources 600 Exploration
Kepken Central Asia Resources 411 Exploration
Kengir Central Asia Resources 127 Exploration
Over 35 out of more than 80 registered gold deposits are currently operating in
Kazakhstan. They number is growing.
Environmental analysis
Resources
Largest deposits Company Status
(thousand ounces)
Russia
Natalkinskoye Polyus Zoloto 48,000 Pending operation
Sukhoy Log State-owned 33,000 Reserved
Nezhdaninskoye Polyus Zoloto 15,000 Pending operation
Olympiada Polyus Zoloto 12,000 Production
Blagodatnoye Polyus Zoloto 7,000 Pending operation
Kupol Kinkross Gold Corporation 1,684 Production
Uzbekistan
Navoi Mining and Metallurgical
Muruntau 176,370 Production
Plant
Kyrgyzstan
Kumtor Centerra 3,456 Production
Mongolia
Oyu-Tolgoi Turquoise Hill Resources 46,300 Production
China
Jinfeng - 5,467 Production
Baguamiao - 3,215 Production
Axi - 2,250 Production
Given the large number of gold mining enterprises in Kazakhstan and neighboring Kazakhstan has currently about 80 gold deposits. However, most of them are
countries, we can assume that refineries of the region are highly overloaded. either at the preparatory stage or not operated at all.
Financial section
Kogadyr-6 deposit
Financial data
Main assumptions Basic products

The forecast period is 13 years until 2030 given the terms of the current subsoil
use contract. The main source of income is from the sale of Dore gold.
However, it is possible to extend the contract for further development of the Production output in Year 3 will reach 134.8 thousand
deposit. ounces of gold (99%) per year.
All cash flows were expressed in nominal terms (i.e. inclusive of inflation) in US$,
less VAT.
The expected project start date is January 2018. The Project will be implemented
Revenue forecast, US$ thousands
in two stages.
Stage one is the construction period, stipulating the construction and purchase, Index Year 3 Year 4 Year 5 Year 12 Year 13
assembling and installation of necessary equipment. Construction will last for 36
months. Revenue,
179,374 175,924 179,822 208,332 212,532
US$ thousands
Stage two is the production period, which involves the mining and purchase of raw
materials and their subsequent processing. EBITDA margin, % 49% 45% 44% 37% 37%
The average sales price of Dore gold in the domestic market is equivalent to the
market price on the London Stock Exchange. Prices were indexed for forecast The EBITDA margin of the Project varies between 35-49%.
inflation in Kazakhstan.
The WACC is calculated using a CAPM and amounts to 13.27%.
In calculations we assume that the Project will receive a number of preferences
and investment subsidies to reimburse some costs for equipment acquisition.
Source: Deloitte analysis
Kogadyr-6 deposit
Cost of goods sold
Cost structure, Year 3
Production costs of the gold recovery plant make up a

Processing,
Cost of processing, Processing costs,
large part of all costs - 61% in Year 3;
thousands of
US$/t US$ thousands Processing capacity will be 3,000 thousand tonnes of
tonnes
ore;
Cost of processing in Year 3 will amount to
3,000 17 52,240 US$ 17 per tonne of ore.
Gold recovery
plant
61%
POL 160
Electricity 369
Production costs of the crushing and agglomeration
Oils and filters 432
shop (CAC) account for 8% of total costs;
Crushing and Payroll 606
The largest portion of costs accounts for auxiliary
agglomeration Others 805 materials and spare parts (51%);
complex
Cement 1,023
8% Furthermore, there are significant costs for cement,
Spare parts 3,603 one tonne of which is required for 5 kg of ore.
- 1,000 2,000 3,000 4,000
US$ thousands
Mining Mining
operations services -
31% Overburden Environmen
16% tal Mining costs are ranked second (31%) in the cost
payments structure;
2%
Major costs will account for mining services: ore (US$
Payroll 20,830 thousand) and overburden (US$ 4,202
2%
thousand);
Others
Mining Costs also include environmental pollution payments
1%
services - and payments for the storage of overburden.
Ore
Source: Deloitte analysis 79%
Kogadyr-6 deposit
Financial data
Structure of sales expenses and administrative costs, Year 3 Fixed assets, Year 3
Buildings and
Administrative costs
Sales expenses structures
13%
87% 12%
Office rental,
15%
Machines and
equipment
Others, 47%
17%
Others
41%
Payroll,
68%
Sales expenses and administrative costs in Year 3 will amount to US$ 6,028 Buildings and structures account for 12% of the total fixed assets or
thousand. Sales expenses account for 3% of the revenue for this period; US$ 9,420 thousand.
The majority of administrative costs is made up of payroll costs (68%). Machines and equipment account for 47% of the total fixed assets or
The average monthly salary per administrative member of staff is US$ 46,829. US$ 37,669 thousand.
The remaining US$ 32,675 thousand is other expenses.
Working capital structure, Year 3
The main part of working capital will be made up of inventories.

