2018 integrated annual report nac kazatomprom · 28 december 2018: kazatomprom and cameco...
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2018 INTEGRATED ANNUAL REPORT
NAC KAZATOMPROM
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TABLE OF CONTENTS
ABOUT THIS REPORT............................................................................................................................................. 4
KEY FIGURES – 2018................................................................................................................................................ 5
2018 KEY EVENTS .................................................................................................................................................... 6
STATEMENT OF THE CHAIR OF THE BOARD OF DIRECTORS ................................................................. 8
STATEMENT OF THE CHIEF EXECUTIVE OFFICER ..................................................................................... 9
BUSINESS MODEL ................................................................................................................................................. 10
COMPANY DEVELOPMENT STRATEGY ......................................................................................................... 12
BUSINESS TRANSFORMATION .......................................................................................................................... 15
LISTING INFORMATION ...................................................................................................................................... 17
ABOUT KAZAKHSTAN ......................................................................................................................................... 18
ABOUT THE COMPANY ....................................................................................................................................... 20
ACTIVITY PROFILE .............................................................................................................................................. 20 MAIN PRODUCTS .................................................................................................................................................. 20 COMPANY HISTORY ............................................................................................................................................ 21 COMPANY ASSET STRUCTURE ......................................................................................................................... 22 GEOGRAPHY AND TARGET MARKETS ............................................................................................................ 25 ASSOCIATION MEMBERSHIP AND INTERNATIONAL COMPLIANCE ........................................................ 29
OPERATING AND FINANCIAL REVIEW .......................................................................................................... 31
SIGNIFICANT FACTORS AFFECTING GROUP OPERATING RESULTS ........................................................ 31 KEY PERFORMANCE INDICATORS ................................................................................................................... 35 CAPITAL EXPENDITURES REVIEW................................................................................................................... 38 RESERVES AND GEOLOGICAL SURVEYS ....................................................................................................... 41 FINANCIAL ANALYSIS ........................................................................................................................................ 42 LIQUIDITY AND CAPITAL RESOURCES ........................................................................................................... 46 INDEBTEDNESS .................................................................................................................................................... 49 GUIDANCE FOR 2019 ............................................................................................................................................ 50 SENSITIVITY ANALYSIS FOR 2019 .................................................................................................................... 51 FORWARD-LOOKING STATEMENTS ................................................................................................................ 51
SUSTAINABLE DEVELOPMENT ......................................................................................................................... 52
PROGRAMME OF SUSTAINABLE DEVELOPMENT ...................................................................................... 52 SUSTAINABLE DEVELOPMENT INITIATIVES ............................................................................................... 52 GOVERNANCE DIAGNOSTICS ........................................................................................................................ 53
SUSTAINABLE ECONOMIC DEVELOPMENT ................................................................................................... 54 CREATED AND DISTRIBUTED DIRECT ECONOMIC VALUE ...................................................................... 54 SCIENCE AND INNOVATION .......................................................................................................................... 54 ECONOMIC EFFECT IN REGIONS OF OPERATION .................................................................................... 55 CHARITY AND SPONSORSHIP ........................................................................................................................ 56 PROCUREMENT ............................................................................................................................................... 56
SOCIAL RESPONSIBILITY ................................................................................................................................... 58 COMPANY STAFF ............................................................................................................................................. 58
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SOCIAL POLICY ................................................................................................................................................ 63 SOCIAL STABILITY ........................................................................................................................................... 65 OCCUPATIONAL HEALTH AND SAFETY ....................................................................................................... 65
ENVIRONMENTAL RESPONSIBILITY ............................................................................................................... 66 WASTE MANAGEMENT .................................................................................................................................... 67 DIRECT GREENHOUSE GAS EMISSIONS ...................................................................................................... 68 ENERGY EFFICIENCY ..................................................................................................................................... 69 WATER RESOURCES ........................................................................................................................................ 70 NUCLEAR SAFETY ............................................................................................................................................ 71
DEVELOPMENT PLANS ....................................................................................................................................... 72 INTERACTION WITH THE STAKEHOLDERS .................................................................................................... 76
CORPORATE GOVERNANCE AND ETHICS .................................................................................................... 81
CORPORATE GOVERNANCE STRUCTURE ...................................................................................................... 81 CORPORATE GOVERNANCE CODE................................................................................................................... 83 GENERAL MEETING OF SHAREHOLDERS ....................................................................................................... 85 BOARD OF DIRECTORS ....................................................................................................................................... 85
COMPOSITION OF THE BOARD OF DIRECTORS ........................................................................................ 86 CHANGES IN THE COMPOSITION OF THE BOARD OF DIRECTORS IN 2018 .......................................... 88 ACTIVITY OF THE BOARD OF DIRECTORS .................................................................................................. 88 ASSESSMENT OF THE ACTIVITY OF THE BOARD OF DIRECTORS ........................................................... 90 ENGAGEMENT OF INDEPENDENT DIRECTORS ......................................................................................... 90 COMMITTEES OF THE BOARD OF DIRECTORS .......................................................................................... 90
MANAGEMENT BOARD....................................................................................................................................... 95 COMPOSITION OF THE MANAGEMENT BOARD ......................................................................................... 96 ACTIVITY OF THE MANAGEMENT BOARD IN 2018 ..................................................................................... 98 MANAGEMENT BOARD COMMITTEES.......................................................................................................... 99
REMUNERATION OF DIRECTORS AND EXECUTIVES ................................................................................. 100 STATEMENT OF RESPONSIBILITY OF MEMBERS OF THE BOARD OF DIRECTORS AND THE
MANAGEMENT BOARD..................................................................................................................................... 100 EMPLOYMENT AGREEMENTS OF SENIOR MANAGEMENT ...................................................................... 101 CONFLICTS OF INTEREST ................................................................................................................................. 101 INTERNAL AUDIT SYSTEM .............................................................................................................................. 102 ORGANISATIONAL STRUCTURE OF THE COMPANY’S CORPORATE CENTRE...................................... 102 CORPORATE ETHICS .......................................................................................................................................... 102 RISK MANAGEMENT AND INTERNAL CONTROL ........................................................................................ 104 INFORMATION ON TAXATION IN THE UNITED KINGDOM ....................................................................... 109 EXTERNAL AUDIT .............................................................................................................................................. 110
ABOUT THIS REPORT......................................................................................................................................... 111
PRINCIPLES FOR DEFINING REPORT CONTENT AND SUBJECT LIMITATIONS ..................................... 112 ESSENTIAL SUBJECTS ....................................................................................................................................... 113 STANDARDS AND GUIDELINES ...................................................................................................................... 115 EXTERNAL VERIFICATION .............................................................................................................................. 116
INFORMATION FOR SHAREHOLDERS .......................................................................................................... 118
CONTACT INFORMATION ................................................................................................................................ 119
ANNEXES ............................................................................................................................................................. 120 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ........................................................................ 120 INDEX OF GRI-COMPLIANT STANDARDS IN THIS REPORT ...................................................................... 125
GENERAL DISCLOSURES .............................................................................................................................. 125 SPECIFIC DISCLOSURES .............................................................................................................................. 127
GLOSSARY ........................................................................................................................................................... 130
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ABOUT THIS REPORT
The purpose of this Integrated Annual Report is to inform readers about the material aspects of the business of
joint stock company (JSC) Kazatomprom (the Company), Kazakhstan’s national atomic company. With this report,
the Company aims to help investors and other stakeholders understand how it formulates its development strategy,
manages its operations, achieves its financial performance, ensures the long-term sustainability of its business and
develops value for stakeholders and interested parties. It addresses the following questions.
What do the Company, its subsidiaries, associates and joint ventures do?
In what environment does the Company operate?
How will the Company’s corporate-governance structure provide for value creation for stakeholders in the
short, medium and long term?
What is the Company’s business model?
What are the main risks and opportunities influencing the Company’s ability to create value for stakeholders
in the short, medium and long term, and how are these being managed?
What are the Company’s goals, aims and objectives, and how does it intend to achieve them?
To what extent has the Company met its goals, aims and objectives for the reporting period, and what has
been the effect on its valuation for stakeholders?
What are the key challenges and uncertainties the Company is likely to face in pursuing its development
strategy and what are the potential implications for its business model and future performance?
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KEY FIGURES – 2018 102-7
Table 1. Key indicators – Production KAP2
2017 2018 Change (%)
Kazatomprom uranium
mining world ranking
(in volume terms)
1 1 –
Kazatomprom share of the
global natural uranium
mining market, (including all
participations, subsidiaries
and affiliates (%)
21% 23% 9%
Kazatomprom uranium -
production output in volume
terms (including all
participations, subsidiaries
and affiliates, tonnes)
12,093.4 11,476.0 -5%
Output of niobium products
(tonnes of Nb) 27.0 25.6 -5.2%
Output of beryllium products
(tonnes of Be) 1,585.2 1,711.7 8.0%
Output of tantalum products
(tonnes of Ta) 140.0 131.7 -6%
Electrical power output
(million kWh) 1 114.8 117.8 2.6%
Table 2. Finance
2017 2018 Change (%)
Revenue (KZT million) 277,046 436,632 58%
Operating profit (KZT
million) 32,602 77,480 138%
Net profit (KZT million) 139,154 380,266 173%
Net debt/Adjusted EBITDA -1.3 0.54 142%
Profitable mining investments
(100% base) (KZT billion) 75.4 81.5 8.0%
Free float (%) 0.00% 14.92% –
Net income per share
(KZT/share) 534.1 1,435.0 169%
Table 3. Staff and social responsibility indicators
2017 2018 Change (%)
Staff
Number of employees 25,020 20,507 -18%
Social sphere
Social-security tax and social
contributions (KZT million)
6,163 6,034 -2%
Table 4. Health and safety indicators
2017 2018 Change (%)
Occupational safety
Injury frequency rate (number of
injuries per 1,000 employees)
0.31 0.15 -52%
1 In 2018 operations of MAEK-Kazatomprom LLP were classified as discontinued.
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2018 KEY EVENTS
January
10 January 2018: The termination of the activities of Ulba FtorComplex LLC is registered by order of the
Department of Justice of Ust-Kamenogorsk, Department of Justice of East Kazakhstan region No. 41.
February
8 February 2018: The Board of Directors of NAC Kazatomprom JSC approves a new development strategy
for 2018-2028.
March
2 March 2018: The “Kazatomprom Town Hall: In Lockstep with Time” is held in the city of Shymkent,
during which Galymzhan Pirmatov, Chairman of the Board of NAC Kazatomprom JSC, presents NAC
Kazatomprom JSC’s strategic priorities for 2018-2028, in line with the new development strategy.
7 March 2018: A Memorandum of Understanding is signed by NAC Kazatomprom JSC and a consortium of
Japanese companies (EAHL) in Nur-Sultan (Astana), setting out the basic conditions for the parties’
interaction with respect to Baiken-U LLP, Kyzylkum LLP and JV Kharasan-U LLP.
April
4 April 2018: The termination of the activities of Geotechnoservice LLP is registered by Order of the
Department of Justice of South Kazakhstan region No. 22.
June
29 June 2018: NAC Kazatomprom JSC sells 100% of its shares in the authorised capital of KAES JSC to
Samruk-Kazyna JSC.
Transition to the target model of personnel management was completed within the transformation
programme. The project covers the corporate centre and 6 subsidiaries and affiliates.
July
3 July 2018: NAC Kazatomprom JSC completes the sale of 100% of its shares in MAEK-Kazatomprom LLP
to Samruk-Kazyna JSC.
1 July 2018: In the corporate centre of NAC Kazatomprom JSC and Kazatomprom-SaUran LLP a single
integrated SAP system was put into operation.
31 July 2018: Transition to new strategic planning and performance management processes completed.
August
29 August 2018: At an Extraordinary General Meeting of the shareholders in Ulba-Konversia LLP approves
the voluntary liquidation of the legal entity. The liquidation committee also approves decisions on the
procedure for and terms of liquidation.
September
3 September 2018: NAC Kazatomprom JSC signs an agreement with EAHL, under which, and under a
number of specific conditions, to buy 40.05% of Energy Asia (BVI) Limited (owner of 95% of shares in the
authorised capital of Baiken-U LLP and 40% of shares in the authorised capital of Kyzylkum LLP) and
16.02% of shares in the authorised capital of JV Kharasan-U LLP.
28 September 2018: NAC Kazatomprom JSC enters into an agreement to sell its 76% stake in the authorised
capital of Kyzyltu LLP for KZT 3,834,000,000. The buyer is Stepnogorsk Mining-Chemical Complex LLP.
In September 2018, NAC Kazatomprom JSC became a Vision Zero partner.
Implementation of the SAP ERP project (enterprise resource management system) at TTK LLP was launched
under the Transformation programme.
24 September 2018: NAC Kazatomprom approved a Transformation programme roadmap for 2017-2018.
The Board of Directors of NAC Kazatomprom JSC approved the Code of Ethics and Compliance.
October
12 October 2018: NAC Kazatomprom JSC signs an agreement to sell its 100% stake in the share capital of
Sareco LLP. The buyer is NMC Tau-Ken Samruk JSC.
Transition to the target model of integrated security was completed within the transformation programme.
The project covers the corporate centre and 6 subsidiaries and affiliates.
15 October 2018: The integrated planning system has been put into commercial operation at the first-tier
enterprises.
November
The Company listed its shares and global depository receipts (GDRs) on LSE and Astana International
Exchange (AIX).
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The first stage of automated processes implementation in accordance with the target IT management model
within the transformation programme implementation plan has been completed.
December
7 December 2018: the General Meeting of Shareholders of Kazatomprom-Damu LLP approves the voluntary
liquidation of the legal entity.
13 December 2018: NAC Kazatomprom JSC completes a transaction to acquire 40.05% of the shares of
Energy Asia (BVI) Limited (EAL) and 16.02% of shares in the authorised capital of JV Kharasan-U LLP.
Consequently, the Company's stake in Baiken-U LLP increases from 5% to 52.5% (5% direct participation
and 47.5% indirectly through EAL), its stake in Kyzylkum LLP increases from 30% to 50% (30% direct
participation and 20% indirectly through EAL) and its stake in JV Kharasan-U LLP increases from 33.98%
to 50% (direct participation).
21 December 2018: The termination of the activities of Betpak-Dala LLP is registered by Order of the
Department of Justice of Turkestan Region No. 208.
28 December 2018: Kazatomprom and Cameco Corporation entered into an Agreement under which
Kazatomprom will receive by 2020 (upon receipt of necessary permits from state bodies) the right to use
refining and uranium conversion technologies. This would allow Kazatomprom to proceed with assessment
of the economic feasibility of such technologies application in the Republic of Kazakhstan, subject to
favourable market conditions.
December 2018: The first 30 students –20 of whom are employees of the subsidiaries and affiliates of NAC
Kazatomprom JSC and 10 of whom are undergraduates not associated with NAC Kazatomprom JSC and its
enterprises – graduate from the Master’s degree programmes of the International Scientific and Educational
Centre of the Nuclear Industry, founded with KazNRTU named after scientist K.I. Satpaiev.
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STATEMENT OF THE CHAIR OF THE BOARD OF DIRECTORS
102-14
Dear Shareholders,
2018 was an historic year for Kazatomprom and the Republic of Kazakhstan, due to our successful
privatisation and dual listing on two international exchanges. Kazatomprom is the first national company to
successfully place its shares simultaneously via initial public offering (IPO) on the Astana International Exchange
(AIX) and the London Stock Exchange (LSE).
Kazatomprom’s IPO was the first major milestone of the State Privatisation Programme adopted by the
Government at the end of 2015 as part of the plan formulated by the First President of the Republic of Kazakhstan
Nursultan Nazarbayev to reduce the state’s share in the economy.
The company has entered a new phase of its corporate development. It now counts Kazakh investors and
leading international investment funds amongst its shareholders. This means additional responsibility for
Kazatomprom in terms of delivering transparency and corporate governance. Kazatomprom, as a public company, is
committed to achieving the highest international standards of corporate governance.
Last year also saw approval of the new Kazatomprom development strategy for 2018‒2028. The strategic
objectives for this period were developed based upon our vision – to be the partner of choice for the global nuclear
fuel industry. The company will focus on its core business – the mining and processing of uranium and associated
mineral resources – while continuing to optimise production, processing and sales volumes based on market
conditions. It will also strengthen the marketing function and expand sales channels, apply best practices in its business
activities and develop a corporate culture corresponding to its status as an industry leader. To guide the achievement
of these strategic goals and objectives, the new Board of Directors includes three independent directors who are
established professionals with deep international management experience in natural resources, as well as the uranium
and nuclear industries.
In 2018, the International Atomic Energy Agency (IAEA) announced the selection of Kazatomprom as a
supplier of low enriched uranium (LEU) to the IAEA LEU Bank. The Board of Directors of Kazatomprom believes
its selection reflects the high level of trust the global community has in the company as a reliable and recognised
supplier of uranium products.
Within the framework of improving health and safety across our business in 2018, Kazatomprom was one of
the first national companies of the Republic of Kazakhstan to become an official participant in a global programme to
promote the concept of ‘zero injury’ (Vision Zero), which prioritises the health, safety and wellbeing of our employees
and contractors. The programme was developed by the International Social Security Association (ISSA) to help prevent
industrial accidents and reduce occupational health risks.
The Board of Directors is confident in the long-term prospects of the industry and believes that nuclear energy
as a carbon-free, stable source of electricity will remain an important and growing part of the global energy supply
mix. The results we achieved in 2018 confirm the effectiveness of the strategy we have implemented to date and will
ensure the company’s sustainable development in the interests of all its shareholders.
Chair of the Board of Directors of NAC Kazatomprom JSC
Jon Dudas
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STATEMENT OF THE CHIEF EXECUTIVE OFFICER
102-14
Dear Colleagues, Partners and Investors,
I am proud to present Kazatomprom’s annual report for 2018. The achievements of the atomic holding company
mirror the contribution it has made to the socio-economic development, preservation of the environment and wellbeing
of the citizens of the Republic of Kazakhstan.
At the end of 2018, Kazatomprom placed 15% of its shares on the international markets and it was very well received
by both domestic and foreign investors. The company’s main shareholder, Samruk-Kazyna Sovereign Wealth Fund,
received and transferred to the State’s National Fund $450 million from the sale of its shares. Our successful IPO is
both the result of a strong preparatory collaboration with Samruk-Kazyna in the lead up to the flotation and a sign of
confidence from our new shareholders. Our ability to meet our obligations will build the company's reputation and
this, along with market and operational factors, will be reflected in the value of our shares.
The company's mission, per our new development strategy, is to effectively and safely develop uranium deposits and
components of the nuclear value chain to create long-term value for all of our stakeholders. Our planned operating
activities will not start with an increase in production volumes, but an appropriate response to market conditions.
Kazatomprom reduced its uranium production by about 8% from previously planned production levels in 2017 and
will do so again, by 20%, between 2018 and 2020. Partially due to Kazatomprom’s actions in 2018, global supply and
demand for uranium products became more balanced.
As the world’s largest uranium producer, we have been able to forge strong relationships with most of the world's
leading uranium consumers with a view to supplying our natural uranium products to more regions, solidifying our
customer base. Our main customers are nuclear power operators and our key export markets are China, Southeast
Asia, North America, Europe and the Asia-Pacific region. In 2018, Kazatomprom produced a record amount of natural
uranium, becoming not only the world’s largest uranium producer, but also the world’s largest seller.
As part of our efforts to expand our presence in all areas of the nuclear fuel cycle, Kazatomprom signed an agreement
with Cameco Corporation in December 2018, which will allow us to use Cameco’s refining and conversion
technologies by 2020. If market conditions are favourable, this will enable us to explore the economic feasibility of
using these technologies in the Republic of Kazakhstan.
Last year, we completed the acquisition of a 40.05% stake in Energy Asia (BVI) Limited and a 16.02% stake in the
share capital of JV Kharasan-U from Energy Asia Holdings (BVI) Limited. The purchases brought Kazatomprom’s
shareholdings in Baiken-U LLP, Kyzylkum LLP and JV Kharasan-U LLP to 52.5%, 50% and 50%, respectively.
Kazatomprom applies best practices when it comes to health and safety and environmental protection, and these topics
will remain of paramount importance to our team. In 2018, we adopted an environmental and social action plan to
achieve full compliance with the best international industry practices, including IFC Performance Standards. We
continue to support the socio-economic and infrastructural development of uranium mining regions, allocating funds
for these purposes under our subsoil-use contracts. We also met all of our social-guarantee commitments in 2018 and
further improved our corporate governance processes.
Kazatomprom’s results in 2018 were entirely due to the efforts of the entire workforce – a close-knit and highly
efficient team, working in line with our core values.
Our 2018 results confirm the effectiveness of our strategy and the importance of the priorities we identified. I am
confident that in 2019, Kazatomprom will maintain its momentum and continue to strengthen its leading position in
the global uranium market, achieving high production rates, maximising the efficiency of all business processes and
increasing the long-term value of the company.
Galymzhan Pirmatov
Chief Executive Officer,
NAC Kazatomprom JSC
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BUSINESS MODEL
КАP1
The Kazatomprom Group2 is the largest producer of natural uranium globally (in production volume terms), with
priority access to one of the world’s largest resource bases. According to UxC data, the Group’s uranium production,
including the output and refined products of its jointly controlled entities and attributable associates, for the year ended
31 December 2018 corresponded to approximately 23% of total global primary uranium production and around 40%
of global in situ leach recovery (ISR) uranium production.
Through its subsidiaries, jointly controlled entities and associates, the Group operates 26 deposits, grouped into 13
asset clusters, all of which are located in Kazakhstan. All of the Group’s uranium deposits are suitable for ISR. The
combination of cost-efficient ISR technology, which has a smaller environmental impact than other mining methods,
and the Group’s long-life mining asset base will allow it to remain amongst the highest-output and lowest-cost uranium
producers globally, according to UxC data. The Group can draw on more than 40 years of ISR experience in
Kazakhstan’s uranium mining industry. In addition to being cost efficient and having a low environmental impact,
ISR technology offers enhanced operational flexibility compared with conventional mining, improving the scalability
of Group operations and allowing it to increase or decrease production quickly and cost efficiently in response to
evolving market conditions.
The Company is Kazakhstan’s national importer and exporter of uranium and its compounds, nuclear power-plant
fuel, special equipment and technologies, as well as rare metals. Its status as the country’s flagship operator gives the
Company certain privileges. For example, it can access subsoil use agreements through direct negotiation with the
Government, rather than through the tender process that would otherwise be required. This effectively gives the
Company priority access to the high-quality and ISR-conducive deposits of natural uranium that are abundant in
Kazakhstan.
The Group only produces uranium from deposits in Kazakhstan. According to UxC data, for the year ending
31 December 2018, Kazakhstan is one of the largest uranium producing countries which accounted for about 44% of
global uranium production. The Group also possesses the largest uranium ore reserves of its competitors, according
to UxC data. As of 31 December 2018, the Group’s attributable proved and probable ore reserves contained
305,600 tonnes of UME; its attributable measured and indicated mineral resources (including those mineral resources
modified to produce the ore reserves) contained 476,700 tonnes of UME, in accordance with the terms and definitions
of the JORC Code3.
As the Republic of Kazakhstan’s national atomic company, the Company has partnered with most of the leading
players in the global uranium mining industry. The Group has built 10 successful asset-level partnerships with
Cameco, CGNPC, Kansai, Marubeni, Orano (formerly Areva), RosAtom and Sumitomo, as well as the Energy Asia
consortium, demonstrating the prominence of the Group’s asset base on a global scale. These collaborations have also
given the Group access to its partners’ technologies, at the same time allowing it to improve its technological and
management know-how. For the years to 31 December 2017 and 31 December 2018, 60.4% and 49.1%, respectively,
of the Group’s attributable mined uranium stemmed from its joint-venture (JV) and associate participations.
The Group’s primary customers are operators of nuclear power plants and the principal export markets for the Group’s
products are China, South and Eastern Asia, North America and Europe. The Group sells uranium products under
long-term contracts, short-term contracts as well as on the spot market via its Switzerland-based trading subsidiary.
The price of uranium accounts for a relatively small fraction of the overall cost of producing nuclear energy and most
of the Group’s customers tend to prioritise security of supply, which the Group is well positioned to provide on more
favourable terms, thanks to its size and uranium production output.
While uranium mining is the predominant focus of its operations, the Group is also present (through its subsidiaries,
JVs and associates) in most of the other stages of the ‘front-end’ nuclear fuel cycle, with the exception of uranium
conversion. These stages include production of nuclear fuel components and uranium reconversion. The Group has
access to production facilities for uranium enrichment. The Group produces uranium products, including natural
uranium concentrate, uranium dioxide ceramic powder and fuel pellets, which are used in the manufacture of nuclear
fuel assemblies, the fuel used by nuclear power stations to generate electricity. In addition, the Group is currently
engaged in the construction of a fuel assembly plant for the Chinese market, which it expects to be operational by the
2 In this document, the term “the Group” refers to the Company and its consolidated subsidiaries, i.e. companies that the Group controls by having (i) the power to direct their relevant activities that significantly affect their returns, (ii) exposure, or rights, to variable returns from its involvement
with these entities, and (iii) the ability to use its power over these entities to affect the amount of the Group’s returns. The existence and effect of
substantive rights, including substantive potential voting rights, are considered when assessing whether the Group has power over another entity. 3 The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
11
end of 2019. Further, by the end of 2020 it is planned that the plant certification procedure by the technology provider
(Framatome) will occur followed by commissioning of the first output. Commercial deliveries of fuel assemblies to
China are scheduled to begin in 2021. The Group is well placed to develop a conversion facility, should conversion
become economically attractive in future; besides that, the Group plans to secure access to the requisite conversion
technologies.
