Annual Report and Accounts 2011

Mining

Kazakhmys Mining production summary

Copper production
kt (unless otherwise stated) 2011 2010
Ore output1 33,432 32,935
Copper grade (%) 1.01 1.09
Copper in concentrate from own production 303 335
Copper cathode equivalent from own concentrate2 299 303
Copper cathodes from purchased concentrate 2 3
Copper rod production 32 35
  • 1 Excludes output from the Central Mukur gold mine in 2010 and 2011 and the Mizek mine in 2010.
  • 2 Includes cathode converted into rod.

Total ore extracted from the 15 underground and three open-pit copper mines operated by Kazakhmys Mining during 2011 was 2% above the prior year. The growth in ore output was mainly due to higher production volumes from the Central and East Regions which offset a decline in output from the Zhezkazgan Region.

In the Central Region, production from the West Nurkazgan mine ramped up as ore transportation at the site improved following the repair of the mine’s ore conveyor in early 2011. The Akbastau open-pit mine recommenced in September 2011 mainly to conduct preparatory ore extraction work after operations were suspended in 2008. Continued extraction is expected from Akbastau in 2012 ahead of the project to extend the life of the mine and construct a concentrator at the site. These production gains were partially offset by lower output from the Sayak mine which was impacted by harsh winter conditions in early 2011 and equipment outages.

Ore extraction volumes in the East Region were 2% higher than the prior year as improved equipment availability at the Irtyshsky mine more than mitigated lower production from the Artemyevsky mine which experienced poor weather conditions in early 2011 and as the ageing backfill plant underwent reconstruction throughout the year. The work on the backfill plant was completed at the end of 2011 and this should assist production from the Artemyevsky mine in 2012, providing access to other sections of the deposit.

In the Zhezkazgan Region, total extraction volumes were 2% below the prior year, mainly as operations at the maturing Annensky mine moved to more challenging sections, and as production at other mature mines also declined. Zhomart, the region’s largest mine by copper metal extracted, maintained ore output at 3.7 MT but at a slightly reduced copper grade of 1.44%. Whilst insufficient to offset the lower output from the region’s mature mines, extraction at the open-pit North mine rose as production in the first half of 2010 was limited due to the extensive stripping work that was conducted.

During 2011, the average copper grade of ore extracted fell in line with Kazakhmys Mining’s plan to 1.01%, down from 1.09% in 2010. The lower copper grade was due to a number of key mines in the Zhezkazgan Region maturing and as the Central Region also saw a decline in grade, with operations at Sayak and Abyz mines moving to lower copper content sections and as the West Nurkazgan mine, which has a lower than average copper grade, ramped up output. The lower copper grade was partially offset by the higher ore output, and resulted in a 23 kt or 6% reduction in copper metal in ore extracted in 2011 compared to 2010.

Copper in concentrate from own production totalled 303 kt in 2011, a 10% decline compared to the prior year due to the lower quantity of copper metal in ore extracted and a small decrease in concentrator recovery rates. In addition, higher volumes of stockpiled ore were processed in 2010. The contribution to copper in concentrate production from the reprocessing of slag generated from the Balkhash concentrator and converters was flat year on year, with this material continuing to be processed in 2012.

Despite the 10% fall in own copper in concentrate output, copper cathode equivalent production from own concentrate of 299 kt in 2011 was only 2% below the prior year, with the balance mainly made up by the release of copper material at the smelters over 2011 which had accumulated in previous years. The Balkhash smelter and refinery produced 63% of Kazakhmys Mining’s copper cathode output in the year, processing all of the copper concentrate from the Central and East Regions, along with some concentrate from the Zhezkazgan Region to gain processing efficiencies. The Zhezkazgan smelter continued to operate with one of its two furnaces held in reserve and this is expected to continue in 2012.

Own copper cathode equivalent production in 2012 is anticipated to be at similar levels to that achieved in 2011. This target will be supported by higher ore extraction volumes with a full year of production from the Akbastau mine, increased production from some of the existing mines as optimisation work is completed and market conditions permitting, the recommencement of the low grade Konyrat open-pit mine in the second half of 2012. Copper grades are expected to decline in 2012 with output from Konyrat and lower grades at a number of existing mines.

Copper rod production was slightly below the prior year. With the decline in premiums available for copper rod, it is expected that a reduced volume of copper rod will be produced in 2012.