Accounts payable will amount to US$ 7,014 thousand.
Inventories Accounts receivable

US$ 23,379 thousand US$ 14,743 thousand
Accounts payable
US$ 7,014 thousand
Kogadyr-6 deposit
Financing structure
Financing structure
Company and borrowed funds will be used to implement the Project.

Shareholder equity
The plan is for Company funds to account for 30% or US$ 33,357 thousand.
The remaining 70% of cash will be raised from creditors and will amount to US$ 77,833 thousand.
30%
It is assumed that borrowed funds will begin to be repaid from the 4 th operating year. The loan will be repaid in
US$ 33,357 thousand full in the 13th year.
The loan currency is US$, interest rate – 6% and repayment deadline – 10 years.
The table below shows the proposed repayment schedule for borrowed funds.
70%
US$ 77,833 thousand
Debt capital
Loan repayment schedule, US$ thousands
Index Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13
Principal repayment 7,783 7,783 7,783 7,783 7,783 7,783 7,783 7,783 7,783 7,783
Interest payments 4,670 4,203 3,736 3,269 2,802 2,335 1,868 1,401 934 467
Kogadyr-6 deposit
Financial forecasts
Balance sheet, US$ thousands

Index Year 1 Year 2 Year 3 Year 4 … Year 12 Year 13
ASSETS
Short-term assets
Cash and equivalents 73,169 41,645 72,947 90,268 … 235,367 249,779
Accounts receivable (short-term) 5,277 4,503 14,743 14,460 … 17,123 17,468
Inventories 5,019 6,481 23,379 24,603 … 33,583 34,588
Total 83,464 52,629 111,069 129,331 … 286,073 301,835
Long-term assets
Property, Plant and Equipment 54,493 86,947 79,764 67,477 … 19,853 19,465
Total 54,493 86,947 79,764 67,477 … 19,853 19,465
Total assets 137,956 139,576 190,833 196,807 … 305,926 321,300
Equity and liabilities
Short-term liabilities
Financial liabilities 77,954 77,954 77,954 70,158 … 7,795 -
Accounts payable 2,633 1,944 7,014 7,381 … 10,075 10,376
Total 80,586 79,898 84,967 77,539 … 17,870 10,376
Equity
Authorised capital 45 597 45 597 45,597 45,597 … 45,597 45,597
Retained earnings (accumulated loss) 11 773 14 081 60,269 73,671 … 242,459 265,327
Total 57 370 59 678 105,866 119,268 … 288,056 310,924
Total equity and liabilities 137 956 139 576 190,833 196,807 … 305,926 321,300
Kogadyr-6 deposit
Financial forecasts
Profit and loss statement, US$ thousands

Revenue 47,202 54,786 179,374 175,924 … 208,332 212,532
Revenue growth rate n/a 16.07% 227.41% -1.92% … 2.00% 2.02%
COGS (excl. depreciation & amortization [D&A]) 22,659 24,582 85,938 90,438 … 123,450 127,143
Administrative costs (excl. D&A) 2,131 2,416 6,204 6,140 … 7,403 7,561
EBITDA 22,412 27,788 87,232 79,346 … 77,480 77,828
EBITDA margin 47.48% 50.72% 48.63% 45.10% … 37.19% 36.62%
Depreciation & Amortisation 7,696 17,546 24,376 26,488 … 19,708 20,357
EBIT 14,716 10,243 62,856 52,858 … 57,772 57,471
EBIT margin 31.18% 18.70% 35.04% 30.05% … 27.73% 27.04%
Financial expenses - - - 4,677 … 935.45 467.72
EBT 14,716 10,243 62,856 48,181 … 56,836 57,003
EBT margin 31.18% 18.70% 35.04% 27.39% … 27.28% 26.82%
Corporate income tax 2,943 2,049 12,571 9,636 … 11,367 11,401
Net income 11,773 8,194 50,285 38,545 … 45,469 45,602
Net income margin 24.94% 14.96% 28.03% 21.91% … 21.83% 21.46%
NOPAT 11,773 8,194 50,285 42,287 … 46,217 45,977
Kogadyr-6 deposit
Financial forecasts
Cash flow statement, US$ thousands