In addition to its uranium operations, the Group is engaged in the manufacture of certain rare metal products, primarily
tantalum and beryllium.
The Group has a stable financial position and positive cash flow from its operating activities. The Group expects to
finance its operating activities and planned capital investments in existing production assets from its own funds and
available debt financing facilities in the foreseeable future. At the same time, the Group shares a significant portion
of the risk and cost of field development with joint-venture partners. The listing of Kazatomprom’s shares on the
Astana International Exchange (AIFC) and the London Stock Exchange, along with the availability of credit ratings,
provide the Group with favourable conditions for accessing the capital markets.
Figure 1: NAC Kazatomprom JSC business model
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COMPANY DEVELOPMENT STRATEGY
Kazatomprom's mission is to develop uranium deposits and the components of the uranium value chain, creating long-
term value for all of the Company’s stakeholders, in accordance with the principles of sustainable development.
Kazatomprom’s vision is to become the preferred partner of the global nuclear industry. This vision allows the
Company to operate in step with the priorities of its customers and partners in the industry.
In 2018, the Company adopted a new development strategy, focusing on five strategic objectives for 2018-2028:
• Focus on uranium mining as the main activity;
• Optimise production, processing and sales based on market conditions;
• Create value by enhancing the marketing function and expanding sales channels;
• Apply best practices in business activities;
• Develop a corporate ethics culture commensurate with an industry leader.
Focus on mining operations as the core business. Kazatomprom’s core business activity is uranium mining. The
Company believes that mining – in particular, the ISR extraction method – is the most attractive segment of the
nuclear-fuel value chain in terms of sustainable profitability and returns on capital. It further expects it to remain
so for as long as current market fundamentals persist. The Company’s access to ISR-conducive uranium deposits
in Kazakhstan gives it a natural competitive advantage in ISR uranium mining. Accordingly, Kazatomprom intends
to maintain its primary focus on its uranium mining operations, while retaining the option to expand its presence
in other segments of the front-end cycle, such as conversion, as well as in its rare metals operations.
To streamline its operations, Kazatomprom has progressively disposed of a significant number of non-core assets,
including– more than 30 non-core subsidiaries over the past five years. Most recently, these included MAEK, the
utility company, which accounted for a material portion of the Group’s revenue (but a small share of profit) in the
periods under review. The Company aims to complete its non-core asset disposal programme by the end of 2019.
Kazatomprom has also increased its interest in a select number of uranium mining joint ventures. Most notably,
as of 1 January 2018, it increased its equity stake in its joint venture with Cameco, JV Inkai LLP, from 40% to
60%, while in December 2018, it raised its equity stake in Baiken-U LLP, a joint venture with the Energy Asia
Limited consortium, from 5.0% to 52.5% and increased its equity interest in JV Kharasan-U LLP, a joint venture
with RosAtom and Marubeni Corporation, from around 34% to 50%.
Kazatomprom is currently engaged in the construction of a fuel assembly plant in Kazakhstan together with China
General Nuclear (CGN). Expansion into new segments of the nuclear value chain could allow Kazatomprom to
offer a broader range of products to its customers and capture additional margins. The Company may consider
further strengthening its market position by selectively acquiring or investing in high-quality assets in the nuclear-
fuel chain.
Continue to pursue a market-centric approach to uranium production, optimizing production, processing and
sales volumes based on market conditions.
In the past two years, Kazatomprom has substantially changed its strategic approach to become a market-centric,
rather than a production-led operator. Crucially, this involves setting production targets based upon market and
sales-volume forecasts, as well as adapting production plans to changing market conditions.
The Group’s use of ISR technology allows it to respond to changes in uranium market conditions by ramping up
or reducing its uranium production far more rapidly and cost effectively than most of its peers, which rely on
conventional mining methods to develop non-ISR-amenable deposits. The Group’s uranium deposits can be
developed exclusively using ISR technology, giving it the flexibility to react rapidly to uranium market prices and
adjust its production accordingly, without a meaningful impact on the per-unit cost of production.
For example, in the year ended 31 December 2017, the Group cut its uranium output by 8% from the previous
year. In November 2017, it announced its intention to reduce its planned contractual obligations production
volumes by 20% for 2018–2020. While the Company’s production plans beyond 2020 currently envisage a return
to ‘pre-production-cut’ levels, the Company enjoys full technical and legal flexibility to keep production at reduced
levels if market conditions dictate, as long as any amendments to its subsoil-use agreements with the Government
are approved.
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Continue to enhance sales and marketing capabilities and optimise the contracts portfolio.
Kazatomprom has strengthened a number of areas of its sales and marketing function over the past two years.
Notably, it has created a new sales channel through its wholly owned subsidiary THK in Switzerland, allowing it
to engage with new categories of customer, such as US-based utility companies, which prefer to purchase uranium
on the spot market. THK has also enhanced the Company’s analytical capability, enabling it to undertake arbitrage
operations, and facilitating its expansion into the short-term/spot market, which requires significant operational
flexibility. Moreover, Kazatomprom has expanded its physical sales presence in each of its main target regions
and will continue to strengthen this sales network.
In addition, with the launch of THK’s operations in 2017, Kazatomprom became able to offer complex sales-
formula pricing terms to its customers. The Company plans to build on these capabilities and offer customers a
wider range of pricing options than it could before, due to certain limitations of Kazakhstan’s legislation.
The Company stopped its sales to uranium traders in 2016, in line with its strategy to bypass intermediaries and
build direct relationships with customers that are contracting smaller amounts.
Maintain global leadership in the uranium mining industry through operational excellence.
Kazatomprom prides itself on being the world’s leading uranium producer and seeks to build on this standing in
future in terms of scale, operating efficiency and innovation. It intends to continue investing in the exploration and
development of its reserve base to ensure sustainable low-cost production from its mines in the long term, while
its current reserve base allows it to maintain current production levels for around 15 years.
The Company views its low production costs as a key competitive advantage and plans to work continuously on
sustaining its attractive position on the global uranium-mining cost curve. Kazatomprom intends to achieve this
by continuing to optimise its mining development plans and stringent cost controls. The Company takes a
disciplined approach to production planning, focusing overwhelmingly on value and economic returns rather than
maximizing production volumes.
Kazatomprom remains focused on the ongoing optimisation and digitalisation of its business processes and the
further strengthening of its sales and marketing function. Kazatomprom continues to follow its Transformation
Initiative for 2016 to 2025, aimed at increasing the transparency, efficiency and harmonisation of processes across
the Company.
Develop an ethics culture commensurate with an industry leader and continue to improve health, labour and
environmental policies in line with global best practices.
Kazatomprom is committed to best health and safety practices and these will remain of paramount importance to
the management team going forward. Kazatomprom strives to be an employer of choice in Kazakhstan. It aims to
ensure that its facilities are a completely safe working environment and that they are not inflicting damage on
Kazakhstan’s natural ecosystem. Furthermore, the Company has signed up to the international Vision Zero
movement to promote zero work-related injuries and is focused on maintaining a low lost time injury frequency
rate and the lowest possible level of occupational accidents. In 2016-2017 Kazatomprom stepped up its investment
in health and safety from KZT 5.1 billion in 2015 to more than KZT 7.1 billion in 2017 and will continue to
increase this investment in the coming years.
Another one of the Kazatomprom’s strategic priorities is to ensure a balance between shareholder income and
optimal capital structure. The Company runs high-margin and cash-generative operations with a relatively limited
capital-expenditure profile for expansion and low leverage. Kazatomprom will, therefore, seek to pay dividends
to its shareholders, while preserving a conservative balance-sheet structure that allows it to maintain a comfortable
leverage level in case of adverse changes in commodity prices. The Company’s dividend policy is to distribute no
less than 75% of its free cash flow if the Company’s leverage ratio is below or equal to 1.0x net debt/adjusted
EBITDA and no less than 50% of its free cash flow if the ratio is above 1.0x and below 1.5x net debt/adjusted
EBITDA.
14
Table 5. Review of Company development strategy implementation in 2018
Strategic goals Steps towards strategic goal implementation in 2018
To focus on the core
business The acquisition of a 40.05% stake in Energy Asia (BVI) Limited (47.5% in
Baiken-U LLP and 20% in Kyzylkum LLP) and 16.02% of the share capital of
JV Kharasan-U LLP was completed.
The increase in reserves in 2018 amounted to 96,057 tonnes, including in
category C1 – 50,747 tonnes, C2 – 45,310 tonnes.
A Portfolio of investment projects of the Company for 2018 have been formed
in accordance with the key provisions of Investment Policy of the Company
To optimise production,
processing and sales based
on market conditions
Based on forecasts of uranium market needs for 2018, the Company reduced
its volume of uranium mined by 20% relative to planned volumes for 2018 set
out in its subsurface use contracts.
To create value by
enhancing the marketing
function and expanding
the sales channels
The Company developed and implemented a methodological base of
procedures, methods, questionnaires, and standard forms of purchase and sale
agreements aimed at strengthening marketing functions.
Planned uranium sales revenue was exceeded by 5% due to an increase in the
customer base, as the Company attracted new customers in the US, Europe and
South Korea, expanded the geography of uranium supplies, stopped uranium
sales to traders, sold uranium derivative instruments and optimised its uranium
sales-contract portfolio.
To apply best practices in
business activities In the area of occupational safety, processes were put in place for conducting
behavioural safety audits and for identifying hazardous conditions and actions,
or potentially dangerous near-miss accidents. Some 1,800 audits were
conducted and 6,200 near misses registered.
The use of alternative chemical reagents in the process of manufacturing
finished uranium products achieved savings of KZT 109.2 million.
The economic effect of cost optimisation in the construction of production
wells amounted to KZT 107.6 million.
The Company developed and approved its IT strategy.
The Company carried out a primary inventory of digitisation projects and
created a list of future priority projects.
The Company is implementing a portfolio approach to investment activities, in
this regards the methodology on the portfolio project management have been
developed and approved in 2018.
Twelve business processes (some automated) were implemented in the
Corporate Centre and its subsidiaries. As of the end of the year, coverage
corresponded to 32% of all business-process reengineering planned until 2021,
in accordance with the Company's transformation programme charter.
SAP ERP and EIS information systems were implemented in the Corporate
Centre, as well as in certain individual subsidiaries and affiliates.
Supporting the International Social Security Association (ISSA) initiative to
improve safety, health and well-being at work, the Company is registered as a
member of the international Vision Zero program. This participation reflects
the Company's conviction that a strong safety culture can reduce accidents,
injuries and illnesses at work.
To develop an ethics
culture commensurate with
an industry leader
The Company updated and approved its Human Resources (HR) Policy for
2018-2028 based on global industry best practices, designing a system of
principles, key directions, approaches and human-resource management
methodology based on business needs.
The Company formulated and approved a system of corporate values and
began its dissemination to employees.
The Company improved its corporate governance in accordance with best
international practices (based on the recommendations of independent
consultants), ensuring that its corporate-governance rating was maintained.
Educational programme has been deployed.
15
BUSINESS TRANSFORMATION
KAP3
In 2015, the Company and 12 of its subsidiaries embarked on a transformation initiative, with a view to implementing
the principles set out by its then sole shareholder, Samruk-Kazyna. The principal aims of the transformation initiative
were to improve transparency and operational efficiency, as well as to standardize and harmonise business processes,
based on Samruk-Kazyna’s reference model. As part of the initiative, in 2016, the Company developed a portfolio of
24 projects on various aspects of Kazatomprom’s operations, such as production, procurement, resource management,
and business planning and modelling efficiency. By 2017, it had implemented seven of these projects, including:
• A category-based procurement management system, allowing the Group to optimise its approach to
procurement and achieve short- and long-term benefits, using approved category-based strategies.
Kazatomprom implemented this strategy in the fuel and lubricants category and the power category.
• An information security model, designed to improve information security and incident management
processes based on a Security Information and Event Management (SIEM) class control and analysis system.
This allowed Kazatomprom to avail of unified systems, as well as the services and risk-oriented approach
offered by the system.
• A targeted risk-management model, enabling Kazatomprom to automate risk-management processes, such
as a risks registry, report monitoring, visualisation and prediction. These capabilities improved the
Company’s risk-analysis capabilities and keep senior management appraised of pertinent risks, ensuring
timely reaction.
A sales and marketing model, designed to increase the Company’s margins by improving its market
perception, strengthening its sales and marketing capabilities, developing a better understanding of the
strengths and weaknesses of both Kazatomprom and its competitors, and improving the Company’s
understanding of customer and potential customer needs.
In the first half of 2018, the Company's transformation programme was expanded by the inclusion of additional
initiatives aligned with the master plan for implementing the Samruk-Kazyna’s transformation programme for 2018–
2021, approved by the Chairman of the Samruk-Kazyna Board on 14 May 2018.
Thus, in addition to the business-process reengineering initiative, in 2018, Kazatomprom’s transformation programme
included initiatives to:
Digitise business processes;
Simplify the legal structure;
Transform human capital;
Implement change management and a project management approach.
As part of the business-process reengineering initiative in 2018, the Company completed the following transformation
initiative projects:
A new model of personnel management, aimed at ensuring the Company’s compliance with the best practices in
human-resource management, strengthening staff engagement, accumulating and preserving knowledge within
Kazatomprom and enhancing the role of Kazatomprom corporate culture;
A new health and safety model, aimed at reducing the number of accidents at work by introducing the timely
monitoring of potentially dangerous situations, by conducting behavioural safety audits at Kazatomprom facilities
and by checking contractors for compliance with safety-monitoring requirements;
A new model of strategic planning and performance management, aimed at creating a unified process of
strategic planning and performance management, creating a clear hierarchy of goals with a specified relationship
to key performance indicators (KPIs). Motivational KPIs were then set for Company executives, subsidiaries and
associates, all focused on achieving the Company's strategic goals, so as to meet its shareholders’ expectations in
the strategic long and medium term.
16
A number of IT systems were introduced in 2018:
In July 2018, the SAP Enterprise Resource Planning (ERP) system was put into commercial use in the Corporate
Centre and Kazatomprom-SaUran LLP and, in December 2018, in the Trade and Transport Company LLP.
In October 2018, the integrated planning system was put into operation in the Corporate Centre and four
enterprises (RU-6 LLP, the Ortalyk LLP production company, APPAK LLP and Kazatomprom-SaUran LLP).
In October 2018, the integrated planning system was put into commercial operation in the corporate centre and
four enterprises (RU-6 LLP, Production Enterprise Ortalyk LLP, Appak LLP and Kazatomprom-SaUran LLP).
In December 2018, the Digital Mine system was piloted at Kazatomprom-SaUran LLP.
In December 2018, the IT service management (ITSM) system was launched in the Corporate Centre and in two
Group enterprises (KAP Technology LLP and RU-6 LLP).
Based on the Transformation initiative projects implementation results the Company expects to gain economic
benefits due to work efficiency increase.
Following the other initiative projects implementation in 2018a digitisation office was created, while seven
subsidiaries and affiliates were removed from the structure. The company established a code of ethics and compliance
with corporate values, along with a leadership development programme for 2019‒2020. Leadership-development
modules were run for the CEO and CEO‒1 management levels. A company ethics analysis was conducted and a
roadmap approved for corporate culture development in 2018‒2021.
As part of the plan to implement change management and a project approach, the change-management function was
structured within the business transformation department. Professional requirements for employees in certain positions
in the Corporate Centre and in subsidiaries were updated to reflect project-management competencies, and training
was provided for the CEO, CEO‒1, CEO‒2 management levels on change and project management.
In 2019, the company plans to continue implementing the following key Transformation projects:
SAP ERP replication in the Company's production facilities;
An integrated planning system in production companies of the second wave; and
Digital Mine replication in two mining facilities.
Under the digitisation framework, there are plans to diagnose business problems, to identify potential growth with the
need for digitalisation, to develop a portfolio of projects of digitalisation and to start implementing them.
As part of the plan to transform people, the Company plans to continue its work on the development of a corporate
ethics culture and to train at least 60% of management at CEO ‒1, ‒2 and ‒3 levels on the leadership development
programme.
To implement change management and project management approach, the Company plans to adapt and approve
change- and project-management standards, update change management competencies and incorporate the Corporate
Centre and subsidiaries (included in the perimeter of the transformation) into the corporate model, training mid- and
lower-level corporate managers in the Corporate Centre and subsidiaries on project and change management.
17
LISTING INFORMATION 102-5
In November 2018, the Company listed its shares and global depositary receipts (GDRs) on the Astana International
Exchange (AIX) and London Stock Exchange (LSE), respectively.
The successful placement occurred despite vulnerable market conditions characterised by high volatility. For example,
in the second half of 2018 some 17 IPO transactions in the EMEA region were cancelled.
The Company’s IPO attracted significant interest among investors evidenced by the existence of top-tier international
investors amongst the Company’s new shareholders.
Table 6. Share and GDR listings
Instrument Currency ISIN Astana
International
Exchange (AIX)
London Stock
Exchange
(LSE)
Ordinary shares KZT KZ1C00001619 KAP ‒
Global depositary
receipts (GDRs); 1
GDR corresponds to
1 ordinary share
USD US63253R2013
KAP.Y KAP
There are a total 259,356,608 Kazatomprom shares in issue (including those represented by the GDRs), of which
14.92% are in free circulation and the remaining 85.08% are owned by the state-run Sovereign Wealth Fund Samruk-
Kazyna. The shares and GDRs were listed in November 2018 in connection with the initial public offering (IPO) of
Kazatomprom, priced at USD 11.60 per GDR, or the equivalent KZT 4,322.74 per common share, on the day of
announcement. Consequently, at the time of the IPO, the Company's market value (capitalisation) was around USD
3 billion. The value of the placed shares (including those represented by the GDRs) was about USD 450 million.
18
ABOUT KAZAKHSTAN
Key facts
The Group’s activities and assets are predominantly concentrated in Kazakhstan. Kazakhstan became an independent
sovereign state in 1991 following the collapse of the USSR. Since then, the country has undergone large-scale changes,
transitioning from a centralised command economy and embracing a market-based model of economic development.
Kazakhstan is a unitary state with a presidential form of government. According to its constitution, the country is a
democratic, secular, legal and social state, the highest values of which are the person, their life, rights and freedoms.
The President of the Republic of Kazakhstan is the head of state, its highest official, who determines the main
directions of domestic and foreign policy and represents Kazakhstan at home and abroad. 102-4
The population is approximately 18.4 million people (as of 1 January 2019).
The capital city is Nur-Sultan (previously Astana, renamed in March 2019), with a population of more than
1 million people.
The largest city is Almaty, with a population of 2 million.
The ethnic makeup of the population is one of the most multinational in the world: Kazakhs – 67.5%,
Russians – 19.8%, Uzbeks – 3.2%, Ukrainians – 1.5%, Uigurs – 1.5%, Tatars – 1.1%, other – 5.6%).
The ratio of urban to rural dwellers is about 58:42.
The national currency is the tenge (₸), denoted internationally as KZT.
As of 31 December 2018, the exchange rate was KZT 384.2per USD 1.
Gross domestic product (GDP) per capita is USD 9,331 (2018).
GDP growth in 2018 was 4.1%.
The territory spans 2,724,900 square kilometres. It shares borders with the Russian Federation, China,
Kyrgyzstan, Uzbekistan and Turkmenistan. Its land border stretches 13,200 km.
Kazakhstan’s main trading partners are the Russian Federation, China, the countries of the European Union
and the Commonwealth of Independent States (CIS).
Kazakhstan has 67% of the world's proven uranium reserves suitable for mining by the ISR method.
According to World Bank and International Finance Corporation Doing Business Survey for 2019,
Kazakhstan ranks 28th in the world for the ease of doing business, the best in its region.
Kazakhstan is a founder member of the Eurasian Economic Union (EEU), which includes Russia, Belarus,
Armenia and Kyrgyzstan.
The volume of foreign investment in Kazakhstan since 1991 has totalled about USD 300 billion.
Republic of Kazakhstan credit ratings as of 31 December 2018
Moody’s: Baa3 (Stable) – October 2018
S&P: ВВВ- (Stable) – September 2018
Fitch: BBB (Stable) – September 2018
The Republic of Kazakhstan is a huge country located in Central Asia, occupying an area roughly equivalent to
Western Europe. It has enormous mineral reserves and considerable potential for economic growth. Kazakhstan’s
resource base comprises more than 5,000 mineral deposit sites, the value of which is estimated in the tens of trillions
of dollars. Of the 105 elements of the periodic table lying beneath the country’s surface, 99 have been identified.
Seventy deposits have been explored and more than 60 elements have been in production. Currently, there are 493
known deposits, containing 1,225 types of mineral raw material.
Table 7. Kazakhstan’s mineral deposits by global ranking
RESOURCE GLOBAL RANKING
ZINC, TUNGSTEN STEEL, BARITES 1
SILVER, PLUMB, CHROMITE,
URANIUM 2
COPPER, FLUOR 3
MOLYBDENUM 4
GOLD 6
COAL 7
PETROLEUM 12
GAS 24 Source: Committee of Geology and Subsoil Use of the Ministry of Investment and Development of the Republic of
Kazakhstan, Statistical Review of British Petroleum.
19
Geological and economic assessments of the mineral reserves of Kazakhstan show coal, oil, copper, iron, lead, zinc,
chromites, gold and manganese to have the greatest weight in terms of economic importance. Ores of ferrous and non-
ferrous metals mined in Kazakhstan are exported to Japan, South Korea, the US, Canada, Russia, China and the EU.
Kazakhstan depends on neighbouring states for access to world markets; its main exports are uranium (all of the
Group’s uranium products are exported), oil, natural gas, steel, copper, ferroalloys, iron ore, aluminium, coal, plumb,
zinc and wheat. Thus, good neighbourly relations are crucial to realizing export opportunities.
Kazakhstan is a country with a fast-growing economy and a long-term development plan. From 2005 to 2017, average
GDP growth was about 9%. All national economic, social and international policy is implemented in accordance with
the country’s plan for sustainable long-term development. The main goal of the Government’s Kazakhstan 2050
strategy is to join the world’s 30 most developed countries by 2050.
Kazakhstan is committed to the principles of economic liberalisation. The national privatisation programme will have
reduced the percentage of state participation in the economy by 2020. In the World Bank's Ease of Doing Business
rankings for 2019, Kazakhstan came in top in the region, polling in 28th place globally, ahead of Russia (31st), Turkey
(43rd), Kyrgyzstan (70th) and China (46th) and just a little behind Azerbaijan (25th).
Between 2005 and 2018, foreign direct investment in Kazakhstan exceeded USD 280 billion.
To develop the country’s financial-services sector and improve the region’s access to international capital markets,
Kazakhstan has established a financial hub – the Astana International Financial Centre (AIFC) – with a special legal
regime based on English law. The main AIFC strategic priorities are the development of the capital market, asset
management, wealth management (private banking for high net worth individuals), financial technologies and Islamic
finance. In 2018, the Astana International Exchange (AIX) came into operation and commenced trading with the
placement of securities of NAC Kazatomprom JSC.
Sources: Statistics Committee of the Ministry of National Economy of the Republic of Kazakhstan, World Bank, World Trade
Organization, BP Statistical Review, International Monetary Fund, Kazakh Invest.
20
ABOUT THE COMPANY
ACTIVITY PROFILE
Geological exploration
Natural uranium mining
Uranium products: natural uranium concentrate, ceramic-grade uranium dioxide powders and fuel pellets
Bulk concentrate of rare-earth metals
Beryllium, tantalum, niobium products
Science, social security and personnel training
MAIN PRODUCTS
Table 8: Main product characteristics
Uranium products - Uranium mining; reprocessing and sale of uranium
products
Beryllium products - Production and sale of beryllium products; research and
development
Tantalum products - Production and sale of tantalum products; research and
development
Energy resources - Production and sale of electrical power, heating and
water
Other - Sale of products and services connected to main
production activities
102-2
21
COMPANY HISTORY
For more than 60 years, Kazakhstan has been a key global supplier of raw materials and components for nuclear fuel.
Some of the entities that currently belong to Kazatomprom subsidiary Ulba Metallurgical Plant JSC (UMP) began
operating in 1949 and have been involved in the production of uranium products since 1954. In 1996, JV Katco LLP
and JV Inkai LLP (subsequently transferred to the Company) were launched as joint ventures with Areva (now Orano)
and Cameco, respectively.