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Zinc production
kt (unless otherwise stated) 2011 2010
Zinc grade (%) 3.55 4.58
Zinc in concentrate 140 167

Zinc grades were lower in 2011 as most of the mines in the East Region, which produced 92% of the zinc metal in ore extracted by Kazakhmys Mining, recorded declining grades. In particular, grades were lower at the Artemyevsky and Orlovsky mines as extraction moved to lower zinc content zones. The decline in grades also reflects the extraction of lower zinc grade ore from the Akbastau mine. The quantity of zinc metal in ore extracted in 2011 was 13% below the prior year as the decline in the zinc grades was partially offset by a 12% increase in the production of ore containing zinc.

The zinc in concentrate output of 140 kt in 2011 was 17% below the prior year due to the lower volume of zinc metal in ore extracted and a decline in concentrator recovery rates from 72% to 69%, primarily due to the lower grade and also with the processing of Akbastau copper-zinc ore from which reduced zinc recovery rates are achieved.

In 2012, zinc in concentrate production is expected to slightly exceed output in 2011, as extraction moves to higher zinc content sections of existing mines in the East Region.

Precious metals production
  2011 2010
Silver grade (g/t) 17.69 20.06
Silver own production1, 2 (koz) 13,137 14,127
   
Gold grade (g/t) 0.66 0.73
Gold own production (by-product)1 (koz) 118 127
 
Gold grade (g/t) 1.27 1.25
Gold doré production (primary) (koz) 33 43
  • 1 Includes slimes from purchased concentrate.
  • 2 Includes a small volume of by-product production from the Central Mukur and Mizek mines (previously included within Kazakhmys Gold).

The volume of silver bearing ore in 2011 was 2% above the prior year, however the volume of silver metal in ore extracted reduced by 11% compared to 2010 as the silver grades in the Zhezkazgan and East Regions were lower. Together, the Zhezkazgan and East Regions produced over 90% of the silver metal in ore extracted in 2011. The lower silver grades were anticipated as grades declined at the mature mines in the Zhezkazgan Region and as grades fell at a number of the mines in the East Region, in particular at the Artemyevsky mine.

The 11% decline in silver metal in ore extracted in 2011 was partially mitigated by the release of work in progress at the smelters and precious metals refinery brought forward from the prior year. Silver granule and bar production from own material was 13,115 koz for the year. The output of silver granule and bars is estimated to be around 12,000 koz in 2012 with a decline in silver grades and no significant contribution from the release of work in progress expected.

The volume of ore containing gold extracted in 2011 increased by 10% compared to the prior year with the re-opening of the Akbastau mine and ramping up of the West Nurkazgan mine. However, gold metal in ore output in 2011 was 1% below the prior year as gold grades were lower than in 2010. Gold grades fell due to the West Nurkazgan mine producing a greater volume of ore with a below average gold content and as the grades at the Artemyevsky and Orlovsky mines in the East Region were adversely impacted by changes to the extraction zones.

Gold bar production was 7% below the prior year as the lower volume of gold metal in ore extracted in 2011 was combined with an increase in work in progress at the smelters and precious metals refinery, while the prior year benefited from a release of work in progress.

Kazakhmys Mining includes the Central Mukur and Mizek mines previously reported in Kazakhmys Gold. The closure of the depleted Mizek mine at the end of 2010 is the main reason for the 23% decline in gold doré production in 2011, although some processing of previously extracted ore from the mine continued in 2011. The processing of material from the Central Mukur mine also reduced in 2011 as the mine reached the end of its operational life.

Total gold bar and doré production from the Mining Division is expected to be approximately 120 koz in 2012, below the current year production of 151 koz mainly due to declining output from the processing of stockpiled ore at Central Mukur and the completion of the processing of stockpiled ore at Mizek in 2011.

Support services summary

Kazakhmys Mining operates two coal mines which supply around 90% of their coal production to the Group’s captive power stations with the balance sold externally. In 2011 the coal mines produced 7.6 MT of coal, below the output of 8.1 MT in the prior year, as transportation delays resulted in lower extraction volumes.

Kazakhmys Mining also owns a rail and road transportation network to move ore, concentrate and cathodes. The rail network includes 1,100 km of railway in Kazakhstan, a fleet of 110 electric and diesel locomotives and over 1,500 wagons. The road haulage fleets operate principally in the East and Karaganda Regions where there is less railroad infrastructure. The management of railway services and a number of the road haulage routes are outsourced to third-party suppliers.

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Our strategy

Our strategy

Reducing our environmental impact

Reducing our environmental impact

Reducing our environmental impact

The Balkhash smelter is reducing sulphur dioxide (SO2) emissions by transforming them into sulphuric acid at a nearby production plant. In 2011, the plant increased acid production by 10.5% to 913,524 tonnes, utilising 87% of SO2 emissions produced at the complex.

Reducing our environmental impact