Net income 11,773 8,194 50,285 38,545 … 45,469 45,602
Depreciation and amortization 7,696 17,546 24,376 26,488 … 19,708 20,357
Working capital change -7,662 -1,377 -22,068 -573.33 … -1,035 -1,048
Cash flow from operations 11,806 24,362 52,592 64,459 … 64,142 64,911
Capital expenditures -50,000 -50,000 -17,193 -14,200 … -19,389 -19,969
Cash flow from investment activities -50,000 -50,000 -17,193 -14,200 … -19,389 -19,969
Equity injection 33,409 - - - … - -

Receiving loans 77,954 - - - … - -
Debt repayment - - - -7,795 … -7,795 -7,795
Dividends paid - -5,887 -4,097 -25,142 … -22,710 -22,734
Cash flow from financial activities 111,362 -5,887 -4,097 -32,938 … -30,506 -30,530
Net cash flow 73,169 -31,524 31,302 17,321 … 14,248 14,412

Cash at the beginning of the period - 73,169 41,645 72,947 … 221,119 235,367
Cash at the end of the period 73,169 41,645 72,947 90,268 … 235,367 249,779
Kogadyr-6 deposit
Main earning yield
Estimation of key investment indicators of the Project, US$ thousands

NOPAT 11,773 8,194 50,285 42,287 … 46,217 45,977
Depreciation and amortization 7,696 17,546 24,376 26,488 … 19,708 20,357
Capital expenditures 50,000 50,000 17,193 14,200 … 19,389 19,969
Working capital change 7,662 1,377 22,068 573.33 … 1,035 1,048
Free cash flow -38,194 -25,638 35,400 54,001 … 45,502 45,316
Discounted free cash flow -35,887 -21,267 25,925 34,916 … 10,859 9,547
Sum of discounted cash flows 163,521
Terminal period cash flow -
WACC 13.27%
Terminal period growth 2.79%
Terminal value discount factor 0.0535098
Terminal value -
Enterprise Value (EV, NPV) 163,521
Kogadyr-6 deposit
Results
Key Project investment data An industrial analysis shows domestic production can not meet the demand for gold.
Earning yield for the Project to develop Kogadyr-6 deposit and increase Gold in Kazakhstan is mainly used for the replenishment of the country’s monetary
processing capacity through the construction of a gold recovery plant will be as reserves. Gold for this purpose is produced by three refineries using various refining
follows: technologies: Kazzinc in Ust-Kamenogorsk, Kazakhmys in Balkhash and state-
owned plant Tau-Ken Altyn in Astana. The volume of refined gold in Kazakhstan
grows annually by an average of 10%. Its volumes reached 31 tonnes in 2016.
Index Result, US$ thousands According to expert estimates, refining output may reach 80-90 tonnes by 2020.
111,362
Domestic refineries pursue an active marketing policy with competitive tariffs for
Investment
subsoil users, which helped redirect supplies of gold-bearing rock from other
Project NPV 163,521 destinations to Kazakhstan. The total annual production capacity of these refineries
makes up 130 tonnes per year. The main gold consumer in Kazakhstan is the
IRR, % 53.9% National Bank, which over the last five years has been increasing its gold and
foreign currency reserves, precious metals in particular. Participation of the National
Payback period, years 3.5
Bank in the gold market is recognised as a positive factor for domestic producers as
Discounted payback period, years 3.9 gold production and supplies became continuous.
Low cost of production is achieved due to cheap raw materials. Over 35 out of more
than 80 registered gold deposits are currently operating in Kazakhstan. The quality
The Project needs investment of US$ 111,191 thousand.
and grade of ore do not require substantial costs to process ore into raw materials
According to our calculations, the Net Present Value (NPV) of the Project suitable for refining (content of precious metals varies from 10 to 98%).
amounts to US$ 139,460 thousand.
This Project will help boost gold production in Kazakhstan.
Conclusions
Gold is a soft and heavy metal, having a bright yellow to silvery white color. Gold
has a metallic luster and is characterized by an exceptional chemical inertness,
resistant to atmospheric corrosion.
Gold consumption in the world is growing every year. Gold is used in alloys with
other metals, as well as in the aviation, space and medical industries, in radio
equipment and electronics. A significant portion of gold is used in jewelry and
plays the role of main currency metal.
SWOT analysis
Kogadyr-6 deposit
Project SWOT analysis
Strengths Weaknesses
Gold quality. Gold in the ore from the deposit does not require additional Non-diversified income. The company’s main source of income is from the
processing. sale of gold, a strongly correlated metal. Therefore, revenues are not
Sales market. The only sales market is Kazakhstan. This will help reduce diversified. Changes in gold prices will directly affect the company’s operations.
transportation costs. Production. Mining is a capital-intensive industry.
High demand for gold. The demand for gold in Kazakhstan has been growing Finances. Mining is a capital-intensive industry.
for more than 5 years both from the National Bank and the population to Innovation. Inert implementation and development of innovation technologies.
replenish assets and from jewelry manufacturers.
Qualified staff. A lot of gold deposits is concentrated in this oblast. This
makes it possible to employ experienced specialists from the nearby city of
Kordai.
S W
Opportunities
O T Threats
Available deposits. The company operates 8 deposits with a potential to Price. Price for gold is dependent on its supply in the market.
continuously increase production capacity. Long-term loans with a high interest rate.
Political aspect. Kazakhstan increases its gold reserves, which gives an Taxes. High taxes for gold mining enterprises.
opportunity to increase production capacity with the support of the state.
Increase in the cost of the Project. Rise in prices for energy, gas, transport,
Demand factors. Gold ore is geologically and technically available. etc.
Market factors. Satisfaction of consumer demand. Production risks. Risks associated with shutdown losses caused by various
factors and mainly with the damage to fixed and working capital (equipment,
raw materials, transport, etc.).
Abbreviations
bln billion
CAGR compound annual growth rate
CAPM Capital Asset Pricing Model
CIS Commonwealth of Independent States
CIT corporate income tax
CPA crop protection agents
D&A Depreciation & amortization
EBIT earnings before interest and taxes
EBITDA earnings before interest and taxes, depreciation and amortization
EIU Economist Intelligence Unit
F Forecast (in tables and figures)
g gram(mes)
GDP gross domestic product
GI Global Insight
IRR internal rate of return
JSC joint-stock company
kg kilogram(mes)
KZT Kazakhstan tenge
LLP limited liability partnership
mln Million
mm millimetre(s)
NPV net present value
OECD Organization for Economic Cooperation and Development
QI (II,III,IV) Quarter I (II,III,IV)
t tonne(s)
VAT value added tax
WACC weighted average cost of capital
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Business Plan For The Development of Kogadyr-6 Deposit