The Company was established in 1997 by decree of the President of the Republic of Kazakhstan, as the national
operator of Kazakhstan's nuclear fuel industry. Since inception, the Company has adhered to the principles of the non-
military use of atomic energy, supplying the produced uranium and uranium products only under the guaranty that a
customer is not engaged in the utilisation of uranium or uranium products for military purposes. A brief history of the
Company is provided below:
1997 The Company is established. Kazatomprom is the 13th largest uranium miner globally in volume
terms. The Company buys a stake in JV Inkai LLP, a Group joint venture with Cameco.
2000 The Group becomes the world’s sixth-largest producer of uranium in volume terms, according to the
NEA, IAEA and Red Data Book. The Group launches tantalum and beryllium production, focused on
peace-time production.
2002 The Group extends the reach of its uranium product sales to include the US and European markets. It
also enters the Chinese and South Korean markets.
2003 The Group is now the world’s second-largest producer of beryllium (29% of world production) and the
fourth-largest producer of tantalum in volume terms.
2007 The Сompany is assigned a credit score for the first time.
2010 The Group becomes the world’s largest uranium producer in volume terms, according to the NEA,
IAEA and Red Data Book.
2012 The Group commissions a sulphuric acid plant with an annual capacity of 500,000 tonnes.
2013 Through equity participation, the Group gains access to the enrichment plants of Urals Integrated
Electrochemical Plant JSC and the International Uranium Enrichment Centre (IUEC) with respective
annual separation capacities of 2.5 million and 60,000 tonnes.
2015 The Group enters into a strategic agreement on commercial terms with CGNPC for the design and
construction of a fuel assembly plant and the joint development of uranium deposits in Kazakhstan.
UMP JSC takes over as operator of the bank of low enriched uranium in the Republic of Kazakhstan,
established under the umbrella of the IAEA.
2016 The Group undertakes an asset restructuring programme.
2017 Trading Company Kazakatom AG (THK – Trade House Kazakatom AG), a new trading company
established in Switzerland, begins operations.
2018 The Company lists its ordinary shares and global depository receipts (GDRs) on LSE and AIX.
The Company's Board of Directors adopted a new development strategy focusing on five key elements:
(i) reorientation to the core area of focus; (ii) optimisation of production, processing and sales volumes
based on market conditions; (iii) value creation by expanding sales and marketing; (iv) introducing
advanced business processes; and (v) fostering the corporate culture of an industry leader.
22
COMPANY ASSET STRUCTURE
In this document, ‘the Group’ refers to the Company and its consolidated subsidiaries, i.e. the companies that the Group
controls by having (i) the power to direct activities that significantly affect their returns, (ii) exposure or rights to
variable returns from its involvement in those entities, and (iii) the ability to use its power over these entities to affect
the level of Group returns. The existence and effect of substantive rights, including substantive potential voting rights,
are considered when assessing whether the Group has power over another entity.
The Group, with its Associates and Joint Ventures (“JVs”), are collectively referred to as “the Holding”.
102-1 102-10 102-7
Main assets and corporate structure
The Holding’s main assets are:
• Subsoil use contracts that grant Group subsidiaries mining rights in respect of 9 uranium deposits located in the
Chu-Sarysu and Sirdariya regions, in which there were combined proven and probable ore reserves containing
234,000 tonnes of UME, as well as measured and estimated mineral resources containing 374,200 tonnes of
UME as of 31 December 2018;
• Subsoil use contracts that grant joint ventures and associates of the Group mining rights in respect to 11 uranium
deposits located in the Chu-Sarysu and Sirdariya regions, in which proven and probable ore reserves are
registered on a 100% basis in the amount of 286,600 tonnes of UME and total mineral resources (including
measured, estimated and pre-estimated mineral resources) in the amount of 365,800 tonnes of UME as of 31
December 2018;
• Thirteen uranium production companies, out of which 5 are subsidiaries (excluding Baiken-U LLP) and 8 JVs
and associated companies of the Group;
• Ulba Metallurgical Plant JSC, a facility for the production of uranium products and rare-earth metals, with an
annual capacity of 3,728 tonnes of U3O8, 317 tonnes of UO2 powder made from UF6, 155 tonnes of UO2 powder
made from scrap and 108 tonnes of fuel pellets, as well as 1,626.9 tonnes, 141.9 tonnes and 25.2 tonnes of
products from the rare earth metals beryllium, tantalum and niobium, respectively;
• Uranium trading subsidiary, Trade House Kazakatom AG (THK), located in Zug, Switzerland; and
• Ancillary enterprises, including:
o two sulphuric acid production plans, with an aggregate annual production capacity of 680,000
tonnes;
o Volkovgeologia JSC – a company that conducts geological work and technological drilling; and
o A transport and logistics company serving the assets of the Group.
The following table lists the Group’s subsidiaries, JVs, joint operations (JOs) and associates as of 31 December 2018.
In all cases, the share is equal to the Group’s voting rights, with the exception of Ulba Metallurgical Plant JSC and
Volkovgeologia JSC, in which the Group has 100% voting rights.
Table 9: Holding’s subsidiaries, JVs, JOs and associates (31 December 2018)
Treatment Name Share (%)
Uranium mining and processing
Subsidiaries Ortalyk LLP 100.00
Kazatomprom-SaUran LLP(1) 100.00
RU-6 LLP(1) 100.00
APPAK LLP 65.00
JV Inkai LLP(2) 60.00
Baiken-U LLP (4) (5) 52.50
Joint ventures JV Budenovskoye LLP 51.00
Semizbai-U LLP 51.00
Joint operations JV Akbastau JSC (3) 50.00
Karatau LLP (3) 50.00
Associates JV Katco LLP 49.00
JV South Mining Chemical Company LLP 30.00
JV Zarechnoye JSC 49.98
23
1 The Company transferred its rights and obligations under the subsoil use licences relating to Kanzhugan, Southern Moinkum, Eastern Mynkuduk
and Uvanas deposits, along with the associated production assets to Kazatomprom-SaUran LLP and its rights and obligations under the subsoil use licences relating to the Southern and Northern Karamurun deposits, to RU-6 LLP, in November 2018. Rights and obligations under the subsoil use
licence relating to Central Moinkum are planned to be transferred to Kazatomprom-SaUran LLP in 2019.
2 The Company increased its interest in JV Inkai LLP from 40% to 60% and started fully consolidating this entity in its financial statements with effect from 1 January 2018.
3 JV Akbastau JSC and Karatau LLP were classified as joint operations with effect from 1 January 2018.
4 On 13 December 2018, the Company completed the acquisition of 40.05% of the shares in EAL and a 16.02% stake in the issued capital of JV Kharasan-U LLP from Energy Asia Holdings (BVI) Limited.
As a result of these transactions, the Company increased its interests in Baiken-U LLP from 5% to 52.5% (direct ownership 5%, indirect ownership
through Energy Asia (BVI) Limited 47.5%), its interest in JV Kyzylkum LLP from 30% to 50% (direct ownership 30%, indirect ownership through Energy Asia (BVI) Limited 20.0%) and in JV Kharasan-U from 33.98% to 50% (direct ownership).
5 The Company holds 100% (direct ownership) of Power System International Limited (PSIL) and 40.05% (direct ownership) of Energy Asia
(BVI) Limited. PSIL holds 9.95% (direct ownership) of Energy Asia (BVI) Limited. Energy Asia (BVI) Limited holds 40% (direct ownership)
of Kyzylkum LLP and 95% (direct ownership) of Baiken-U LLP.
6 These companies are third-level entities for the Company through interests in the subsidiaries, JVs and associates presented above these
companies in the table.
JV Kharasan-U LLP (4) 50.00
Kyzylkum LLP (5) 50.00
Zhanakorgan-Transit LLP (6) 60.00
Energy Asia (BVI) Limited (4) (5) 40.05
Nuclear fuel cycle and metallurgy
Subsidiaries Ulba Metallurgical Plant JSC 90.18
ULBA-CHINA Co Ltd(6) 100.00
Mashzavod JSC(6) 100.00
Ulba FA LLP(6) 51.00
Nuclear fuel cycle
Joint ventures Uranium Enrichment Centre JSC 50.00
Ural Electrochemical Integrated Plant JSC(6) 25.00
Investments International Uranium Enrichment Centre JSC 10.00
Ancillary operations
Subsidiaries High Technology Institute LLP 100.00
KazakAtom TH AG 100.00
KAP-Technology JSC 100.00
Trading and Transportation Company LLP 99.99
Volkovgeologia JSC 90.00
Rusburmash-Kazakhstan LLP(6) 49.00
Korgan-KAP LLP 100.00
Power System International Limited (5) 100.00
Joint ventures
SKZ-U LLP 49.00
Uranenergo LLP 48.54
Shieli-Energoservice LLP(6) 99.75
Taukent-Energoservice LLP(6) 99.75
Uranenergo-PUL LLP(6) 100.00
Associates JV SKZ Kazatomprom LLP 9.89
24
The following assets are currently for sale or subject to restructuring:
Table 10: Assets for sale or subject to restructuring
Treatment Name Share (%)
Alternative Energy
Subsidiaries Kazakhstan Solar Silicon LLP(7) 100.00
MK KazSilicon LLP(7) 100.00
Astana Solar LLP(7) 100.00
Nuclear fuel cycle
Joint venture JV UKR TVS Closed Joint Stock Company 33.33
Auxiliary operations
Associates Caustic JSC(8) 40.00%
7 The Company intends to dispose of its interests in Astana Solar LLP, MK KazSilicon LLP and Kazakhstan Solar Silicon LLP before the end of
2019.
8 The Company intends to dispose of its entire block of shares in Caustic JSC before the end of 2020.
25
GEOGRAPHY AND TARGET MARKETS
Mineral assets KAP4
The Company’s mineral assets are located in four main administrative regions of Kazakhstan (Figure 2): the Kyzylorda
Region (Shieli and Zhanakorgan districts), the Turkestan Region (Sozak and Otyrar districts), the North Kazakhstan
Region (Ualikhanov district) and the Akmola region (Enbekshilder district) (Figure 2).
Figure 2: Location of mineral assets and mining and processing facilities
Uranium deposits in Kazakhstan are grouped into six uranium provinces (Figure 3).
Figure 3: Kazakhstan’s uranium provinces and distribution of uranium reserves
With the exception of the Semyzbay field in Northern Kazakhstan, which is located in the North Kazakhstani and
Akmola regions, the Company's fields are located in the south of Kazakhstan in the Shu-Sarysu (8) and Syrdarya (5)
provinces. All mines are located in areas that are sparsely populated and have minimal vegetation cover. Natural
vegetation in mine areas varies from desert to shrub and steppe. Only six mines are located within 10km of human
settlements, all of them villages. In all regions, the climate is continental, with hot summers, harsh winters and little
rainfall (300mm or less).
26
Uranium products market KAP2
The key factor affecting the Company's financial results is the sales price for uranium products, as the uranium
segment accounted for 84% of consolidated revenues in 2018.
Although the average annual sales price of a uranium producer depends upon the structure of sales (in particular, the
share of deliveries under long-term contracts and price formulae used in each contract), in the long term, the market
price for uranium products is determined by the balance of supply and demand. Based on the opinion of industry
experts, Kazatomprom expects that in the long term, nuclear power, as a stable source of meeting base-load electricity
demand not associated with greenhouse gas emissions, will maintain and strengthen its position in the overall structure
of growing energy production, which will ensure growth in demand for uranium energy products. This, in turn, will
lead to a rise in prices for these products from current levels; prices have been depressed by declining demand for
uranium following the accident at the Fukushima power station in 2011, against a backdrop of rising global uranium
production in previous years. A detailed analysis of factors affecting the price of uranium products is provided in the
‘industry overview’ section of the Kazatomprom IPO Prospectus.
Figure 4: Spot prices for uranium, 2000-2018
Source: UxC
On the demand side of the uranium products market in 2018, multidirectional factors were at play. Consumer
sentiment was dented by uncertainty surrounding the ongoing investigation under Section 232 of the United States
Trade Expansion Act, which could limit the access of US operators of nuclear power plants to imported uranium if it
were to lead to the introduction of quotas or customs duties. In terms of the prospects for introducing additional
generating capacity, demand for construction during the year was affected, on the one hand, by the delay in the
construction of a nuclear reactor in the United Arab Emirates and the slow pace of restarting Japan’s reactors and, on
the other, by a delay in plans to reduce the proportion of nuclear energy in France and popular opposition to plans to
abandon nuclear power in Taiwan and South Korea. The persistence of an uncertain situation on the demand side led
to low activity in the market for medium-term and long-term contracts: the long-term U3O8 price stagnated at around
USD 30 per pound, with a small volume of purchases – just over 90 million pounds of U3O8 – significantly less than
annual consumption.
On the supply side, an important factor was the reduction in supply and investment in the expansion of uranium
production from the largest global producers, including Kazatomprom, as well as in supply from secondary sources.
As a result, after a long period of market oversupply, in 2018, there was a shift towards market balance, or even a
small deficit. As a result, in the spot market in 2018, there was an increase in price from USD 24 to almost USD 29
per pound of U3O8, with high trading volumes.
27
Realisation and sales 102-6 102-9 102-10
Customers
The Group sells its products to more than 22 customers in 11 countries. In 2018, the Company’s top three and top five
uranium-product customers accounted for 45% and 62% of Group revenues, respectively.
In May 2018, the Company entered into a supply agreement with Yellow Cake plc, a long-term corporate buyer and
holder of uranium, listed on LSE AIM. Under the agreement, the Company initially supplied 8.1 million pounds (or
about 3,112 tonnes) of U3O8 worth USD 170 million and Yellow Cake will have the right to purchase additional U3O8
to a cap of USD 100 million annually from 2019 to 2027.
The Group estimates that there are around 70 end-users of uranium globally. The company is seeking to expand its
client base and is negotiating with potential customers in Europe, North and South America and the Middle East.
The following table shows the geographical distribution of customers for the Group's uranium products by revenue
for the calendar years 2015 to 2018.
Table 11: Group sales of uranium products by region, 2015‒2018 (%)
Regions
Year ended December 31
2018 2015 2016 2017
China………………………………………………………………………. 44% 47% 60% 34%
Europe……………………………………………………………………... 19% 16% 18% 9.2%
India……………………………………………………………………….. — 11% 8% 23.2%
South Korea..……………………………………………………………… 3% 6% 4% —
USA……………………………………………………………………….. 20% 12% 4% 4.5%
Other(1)…………………………………………………………………….. 14% 8% 6% 29.1%
Total………………………………………………………………………. 100% 100% 100% 100%
Sales to other countries, to uranium funds and THK sales on the cash market
Realisation and marketing
In 2017, Kazatomprom established Trading House Kazakatom AG (THK), a subsidiary trading company based in
Switzerland, to improve the Company’s marketing function, strengthen its cooperation with partners, facilitate sales
of uranium and uranium products in Kazakhstan and, more generally, increase the Company’s global reach. THK’s
key activities are:
• The sale and purchase of uranium in the cash market with the aim of generating additional profit, thanks to
THK’s quick decision-making procedures;
• Assistance in creating additional liquidity in the spot uranium market and improving the reliability of the
Kazatomprom portfolio of contracts for uranium mining; and
• Improving the global reach of the Company in the uranium market by offering a wider choice of pricing
and contractual structures and providing additional market tools for Kazatomprom customers, such as offer
kits and more flexible pricing structures.
Since its launch, THK has helped Kazatomprom to enjoy some tangible benefits in the uranium market. Notably, THK
achieved additional spot sales on the cash market of more than USD 80 million for the year ended 31 December 2018.
THK also acquired new customers for the Company during this period and concluded a number of long-term contracts
for the supply of uranium (with the term of some contracts concluding in 2029).
The Company believes that, due to the scope of work and coverage of THK, the Company can more easily understand
both sides of the global uranium market: the demand side, as the leading producer and seller of natural uranium, and
the supply side. As a result, Kazatomprom can get a better sense of the market, improving its analytical capabilities
and allowing management to make more informed decisions.
28
Transportation 102-9
Transportation of U3O8 is carried out in special 20-foot sealed containers and any such load is accompanied by security
personnel until it reaches its destination. The Company insures risks associated with the transportation of uranium.
The Group delivers U3O8 and finished products to the following destinations for conversion or to end customers:
Western countries. The Group transports U3O8 to companies such as ConverDyn (US), Cameco
(Canada) and Comurhex (France) by rail to the port of St. Petersburg in Russia, then by sea to various
ports in the US, Canada and Europe, then, finally, by rail or road to the processing facilities in
question. In some cases, the Group enters into swap (exchange) agreements to reduce transportation
costs. These can include the exchange of U3O8 with partners of the Group at the conversion facility.
Please see the following section on ‘realisation and sales’ for more.
China. When transporting materials to China, the Company delivers its cargo to the Alashankou
railway station near the Kazakhstan-China border.
Russia. When shipping to the Russian Federation – recipients include Angarsk Electrolysis and
Chemical Combine OJSC (AECC)), Siberian Chemical Combine OJSC (SCC) and Chepetsk
Mechanical Plant OJSC (Rosatom) – the Group delivers its cargo to the Sukhovskaia railway station
for delivery to AECC in Angarsk, to the Tomsk-2 railway station for delivery to the Siberian Chemical
Combine in the city of Seversk, and to the Glazov railway station for delivery to the base of the
Chepetsk Mechanical Plant OJSC (Rosatom) in Glazov. India. The company delivers U3O8 to destinations in India by rail to the port in St. Petersburg, Russia,
and then by sea to the port of Mumbai, India. From the port of Mumbai, the client organises their own
transport to the destination.
The average cost of shipping products to specified destinations ranges from USD 0.5 to USD 3.0 per kilogram of
U3O8.
As far as possible, the Group tries to enter into swap agreements to minimise delivery times (physical transportation
of materials takes, on average, 100 days, while deliveries under swaps agreements take, on average, 25 days),
transportation costs and the risks associated with transporting uranium products.
29
ASSOCIATION MEMBERSHIP AND INTERNATIONAL COMPLIANCE
Kazatomprom is an active member of a number of professional industrial nuclear power organisations:
102-13
World Nuclear Association, London, United
Kingdom
Website: http://www.world-nuclear.org.
Member since 1993
World Nuclear Fuel Market Norcross, Georgia, USA
Website: http://www.wnfm.com.
Member since 2002
Nuclear Society of Kazakhstan, Nur-Sultan,
Republic of Kazakhstan
Website: http://www.nuclear.kz.
Member since 2002
Tantalum-Niobium International Study Centre,
Brussels, Belgium
Website: http://www.tanb.org.
Member since 1999
Nuclear Energy Institute
Washington, DC, USA
Website: http://www.nei.org
Member since 2018
The Company strictly observes key agreements in relation to the peaceful use of nuclear energy to which the Republic
of Kazakhstan is party: 102-12 103-2
30
Table 12. International agreements on the peaceful use of nuclear energy to which Kazakhstan is party
Document Place and date of
signing
Date of effect
Agreement on the Privileges and Immunities of the
IAEA
Vienna,
1 June 1959
Law of the Republic of
Kazakhstan No. 178-I of 30
October 1997 on ratification
Convention on the Physical Protection of Nuclear
Material and Nuclear Facilities
Vienna, New York
3 March 1980
Law of the Republic of
Kazakhstan No.17 of 22 December
2004 on joining
Law of the Republic of
Kazakhstan No. 416-IV of 19
March 2011 on ratification of the
amendment to the Convention
Convention on Early Notification of a Nuclear Accident
Vienna,
26 September 1986
Law of the Republic of
Kazakhstan No. 243-IV
of 3 February 2010
on ratification, effective 9 April
2010
Convention on Assistance in the case of Nuclear
Accident or Radiological Emergency
Vienna,
26 September 1986
Law of the Republic of
Kazakhstan No. 244-IV of
February 03, 2010 on ratification,
effective 9 April 2010
Agreement on Basic Principles of Cooperation in
Peaceful Uses of Atomic Energy (of CIS member-states)
Minsk,
26 June 1992
Effective the day of signing
Treaty on the Non-Proliferation of Nuclear Weapons
(NPT)
(Washington, London, Moscow, Geneva, 1 July 1968)
13 December 1993 Supreme Council Regulation of
the Republic of Kazakhstan of 13
December 1993, No. 2593-XII, on
joining, effective the day of
signing
Convention on Nuclear Safety
Vienna, 17 June 1994
Act of the Republic of Kazakhstan,
3 February 2010, No. 245-IV on
ratification, effective 8 June 2010
Memorandum on security guarantees in connection
with the accession of the Republic of Kazakhstan to the
Treaty on the Non-Proliferation of Nuclear Weapons
5 December 1994 Effective the day of signing
Agreement on the Application of Safeguards in
Connection with the Treaty on the Non-Proliferation of
Nuclear Weapons, signed between the Republic of
Kazakhstan and the IAEA
Almaty, 19 June 1995 Decree of the President of the
Republic of Kazakhstan of 19 June
1995, No. 2344
Comprehensive Nuclear-Test-Ban Treaty
New York,
30 September 1996
Law of the Republic of
Kazakhstan of 14 December 2001,
No. 270, on ratification
Joint Convention on the Safety of Turning Wasted
Production and on the Safety of Radioactive Waste
Management
Vein,
5 September 1997
Law of the Republic of
Kazakhstan of 3 February 2010,
No. 246-IV, on ratification,
effective 8 June 2010
International Convention for the Suppression of Acts of
Nuclear Terrorism
(General Assembly of the United Nations 13 April 2005)
New York,
14 September 2005
Law of the Republic of
Kazakhstan of 14 May 2008, No.
33-IV, on ratification
Central Asian Nuclear-Weapon-Free Zone Treaty
Semipalatinsk
8 September 2006
Approved by Decree of the
President of the Republic of
Kazakhstan, No. 176 of 7
September 2006
Law of the Republic of
Kazakhstan No. 120-IY of 5
January 2009 on ratification
Additional Minutes to the Agreement between
Kazakhstan and the IAEA for application of safeguards
in connection with the Treaty on the Non-Proliferation
of Nuclear Weapons
2007 Law of the Republic of
Kazakhstan, No. 229, of 19
February 2007
Vienna Convention on Civil Liability for Nuclear
Damage 1997 (Consolidated text of Vienna Convention
on Civil Liability for Nuclear Damage of 21 May 1963,
as amended per the Minutes of 12 September 1997)
February 2011 Law of the Republic of
Kazakhstan, No. 405-IV,
of 10 February 2011 on
ratification, effective 29 June 2011
31
OPERATING AND FINANCIAL REVIEW
This Operating and Financial Review is intended to assist with understanding and assessment of trends and significant
changes related to the operations and financial position of NAC Kazatomprom JSC (‘the Company’ or
‘Kazatomprom’). This review is based on the audited consolidated financial statements of the Group, in each case
without material adjustment, unless otherwise stated. It should be read in conjunction with those statements and the
accompanying notes, in addition to the Kazatomprom Q4 2018 operations and trading update, and other Company
reports. All financial data and discussions thereof are based upon the audited consolidated financial statements
prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise indicated.
SIGNIFICANT FACTORS AFFECTING GROUP OPERATING RESULTS
The significant factors affecting the Group’s operating results for 2017 and 2018, which the Company expects to
continue to affect the Group’s operating results in future, include:
• The price received for the sale of natural uranium and changes in natural uranium product prices;
• Changes in the Group structure;
• The impact of changes in exchange rates;
• Taxation, including mineral extraction tax;
• The price and availability of sulphuric acid;
• The impact of changes in ore reserves estimates; and
• Transactions with JVs and associates.
Changes in natural uranium product prices Spot market prices for U3O8, the Group’s main marketable product, have the most significant effect on Group revenue.
The majority of Group revenue is derived from sales of U3O8 in the spot market and from contracts with price formulas
referencing the spot price. In addition to spot prices, the Group’s effective realised price depends on the proportion of
contracts in the portfolio with a fixed price component in a given period. The average realised price for each period
can, therefore, deviate from the prevailing spot-market price.
Table 13. Average spot-market and realised prices per pound of U3O8
2017 2018 Change
Average market spot price (per lb U3O8) USD 22.07 24.64 12%
KZT 7,196 8,497 18%
Average realised price by the Group (per lb U3O8) USD 23.85 24.46 3%
KZT 7,779 8,435 8%
Average realised price by Kazatomprom (per lb U3O8) USD 24.15 24.37 1%
KZT 7,874 8,406 7%
Source: Market prices per UxC LLC
Change in Group structure In 2018, the Group completed several projects that resulted in a change in accounting treatment:
The Group’s shareholding in JV Inkai LLP increased from 40% to 60%, effective 1 January 2018, resulting in a
change in accounting treatment from equity to full consolidation.
Agreements were signed with Uranium One Inc., under which the Company and Uranium One Inc. have the
obligation to purchase all of the output of JV Akbastau JSC and Karatau LLP on equitable terms, with financing
of the joint arrangements in proportion to their shareholdings. As a result, the Group’s investments in these
two operations were reclassified as JOs in the consolidated financial statements and accounted fo r by
recognizing the Group’s direct right in joint assets, liabilities, income and expenses in proportion to its
ownership, effective 1 January 2018.
In accordance with IFRS, the Group assessed the fair values of the assets and liabilities acquired in the above business
combinations of JV Inkai LLP, JV Akbastau JSC and Karatau LLP, resulting in a net gain of KZT 313.5 billion being
recorded in the 2018 statement of profit and loss.
In December 2018, the Company increased its interest in JV Kharasan-U LLP (from 34% to 50%), its effective
interest in JV Kyzylkum LLP (from 30% to 50%) and its effective interest in Baiken-U LLP (from 5% to 52.5%).
32
The company expects to fully consolidate the results of these operations, except for JV Kyzylkum LLP, once the
agreements are finalised in 2019. The fair-value assessments of the assets and liabilities acquired in these
transactions have yet to be completed and, accordingly, no gain or loss was recognised in 2018.
During the periods under review, the Group also disposed of seven non-core assets: 102-49
In July 2018, the Company transferred its entire interest in MAEK-Kazatomprom LLP to its then sole
shareholder, Samruk-Kazyna, resulting in the elimination of the Group’s Energy segment. This transaction was
cash neutral, as an amount equivalent to the sale proceeds was paid to Samruk-Kazyna as a dividend in 2018.
That entity has a utilities business and owns a non-operating BN-350 nuclear reactor, which is currently being
decommissioned. In accordance with the sale and purchase agreement, in relation to its period of ownership of
MAEK-Kazatomprom LLP, the Group:
• is not exposed to any liabilities associated with the reactor, unless caused by the Group’s gross negligence or
intentional guilty actions; and
• may be responsible for financial and environmental liabilities that may be identified in future periods relating
to the utilities business.
Management believes that the Group had no obligations under this agreement as of 31 December 2018 and,
accordingly, no liability is recognised in the consolidated financial statements.
In June 2018, the Company transferred its entire block of shares in Kazakhstan Nuclear Power Plants JSC to its
then sole shareholder, Samruk-Kazyna. This transaction was also cash neutral.
In December 2018, the Company entered into an advisory and consulting services agreement with Samruk-
Kazyna in relation to MAEK-Kazatomprom LLP and Kazakhstan Nuclear Power Plants JSC. According to the
agreement terms, the Company will provide consulting services with respect to all matters raised for Samruk-
Kazyna’s consideration in its capacity as a sole participant in MAEK-Kazatomprom LLP, including the approval
of the implementation plan for a management reporting system and the formation of a supervisory board and
management board. The services agreement will be effective until December 2021, or until MAEK is transferred
by Samruk-Kazyna to the Government of Kazakhstan (whichever comes first).
The agreement with respect to Kazakhstan Nuclear Power Plants JSC includes the same scope of the Company’s
services and is expected to remain effective until December 2021, or until a feasibility study for nuclear power-
plant construction is completed and approved by the competent state authorities of the Republic of Kazakhstan
(whichever comes first).
In September 2018, the Company signed an agreement to sell its 76% interest in Kyzyltu LLP to the other
shareholder, Stepnogorsk Mining and Chemical Plant LLP (SMCP), for KZT 3.8 billion. Currently, the Company
is awaiting payment. Under the terms of the sale and purchase agreement, from 7 December 2018, the Company
will charge SMCP an amount of 0.01% of the total sum per day until the payment is completed. Ownership rights
will be transferred after the Company receives the full amount of the purchase price.
In October 2018, the Company transferred its entire interest in Sareco LLP, a company engaged in the
manufacture of an insignificant volume of rare earth metal products, to the national mining company, Tau-Ken
Samruk JSC, a related entity of Samruk-Kazyna.
In December 2018, Kazatomprom-Damu LLP began the dissolution of the legal entity following approval at the
Annual General Meeting.
JV Betpak Dala LLP was also dissolved as a legal entity. All necessary liquidation measures are in progress.
In January 2019, the General Meeting of Shareholders approved the interim liquidation balance of ULBA
Conversion LLP. The legal entity is expected to be dissolved by the end of 2019.
In total, the number of Group subsidiaries, JVs, JOs and associates decreased from 50 as of 31 December 2017
to 44 as of 31 December 2018.
In 2019, the Company expects to dispose of its entire interests in Astana Solar LLP, Kazakhstan Solar Silicon
LLP and MK KazSilicon LLP, as well as its holdings in Shieli-Energoservice LLP, Taukent-Energoservice LLP
and Uranenergo-PUL LLP. In 2020, it expects to dispose of its entire stake in Caustic JSC.
33
Impact of changes in exchange rates Fluctuations in the KZT/USD exchange rate can significantly affect the Group’s consolidated operating results,
primarily because:
Uranium spot prices are typically quoted in USD, so most of the Group’s sales contracts and consolidated
revenues are denominated in USD. In 2017, 78% of Group revenue was denominated in USD; this rose to
87% in 2018. The increase was due to higher USD revenues from the uranium segment in 2018 than in 2017.
A substantial portion of Group expenses, including most of its operating production expenses and more than
two-thirds of its capital expenditure, are denominated in KZT. The main expenses not denominated in KZT
relate to the purchase of industrial pumps used in ISR operations and resins used in processing uranium.
Most of the Group’s borrowings are denominated in foreign currencies. As of 31 December 2018, 99% of
the Group’s borrowings were denominated in USD.
As most of the Group’s revenue is denominated in USD, while a significant share of its costs is in KZT, an appreciation
of the USD against the KZT generally has a positive effect on the Group’s financial performance. However, because
the Group has significant outstanding USD-denominated liabilities, the positive effect of an appreciating USD may
be fully or partially offset. In addition, although the Company purchases uranium and uranium products from its JVs
and associates under KZT-denominated contracts, the prices are determined by reference to the prevailing spot-market
prices of U3O8, which are in turn denominated in USD. Accordingly, a significant appreciation of USD would result
in a corresponding increase in the KZT-denominated uranium purchase costs under such contracts.
Where possible, the Group attempts to mitigate the risks associated with exchange rates by matching the currency of
its interest payments and financial liabilities with the currency of its cash flows. Through this matching, the Group is
able to hedge without the use of derivatives. For monetary assets and liabilities denominated in currencies other than
KZT, the Group attempts to keep its net exposure to an acceptable level by buying or selling such currencies at spot
rates when necessary to address short-term imbalances.
In 2018, the KZT/USD exchange rate fluctuated between KZT 332.3 and KZT 384.2 per USD. The following table
provides annual average rates and year-end closing KZT/USD exchange rates.
Table 14. Annual average and year-end closing rate for KZT/USD
2017 2018 Change
Average exchange rate for the period1 KZT/USD 326.08 344.90 6%
Closing exchange rate for the period KZT/USD 332.33 384.20 16% 1 The average rates are calculated as the average of the daily exchange rates on each calendar day. Source: National Bank of Kazakhstan
Taxation and mineral extraction tax (MET) Kazakhstan’s MET is determined by applying a 29% tax charge to the taxable base related to mining production costs
(based on a formula – see footnotes to Table 15). Taxable expenditures are made up of all direct expenditures
associated with mining operations, including wellfield development depreciation charges and any other depreciation
charges attributable to direct mining activities, but specifically exclude processing and general and administrative
expenses. The MET is calculated separately for each subsoil use licence.
The resulting MET paid is therefore dependent upon the cost of mining operations.
Table 15. Summary of taxes accrued by the Group
(KZT million) 2017 2018 Change
Corporate income tax1 14,675 31,412 114%
Mineral extraction tax2 13,280 17,720 33%
Excess profit tax3 5,609 ‒ ‒
Other taxes and off-budgetary payments4 38,470 49,684 29%
Total tax accrued 72,035 98,816 37% 1 Applicable rate: 20%; calculation: taxable income (based on tax reporting accounts) multiplied by corporate income tax rate. 2 Applicable rate: 18.5% for uranium cost in pregnant solution; calculation: the tax charge is a cost of mining and is based on a deemed 20% profit
margin on certain expenditures, and a MET rate of 18.5%. The tax charge of 29% is determined by the following formula: (1 + 20%) × 18.5%
÷ (1 – (1 + 20%) × 18.5%). 3 Applicable rate: 10–60%. Abolished as of 1 January 2018 for subsoil use licences relating to solid mineral deposits, including uranium. 4 Includes property tax, land tax, transport tax, social tax, off-budgetary payments, VAT and PIT.
Total tax accrued, including corporate income tax, MET and other taxes, increased by 37% on the year to KZT 98,816 million in 2018, due to an
increased tax base resulting from higher sales volumes and higher spot prices, as well as accounting changes related to the change in the Group structure (see section
Change in Group structure on page 25 for details).
34
Price and availability of sulphuric acid Extraction of uranium using the ISR mining method requires substantial amounts of sulphuric acid. If sulphuric acid
is unavailable, it could impact the Group’s uranium production schedule. Higher prices for sulphuric acid could
adversely impact the Group’s profits.
The Group’s weighted average price of sulphuric acid increased slightly to KZT 21,557 per tonne in 2018 (from KZT
21,529 per tonne in 2017). On average in 2018, the price of sulphuric acid represented about 16% of the Group’s
uranium production cost.
Impact of changes in ore reserve estimates The Group reviews its estimates of Ore Reserves and Mineral Resources on a regular basis. As a result, certain Ore
Reserves and Mineral Resources may be reclassified in accordance with applicable standards. Such reclassifications
may have an impact on the Group’s financial statements. For example, if a reclassification results in a change to the
Group’s life of mine plans, there may be a corresponding impact on depreciation and amortisation expenses,
impairment charges, as well as mine closure charges incurred at the end of mine life.
Transactions with JVs and associates The Company purchases U3O8 from its subsidiaries, JVs and associates, principally at spot price with discounts, which
can vary by operation. Purchased volumes generally correspond to the Company’s interest in the respective selling
entities.
The Group’s Uranium segment revenue is primarily composed of two streams:
• The sale of U3O8 purchased from JVs and associates, and
• The sale of U3O8 produced by the Company and by its consolidated subsidiaries and JOs.
Cost of sales of purchased uranium is equal to the purchase price from JVs and associates (using equity accounting),
which in most cases is the prevailing spot price with certain applicable discounts. The share of results of JVs and
associates therefore represents a significant part of the Group’s profits and should be considered accordingly in the
assessment of the Group’s financial results. In 2018, the weighted average discount on pounds purchased from
operations was 4.2% of the prevailing spot price.
When uranium produced by the Company, consolidated subsidiaries and JOs, is sold, the cost of sales is predominantly
represented at the cost of production. For those sales, the full mining margin is therefore captured in the consolidated
results of the Group.
The following table provides the volumes purchased by the Company; these volumes were accounted for using the
purchase price in the Company’s cost of sales for the periods indicated:
Table 16. Volume of U3O8 purchased by the Company, 2017‒2018
(tU) 2017 2018 Change
U3O8 purchased from JVs and associates 6,877 3,022 (56)%
U3O8 purchased from non-controlled investment1 1,882 1,647 (12)%
Total 8,759 4,669 (47)% 1 Non-controlled investment is Baiken-U LLP, with 5% direct ownership by the Company.
The volume of U3O8 purchased from JVs, associates, and non-controlled investments that is accounted for in cost of sales using purchased price,
totalled 4,669 tonnes in 2018, a decrease of 47% compared to 2017 mainly due to the change in the Group structure (see section
Change in Group structure on page 25 for details). Note that total volumes of purchased uranium are higher since the Company and THK
also buys from subsidiaries and third parties.
35
KEY PERFORMANCE INDICATORS
Table 17. Consolidated financial indicators
(KZT billion unless noted) 2017 4
(recalculated) 2018 Change
Group consolidated revenue
(according to the financial statements) 277.0 436.6 58%
Operating profit 32.6 77.5 138%
Net profit 139.2 380.3 173%
Gain on exercise of put option (one-time effect)1 107.7 ‒ ‒
Gain from business combinations (one-time effect) ‒ 313.5 ‒
Adjusted net profit 31.5 66.8 112%
Earnings per share attributable to owners (basic and diluted), KZT/share 534.1 1,435.0 169%
Adjusted EBITDA2 96.7 131.3 36%
Adjusted attributable EBITDA3 128.2 140.2 9%
Operating cash flow 23.4 58.3 149% 1 In 2017 the Group recognised a gain from the exercise of a put option of KZT 107.7 billion because of the difference between the consideration
received and the carrying amount of the investments. 2 Adjusted EBITDA is calculated by excluding from EBITDA all items not related to the main business and having a one-time effect. 3 Adjusted Attributable EBITDA is calculated as an adjusted EBITDA less the share of the results in the net profit in JVs and associates plus the
share of adjusted EBITDA of JVs and associates engaged in the uranium segment (except Budenovskoye JV LLP’s EBITDA due to minor effect it has during each reporting period) less non-controlling share of adjusted EBITDA of Appak LLP and Inkai JV LLP less any changes in the
unrealised gain in the Group. 4 Due to classification of operations of MAEK-Kazatomprom LLP as discontinued.
Consolidated revenues were KZT 436.6 billion in 2018, an increase of 58% compared with 2017, mainly due to an
increase in sales of uranium products as a consequence of market-share growth and the change in Group structure (see
section Company Asset structure on page 22 for details).
Operating profit was KZT 77.5 billion in 2018, an increase of 138% compared with 2017, mainly due to the rise in
U3O8 sales volumes, the appreciation of the USD against the KZT, and higher average sales price.
Net profit for the year was KZT 380.3 billion, an increase of 173% compared to 2017. However, a significant portion
of the year-over-year increase is associated with one-time effects of transactions in both years, especially the exercise
of the put option in 2017 and the change in investment value resulting from the inclusion of JV Inkai LLP, Karatau
LLP, JV Akbastau JSC in the consolidation (see section Company Asset structure on page 22 for details). The one-
time effects of these transactions increased net income by KZT 107.7 billion and KZT 313.5 billion in 2017 and 2018
respectively. Adjusting for those effects, adjusted net profit was KZT 66.8 billion, an increase of 112% compared to
2017.
Adjusted EBITDA totalled KZT 131.3 billion in 2018, an increase of 36% from 2017, while adjusted attributable
EBITDA was KZT 140.2 billion, an increase of 9% compared with 2017. The increases were mainly driven by the
increase in operating profit and the change in Group structure (see section Company Asset structure on page 22 for
details).
For similar reasons, operating cash flows totalled KZT 58.3 billion, an increase of 149% from 2017.
Table 18. Production and sales metrics
2017 2018 Change
Production volume as U3O8 (100% basis) tU 23,321 21,705 (7)%
Group production volume as U3O8 (attributable basis)1 tU 12,093 11,476 (5)%
U3O8 sales volume (consolidated) tU 10,111 16,647 65%
Including KAP HQ/THK U3O8 sales volume tU 9,300 15,287 64%
Group inventory of finished goods (U3O8) tU 9,085 7,892 (13)%
KAP/THK inventory finished goods (U3O8) tU 8,999 7,353 (18)%
Average sales price of the Group KZT/kg 20,222 21,930 8%
Average sales price of the Group USD/lb U3O8 23.85 24.46 3%
Average weekly spot price USD/lb U3O8 22.07 24.64 12%
Average month-end spot price USD/lb U3O8 21.78 24.59 13% 1 Group production volumes as U3O8 (attributable basis) are not equal to the volumes purchased by the Company and THK.
Production volumes of U3O8 on a 100% basis decreased by 7% at all uranium mining entities for 2018, compared to
36
2017. Production was reduced in accordance with the Company’s decision that saw production at all operations reduce
by 20% against subsoil-use licence volumes. Attributable production volumes were lower for the same reason.
Consolidated U3O8 sales volumes in 2018 totalled 16,647 tonnes, an increase of 65% compared to 2017. Consolidated
sales in 2018 were favourably impacted by the sale of 3,112 tU to uranium fund Yellow Cake PLC following its initial
public offering; the effect of the change in the Group structure; and transformation of the Group’s marketing sales
function that included the creation of THK, which resulted in the acquisition of new customers and higher direct
contracting without the use of intermediaries.
Consolidated Group inventory of finished U3O8 products at 31 December 2018 amounted to 7,892 tU, which is 13%
lower than at the end of 2017. At the HQ/THK level, inventory of finished U3O8 products was 7,353 tU, a decrease of
18% compared to 2017. The lower inventory levels are the result of an increase in sales volumes in 2018, as well as
the Company’s target to maintain an optimum inventory level of approximately six months of annual attributable
production.
The average KZT sales price realised by the Group in 2018 was KZT 21,930 per kg (24.46 USD/lb), an increase of
8% compared to 2017 due to the increase of average spot price for uranium products and the appreciation of USD
against KZT.
Table 19. Uranium segment financial metrics
(KZT billion unless noted) 2017 2018 Change
Average exchange rate for the period KZT/USD 326.08 344.90 6%
Uranium segment revenue 205.6 366.8 78%
Including U3O8 sales proceeds (across the Group) 204.5 365.1 79%
Share of a revenue from uranium products % 74% 84% 13%
Attributable cash cost USD/lb 12.02 11.56 (4)%
Attributable all-in sustaining cost USD/lb 16.09 15.08 (6)%
Investments of mining companies
(100% basis)1 81.5 75.4 (7)%
1 Excludes liquidation funds and closure costs and includes expansion investments. In section Ошибка! Источник ссылки не найден. total
results includes liquidation funds and closure cost.
Consolidated U3O8 sales were KZT 365.1 billion in 2018, an increase of 79% compared to 2017, mainly due to an
increase in sales of uranium products, reflecting market share growth and the change in the Group structure.
Attributable Cash Cost (C1) and All-In-Sustaining Costs (AISC) decreased by 4% and 6% respectively in 2018,
compared to 2017. The decreases were primarily due to depreciation of KZT. It should be noted that despite of the 7%
decrease in production volumes (see section Table 18. Production and sales metrics for details), the cost of production
per unit in KZT changed insignificantly due to cost optimisation efforts to further position the Group’s U3O8 unit
production costs among the lowest in the industry.
Investment costs of mining companies (on 100% basis) totalled KZT 75.4 billion, a decrease of 7% compared to 2017,
mainly due to the decrease of sustaining capital costs substantiated by the cost optimisation programme (see section
Capital Expenditures Review for details).
Table 20. UMP segment
Rare metals products 2017 2018 Change
Beryllium products KZT/kg 8,267 10,447 26%
Sales, tons 1,599.6 1,662.1 4%
Tantalum products KZT/kg 95,369 104,076 9%
Sales, tons 135.0 137.7 2%
Niobium products KZT/kg 19,906 24,088 21%
Sales, tons 23.7 22.9 (3)%
Increased consumer demand for beryllium and tantalum products in 2018 resulted in higher sales.
Sales of niobium in 2018 decreased compared to the prior year due to a reduction in quantity of orders for niobium
alloying additives and for niobium-containing sublimates.
37
Table 21. UO2 power and fuel pellets
Sales 2017 2018 Change
Fuel pellets tonnes 75.2 84.3 12%
Ceramic powder tonnes 10.2 10.2 ‒
Dioxide from scraps tonnes 15.3 8.3 (46)%
Sales of fuel pellets in 2018 increased to 84.3 tons, 12% higher than in 2017 due to increased amounts of tolling
services according to customer agreements.
Sales volumes of ceramic powder in 2018 were unchanged compared to 2017.
The decline in sales volumes of dioxide from scraps is due to a reduction in scrap recycling.
Table 22. Other segments
(KZT billion unless noted) 2017 2018 Change
Revenue1 80.3 79.2 (1)%
Including external revenue 39.1 31.4 (20)%
Cost of sales1 75.3 77.0 2%
Gross profit1 5.0 2.2 (57)% 1 All indicators include intra-group transactions (eliminations), for more details see the annual financial statements.
Other segments include services such as drilling, transportation of commodities and sulphuric acid, R&D and training
which are provided to mining entities.
Total external revenue from other segments was 79.2 billion in 2018, which was similar to 2017. External revenue
from the Other segments represented about 7% of the Group’s total consolidated revenue in 2018, compared to about
14% in 2017. A decrease in the Other segments gross profit is mainly due to the change in the Group structure (see
section Company Asset structure on page 22 for details).
38
CAPITAL EXPENDITURES REVIEW
The Group primarily incurs capital expenditures in relation to its subsidiaries engaged in the mining of natural
uranium, as well as expenditures of a similar nature relating to its JVs and associates engaged in the mining of natural
uranium. Such expenditures are comprised of the following key components:
• Well construction costs;
• Expansion costs, which typically include expansion of processing facilities, extension of services and
transport routes to new wellfield areas, implementation of new systems and processes;
• Sustaining capital – largely reflecting recurring, infrastructure, maintenance and equipment replacement
related costs which are assumed to cease three years prior to cessation of production;
• Liquidation-fund contributions and mine-closure costs, which are not included in the calculation of AISC
The following table provides the capital expenditures for the Group’s subsidiaries, JVs and associates engaged in
uranium mining for the periods indicated. Capital expenditure amounts shown were derived from stand-alone
management information of certain entities within the Group on an unconsolidated basis, and they are therefore not
comparable with or reconciled to the amounts of additions to property, plant and equipment as presented in the
financial statements. Investors are strongly cautioned to not place undue reliance on capital expenditure information,
as it represents unaudited unconsolidated financial information on an accounting basis which is not in compliance
with IFRS:
Table 23. Group capital expenditure (KZT millions)
Enterprise name
2017 2018
Stake WC1 S2 LF/C3 Total Owner
ship WC1 S2 LF/C3 Total
Ortalyk LLP 100% 2,555 543 169 3,267 100% 2,321 5,0104 171 7,502
Kazatomprom-SaUran LLP 100% 5,197 1,185 639 7,020 100% 6,778 1,478 2,990 11,245
RU-6 LLP 100% 2,453 541 282 3,276 100% 2,472 676 1,062 4,210
Appak LLP 65% 2,046 209 87 2,341 65% 999 257 68 1,325
JV Inkai LLP 40% 5,258 8,077 — 13,335 60% 8,707 2,324 31 11,062
Semizbay-U LLP 51% 2,364 470 137 2,971 51% 2,996 980 115 4,091
Karatau LLP 50% 4,369 2,558 99 7,026 50% 2,376 685 80 3,141
JV Akbastau JSC 50% 3,103 2,486 144 5,733 50% 2,031 1,192 79 3,301
JV Zarechnoye JSC 49.98% 3,386 535 11 3,931 49.98% 3,971 182 10 4,162
JV Katco LLP 49% 10,252 2,866 768 13,886 49% 9,275 2,447 1,368 13,090
JV Kharasan-U LLP5 34% 6,582 254 182 7,018 34% 4,983 1,611 142 6,736
JV SMCC LLP 30% 3,962 2,761 858 7,582 30% 5,813 339 535 6,688
Baiken-U LLP5 5% 4,389 3,051 233 7,674 5% 4,674 861 146 5,681
Total of mining assets 55,918 25,535 3,609 85,061 57,396 18,041 6,798 82,235 1 Well construction 2 Sustaining 3 Liquidation fund/closure 4 Includes expansion investments in amount of KZT 4.6 billion. 5 As of 31 December 2018, the share in Kharassan was 50%, in Baiken-U, 52.5%.
In order to achieve the planned levels of production, on an annual basis, the Group’s mining companies assess the
required level of wellfield and mining preparation based upon the availability of reserves. These costs relate to the
capitalised costs of maintaining the sites, with the main component being wellfield construction.
39
Diagram 1. Wellfield construction and sustaining costs, 2018 in KZT millions
Table 24. Wellfield construction and sustaining costs
(KZT millions) 2017 2018 Change
Well construction 55,918 57,395 3%
Sustaining 25,535 13,419 (47)%
Total wellfield construction and sustaining costs 81,452 70,8141 (13)% 1 Excludes expansion investments of KZT 4.6 billion
Wellfield construction and sustaining costs for the 13 mining entities in 2018 amounted to KZT 70.8 billion, which is
13% lower than in 2017. The change was mainly due to the decrease of sustaining capital expenses related a cost
optimisation program. A 3% rise in the cost of well construction is related to higher piping costs, higher pump prices
combined with KZT depreciation.
Diagram 2. Production vs. increase in ready-to-mine reserves, tonnes
During 2018, 23,199 tU of reserves were added to production, down 11% from 2017. The increase in ready-to-mine
reserves was smaller due to lower uranium production volumes in the mine plan in 2018 compared with 2017. The
increase in ready-to-mine reserves is made according to the results of the GPR complex that included construction of
technological wells on technological blocks, piping of technological wells and technological blocks, acidification of
technological blocks. KAP4
The information presented in Table 25 reflects wellfield development depreciation (commonly known as PGR),
property, plant and equipment, and depreciation and amortisation data for each mining asset as of 31 December 2018.