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Business plan for

the development of Kogadyr-6 deposit

Project overview Market factors

CAPEX and working capital investment for Kogadyr-6 deposit

Index US$ thousands

Capital expenditures (Year 1 + Year 2 + Year 3) 103,700

Gold recovery plant 100,000

Buildings and structures 10,000

Machines and equipment 52,000

Mining equipment 3,700

Investment in working capital 7,662

Total investment in fixed assets and working capital 111,362

Project implementation timeline for Kogadyr-6 deposit

Year 1 Year 3 Year 13

Average growth rate – 22%

Construction period Production period Sales period

Central Asia Gold

Central Asia Gold Corp. Central Asia Gold Production

Kogadyr-5 Kogadyr-6 Kogadyr-7

Subtotal Measured + Transition 4.1 0.91 120 3.7

Kogadyr gold deposit is located 20 km north of Kyrgyzstan and 40 km north of

ore of planned grade

Heap leach pads (HLP)

Basic machineries and equipment for deposits

Basic machineries and equipment for Kogadyr-6 1

State program - Productivity -2020: Export 2020 Development and Promotion

Business Road Map-2020:

Source: Baiterek National Holding https://business.gov.kz/ru/

Concessions for priority investment projects

Equipment and Land plots and

Tax duties and

Land tax Property tax

Doing Business index based on 2016 results

Source: World Bank

Historical and forecast nominal GDP of Kazakhstan

Exports, US$ billions Imports, US$ billions Average KZT/US$ rate

Source: Global Insight

Historical and forecast average monthly salaries Conclusion

Average monthly salary, US$ Growth, %

Source: Global Insight, Economist Intelligence Unit

Source: Kazakhstan Statistics Committee

Source: Kazakhstan State Revenue Committee

Total tonnes Annual growth

Overall production of fine gold in Kazakhstan for 2013 - 2016, kg

Kazakhstan Gold spot price index

As an exchange commodity, gold has its own

Source: FX Group Ltd., CNBC

Gold imports to Kazakhstan, 2016 Gold export from Kazakhstan, 2016

Source: Kazakhstan Statistics Committee, State Revenue Committee

Gold imports by countries

China Russia Kyrgyzstan Kazakhstan Mongolia Uzbekistan

Source: UN COMTRADE Statistics

Gold imports to China, 2016 Gold imports to Russia, 2016

USA Singapore Italy Others

1,590,307 kg Switzerland 575 kg

* Import of raw gold, semis or powder gold

Changes in gold ore imports and exports in Kazakhstan, 2010-2016