KZT millions
tonnes
40
Table 25. Depreciation and amortisation, 31 December 2018
(KZT million unless noted) PGR volumes
(tU) PGR
Exploration
value
Book value of
PPE (excl.
wellstock)
Gross value of
PPE (excl.
wellstock)
D&A (excl.
wellstock)
Ortalyk LLP 2,711 9,909 328 12,749 18,168 1,046
Kazatomprom-SaUran LLP 4,993 11,088 2,870 6,518 15,085 1,059
RU-6 LLP 2,954 7,838 - 3,058 5,589 391
Appak LLP 2,447 3,942 2,158 4,118 8,280 368
JV Inkai LLP 4,901 19,901 20,320 59,706 95,428 2,244
Semizbay-U LLP 2,902 5,611 31 7,990 16,346 809
Karatau LLP 3,070 6,772 3,202 11,733 22,708 1,272
JV Akbastau JSC 2,277 4,758 6,893 7,509 10,831 402
JV Zarechnoye JSC 2,502 8,406 664 2,811 8,435 668
JV Katco LLP 4,881 22,590 4,432 17,502 50,212 3,538
JV Kharasan-U LLP 4,108 9,637 9,893 10,738 15,379 681
JV SMCC LLP 4,813 9,615 6,479 12,290 19,269 1,949
Baiken-U LLP 3,176 9,246 7,193 11,318 19,475 1,135
41
RESERVES AND GEOLOGICAL SURVEYS
Diagram 3. Reserves and resources, 31 December 2018, thousand tU
Mineral reserves of all mining assets as of 31 December 2018 (including annual depletion) totalled an estimated
520,600 tU, (100% basis, 305,600 tU attributable to the Company, or 59%). Total mineral resources (including
reserves) were estimated at 740,000 tU (100% basis, 476,700 tU attributable to the Company). In comparison to the
first half of 2018, as reported in the IPO prospectus, total resources increased by about 66,000 tU (100% basis, about
41,000 attributable).
The Company pays significant attention to the evaluation of prospective deposits and the projects portfolio, including
exploration projects. In 2018, the Company was awarded uranium exploration contracts for site No. 2 and No. 3 of
the Inkai deposit with duration of 4 years. According to the Report of the Competent Authority of the Ministry of
Energy of the Republic of Kazakhstan, as of 1 July 2017, the mineral resources for sites No. 2 and 3 are 125,100
tonnes (of which 42,000 tonnes are on site No. 2, and 83,100 tonnes on site No.3). In 2019, the Company plans to
start geological studies on site No.2 of the Inkai deposit.
(thousand tU)
42
FINANCIAL ANALYSIS
The table below shows financial information related to the consolidated results of the Group for 2017 and 2018:
Table 26: Key financial information, 2017‒2018
(KZT millions) 2017
(recalculated) ² 2018 Change
Revenue 277,046 436,632 58%
COGS (209,934) (313,817) 49%
Gross profit 67,112 122,815 83%
Selling expenses (4,316) (10,530) 144%
G&A (30,194) (34,805) 15%
Operating profit 32,602 77,480 138%
Other income/(loss), including: 77,294 312,436 304%
Gain on exercise of put option (one-time effect) 107,714
Net gain from business combinations (one-time effect)1 313,517
Share in the results of associates 22,007 22,786 4%
Share of JV results 22,107 (4,743) (121)%
Pre-tax income 154,010 407,959 165%
Corporate income tax (17,287) (28,797) 67%
Income from discontinued operations 2,431 1,104 (55)%
Net profit 139,154 380,266 173%
Adjusted net profit (net of one-time effect) 31,440 66,759 112%
Net profit attributable to shareholders 138,527 372,176 169%
Net profit attributable to non-controlling interest 627 8,090 1,191% 1 Includes the gain in amount of KZT 5 million from other investments.
² Due to classification of operations of MAEK-Kazatomprom LLP as discontinued.
Net profit of the Group in 2018 is significantly affected by the transactions related to change in the Group structure:
• a gain from increase of additional interest in JV Inkai LLP of KZT 95,929 million
• a gain from the change of classification of Karatau LLP and JV Akbastau JSC to joint operations of KZT
124,632 million and KZT 92,951 million, respectively
The components of revenue, cost of goods sold, general and administrative expenses, distribution costs, and other
income and expenses are changed in 2018 compared to 2017 due to the change in the Group structure (see section
Company Assets Structure on page 22 for details).
43
Revenue Diagram 4. Revenue by source (KZT millions)
The main factors influencing the change in revenue in 2018 compared to 2017 are presented in the graph below:
Diagram 5. Sources of changes in revenue (KZT millions)
Cost of sales Cost of sales totalled KZT 313,817 million in 2018, an increase of 49% compared to 2017. The increased is mainly
due to higher uranium sales volumes in 2018 and the change in the Group structure (see section Company Assets
Structure on page 22 for details).
The table below shows the Group’s cost of sales for 2017 and 2018 by component:
Table 27. Cost of sales by component, 2017‒2018
Proportion of cost of sales
(KZT millions) 2017 2018 Change 2017 2018
Materials and supplies 143,771 202,817 41% 69% 64%
Wages and salaries 22,830 24,024 5% 11% 8%
Processing and other services 5,052 10,354 105% 2% 3%
Depreciation and amortisation 13,623 39,866 193% 6% 13%
Taxes other than income tax 10,552 22,033 109% 5% 7%
Other 14,106 14,723 4% 7% 5%
Cost of Sales 209,934 313,817 49% 100% 100%
The cost of materials and supplies was KZT 202,817 million in 2018, an increase of 41% from 2017. The increase
was largely due to higher uranium sales volumes and the change in the Group structure.
Wages and salaries totalled KZT 24,024 million in 2018, an increase of 5% from 2017, mainly due to the change in
the Group structure.
The cost of processing and other services was KZT 10,354 million in 2018, an increase of 105% from 2017, mainly
as a result of higher costs associated with third-party services.
44
The other cost categories – including depreciation and amortisation, taxes and other expenses, and other – totalled
KZT 76,622 million in 2018, an increase of 100% from 2017, mainly due to the consolidation of expenses attributable
to JV Inkai LLP and an increase in sales of uranium products at Group level compared with products purchased from
JVs and associates during 2018.
The main factors influencing the change in cost of sales in 2018 are presented in the graph below:
Diagram 6. Changes in cost of sales, 2018 vs. 2017 (KZT millions)
Selling expenses
Table 28. Selling expenses, 2017‒2018
Proportion of selling expenses
(KZT millions) 2017 2018 Change 2017 2018
Shipping, transportation and storing 2,868 7,275 154% 66% 69%
Wages and salaries 484 950 96% 11% 9%
Rent 85 106 24% 2% 1%
Materials 169 221 31% 4% 2%
Depreciation and amortisation 65 67 3% 2% 1%
Others 645 1,911 196% 15% 18%
Selling expenses 4,316 10,530 144% 100% 100%
Selling expenses totalled KZT 10,530 million in 2018, an increase of 144% from 2017, mainly due to an increase in
the costs of loading, transporting and storing (associated with higher uranium sales volumes) and the change in the
Group structure.
Selling expenses related to sales of HQ/THK volumes increased by 123% on the year in 2018. This constituted 29%
of the total increase in selling expenses; the remainder related to the change in the Group structure (see section
Company Assets Structure on page 22 for details).
General & administrative expenses (G&A)
Table 29. General and administrative expenses, 2017‒2018
Proportion of G&A expenses
(KZT millions) 2017 2018 Change 2017 2018
Wages and salaries 16,556 17,809 8% 55% 51%
Consulting and information services 3,150 4,488 42% 10% 13%
Rent 1,086 1,166 7% 4% 3%
Depreciation and amortisation 696 808 16% 2% 2%
Other 8,706 10,534 21% 29% 31%
G&A expenses 30,194 34,805 15% 100% 100%
G&A expenses were primarily influenced by the change in the Group structure, including wages and salaries
(KZT 17,809 million in 2018, 8% higher than 2017), rent expenses (1,166 million, 7% higher than 2017), and
depreciation and amortisation (KZT 808 million, 16% higher than 2017).
45
The cost of consulting and information services was KZT 4,488 million in 2018, an increase of 42% from 2017, largely
due to an increase in services purchased by the Company during 2018.
Other expenses totalled KZT 10,534 million in 2018, an increase of 21% from 2017. The increase was largely related
to expenses on the construction of social facilities in the newly formed Turkestani region. Other expenses also includes
maintenance and repairs, travel expenses, communication expenses, materials, taxes other than income tax, utility
costs, corporate events, fines and penalties, and certain other expenses.
The share of associate and JV results The share of results of associates and JVs in 2018 was KZT 18,042 million, a decrease of 59% from 2017. The decrease
was mainly down to the change in Group structure (see section Company Assets Structure on page 22 for details). The
increase in the average spot price in 2018 compared with 2017 positively impacted the operating results of the
associates and JVs and their resulting contributions to the Group.
Profit before tax and tax expense
Diagram 7. Profit before tax and tax expense, 2017‒2018, KZT millions
Table 30. Profit before tax and tax expense, 2017‒2018
(KZT millions) 2017 2018 Change
Profit before tax 154,010 407,959 165%
Non-taxable one-time effects 107,714 313,517 191%
Taxable profit before tax 46,296 94,442 104%
Corporate income tax 17.287 28.797 67%
The Group’s profit before tax was KZT 407,959 million in 2018, an increase of 165% from 2017. The increase was
mainly due to the change in the Group structure and the resulting recognition of a KZT 313.5 billion profit related to
the business combination, as well as higher uranium sales volumes in 2018.
The corporate tax rate applicable to the majority of the Group's profits was 20% in both 2018 and 2017. The Group's
effective tax rates were 11% and 7% in 2017 and 2018, respectively. The effective tax rate differed from corporate
income tax primarily due to certain elements of reported income not being recognised in tax accounting.
KZT millions
46
LIQUIDITY AND CAPITAL RESOURCES
Kazatomprom’s management pays special attention to preserving financial stability in a constantly changing market
environment. The Group’s financial management policy is aimed at maintaining a strong capital base to support
existing operations and business development.
Capital resources The Group’s liquidity requirements primarily relate to funding working capital, capital expenditures, service of debt,
and payment of dividends. The Group has historically relied primarily on cash flow from operating activities, and to
a smaller degree, external sources of financing, to fund its working capital and long-term capital requirements. It is
expected that there will be no significant change in the sources of the Group’s liquidity in the foreseeable future. As
required, the Company will consider entering into project financing arrangements to fund certain investment projects.
The Group also obtains capital for its operations through the formation of joint ventures with industry partners, and in
the past, it has raised financing in the international debt capital markets.
Dividends received The Company is the parent company for the Group, and in addition to revenue from its business operations, it receives
dividends and other payments from its subsidiaries, JVs and associates, and other investments. In 2017 and 2018, the
Group received dividends of KZT 36,486 million and KZT 12,773 million, respectively, from its JVs and Associates
and other investments. The decrease in 2018 was primarily due to the change in the Group structure (see section
Company Assets Structure on page 22 for details). The Company strives to use its voting power to maximise its
dividend flow from subsidiaries, JVs and associates. Dividends received by the Company from investees domiciled
in the Republic of Kazakhstan are exempt from dividend tax.
In 2018, the Company paid dividends in the amount of KZT 161,661 million to Samruk-Kazyna.
Working capital The table below provides the Group’s working capital as at 31 December 2017 and 2018:
Table 31. Group working capital, year end, 2017 and 2018
(KZT millions) 20171 20182 Change
Inventory 169,675 170,261 ‒
Receivables 58,085 94,477 63%
Recoverable VAT 24,182 29,799 23%
Other current assets 18,396 18,322 ‒
CIT prepayment 5,493 4,366 (21)%
Payables (112,642) (51,534) (54)%
Employee remuneration liabilities (173) (147) (15)%
Income tax liabilities (5,618) (977) (83)%
Other taxes and compulsory payments liabilities (4,168) (10,711) 157%
Other current liabilities (14,349) (30,319) 111%
Net working capital 138,881 223,537 61% 1 Include the MAEK as of 31 December 2017 2 Excluding the MAEK due to the disposal from the Group.
The Group’s net working capital remained positive during all periods under review. The Company regularly monitors
the cash position of its subsidiaries and focuses on effectively collecting excess cash from such subsidiaries.
Table 32 summarises the Group’s turnover of inventories, receivables and payables, and provides details of the
Group’s cash conversion cycle (in days), at 31 December 2017 and 2018:
Table 32. Turnover of inventories, receivables and payables and cash conversion cycle
(days) 20171 2018 Change
Inventories turnover 292 198 (32)%
Receivables turnover 70 79 13%
Payables turnover 208 60 (71)%
Cash conversion cycle 154 217 41%
47
1 For the comparison purpose the Inventories, Receivables and Payables of the MAEK were excluded in 2017. Also, in the consolidated statement
of Profit and Loss, the MAEK was reclassified as discontinued operations as in 2017.
The increase in the cash conversion cycle in 2018 is largely due to increased sales volumes of finished
goods, repayments of accounts payable in 2018, and the change in the Group structure (see section Company Assets
Structure on page 22 for details).
The Group constantly monitors the uranium market and may pursue a strategy of increasing its inventories in
unfavourable market conditions. The following table sets forth the components of the Group’s inventories as at
31 December 2017 and 2018:
Table 33. Group inventories, year end, 2017 and 2018
(KZT millions) 2017 2018 Change
Finished goods and goods for resale 140,533 130,157 (7)%
Work-in-process 17,563 19,768 13%
Raw materials 14,520 13,728 (5)%
Spare parts 819 720 (12)%
Materials in processing 762 1,226 61%
Fuel 889 1,875 111%
Other materials 2,842 5,459 92%
Provision for obsolesce and write-down to net realizable value (8,253) (2,672) 68%
Total inventories 169,675 170,261 ‒
The Group’s largest inventory item is finished goods and goods for resale, which primarily consist of U3O8. In line
with its market-oriented strategy, the Group’s inventory levels decreased in 2018 due to the increase of sales volumes
including U3O8 and other goods sold by the Group. Consolidated inventory levels of U3O8 decreased by 13% whereas
Finished goods and goods for resale in the table above decreased by 7%. The difference is largely because inventories
in 2018 includes uranium purchased from JVs and associates, the cost of which was higher in 2018 compared to 2017
due to higher spot market prices and exchange rates in 2018.
The Company expects to maintain inventory levels of approximately six months of annual attributable production.
Cash flows The following cash flow discussion is based on, and should be read in conjunction with, the financial statements and
related notes.
The following table provides the Group’s consolidated cash flows for 2017 and 2018:
Table 34. Group consolidated cash flows, 2017‒2018
(KZT millions) 20171 2018
Cash flows from/(used in) operating activities1 23,355 58,327
Cash flows from/(used in) investing activities 215,575 (40,279)
Cash flows (used in) financing activities (74,881) (139,272)
Net increase / (decrease) in cash and cash equivalents 164,049 (121,224) 1 Includes income tax and interest paid.
Cash flows from operating activities Cash flows generated from operating activities increased to KZT 58,327 million for 2018 from KZT 23,355 million
for 2017. This change was primarily due to:
a KZT 120,952 million increase in cash receipts from customers in 2018. This increase was largely due to an
increase in the Group’s sales volumes and the change the Group structure (see section Company Assets Structure
on page 22 for details).
a KZT 69,024 million increase in payments to suppliers for 2018. This increase was largely due to payments of
accounts payable in 2018 which were greater than payments of accounts payable during 2017, and the change
the Group structure (see section Company Assets Structure on page 22 for details).
48
Cash flows from investing activities There was net cash used in investing activities in 2018 of KZT 40,279 million compared to net cash from investing
activities of KZT 215,575 million in 2017.
In the prior year, investing cash flows were significantly affected by the receipt of KZT 173,719 million relating to a
put option held by the Company, which it exercised.
Other changes in investing cash flows in 2018 are due to:
KZT 23,713 million decrease in dividends received from associates, JVs and other investments as a result of the
change in the Group structure (see section Company Assets Structure on page 22 for details).
KZT 34,193 million payments for the acquisition of 40.05% shares in Energy Asia Limited and a 16.02% stake
in the chartered/authorised capital of JV Kharasan-U LLP from Energy Asia Holdings (BVI) Limited. In the
consolidated financial statements, it is presented as an acquisition of interest in controlled entities, net of cash
acquired, in accordance with IFRS.
Cash flows from financing activities Cash flows used in financing activities increased to KZT 139,272 million in 2018 from KZT 74,881 million for 2017.
This change was primarily due to:
an increase of KZT 95,812 million in dividends paid to Samruk-Kazyna in 2018 compared 2017;
a KZT 86,324 million increase in cash used in repayment of loans and borrowings in 2018, due to early repayment
for loans related to Astana Solar LLP, MK KazSilicon LLP and Kazakhstan Solar Silicon LLP, and the change in
the Group structure (see section Company Assets Structure on page 22 for details).
In 2018, there was a KZT 117,754 million, or 223%, increase in proceeds from loans and borrowings compared
to the prior year. The increase was primarily attributable to short-term borrowings by the Group to finance the
Group’s payments for the increased share in Baiken-U LLP and Kharasan-U LLP, and working capital
requirements.
Liquidity The Group manages its liquidity requirements to ensure sufficient funds are available for operations and for settlement
of financial obligations.
The Group ensures the availability of funds on demand in amounts sufficient to cover expected operating expenses
using, among others, short-term as well as long-term corporate credit lines without collateral.
Table 35. Liquidity, year end, 2017 and 2018
(KZT millions) 2017 2018 Change
Cash and cash equivalents 239,936 128,819 (46)%
Current term deposit 8,472 205 (98)%
Total cash 248,408 129,024 (48)%
The Group’s cash and cash equivalents as at 31 December 2017 and 2018 were KZT 239,936 million (includes cash
receipt from put-option exercising) and KZT 128,819 million, respectively. The decrease as of 31 December 2018 is
mainly caused by dividends paid Samruk-Kazyna in 2018 and scheduled repayment of debt.
The corporate credit lines are an additional liquidity source for the Company. At 31 December 2018, the Company
with certain subsidiaries had total available revolving credit facilities of USD 302.5 million of which USD 222.5
million or 74% was undrawn at that date.
49
INDEBTEDNESS
The Company’s financial liabilities comprise loans and guarantees issued for loans of affiliated companies. The debt
portfolio is primarily in USD, which is its main revenue currency (99% for 2018). As a result, the Company has a
natural economic hedge of USD/KZT foreign-currency risk without the use of derivative financial instruments.
Table 36. Total Debt
(KZT millions) 2017 2018 Change
Loans, borrowings and finance lease liabilities 121,703 200,169 64%
Guarantees issued for loans of affiliated companies 14,732 13,935 (5)%
Total debt 136,435 214,104 57%
The following table summarises the Group’s indebtedness as of December 31, 2017 and 2018:
Table 37. Total Group’s indebtedness
(KZT millions) 2017 2018 Change
Non-current debt, including 39,204 16,620 (58)%
Bank loans 38,557 16,270 (58)%
Non-bank loans 353 ‒ ‒
Finance lease liabilities 294 350 19%
Current debt, including 82,498 183,549 122%
Bank loans 82,374 74,159 (10)%
Non-bank loans ‒ 35,726 ‒
Issued bonds ‒ 73,535 100%
Finance lease liabilities 125 129 3%
Total debt 121,703 200,169 64%
Total debt increased by 64% largely due to the consolidation of Inkai JV LLP’s debt of KZT 35,085 million, and an
increase in short-term loans to finance the Group’s payments for the increased share in Baiken-U LLP and Kharasan-
U LLP, and for working capital requirements.
On October 11, 2018, the Group issued bonds indexed to the US dollar in the amount of KZT 70,000 million with an
annual rate of 4.6% to supplement working capital requirements in accordance with Kazakhstan legislation. Bonds to
be redeemed in November 2019.
The following table summarises the Group’s weighted average interest rate on bank loans as at 31 December 2017
and 2018:
Table 38. the Group’s weighted average interest rate
Interest rate (%) 2017 2018
Fixed interest rate 6.29 5.61
Floating interest rate 3.47 4.05
The Group’s credit facilities contain certain affirmative and negative covenants described in the annual financial
statement.
Net debt and debt leverage ratio The following table summarises the key ratios used by the Company’s management to measure its financial stability
as at 31 December 2017 and 2018:
Table 39. The key financial stability ratios
(KZT millions) 2017 2018 Change
Total debt 121,703 200,169 64%
Total cash 248,408 129,024 (48)%
Net debt (126,705) 71,145 156%
Adjusted EBITDA 96,733 131,208 36%
50
Net debt / Adjusted EBITDA (1.3) 0.54 ‒
The above indicators reflect a stable financial position. They indicate the creditworthiness of the Company, achieved
through the generation of adequate financial resources and capital, and moderate debt.
GUIDANCE FOR 2019
Table 40. Guidance indicators
(exchange rate 370 KZT/1USD) 2019
Production volume (tU) (100% basis)1 22,750 – 22,800
Production volume (tU) (attributable basis)2 13,000 – 13,500
KAP/THK sales volume (tU)3 13,500 – 14,500
Group sales volume (tU)3 15,000 – 16,000
Total capital expenditures (KZT billions) (100% basis)4 85 – 95
Revenue - consolidated (KZT billions) 485 – 505
Revenue from Group U3O8 sales,
included in consolidated revenue (KZT billions) 392 – 408
C1 cash cost (attributable basis) (USD/lb U3O8) $11.00 – $12.00
All-in sustaining cash cost (attributable C1+capital cost) (USD/lb U3O8) $15.00 – $16.00 1 Production volume (100% basis): Amounts represent the entirety of production of an entity in which the Company has an interest; it therefore
disregards some portion of that production may be attributable to the Group’s JV partners or other third-party shareholders. 2 Production volume (attributable basis): Amounts represent the portion of production of an entity in which the Company has an interest, which
corresponds only to the size of such interest; it excludes the remaining portion attributable to the JV partners or other third-party shareholders. 3 Kazatomprom HQ/THK sales volume: includes only the consolidated sales of Kazatomprom HQ and THK. Intercompany transactions between KAP HQ and THK are not included. 4 Total capital expenditures (100% basis): includes only capital expenditures of the mining entities
* Note that the conversion of kgU to pounds U3O8 is 2.5998.
In 2019, Kazatomprom expects to remain consistent with its previously announced intention to flex down planned
production volumes by 20% for 2018 through 2020 (versus consolidated planned production levels under subsoil use
licences, which were increasing annually over that period). With the flex down, under the existing subsoil use licences,
production is expected to total approximately 22,750 to 22,800 tU (100% basis) in 2019; without the reduction,
production would have exceeded 28,500 tU (100% basis) in 2019.
Kazatomprom expects to continue following a market-centric approach to uranium production, rather than the
previous production-focused strategy. By leveraging the in-situ recovery mining method, the Company can adjust
production levels and respond to changes in uranium market conditions very rapidly and cost-effectively.
The guidance for sales remains consistent with Kazatomprom’s market-centric strategy. Sales in excess of planned
attributable production are expected to be primarily sourced from inventories, and from KAP subsidiaries under
contracts and agreements with JV partners and other third parties.
The Company expects to maintain an inventory level of approximately six months of annual attributable production
at the 2019 year-end.
51
SENSITIVITY ANALYSIS FOR 2019 The table below presents the correlation between the spot price and the U3O8 average sales price. This table is based
on several key estimates and assumptions that are subject to risks and uncertainties outside the Group’s control. These
estimates are also based on assumptions regarding future business opportunities, which may change. This sensitivity
analysis should be used only as a reference, and actual price changes may result in different values than those provided
in the table below.
Table 41. Correlation between the spot price and the U3O8 average sales price
Nominal Spot Price (USD) 2019E 2020E 2021E 2022E 2023E
20 23 22 22 22 22
30 30 31 31 31 31
40 37 40 40 40 40
50 45 49 49 50 49
60 52 59 58 59 59
70 59 68 67 68 68
Values are rounded to the nearest dollar. The sensitivity analysis above is based on the following key assumptions: ‒ Annual inflation at 2% in the US;
‒ Analysis is at 31 December 2018 and prepared for 2019–2023 on the basis of minimum annual sales of approximately 13.5 thousand tonnes of
Uranium in form of U3O8, of which the volumes which are contracted as of 31 January 2019 will be sold per existing contract terms i.e. contracts with hybrid pricing mechanisms with a fixed price component (calculated in accordance with an agreed price formula) and / or
combination of separate spot, mid-term and long-term prices, while the rest of the sales would be largely based on spot prices;
‒ U3O8 will be sold under short-term contracts negotiated directly with the customers and based on spot prices.
FORWARD-LOOKING STATEMENTS
This document contains statements that are considered to be ‘forward-looking statements’. Terminology that describes
or references the future – including, inter alia, words such as ‘believes’, ‘according to preliminary estimates’,
‘expects’, ‘forecasts’, ‘intends’, ‘plans’, ‘suggests’, ‘will’ or ‘should’ or, similar or comparable terminology, or
references to discussions, plans, objectives, goals, future events or intentions – is used to denote forward-looking
statements. These forward-looking statements include all statements that are not historical facts.
These statements include, without limitation, statements regarding intentions, opinions and announcements on the
Company’s expectations, concerning, among other things, the results of operations, financial state, liquidity,
prospects, growth, potential acquisitions, strategies and sectors, in which the Company operates. In their nature,
forward-looking statements involve risks and uncertainties because they relate to future events and circumstances that
may or may not occur. Forward-looking statements do not guarantee future or actual performance.
The Company’s financial position and liquidity, as well as the development of the country and industries in which the
Company operates, may differ significantly from the options described herein or assumed pursuant to the forward-
looking statements contained herein. The company does not plan and does not assume obligation to update any
information regarding the industry or any forward-looking statements contained herein, whether as a result of
obtaining new information or the occurrence of future events or any other circumstances. The Company makes no
representations, provides no assurances and publishes no forecasts as to whether the outcomes described in such
forward-looking statements will be achieved.
52
SUSTAINABLE DEVELOPMENT
PROGRAMME OF SUSTAINABLE DEVELOPMENT
Kazatomprom’s programme of sustainable development in corporate and social responsibility for 2017‒2019 is aimed
at creating the conditions for sustainable corporate development by: 102-11
Ensuring decent conditions and wages for Company employees;
Safeguarding the labour and social rights of Company employees;
Increasing the longevity and quality of life of Company employees, their families and the population of the
regions in which the Company operates;
Reducing the Company’s environmental impact;
Assisting in the sustainable development of the regions in which the Company operates;
Creating a favourable business climate, both within the Company and in those regions where it is present;
Ensuring effective interaction between Kazatomprom, its partners and state authorities.
The programme includes the following measures, divided into three categories:
1. SOCIAL MEASURES
Ensuring social stability in labour collectives;
Development of human resources;
Ensuring social calmness among the unions of companies being restructured;
Combatting corruption and fraud, dealing with corporate conflicts and conflicts of interest.
2. OCCUPATIONAL HEALTH, SAFETY AND ENVIRONMENTAL PROTECTION MEASURES
Occupational health and safety;
Environmental protection;
Nuclear and radiation safety.
3. MEASURES OF ECONOMIC EFFECT ON REGIONS OF OPERATION
Supporting the social and economic development of the regions of operation;
Procedures to ensure and oversee sustainable procurement practices.
SUSTAINABLE DEVELOPMENT INITIATIVES
The Management Board of Kazatomprom by its decision No. 53 dated March 20, 2018, approved the Materiality
Matrix (only taking into account the survey of employees of Kazatomprom), the Programme for the implementation
of sustainable development initiatives of Kazatomprom for 2018 as well as updated Stakeholder map.
According to the above documents, sustainable development initiatives were:
1. Sustainable economic development (achievement of the target EVA indicator (Economic Value Added),
meeting the targeted net consolidated income on the Group level, staying below the planned cost threshold
of the uranium oxide production in subsidiaries); 2. Increase of industrial safety (implementation of the target model for integrated security management,
implementation of the Industrial Safety Behavioral Audit, introduction of the LTIFR index, increased
reporting transparency);
3. Environmental impact of the company’s operations (maintaining of the established emissions limits below
the threshold, development and introduction of scientifically-based standards of production waste generation
per unit into operations);
4. Production efficiency (energy saving and energy efficiency increase measures);
5. The contribution of innovative scientific research into increase of natural uranium production processes
(approval and implementation of the Kazatomprom R&D Plan);
53
6. Human potential development (organization of training according to employees’ individual development
plans).
Information on the implementation of the above sustainable development initiatives is normally provided to the BoD’s
Committee on Industrial, Environmental, Radiation Safety, Labor Protection and Sustainable Development.
GOVERNANCE DIAGNOSTICS
In order to assess the implementation of the Corporate Governance Code principles in Kazatomprom, in 2017-2018,
following the initiative of Samruk-Kazyna, the Company conducted a diagnostic of its corporate governance system.
As part of this diagnostic, the implementation of the sustainable development principles and sustainable development
systems of Kazatomprom were assessed. In addition, based on the results of the diagnostics of the corporate
governance system conducted in 2017, Kazatomprom received a number of recommendations to improve internal
processes (for the period 2018-2025), including internal processes in the field of sustainable development (consistency
of economic, environmental and social goals for long-term sustainable development , implementation of a sustainable
development system).
The recommendations of independent consultants aimed at corporate governance system improvement, including such
under the “Sustainable Development” section are included in the Action Plans for 2018 and 2019. The relevant
departments work on the implementation of these activities, including in the field of sustainable development.
54
SUSTAINABLE ECONOMIC DEVELOPMENT
CREATED AND DISTRIBUTED DIRECT ECONOMIC VALUE
Kazatomprom performs significant social and economic functions, ensuring the sustainable development of both the
Company and the population in numerous areas of Kazakhstan.
The Company’s high degree of economic effectiveness is attributable to its thorough planning of income and
expenditures, overseen by the development planning and budgeting procedures of Samruk-Kazyna JSC’s Corporate
Standard for Strategic and Business Planning. The business development plan is formulated in consolidated form, to
include five-year plans of subsidiaries and its implementation is monitored by the Company’s Board of Directors as
well as by Samruk-Kazyna JSC.
Table 42. Direct economic value created and distributed (KZT millions)* 201-1**
No. Item 2018 2017*****
(recalculated) Change
Direct economic value created
1 Revenue*** 801,608 444,839 80%
Distributed economic value:
2 Operating costs**** (293,760) (193,783) 52%
3 Salaries and wages (41,833) (39,386) 6%
4 Interest and dividend costs (12,672) (8,933) 42%
5 Taxes, excluding income tax (23,559) (11,275) 109%
6 Corporate income tax (28,797) (17,287) 67%
7 Investment in local society (social expenditures) (730) (609) 20%
8 Miscellaneous expenses (19,991) (34,412) (42)%
Undistributed economic value 380,266 139,154 173%
* Ukraine, the US, the UK and Kazakhstan are members of the Extractive Industries Transparency Initiative (G4 mining and
metals sector disclosures)
** Information from the Company’s audited consolidated financial statement for 2018
***Revenue is calculated in accordance with GRI methodology and includes the sales revenue and all other Company revenues
**** Operating costs include the following items: cost of sales (except for salaries, wages and taxes), distribution costs, general
and administrative costs (except for salaries, wages and taxes).
***** Operations of MAEK-Kazatomprom LLP classified as discontinued
Detailed information on the financial and economic results of Company activities for 2018 can be found in the
audited consolidated financial statement on the Company’s corporate website:
https://www.kazatomprom.kz/en/investors/finansovaya_otchetnost/page-1
SCIENCE AND INNOVATION
Kazatomprom is a world-class innovator, focused on the scientific and technical development of its production
methods. The Company consistently increases its financing of scientific and technical work in fields such as geology,
geotechnology, natural-resource processing, nuclear fuel cycle (NFC) production, rare and rare-earth metal production
and the legal protection of new-generation technologies.
The Company has a scientific and technical subdivision (Institute of High Technologies LLP), as do its subsidiaries
and affiliates (CRL at UMP JSC, CRME at Volkovgeologiya JSC). There are more than 486 research and design staff
in total, including eight doctors of science and 54 doctoral candidates.
In 2018, the Company, its subsidiaries and its affiliates boasted 101 research and development agreements worth
KZT 3.417 billion. The Company filed three patent applications for inventions and received 14 protection documents
for inventions. Employees of Kazatomprom put forward 1,697 rationalisation proposals, of which 1,564 were accepted
and 977 have been implemented to date. The expected economic effect is more than KZT 2.393 billion.
To maintain its competitive edge in the world market, the Company has developed its own Research and Technological
Activity Management policy. Kazatomprom’s priority research areas are coordinated by four scientific hubs:
55
1. Geology, geotechnology and mining and development – Volkovgeologiya, JSC;
2. Extraction and processing of product solutions, concurrent REM extraction – IVT, LLP;
3. High technologies of the NFC, RM production and processing – CRL of UMP, JSC;
4. Knowledge management, commercialisation of intellectual property, general coordination of research and
technological activity – UKN of NAC Kazatomprom, JSC.
In 2018, there was one meeting of Kazatomprom’s Scientific and Technical Council and 12 meetings of the
Specialised Scientific and Technical Councils of its priority research areas.
In accordance with the new policy, in 2018, the Company updated its policy on rationalisation activity.
On 20‒22 September 2018, the Company held an ‘Innovation School’ in Almaty on the theme of “prospects and
technologies for diversifying the activities of NAC Kazatomprom JSC”.
Also in 2018, as part of Kazatomprom’s cooperation with Atomredmetzoloto JSC, there were mutual visits to mines
and industrial sites, along with technical meetings to exchange experiences on uranium mining by the PSV method
and on by-product extraction of useful associated components.
To commercialise the results of its scientific and technological activities, in 2018, Kazatomprom signed a licence
agreement, granting JV Khorasan-U (Khorasan-U), LLP the right to use its patented invention for the underground
leaching of metals through technological well systems (Patent RK No. 11745 of 2001) in exchange for an annual
remuneration payment for the duration of the contract.
Research and development
Almost all of the Company's R&D work is aimed at improving and upgrading the production process. In 2018, the
following technologies were developed and adopted:
Ultrasound technology to boost the desorption of uranium.
The deposition of small crystals of uranium peroxide using flocculants made in Kazakhstan.
To optimise the flow of technological solutions, a simulator (version 3.0) was developed and integrated into
the module of the “Mine” programme, with a view to designing the geo-technological field, the construction
of wells and their operation. The program module was tested on the cells of the ‘central’ section of the
Mynkuduk deposit. Thanks to the use of the simulator in the process of underground leaching, a 10%
reduction in the consumption of sulphuric acid can be expected.
Low-acid leaching using cavitation-jet technologies in combination with special-purpose chemicals at the
pilot testing phase is planned to be introduced in 2020.
Kazatomprom's scientific subdivisions are making significant contributions to the achievement of the Company's
strategic goals, including increasing value added and producing high-tech Kazakh uranium products.
ECONOMIC EFFECT IN REGIONS OF OPERATION
The company pays close attention to supporting infrastructure projects in the regions in which it operates in order to
promote their socio-economic development. 203-1
In February 2018, the Company donated a pre-school institution with 240 places to the Department of Education of
Nur-Sultan City . The project was implemented under the auspices of the Memorandum of Mutual Cooperation
between NAC Kazatomprom JSC and the Akimat of Nur-Sultan city, dated 17 March 2014. The total cost of the
project was more than KZT 831 million. The facility has a total area is 4,602 m2 and the site of the school totals 0.9
ha.
In December 2018, as part of the framework of the Memorandum of Mutual Cooperation between Kazatomprom and
the Water Resources Committee of the Ministry of Agriculture of the Republic of Kazakhstan, dated 15 August 2018,
the Company transferred to the state the operating rights for KAZVODHOZ Shieli-Energoservice, together with more
than KZT 523 million of financial resources to overhaul the transferred entities.
In 2018, the Group paid KZT 1,337 million under its subsoil use contracts for the social, economic and infrastructural
development of the regions in which it operates:
Table 43. Transfers to the Turkistan regional budget, 2018
No. Enterprise Amount transferred
(KZT ’000s)
56
1. NAC Kazatomprom JSC 504,057
2. Karatau LLP 45,206
3. APPAK LLP 32,652
4. JV Zarechnoye JSC 17,441
5. JV Inkai LLP 11,220
6. Volkovgeologiya JSC 4,200
7. PE Ortalyk LLP 70,194
8. JV UGHT LLP 83,493
9. JV Akbastau JSC 185,930
10. JV KATKO LLP 11,234
11. Kazatomprom-SaUran LLP 252
TOTAL: 965,879
Table 44. Transfers to the Kyzylorda regional budget, 2018
No. Enterprise Amount transferred
(KZT ’000s)
1. NAC Kazatomprom JSC 92,986
2. Baiken-U LLP 37,119
3. Khorasan-U LLP 171,112
4. RU-6 LLP 2,000
5. Semizbai-U LLP 23,272
TOTAL: 326,489
Table 45. Transfers to other regional budgets
No. Enterprise Amount transferred
(KZT ’000s)
Akmola region
1. Semizbai-U LLP 16,623
North Kazakhstan region
2. Semizbai-U LLP 16,623
Almaty region
3. MK Kaz Silicon LLP 1,758
East Kazakhstan region
4. UMP JSC 7,457
Mangistau region
5. NAC Kazatomprom JSC 1,869
TOTAL: 44,430
CHARITY AND SPONSORSHIP
In decision No. 126 of January 2016, the Board of Directors of Samruk-Kazyna JSC approved the Fund’s Charity
Policy and Charity Program.
At present, all charitable activity of the Fund group is conducted by the Samruk-Kazyna Trust Social Projects
Development Foundation, which selects projects of social importance on a competitive basis.
PROCUREMENT
The Company ensures transparency of purchases and publishes its procurement regulations and plans, including its
long-term procurement plans, as well as the legal and regulatory documents pertaining to tenders and results for
information purposes on its website.
The Company is currently implementing a new procurement model with the following goals:
To improve purchasing efficiency by using best practices;
To ensure the monitoring and transparency of purchases;
To create and develop a qualified suppliers list; and
To reduce stock costs.
The new purchasing model will apply to Kazatomprom’s corporate centre and all of its subsidiaries and affiliates.
57
The Company lends assistance in the negotiation of contracts for the purchase of goods, work and services between
its affiliates and regional suppliers with a local content level of 79% to support domestic suppliers.
Under a project aimed at managing procurement by category in 2018, four new category-based procurement strategies
(sulphuric acid, shipping and packaging containers, ion-exchange resin and hydrogen peroxide) were developed and
seven strategies were implemented in one to four waves. For example, when selecting pump suppliers for the first
time, the Company used a total cost of ownership (TCO) tool, with a total economic benefit of KZT 3.07 billion,
above the planned figure of KZT 2.3 billion.
Kazakhstan’s Subsoil Code generally requires subsoil users to comply with certain local content requirements,
including the use of local suppliers and personnel. These requirements are usually set out in the subsoil use agreements
to which the Company’s subsidiaries and joint venture companies are party.
In 2002, the Government introduced a policy aimed at replacing imports and spurring the greater involvement, support
and stimulus of local producers. This was taken a step further in 2009, when the Government made amendments to
subsoil legislation, which were then reflected in the Subsoil Code and in related laws, to increase local content of
goods, work and services purchased by state bodies, national companies and subsoil users. The Local Content
Requirements introduced new criteria, such as using local employee wages as a percentage of payroll to calculate
local content.
Table 46. Percentage of local-origin products, work and services purchased (%)
2018 2017 2016
Local-origin products, work and services purchased (as a percentage of total) 80% 80% 82%
Table 47 provides a breakdown of the percentage of local-origin purchases by Kazakhstani region. 204-1
Table 47. Local-origin purchases, by region, 2018 (%)
Region Percentage of local origin in
purchases (%)
Akmola region 98
Almaty region 67
Kyzylorda region 93
Mangistau region 83
South Kazakhstan 89
East Kazakhstan 78
Atyrau region 61
Zhambyl region 89
West Kazakhstan 10
Karaganda region 88
Kostanay region 53
Pavlodar region 89
Aktyubin region 11
North Kazakhstan 73
Nur-Sultan city 82
Almaty city 83
Total for Kazatomprom (in Republic of Kazakhstan) 80
58
SOCIAL RESPONSIBILITY
COMPANY STAFF
103-2
Kazatomprom’s employees are its main asset; they foster its development and ensure it maintains its leading position
in the world uranium market.
The Company’s guiding document in the field of human-resources management is its HR Policy. Its objective is to
achieve the Company's strategic goals by fostering effective individual and team work by qualified and motivated
employees who share the Company’s values.
Kazatomprom’s HR Management Department monitors compliance annually, based on the Company’s HR Policy,
using the following performance indicators:
Increase in staff involvement;
Stabilisation of staff transfers and the prevention of staff turnover growth, except for activities related to the
optimisation of the Company’s management structure;
Increase in the share of employees who have completed training and further education;
Competitive recruitment; and
Human-resource and staff-cost planning efficiency.
In addition, the ideological principles and ethics of the Company’s business culture, structure and development are
governed by its Code of Corporate Ethics and Compliance, a collective agreement, and regulations on corporate
rewards.
The Company adheres to principles, standards and regulations to safeguard the interests and rights of workers and
strives to prevent all forms of discrimination and forced labour. It pays particular attention to safety in the workplace,
to improving workers’ social conditions and to equal opportunities for professional and personal growth.
Since 2012, the Company has been implementing a management succession programme to:
Ensure the succession of top Company management from a pool of candidates suited to key management
and administrative positions;
Identify and develop employees who have significant potential to fill management and administrative roles;
Encourage Company staff to advance professionally and avail of development and career opportunities.
Management has objectively selected a pool of candidates with the greatest potential to operate at a higher level after
appropriate training and practice.
As of the end of 2018, Kazatomprom’s total headcount, including joint ventures and affiliates, was 20,507, down 18%
from the previous year (25,020 people at end 2017 and 25,819 at end 2016). The reduction in headcount was due to
the disposal of assets (MAEK LLP, KAES JSC and SARECO LLP). The majority of the work is executed by the
Company’s employees. Outsourcing (non-staff) is used to carry out works that are not of a permanent nature, based
on the conclusion of a paid service agreements. 102-8
Table 48. Total number of staff and non-staff employees in the Republic of Kazakhstan as of end 20184 102-8
Number (persons) Including
Men Women
Total headcount 20,956 16,981 3,975
Headcount at the end of the reporting period (staff) 20,507 16,642 3,865
Workers on paid services agreements, (non-staff) 449 339 110
Note: The Company's main region of activity is Kazakhstan
At the end of 2018, the share of employees on paid services agreements was 2.1% of total headcount, while 95.4% of
Group staff had open-ended employment contracts. 102-8
Table 49. Total headcount by employment agreement and gender, end 2018 102-8
4 Information on the number of staff is provided according to the data of statistical report 1-T (labor report). Regional disclosures are provided by
place of work. 102-8
59
Number
(people)
Men Women
Total headcount 20,507 16,642 3,865
Permanent employees 19,572 15,974 3,598
Temporary employees (fixed-term agreement) 935 668 267
The percentage of Group employees that were part time as of end 2018 was 0.1%. 102-8
Table 50. Total headcount by employment type, end 2018 102-8
Number
(people)
Men Women
Total headcount 20,507 16,642 3,865
Full-time employment 20,488 16,629 3,859
Part-time employment 19 13 6
A significant percentage of Kazatomprom’s employees (about 66%) work in the South Kazakhstan region (including
the city of Shymkent, 2.7%), where the country’s main uranium deposits and, consequently, the Company's operations
are located.
Table 51. Total headcount by region and gender
Indicator Number
(persons)
Including
Men Women
Almaty 655 379 276
Nur-Sultan 939 518 421
Shymkent 526 306 220
West Kazakhstan 0 0 0
North Kazakhstan 1,198 940 258
South Kazakhstan 13,067 11,709 1,358
Central region 0 0 0
East Kazakhstan 4,107 2,781 1,326
Russian Federation 0 0 0
People’s Republic of China 10 5 5
United States of America 2 2 0
Switzerland 3 2 1
Total 20,507 16,642 3,865
Kazatomprom’s management positions and main staff categories reflect management’s inclusive approach. Indicators
of inclusivity, for example, on gender, age and minority-group affiliation, can be found the company’s annual
sustainable development report.
As of the end of 2018, 81% of the Group employees were men and 19% were women. Compared with the previous
year, the number of men as a percentage of total employees increased slightly (from 80%). This gender ratio is very
much down to the specific production activities of the nuclear industry. The average age of the Group employees was
40 years as of end 2018 – a figure that tends to remain virtually unchanged year on year.
Table 52. Structure of governing positions and staff by gender, nationality and age, end 2018 405-1
Indicator Employees
Administrative
staff
Production
staff Share
Governing
positions Share
Headcount 20,388* 2,131 18,257 100% 119 100%
Gender Men 16,532 984 15,548 81% 110 92%
Women 3,856 1,147 2,709 19% 9 8%
Minority group
(by nationality)
Kazakh 13,710 1,562 12,148 67% 92 77%
Russian 5,280 444 4,836 26% 17 14%
Other 1,398 125 1,273 7% 10 8%
Age groups
Under 30
years of age 3,544 372 3,172 17% 3 3%
From 30 to 50
years of age 11,470 1,372 10,098 56% 75 63%
Over 50 years
of age 5 374 387 4 987 26% 41 34%
60
*excluding management
The share of Company employees covered by collective agreements in 2018 remained unchanged at 98%. 102-41
Table 53. Percentage of employees covered by collective agreements in 2018
Value
Headcount (end of period) 20,507
Total number of employees covered by collective agreements 20,119
Percentage of employees covered by collective agreements 98%
In 2018, the number of employees leaving the Company declined 10% from the previous year, indicating a higher
level of social stability.
Table 54. Number of employees who left the Company in 2016‒2018, by gender 102-8
2018 2017 2016 Change
2018‒2017
Change
2017‒2016
Women 566 727 1,046 -22% -30%
Men 2,418 2,604 3,109 -7% -16%
Total 2,984 3,331 4,155 -10% -20%
Out of the 2,984 people who left the Company in 2018, the largest proportion (43%) were men between the ages of
30 and 50. As Kazakhstan’s uranium mining enterprises are largely located in its Southern region (including
Shymkent), most employees who left the Company were in this region (63%).
Conversely, 2,378 employees joined the Company in 2018. Of these new staff, 51% were hired in the Southern region
(including Shymkent).
Table 55. Number of Group employees hired in 2018, by region 401-1
Region Number Share of new
hires (%)
Almaty 164 7
Nur-Sultan 306 13
Shymkent 112 5
West region 0 0
North region 289 12
South region 1,101 46
Central region 0 0
East region 404 17
Switzerland 2 0
Total 2,378 100
This information is based on information technology (IT) reports and official documentation from Group subsidiaries and affiliates,
in line with the indicators of the Global Reporting Initiative (GRI) on social impact.
Business transformation projects – “Implementation of the target personnel management model”, “Business
processes automation” and “Job-matching”
Between November 2016 and June 2018, Kazatomprom implemented a target personnel management project (KAP-
17) aimed at building HR functions using a process approach taking into account the value of target personnel to the
Company's business. HR processes were implemented using the target personnel management model developed as
part of the Company’s business transformation programme. This involved updating policies and process tools,
reviewing the functionality and developing the competencies of key users, and training process participants in line
with best practices. The objective was to achieve the strategic goal of developing a corporate culture of an industry
leader (part of Kazatomprom’s development strategy for 2018‒2028). The transition to new personnel management
processes was completed for both the Company and six pilot subsidiaries. In 2019‒2020, the project is scheduled to
be replicated in the Group's affiliates.
61
In 2018, as part of the first way of a project to automate business processes, the Company’s personnel administration,
organisational management, attendance and payroll functions were moved to an automated system (baseline SAP
HCM). By the end of 2019, as SAP HCM is rolled out more broadly, an employee HR self-service system is scheduled
for phased launch. The new automated system will allow the combination of all personnel management processes into
a single database, including comprehensive employee assessments, training and development, personnel records,
organisational management, calculation of working time and wages, analytics and reporting.
As part of the transformation process, in 2017, the transition to Kazatomprom’s target organisational structure was
undertaken according to the job-matching recommendations of then sole shareholder Samruk-Kazyna JSC (an
assessment of candidates' compliance with requirements for new positions, based on competencies, skills and work
experience). The main prerequisites for the transition were:
updated development strategy;
a new operational model involving a divisional structure based on elements of the production chain, with a
new organisational structure;
updated competency and skill requirements; and
the introduction of a post grading system.
In 2017, job matching was completed at the Corporate Centre and, in 2018, at DP Ortalyk LLP, RU-6 LLP,
Kazatomprom-Sauran LLP, IVT LLP, UMP JSC, TTK LLP, Volkovgeology JSC. In 2019, the plan is to complete the
move to job matching at the Company's uranium-mining enterprises. Job-matching has led to replacing 26% of the
Corporate Centre employees and 25% of CEO and CEO-1 level employees at the above-mentioned subsidiaries. In
2018, the Corporate Centre embarked on preparatory work to revise organisational structures, strengthen qualification
requirements and assess staff competencies to ensure a quality start to the job-matching process in the Company’s
uranium-mining affiliates.
In 2017 Kazatomprom started a project on Corporate culture development.
Within this project in 2017 the Company organized the following events: corporate culture diagnostics, that covered
more than 17 thousand employees (77%), strategic session with СЕО, СЕО-1 from HQ, and General managers from
subsidiaries, where the Company’s corporate values were determined: SAFETY, RESPONSIBILITY,
PROFESSIONALISM, DEVELOPMENT, TEAM.
The Roadmap of the Corporate Culture Project for 2018-2022 was formed in 2018. It includes the following main
sections: values promotion, creation of a change agents team, updating the competence model, improving the
performance assessment system, leadership training system, succession management and material and non-material
motivation, leadership development programme, effective working environment development, employer brand
development as well as development of the communication system.
In order to support its efforts in corporate culture development and corporate values promotion, Kazatomprom
organized 63 events, 6 out of which were new practices (annual assessment, change agents, townhalls/corporate
culture and values educations, toast master, open space and strategic session Vision zero), with more than 80% of the
Group’s personnel involved.
Staff training and development
A key area of Kazatomprom’s human-resources focus is the professional development and training of its staff.
The Group has systematised the process of training, retraining and further education of employees. As part of its staff
training programme, Group enterprises cooperate with 33 universities and 10 colleges of the Republic of Kazakhstan
and neighbouring countries. Today, at the Company’s expense, 335 students are being trained in industry-and region-
specific specialties and professions; 158 of them are employees of Kazatomprom, its subsidiaries or affiliates, while
177 are not. In 2018, corporate expenditure on third-level education amounted to KZT 213.5 million.
Students enrolled at the Company’s expense undertake practical work experience at the company (if they are not
employees) and each student is assigned a mentor, who is an experienced member of staff. Mentors are also assigned
to those taking part in Kazatomprom’s internship programmes, including the Zhas-Orken internship programme, the
Young Specialist programme, and other talent- and succession-related initiatives.
In addition to educational training programmes, the Company, its subsidiaries and affiliates also pay close attention
to employee development programmes, both professional, including the compulsory education required by legislation
in the Republic of Kazakhstan, and corporate (leadership development, lean manufacturing, corporate culture, health
and safety, etc.). 404-2
62
Table 56. Costs of employee training in 2018
Staff category Number of people Cost of training (KZT ’000s)
Administrative and managerial staff 3,338 688,532
Production staff 23,444 1,023,970
Total 26,782 1,712,502
Table 57. Average annual training hours per employee, man hours 404-1
Staff category 2018 2017 2016 Change
2018‒2017
Change
2017‒2016
Total 32.5 36 31.2 -10% 15%
Top management 59.6 80 61.4 -25% 30%
Middle management 45.2 61 43.3 -26% 41%
Administrative staff 32.1 49 49.5 -35% -1%
Production staff 31.1 33 28.9 -6% 14%
Reduction of training hours per employee is associated with the introduction of a corporate format training whereas
the number of staff trained has increased, and the number of hours per a worker has decreased.
63
SOCIAL POLICY
Collective agreement and trade unions
Approximately 73% of the Group’s employees are members of Public Association “Sectoral Union of Nuclear
Industry Workers”, which had 15,046 members as of 31 December 2018, all of which were Group employees. As of
31 December 2018, approximately 98% of the Group’s employees were party to collective bargaining agreements in
their companies, which provide for certain additional social benefits, such as the entitlement to compensation
payments for certain categories of employee availing of prolonged statutory career breaks, such as mothers of three
or more children under the age of 12, or single parents. The collective bargaining agreements of certain Group
companies also provide benefits to retired employees. The Group’s current collective agreement is valid for three
years and subject to regular renewal. 102-41
The collective agreements of the Group’s companies also require the Company to give employees and their
representatives prior notification of any significant changes in corporate activity that might affect their working
conditions. The minimum notification period is at least four weeks for most employees and at least two weeks for
others. 402-1
The collective agreement of the Company also contains provisions that regulate the following:
Form of remuneration, in accordance with labour legislation;
Payment of material assistance to employees upon marriage, retirement, the birth of children and the death
of family members, etc.;
Employee working time and time off;
Creating healthy and safe working conditions;
Organizing vocational training, retraining and advanced training for employees;
Guarantees and social protection for employees;
Rehabilitation and sanatorium-resort treatment and recreation for employees;
Compensation payments for employees required to retire;
Other issues identified by parties to the collective agreement.
Social policy, payments and benefits
Social benefits and payments are an integral part of Kazatomprom’s remuneration system; they are provided for in
the collective agreement and are guaranteed for all employees. There are also special conditions provided for, such as
social benefits for employees who can no long work due to disability or age.
Under the collective agreement, the trade union is allocated at least 2.5% of the Company’s annual salary pool. In
2018, that corresponded to around KZT 200 million.
In addition, funds are allocated annually for employee medical insurance; in 2018, this amounted to more than
KZT 822 million.
Financial assistance is provided to employees requiring rehabilitation or treatment, in addition to payments on the
birth of a child, on retirement, to families with disabled children under age of 18 years and to large families. There are
also reward payments associated with employee work anniversaries.
The Company provides financial assistance to retired employees (of pension age), as well as charitable assistance to
retirees and their families to commemorate professional holidays, on anniversaries, in the event of a retiree’s death
and for medical reasons.
Collective agreements of the Group's companies also contain measures of social support for employees, similar to the
above or other measures of social support. Some Company entities provide benefits in excess of the norms guaranteed
by the laws of the Republic of Kazakhstan.
There is no difference in benefits for employees in full or part-time employment. 401-2
In addition, the following measures are taken to support employees made redundant by subsidiaries and affiliates:
Support with employment within the entities of the Group and outsourcing companies that provide services
to the Group;
Various requalification programmes are implemented;
Compensation packages. 404-2
64
Remuneration system
The Company’s remuneration system is aimed at motivating employees to produce quality and efficient work. In
2018, the wages of production workers increased 4% from 2017, to average KZT 244,543 per month.
Table 58. Average monthly salary of Kazatomprom’s production staff (KZT)
Item 2018 2017 2016 Change
2018‒2017
Change
2017‒2016
Average monthly salary of
production staff (KZT) 244,543 234,029 215,889 4% 10%
* The indicator is calculated as the Pay Fund of production personnel in accordance with the labor report (Stat. Report) / actual
number of production workers
Table 59. Kazatomprom accrued salary pool (KZT million)*
Item 2018 2017 2016 Change
2018‒2017
Change
2017‒2016
Total wage pool 63,413 61,829 59,600 3% 4%
*Accrued wages, including all relevant taxes and deductions
The ratio of Kazatomprom’s entry-level minimum wage, for all of its enterprises, to the legal minimum wage of the
Republic of Kazakhstan is 1.04:1. 202-1
The Company does not discriminate between employees based on gender and pays men and women equally for their
work.
Diagram 8. Ratio of basic salary of men to women, by employee category (KZT ’000s) 405-2
Table 60. Ratio of standard wage of entry level employee to the established minimum wage in 2018 202-1
Indicator Including
Men Women
Minimum wage in the Republic of Kazakhstan (KZT) 28,284 28,284
Average wage of entry-level Group employee (KZT)* 29,360 29,360
Ratio 104% 104%
Note: * Base wage rate of an entry-level production employee
65
SOCIAL STABILITY
NAC Kazatomprom JSC has a well-balanced HR policy and strives to create a comfortable working environment to
maintain social stability and bolster staff morale. 103-2
The Company has developed action plans to enhance social and working conditions at its enterprises, to ensure a
positive psychological environment, improve wellbeing and safety, organise catering, provide financial incentives for
employees, increase their qualifications, etc. The heads of Kazatomprom subsidiaries and affiliates are personally
responsible for implementing the action plan.
The Centre for Social Interaction and Communications conducts research to determine the Company's social stability
rating (index) annually to assess the level of workforce satisfaction and wellbeing, as well as staff involvement and
the level of social development among the Group’s enterprises.
In 2018, studies were conducted in 17 of Kazatomprom’s enterprises and put its social stability rating (index) at 80%.
Diagram 9. Kazatomprom’s social stability index/ratings, %
The result ranks the company ‘above average’ in terms of its level of social stability. Companies with such research
results are seen as paying greater attention to social-development issues. The social climate and general mood of
production personnel suggest a positive attitude and constructive approach to solving any problems that arise. The
index of social stability shows some fluctuations in values. Changes within (+ -5%) within this study are permissible.
In the long-term development, the Index value increased significantly from 66% in 2013 to 80% in 2018.
OCCUPATIONAL HEALTH AND SAFETY
Ensuring a safe work environment is the Company’s main priority. In addition to strict compliance with all applicable
laws, the Company takes a comprehensive approach to security, which includes international best practices in the field
of labour protection and industrial safety. 403-1
In accordance with the labor legislation of the Republic of Kazakhstan, Production Safety Councils have been
approved throughout the Company's enterprises, which include representatives of the employer and representatives of
employees, including technical inspectors, on a parity basis. Production councils do not replace industrial safety
services, but complement safety and labor protection, prevention of occupational injuries and occupational diseases,
as well as organize inspections of working conditions and labor protection at workplaces with the help of technical
labor inspectors. At the same time, the occupational safety and health council decisions are set to be binding on the
employer and the employees. 403-1
In support of the International Social Security Association (ISSA) initiative to improve safety, health and welfare at
work, the Company has registered as a member of the international Vision Zero project, reaffirming its commitment
to zero injuries in the workplace.
Based on the results of diagnostics of the corporate governance system of Kazatomprom, it was recommended to
develop a new process for identifying, assessing and managing workplace risks and managing production process
safety (PSM) in accordance with the requirements of the Reference Model on industrial safety as well as to revise the
identified risk of "industrial injuries" in the corporate risk map in terms of the risks causes and the effectiveness of
preventive measures. In order to implement this recommendation, the Department of Industrial Safety of
Kazatomprom has developed a new process - Behavioral audit, which monitors the behavior of workers during their
production tasks, the organization and conditions of workplaces / sites, the technical condition of equipment, tools
66
and equipment. devices, availability of all necessary internal documents (instructions, procedures, standards, etc.).
The implementation of this process can have a positive effect on increasing the degree of security.
The company is constantly working to improve its safety culture and increase the level of informed compliance with
industrial safety requirements by employees and leaders at all levels. In 2018, the Company channelled
KZT 7.38 billion (KZT 300 million more than in 2017) to the implementation of measures to ensure it met legislative
requirements on labour protection and industrial safety and to improve working conditions. Over the past five years,
expenditure in these areas has shown steady growth. 403-7
Under the framework of Kazatomprom’s business transformation programme, the KAP20 project to implement a
target model for integrated security management has been implemented in the Company’s subsidiaries and affiliates.
ISO-14001 environmental management systems and OHSAS 18001 occupational health and safety management
systems have also been introduced in its subsidiaries and affiliates. 102-12
In 2018, in line with company policy, there were no industrial accidents, such as uncontrolled explosions, emissions
of hazardous substances or destruction of buildings.
Nine road accidents (without injury) and 12 other accidents were registered, however, including one fatal accident at
UMP JSC (the only fatal incident in the last three years). A tantalum production operator received an electrical injury
from an electrical furnace which tragically led to his death. Based on the investigation it was determined that the main
reason for the accident appears to have been a lack of risk assessment on working with hazardous energy sources.
Following an investigation into the accident, a system to shut down dangerous power sources is being introduced at
the Group’s enterprises.
In addition, as an indication of the leadership and involvement of Company managers in ensuring occupational,
environmental, industrial and radiation safety, it was decided that the occupational safety services of the Company's
subsidiaries, joint ventures and affiliates should come under the direct supervision of top managers. 403-9
As part of efforts to further improve the Company’s safety culture and to promote the application of international best
practices in the field of industrial safety, special attention is being paid to the use of preventive measures, including
identifying and responding to potentially dangerous situations.
To assess the effectiveness of labour protection measures, the Company uses as an indicator the lost time injury
frequency rate (LTIFR), which measures the number of incidents leading to loss of working time per 1,000,000 hours.
Table 61. Injury rates 403-9
Rate 2018 2017 Change (%)
1 Number of accidents 12 7 71
2 LTIFR rate 0,31* 0,15 107
3 Fatal accidents 1 ‒ ‒
4 Road accidents 9 7 28
* 2018 LTIFR data excludes the amount of time worked by MAEK-Kazatomprom LLP staff for the 2H2018.
ENVIRONMENTAL RESPONSIBILITY
The management of Kazatomprom and its subsidiaries and affiliates believes that improving environmental indicators
increases the Company's competitiveness. Kazatomprom strives to minimise the negative impact on the environment
and ensure the stability of the ecosystems in those areas where environmentally hazardous production facilities are
located. It does this by:
Improving the regulatory and technical base, developing and assisting in the adoption of technical regulations
and standards;
Introducing environmental management systems in accordance with ISO 14000, with a view to continuous
improvement in the area of environmental protection; 102-12
Creating a system of conditions and mechanisms to consider environmental aspects and mitigate
environmental risks at all stages of production activity;
Preventing pollution and reducing environmental impact through the integration of state-of-the-art
technologies; and
Ensuring the environmental and occupational safety compliance of the Company’s staff and contractors in
charge of work at Company facilities.
67
The Company’s entities use an environmental management system, integrated Kazatomprom policy in HSE and
provision of nuclear and radiology safety which are revised regularly to take into account changes in market
conditions, production upgrades or new, relevant environmental requirements.
According to the results of Kazatomprom’s corporate governance system diagnostics, it was recommended to develop
a corporate plan / programme in order to improve the analysis and assessment of environmental aspects, which shall
include a section on monitoring of the timely receipt of emission permits. In order to implement this recommendation,
as part of the development, implementation, preparation for certification of the OHSAS 18001 and ISO 14001
management systems, the documentation on the occupational health and safety management system, including
environmental management and risk management, is being developed and updated. This initiative will be continued
in 2019.
Also in 2018, according to recommendations of independent consultants who performed diagnostics of the corporate
governance system, the Company’s risks have been revised and environmental risk with developed risk factors and
preventive measures for them have been included in the draft risk register for 2019 (the risk register was approved by
the decision of the Board of Directors of Kazatomprom No. 11/18 dated December 6, 2018).
In 2018, the total costs of environmental protection activities in the Company’s nuclear operations increased to
KZT 2,138.3 million, up KZT 127.3 million from 2017. Of this amount, KZT 1,124.6 million was directed to
improving technological processes, including the reduction of unorganised emissions to the environment.
KZT 51.03 million was spent on increasing the efficiency of existing dust and gas traps and water treatment plants,
while KZT 124.1 million was spent on scientific and design work in environmental protection areas.
The Company's enterprises managed to achieve a reduction in key environmental impact indicators (gross emissions
and discharges of pollutants) in 2018. Total gross emissions of pollutants for 2018 amounted to 1,866 tonnes, down
1,829 tonnes from 2017. Data for MAEK-Kazatomprom LLP are not taken into account here, because of the transfer
to Samruk-Kazyna.
A significant reduction in the emission of harmful chemicals during the reporting period was down to environmental
protection measures resulting from scheduled preventive maintenance of process equipment at the exhaust gas
conversion and final absorption stages, which saw the replacement of filters and demister units.
The volume of pollutants discharged by the company as a whole decreased by 9.5% in 2018. The emissions of MAEK-
Kazatomprom LLP for 2018 are not included in this figure.
However, some deficiencies and omissions were observed in the environment-related activities of the Company's
subsidiaries and affiliates. Many entities fell short on analysing and assessing environmental aspects, failed to
minimise the negative environmental impact of their activities or did not comply with the requirements of
environmental laws. Overall, the penalties imposed on the Company’s enterprises for non-compliance with
environmental laws decreased and amounted to KZT 15.3 million in 2018, of which KZT 13.6 million represent fines
imposed on UMZ JSC for operations at Karadzhal mine in 2018 and an enrichment plant in Kurchatov city, East
Kazakhstan Region, during the first five months of the year 2016, without the required environmental permits. Non-
financial sanctions have not been reported during this period. 307-1
WASTE MANAGEMENT
The Company’s production activities produce many different types of waste, among them:
Solid and liquid radioactive waste;
Overburden rocks generated during the mining of fluorite copper-molybdenum ores;
Drilling mud from the drilling of the wells at the ISL field testing site;
Fluoric gypsum from the production of hydrofluoric acid;
Ashes and slag waste from the production of thermal energy;
Municipal waste;
Waste oil products;
Car tyres.
Solid radioactive waste created during the production process occurs in:
Radioactive contaminated soil at sites where pregnant solutions are delivered through pipes;
Used ion-exchange resins removed from the production cycle;
Radioactive contaminated slurry from collecting tanks; and
Fragments of equipment and metal constructions removed from production.
68
These types of solid radioactive waste are characterised as ‘low active’ and deemed fourth or fifth grade, which
indicates that they are the least hazardous solid radioactive waste. The Company’s mining facilities dispose of solid
radioactive waste in special disposal facilities certified by state ecological experts, in accordance with the regulations
of Kazakhstan.
The Company’s subsidiaries and affiliates manage industrial and radioactive waste in line with corporate standards
set by the Company, namely, the Rules of Production and Consumption Waste Management at Enterprises of NAC
Kazatomprom JSC and the Practical Guidelines for Management of Radioactive Waste Prior to Landfill.
In the reporting period, the Company’s subsidiaries and affiliates performed an industrial environmental monitoring
(IEM) exercise in accordance with environmental legislation. The IEM is carried out every quarter, with the
involvement of certified and accredited contractors (laboratories). Kazatomprom’s environmental impact in 2018 did
not exceed established environmental quality limits.
In 2018, the Company carried out an account and inventory of the sources of generation, storage and landfill sites, the
disposal and recycling of waste, production waste transferred to third parties for use, utilisation and recycling, and
disposal on specially allotted sites.
In 2018, the Company’s industrial sites generated 1,366,000 tonnes of waste.
Hazardous waste (38,401.54 kg) was transferred to specialized enterprises for disposal. Non-hazardous waste in the
form of drill cuttings (1,163,195.76 kg) resulted from drilling of technological and exploration wells are housed in
special sludge dumps and are reclaimed in accordance with the set procedures. Also, non-hazardous waste included
municipal waste (2,490.49 kg).
Most of the produced hazardous waste was transferred on a contractual basis to specialized enterprises. Waste
management methods were determined in accordance with the Environmental Code of the Republic of Kazakhstan. Waste emissions limits excess established by government agencies (1,812.9 thousand tons) is not recorded.
A detailed breakdown of the Company’s waste by type can be found in Table 64:
Table 62. Total volume of waste generated by Kazatomprom, by type (tonnes) 306-2
Waste type 2018 2017 2016 Change
2018‒2017
Change
2017‒2016
Industrial 1,253,500 797,100 443,600 57% 80%
Municipal 2,500 2,700 3,000 -7% -10%
Solid radioactive 3,900 11,500 2,900 -66% 297%
Liquid radioactive 106,100 125,500 111,100 -15% 13%
Total 1,366,000 936,800 560,600 46% 67%
The 57% increase in industrial waste in 2018 compared with 2017 was caused by the sub-grade drilling of wells and
the generation of overburden rocks at the Karadzhal fluorite ore deposit (EKR).
The Company’s subsidiaries and affiliates posted the following shortfalls and omissions during the reporting period:
The uptrend in the accumulation of production and consumption waste persisted, while there was insufficient
work carried out to utilise and recycle waste prior to disposal. Waste management systems needed
improvement. Just over 1% of the total volume of generated waste was disposed of. The remaining waste
was collected or buried.
A regulatory document governing the hazard-level determination and coding of drilled cuttings was
unavailable, resulting in the violation of both environmental and tax laws. It should be noted that the guidelines for hazard-level determination and the coding of drilled cuttings
generated at the construction of process wells at uranium deposits, developed as part of the Company’s plan
of action for an integrated approach to the development of its waste-management system for 2016–2020, has
been submitted to the state authorities for approval. Once approved, it will apply to all of the Company’s
uranium mining enterprises. The guidelines will enable problems regarding non-compliance with
environmental and tax laws to be resolved.
DIRECT GREENHOUSE GAS EMISSIONS
Experts from both the Company and the Environmental Regulation and Control Committee of the Ministry of Energy
of the Republic of Kazakhstan conduct continuous monitoring of atmospheric emissions at the Company’s uranium
production facilities.
69
Table 63. Overall greenhouse gas emissions, CO2 (carbon dioxide) equivalent, thousand tonnes5 305-1
Indicator 2018 2017 2016
Change
2018‒2017
Change
2017‒2016
Direct greenhouse gas emissions
(coverage area 1)
132.48* 3,929 3,767 -97% 4%
* Substantial decrease in greenhouse emissions is associated with disposal of MAEK Kazatomprom LLP
Carbon dioxide accounts for more than 97% of all greenhouse gas emissions and is, therefore, regulated. Accordingly,
every year, prior to 1 April of the year following the reporting period, Company entities submit a greenhouse gas
emission inventory report to the Ministry of Energy of the Republic of Kazakhstan. The national plan for the
distribution of greenhouse gas emission quotas sets the limits for CO2 emissions.
ENERGY EFFICIENCY
The specifics of the Company’s production processes involve significant power consumption. Energy consumption
has become one of the Company’s biggest production costs. In addition, energy consumption and energy efficiency
directly affect its environmental indicators. 302-1
The Company has been making vigorous efforts to increase its energy efficiency, particularly in three key areas:
The modernisation of production process;
The readjustment of equipment; and
By promoting changes in staff behaviour.
Table 64. Energy consumption, thousand GJ 302-1
Energy 2018 2017 2016 Change
2018‒2017
Change
2017‒2016
Thermal energy 11,551 11,775 11,435 -2% 3%
Electrical energy 5,766 5,936 6,042 -3% -2%
Total energy
consumption 17,317 17,711 17,477 -2% -1%
The amount of electrical energy saved as a result of Company measures to reduce energy consumption and improve
energy efficiency was 170,000 GJ in 2018.
Table 65. Use of primary energy sources, GJ 302-1
Source type 2018 2017 2016 Change
2018-2017
Change
2017-2016
Non-renewable:
Coal 2,5 2,6 2,5 -5% 5%
Natural gas 77,434 75,438 75,837 3% -1%
Fuel (benzine, oil-fuel, diesel) 170 177 180 -5% -1%
Renewable:
Hydrogen* 44* 112* 30* -61% 273%
Note: *Hydrogen consumption is in tonnes
5 The gas emissions are estimated using the government-approved guidelines.
70
The Group’s total consumption of fuel and energy resources in 2018 was 94,924,000 GJ.6 The total consumption
figure excludes hydrogen consumption of 38.28 tonnes. The hydrogen is produced at the UMP JSC station and used
for production purposes.
Kazatomprom’s has an energy management system in place in all of its entities, as required by MS ISO 50001. The
Company complies with Kazakh legislation governing the electric power industry and on energy saving and
improvements in energy efficiency. Consequently, it continuously conducts energy audits to assess the potential for
energy savings. After each energy audit, it develops strategies to save energy and improve energy efficiency. In line
with Kazakh law and the Company’s action plan for 2017‒2020, which seeks to implement its development strategy
for 2015‒2025, the Company developed a plan to save energy and increase energy efficiency at its mining enterprises.
The plan included:
Energy-saving measures;
Measures to speed up processes;
The introduction of effective new methods of repair and renewal;
A reduction in the consumption of reagents and materials; and
The reuse of materials and equipment.
The economic effect (fact) of these actions in 2018 was KZT 5,189 million. The Plan’s forecast economic effect was
KZT 3,550 million. Hence, the effectiveness ratio was 146%. In 2018, according to an analysis of Plan implementation
by Kazatomprom’s mining operations, planned operations were by and large completed.
WATER RESOURCES
A number of the Company’s subsidiaries and affiliates carry out extraction activity and the discharge of water involved
has an impact on sensitive water bodies, the largest of which is the Ulba River. 303-1
The 2018 figures do not include data for MAEK-Kazatomprom LLP, as the asset was transferred to Samruk-Kazyna.
This led to a significant decrease in the reported volume of water drawn and discharged.
In some regions, Kazatomprom supplies water to the local population and to local industry.
Water is used in accordance with permits issued by authorised bodies for the protection of water resources. Enterprises
keep strict control of all water drawn and recycled. The monitoring of wastewater quality is carried out by specialised,
accredited laboratories.
The Company actively uses water in its operating activities. Water use is significant in both primary production and
in the operation of desalination plants, where desalinated water is the end product.
The Company is also an active user of water in its production activities. It uses a considerable amount of water in its
main production activities and in the operation of osmosis plants, through which demineralised water becomes a raw
material for generating electricity that is supplied to the grid to meet the needs of the local population.
In 2018, the Company used more than 12.2 million m3 of water.
Table 66. Total water drawn, by source (thousand m3) 303-5
Source 2018 2017 2016 Change 2018‒
2017
Change 2017‒
2016
Surface water 951.1 1,200,372 1,249,917 -99.9% -4%
Ground water 9,955.4 14,806 14 659 -33% 1%
Municipal and other supply
systems 1,311.5 1,330 1 521 -1%
-13%
Total water drawn 12,217.95 1,216,508 1 266 097 -99% -4%
Kazatomprom seeks to reduce the amount of water it draws for production. To this end, a number of enterprises now
use closed water cycles. 303-2
6A formula taken from the «GRI 302: Energy» standard was used to calculate the total consumption of fuel and energy resources
71
Table 67. Total volume of reusable water (thousand m3) 303-2
Indicator 2018 2017 2016 Change
2018‒2017
Change
2017‒2016
Total volume of reusable water 19,840 20,447 19,774 -3% 3%
Table 68. Total water discharge volume by source (thousand m3) 303-3
Wastewater receiver, thousand m3 2018 2017 2016 Change
2018‒2017
Change
2017‒2016
Caspian sea 0 1,154,910 1,202,440 -100% -4%
Ulba river 1,671 1,353 1,461 23% -7%
Containment pond 3,167.5 1,663 1,307 90% 27%
Evaporation fields 410.9 1,279 1,281 -68% -0.2%
Total 5,249.9 1,159,205 1,206,489 -99.5% -4%
Contamination of ground water
The monitoring of ground water is the most important environmental activity in uranium mining by the ISR method.
To monitor ground-water contamination, samples are taken from wells for analysis. To protect the ground water, the
mining area is enclosed by a sanitary area that extends 500 meters from the ore zone. Furthermore, radionuclide
contamination in water samples taken from monitoring wells may not exceed levels set by SERERS.
Except for the Ulba Facility, all of the Company’s uranium mining operations are located in desert areas of Kazakhstan
and are far removed from densely inhabited areas.
NUCLEAR SAFETY
Nuclear security measures are in place for all Company enterprises that carry out activities involving nuclear materials.
At present, UMP JSC possesses nuclear materials. The monitoring and supervision of nuclear fissile material (NFM)
is the responsibility of the Chief Physicist's Department. In 2018, the Chief Physicist's Department carried out the
following safety-related activities:
A regular nuclear-safety knowledge test to check the knowledge level of employees in the finished products
storage area, uranium production and support departments of UMP JSC, which work with NFM.
Review and approval of the design, engineering, detail and process documentation on nuclear safety of UMP
JSC subdivisions working with NFM;
In Q2 2018, an emergency response drill for staff and services in relation to a spontaneous chain reaction
(SCR) signal by the emergency alarm system at all nuclear hazardous units of UMP JSC;
In November 2018, an inspection of the nuclear safety status of UMP JSC.
A nuclear materials inventory and nuclear safety inspection are carried out at the Group's enterprises on a regular basis
to ensure nuclear safety. The absence of any faults and problems underscores the effectiveness of measures taken.
Radiation safety
In 2018, the Company carried out systematic process monitoring of the radiation environment in its workplaces,
premises, production sites and monitored areas.
Radiation factors at the production site and in sanitary protection and residential zones remained unchanged and equal
to the values for 2017. No radiation accidents and incidents occurred at the Company's enterprises in 2018. There
were no recorded values above the annual radiation dose limits set the Sanitation and Hygiene Standards and Sanitary
and Epidemiological Requirements for Radiation Safety (SHS SERRS), approved by Order of the acting Minister of
National Economy of the Republic of Kazakhstan, No. 155, of 27 March 2015.
In 2018, measures were taken to improve the radiation environment, including repairs on rooms and equipment, the
replacement of corroded or obsolete equipment, the repair and upgrade of ventilation systems, the removal of low-
level radioactive waste to disposal areas, the purchase of new radiation monitoring instruments and radiation safety
and protection training for staff. In 2018, 2,900 tonnes of low-level radioactive waste were removed from
Kazatomprom enterprises to low-level radioactive waste disposal areas, 31 new radiation monitoring instruments were
purchased and 464 employees completed radiation safety and protection training at licensed organisations.
72
The average dose of radiation to which Kazatomprom’s staff were exposed in 2018 was 1.55 mSv per year, including
the natural background radiation. Permissible level - 20 mSv per year. At the same time the level of such natural
background radiation in areas where Company operates amounted 0.3-1.2 mSv per year. The average level in 2018
was 0.76 1.55 mSv per year after subtraction of the natural background radiation. For comparison purposes, the
population is typically exposed to natural background radiation of 1-3 mSv per year.
In 2018, the maximum annual effective dose of group A staff at the Company’s enterprises was 4.97 mSv per year,
down 10% from the maximum dose recorded in 2017.
DEVELOPMENT PLANS
The group is working to adopt best practices in the fields of health, safety and the environment and will continue to
consider these areas as issues of paramount importance in future.
To continually improve its HSE standards, the Company approved an environmental and social action plan (ESAP)
aimed at reviewing the findings and recommendations of SRK Consulting (UK) Limited (SRK), which analysed the
Group’s assets in June 2018. This series of initiatives is aimed at bringing the Company's practices into full compliance
with Good International Industry Practices (GIIP), in particular, with IFC Performance Standards, as well as with the
Guidelines on Occupational Safety and Environmental Safety. The plan includes a wide range of protection measures
relating to air, water, land, waste management, stakeholder participation, habitat review, land-cover restoration plans,
etc.
The overall objective of the ESAP is to move the Group from merely ensuring regulatory compliance to taking
proactive risk-based management of PB issues in accordance with international best practices in all aspects of the
Group’s activities over a five-year period.
The ESAP is based on the following key principles:
• Adoption of a risk-based and proactive management approach. The Group will move its focus on
maintaining regulatory compliance to a risk-based approach that goes beyond compliance, in order to achieve
an even higher level of environment, health and safety (EHSS) performance.
• Increases in headcount to support the timely implementation of the ESAP. The Company’s Board of Directors
has acknowledged the need for additional resources.
• Performance reporting and management review. The Company’s health and safety team will coordinate,
analyse and report to the Company’s senior management and Board of Directors on implementation of the
ESAP. In addition, senior management will review ESAP progress on at least a semi-annual basis.
The Board of Directors acknowledges the need for a paradigm shift and will consider the use of external expertise to
help guide the process. Trainings and workshops for Company and subsidiary management will be used to facilitate
the process.
The following table sets out the principal steps envisaged by the ESAPs:
73
Table 69. Principal steps envisaged by the ESAPs
ESAP goal
Summary of actions
Outcome
Improved impact prediction
and monitoring
The EHSS reviews identified that operations require greater understanding of the
environmental and social context, while the impact assessment and monitoring
undertaken is currently focused on regulatory compliance, rather than geared to a
receptor-based approach. To address these gaps, the following actions are required:
Improved ability of operations to prove and ensure that
they are not having impacts on receptors.
• Further study of water resources, habitats and land use in the vicinity of the
mines to identify impact receptors.
• Refinements to impact predictions.
• Definition of cumulative impacts.
• Improvements in the monitoring and reporting of impacts.
Improved community stakeholder
engagement
The EHSS review identified that the community stakeholder engagement and
grievance management processes are currently not formally integrated into
management systems and otherwise not fully aligned with GIIP. To address these gaps,
the following actions are required:
Active engagement with communities, enhancing risk
management and constructive relationships with
surrounding communities.
• Undertake social scans that define how people are using land and water around
the mines.
• Community stakeholders to be identified by means of a formal stakeholder
identification and analysis exercise.
• Stakeholder engagement plans geared to more active engagement.
• Grievance procedures framed in the context of good international practices and
documented.
• Documentation of stakeholder engagement.
Improved control over low-level
radioactive waste service providers
The EHSS review identified a need to pay more attention to low-level radioactive
waste services, particularly services for the decontamination of metal low-level
radioactive waste, as well as better understanding of their capacity to handle large
quantities of radioactive waste at closure, including the process through which low-
level radioactive waste is disposed of. To address these gaps the following actions are
required:
Group enterprises will be able to prove that the
radioactive waste services used are responsible.
Improvement of closure plans by better understanding of
the capacity of radioactive waste facilities and metal
decontamination services.
74
Table 69. Principal steps envisaged by the ESAPs
ESAP goal
Summary of actions
Outcome
• Where waste is sent to third-party waste facilities, enterprises must
ensure appropriate service agreements are in place (incorporating
liability transfer) and that they have evidence that the EHSS
performance of these facilities is acceptable.
• Group companies must also precisely estimate the quantities of
radioactive waste that will be generated at closure and confirm that the
available licensed waste facilities have capacity to receive such waste.
Improved closure planning The estimated closure costs for the mines were found to be low during the
EHSS review and were further reviewed and revised for the SRK report.
SRK’s EHSS review of non-mining assets also included an evaluation of the
estimated closure liabilities, in line with GIIP (while under Kazakhstan law,
an estimate of closure costs is only required for nuclear installations, which
has a specific definition in the applicable regulation and does not apply to
any of the Group’s facilities, or subsoil use obligations). The EHSS review
identified the need for the following improvements in closure planning:
The Group will regularly update its estimates with respect to both
statutory closure liabilities (required by Kazakhstan legislation)
and closure liabilities, in line with GIIP. The Group will then
ensure sufficient funds are in place to cover closure and
rehabilitation costs at the end of each respective asset’s life.
• Establishment of an internal closure planning group to regularly
review liquidation programmes and cost estimates.
• Update of closure plans and cost estimates on a regular basis.
• Closure criteria to be agreed with regulatory authorities and other
stakeholders and addressed in closure plans.
Health and safety and radiation safety The EHSS review identified that use of personal protective equipment (PPE)
was rigorous in most operations, but not all, while improvement to radiation
protection practices were required. To address these gaps the following
actions are required:
Further enhancement of safety performance.
• Further promote adherence to requirements to use PPE at all
operations.
75
Table 69. Principal steps envisaged by the ESAPs
ESAP goal
Summary of actions
Outcome
• Establish capacity to monitor urine samples of personnel where
relevant.
• Incorporate requirements of the IAEA Safety Guide No. SSG-27 not
already covered in radiation management plans.
Increase the capacity of the corporate
Industrial Safety Department
An increase of the ISD’s headcount is required to meet the Group’s current
EHSS aspirations, handle the increasing volume of EHSS data being
collected from the operations and implement the ESAP.
The Company’s industrial safety team will be in a position to
guide, monitor, audit and report on implementation of the action
plan.
• Increase the capacity of the Company’s ISD team.
• Bring in external expertise to assist with impact identification and
training and mentoring of staff.
The Group also developed a set of key environmental performance indicators, to which the Group will strive, including for waste generation, waste emissions and discharge.
103-3
76
INTERACTION WITH THE STAKEHOLDERS
A prerequisite to the successful implementation of any project is to build a constructive system of relationships with
stakeholders. Stakeholders are defined by the degree of their exposure to, or their opportunity to be exposed to, direct
or indirect positive or negative effects of the implementation activities, which may influence the production processes,
corporate governance or loyalty of the brand. The Company’s key stakeholders are staff and trade unions,
shareholders, suppliers, consumers, state and local government authorities, the mass media and local communities.
To organise effective, targeted interaction with the parties concerned, the impact the community groups have on the
Company’s operations and the impact the Company has on them have been evaluated on a 0 to 4 scale. 102-42
Figure 5. Map of Kazatomprom’s stakeholders
77
Table 70. Stakeholders groups 102-40, 102-43, 102-44
Stakeholder Stakeholder’s interest in
the Company
Form of dialogue between stakeholders and
the Company
Degree
of
influence of the
stakeholder on
the Company
(1 to 4)
Degree
of
influence of the
Company
on the stakeholder,
1 to 4
1. Shareholders
• Economic profit/consolidated net profit/economic
performance
• Free funds for development and dividends
• Net asset value (NAV)
• Corporate governance rating
• Market share/market presence
• Minimisation of emissions to the environment
• Decisions of the general meeting of shareholders
• Decisions of the Board of Directors
• Joint working groups
• Meetings, negotiations and more
• Annual report
• Questioning
• Company internet resources
3.7 2.8
2. Partners
• Market share/market presence
• Specific production cost of U3O8 produced by the
Company and all uranium mining subsidiaries and
affiliates
• Founding treaties;
• Decisions of the general meeting of shareholders
• Board decisions
• Decisions of joint consultative and advisory
bodies
• Joint working groups
• Joint checks
• Meetings, negotiations
• Correspondence on the activities of the subsidiaries and affiliates
• Annual report
• Questioning
• Company internet resources
3.04 2.99
3. Creditors
• Economic profit/consolidated net profit/economic
performance
• Free funds for development and dividends
• Net asset value (NAV)
• The practice of investment and procurement/
benefits from the implementation of category-based
procurement strategies
• Business correspondence
• Regular analytical meetings, conversation
• Publication of information about the Company in
the media
• Annual report
• Company internet resources
2.94 2.33
4. Suppliers of goods,
works and services
• Free funds for development and dividends
• The practice of investment and procurement/
benefits from the implementation of category-based
procurement strategies
• Energy/specific weighting of energy costs in the
production cost of finished products
• Customer feedback
• Holding meetings, negotiations
• Signing agreements, memoranda, agreements on
strategic cooperation
• Annual report
• Company internet resources
2.55 3.08
5. Customers • Market share/market presence
• Product and service labelling
• Customer feedback
• Meetings, negotiations
3.23 3.21
78
• Marketing communications
• Minimisation of emissions to the environment
• Agreements, memoranda, agreements on
strategic cooperation
• Annual report
• Company internet resources
6. Subsidiaries and
affiliates
• Employment, relationship of employees and
management, non-discrimination, level of
satisfaction with the work of employees, as well as
the work of Company-controlled services
• Training and education
• Enhance production safety culture
• Market share/market presence
• Product and service labelling
• Decisions of the Company as a
participant/shareholder of the subsidiaries and
affiliates
• Management hearings from subsidiaries and
affiliate companies
• Performance information/reports,
• production, investment and social plans/
commitments
• sent to the Company
• Annual report
• Questioning
• Company internet resources
2.64 3.30
7. Management and
personnel
• Employment, relations between employees and
management, non-discrimination, level of employee
satisfaction with the work of Company-controlled
services
• Training and education
• Improving the level of safety
• Culture of production
• Decisions of the Board, orders
• Hardware/ manufacturing/
• operational and other meetings
• Reports on current activities
• Inbound and outbound
• correspondence
• Verbal negotiation
• Instructing on production
• security
• Surveys, questioning, testing
• Company internet resources
• Social networks
• Hotline
• Internal corporate communication channels
2.98 3.44
8. Public authorities • Minimisation of emissions to the environment
• Compliance with requirements
• Verification of compliance of the Company's
subsidiaries and affiliates with the laws and
regulations of the Republic of Kazakhstan
• Reporting on the results of the Company's
financial and economic activities
• Providing information at the request of
government agencies in various areas of the
Company's activities
• Development of proposals for amendments and
additions to the Laws and regulatory acts of the
Republic of Kazakhstan
Coordination of the subsoil use contract and state
registration on the right of subsoil use
2.93 1.93
79
• Licensing, checks on subsidiary and affiliate
fulfilment of licence and contract obligations
• Reports on subsidiary and affiliate fulfilment of
licence and contract obligations
• Annual report
• Questioning
• Company internet resources
9. Local executive
authorities
• Sponsorship and charitable assistance/indirect
economic impacts
• Compliance requirements
• Amount of recycled water
• Memoranda of cooperation between local
executive bodies and the Company in order to
support and develop the social sphere of the
regions
• General agreements between local executive
bodies and the Company on social financing for
the regions
• Company internet resources
• Social networks
• Hotline
2.24 2.10
10. Labour union • Enhance production safety culture
• Holding public hearings
• Informing on current activities of subsidiaries
and affiliates
• Letters (complaints) to the Company
• Company internet resources
• Social networks
• Hotline
1.83 2.47
11. Mass media • Creating a positive image of the Group
• Company internet resources
• Social networks
• Annual report
• Hotline
1.84 1.52
12. Public
organisations,
local communities
• Enhance production safety culture
• Amount of recycled water
• Sponsorship and charitable assistance/ indirect
economic impacts
• Compliance with requirements
• Minimisation of emissions to the environment
• Training and education
• Holding public hearings
• Informing on current activities of subsidiaries
and affiliates
• Letters (complaints) to the Company
• Company internet resources
• Social networks
• Hotline
2.02 2.52
80
Getting feedback
The Company builds dialogue with stakeholders on various aspects of its activities. Notably, to obtain information on
their concerns and claims, the Company developed a mechanism for submitting and considering complaints and
grievances, through a feedback function on the Company’s external website, written request, or a telephone hot line.
Company enterprises monitor and review complaints and grievances and submit reports to Kazatomprom’s central
office on a quarterly basis. After appropriate checks, each application is followed up in order to rectify any non-
conformities or to give appropriate advice. 102-43
In 2018, 18 appeals were posted on the Company's corporate website at the CEO blog, including: 4 questions about
the Company, 6 social questions, 6 questions about career, and 2 marked as “other matters”. 4 questions were replied
and published on the site. The remaining questions were processed in working order (answers were provided via e-
mails and phone, etc.).
For regional groups with insufficient Internet skills (primarily local communities in remote areas), the Company holds
‘doors-open days’ and subsidiaries and affiliates allocate time for individuals to discuss their concerns. A schedule of
meetings is published in local mass media. 102-43
In 2018, 24 complaints were received from employees of Kazatomprom entities via “hotline”, including:
related to human-resource issues – 11 appeals;
ethical complaints – 6 appeals;
concerning purchasing - 5 appeals;
other issues - 2 appeals. 102-44
All complainants were given advice and explanations in relation to their concerns.
The following activities are held for employees to avoid repeated complaints and grievances and to improve working
conditions:
Annual staff meetings with management of Kazatomprom’s entities;
A forum on the internal website for discussing problematic issues;
Visiting hours for citizens to meet management at Kazatomprom’s subsidiaries;
Hotline numbers are made available at production sites and shops as well as at the Kazatomprom website
and websites of the Group’s companies (emails, phone#, etc.);
All complaints and grievances are considered in a timely manner;
Corporate newsletters are published containing information relevant to every enterprise and team;
Managers hold monthly meetings with employees on personal matters;
Complaint and proposal boxes are installed in public places (foyers, canteens and dormitories, for example).
81
CORPORATE GOVERNANCE AND ETHICS Corporate governance rating
The Company is working to bring its corporate governance system in line with global best practices. Its corporate
governance rating is assessed on an annual basis using methods developed by independent consultants and approved
by the Company’s shareholders. Efforts are currently underway to improve the corporate governance system, in line
with the Activity Plan approved by the Company’s Board of Directors:
In 2018, at the request of Samruk-Kazyna JSC, an independent consultant conducted a reassessment of NAC
Kazatomprom JSC’s corporate governance system. The assessment was based on the methodology of diagnosing the
corporate governance system in legal entities, more than 50% of the voting shares of which are directly or indirectly
owned by Samruk-Kazyna JSC. This methodology was approved by the decision of the Board of Samruk-Kazyna JSC
on 26 September 2016 (No. 35/16). The methodology assesses the effectiveness of the Board of Directors and the
executive body, risk management, internal control and audit, the system of sustainable development, respect for
shareholders' rights, transparency.
Based on the outcome of the assessment, NAC Kazatomprom JSC has put in place an action plan to improve its
corporate governance system and regular reports on its implementation are provided to the Audit Committee and the
Board of Directors of NAC Kazatomprom JSC.
The assessment showed that the Company’s corporate governance rating had not changed. However, the independent
consultant report showed that the efficiency of the Board of Directors and the executive body had improved, as had
processes to ensure the transparency of Company activities. The corporate governance rating assigned as a result of
the diagnostic assessment meets the Company’s target for 2018 (a key performance indicator).
A plan of measures for the improving corporate governance system for 2019 was prepared and approved by the Audit
Committee and the Board of Directors of Kazatomprom on 19 February 2019.
CORPORATE GOVERNANCE STRUCTURE
102-18
The Company’s corporate governance system ensures proper management and control of activities and is aimed at
increasing long-term value and sustainable development. Good corporate governance is based on efficiency and
transparency.
The main tasks of the Company’s corporate governance system are to improve business transparency and to create
and maintain effective long-term relationships with shareholders and all stakeholders. The system is based on the
following principles:
Protection of rights and interests of shareholders;
Effective management of the Company and the effective functioning of the Board of Directors and Management
Board;
Transparency and objectivity of NAC Kazatomprom JSC activities;
Legitimacy and ethics;
Effective dividends policy;
Effective human-resources policy;
Occupational health and safety;
Environmental protection;
Settlement of corporate disputes and conflicts of interest; and
Share of responsibility and duly execution by the management bodies and personnel of the Company.
The bodies of the Company’s corporate governance system are:
Supreme body – General Meeting of Shareholders;
Supervisory body – the Board of Directors;
Executive body – the Management Board; and
The Internal Audit Service – which monitors and evaluates the Company’s internal control and risk management
systems .
82
Figure 6. Corporate governance structure of NAC Kazatomprom, JSC
83
CORPORATE GOVERNANCE CODE
Corporate governance code
The Company adopted its corporate governance code in 2015, based upon the corporate governance code of then sole
shareholder Samruk-Kazyna. The aims of the code are to improve corporate governance practices, ensure transparency of
governance, and underscore the Company’s commitment to following the standards of good corporate governance.
The code was developed in line with the legislation of the Republic of Kazakhstan and taking on board corporate governance
developments in Kazakhstan and around the world. The code establishes the principles that form the basis of the Company’s
corporate governance system.
Corporate governance is a complex, multi-layered system of relationships that is constantly evolving due to internal and
external factors and influences. The Company's decision to apply high standards of corporate governance are, first and
foremost, determined by its objectives to improve investment attractiveness and partner confidence. External factors that could
influence Company development, such as changes in the macroeconomic environment, pose challenges to corporate
governance. Hence, it is necessary to monitor external and internal changes and to analyse trends in global and national process
development that may have an impact on standards of corporate governance.
Compliance with the highest standards of corporate governance and transparency are key to improving the Company’s
investment attractiveness and its operational efficiency . These, in turn, will inspire confidence among potential investors, help
reduce the risks associated with inefficient use of resources, increase Company value and spread prosperity. The Company has
ensured that its corporate governance system complies with the listing rules of the world’s largest stock exchanges and the
main principles of corporate governance agreed by the global economic community (for example, the corporate governance
principles of the Organization for Economic Cooperation and Development).
Compliance with the corporate governance code
In line with Kazatomprom’s corporate governance code, the Corporate Secretary Service analysed the Company’s compliance
with the principles and provisions of the corporate governance code in 2019. According to the results of this analysis 87% of
the provisions of the Code were observed in full, about 4 % of the provisions of the Code were partly observed, none of the
applicable provisions were characterised as not observed and the remaining 9 % of the provisions of the Code were deemed
inapplicable.
For more information on compliance of Kazatomprom with the corporate governance code for 2018 please follow this link to
the relevant section on our website: https://www.kazatomprom.kz/en/investors/inie_otcheti_i_prezentatsii/page-1
AIX corporate governance principles
The Astana International Exchange (AIX) has established general corporate governance principles for companies whose shares
are listed on AIX. Kazatomprom’s corporate governance code is consistent with these principles to a large extent. Its corporate
governance code also contains certain provisions that ensure compliance with Samruk-Kazyna’s objectives and forecasts. Any
Group engagements in activities outside of its core business are subject to consideration and vetting by the Company’s Board
of Directors, which is chaired by an independent non-executive director and includes two more independent non-executive
members. By the end of December 2019, Samruk-Kazyna intends to have updated the Company’s corporate governance
code based on international best practices.
Differences between the Company's corporate governance code and the provisions of the UK corporate governance
code 7
The main differences between the Company's corporate governance code and the provisions of the UK Corporate Governance
Code are as follows:
In accordance with the provisions of the UK Corporate Governance Code, in the event that 20% or more of
shareholders vote against the recommendations of the Board of Directors, on announcing the results of such a vote,
the Company should explain what actions it intends to take to understand the reasons for the shareholders’ vote.
Updated information on shareholder opinions, as well as on measures taken, should be published no later than six
7 Differences are indicated on the basis of a literal comparison of the contents of the Company's corporate governance code and the UK
Corporate Governance Code. However, such differences do not imply complete non-compliance with the norms of the UK Code in
practice.
84
months after the General Meeting of Shareholders. The Board of Directors should note the impact of feedback on
decisions made in the general conclusions of the Company's annual report, in the explanatory notes to the proposed
decisions of the General Meeting of Shareholders (if applicable).
- The Company’s corporate governance code obliges the Chair of the Board of Directors to build a constructive
dialogue between members of the Board of Directors, major shareholders and the Company’s executive body.
At the same time, the Chair of the General Meeting of Shareholders should strive to ensure that shareholders
receive answers to questions directly during the meeting. If the complexity of the questions does not allow
for immediate answer, the person (s) to whom the question was addressed should provide a written answer
as soon as possible after the conclusion of the General Meeting. In addition, major shareholders may hold
meetings with the Chair and members of the Board of Directors to discuss development strategy issues, elect
the head of the executive body and address other elements that affect growth in long-term value and the
sustainable development of the organisation. Such meetings are pre-planned and held in accordance with
approved procedures.
The UK Corporate Governance Code states that non-executive directors should play a major role in appointing and
terminating the powers of the executive body. It also stipulates the need for meetings of non-executive directors without
the participation of executive directors.
- The Company’s corporate governance code states that candidates for head of the Company must be approved
by the President or the Presidential Administration of the Republic of Kazakhstan (if the company is included
on a certain list, approved by Decree of the President of the Republic of Kazakhstan), the Board of Samruk-
Kazyna JSC, the Nominations and Remuneration Committee of the Board of Directors of Samruk-Kazyna
JSC and Chairman of the Board of Directors of Samruk-Kazyna JSC.
The UK Corporate Governance Code sets out the main responsibilities of the Company’s Nominations and
Remunerations and Audit Committees. It also cites the need to include a description of the main activities of these
committees in the Company's annual report.
- There is no such requirement in the Company’s corporate governance code.
The UK Corporate Governance Code prohibits the Chair of the Board of Directors from being a member of the Audit
Committee.
- There is no such restriction in the Company's corporate governance code.
The UK Corporate Governance Code requires that semi-annual and annual financial statements reflect the position of
the Company's Board of Directors on the acceptability of accounting approaches used in preparing the financial
statements and reveal any significant doubts about the Company's ability to continue such work for 12 months from
the date of approval of the financial statements.
- The Company’s corporate governance code does not require this.
The UK Corporate Governance Code prohibits the Chair of the Board of Directors from chairing the Nominations and
Remunerations Committee. The Chair of the Board of Directors can only be a member of the Nominations and
Remunerations Committee if they are an independent member of the Board of Directors.
- There is no such restriction in the Company's corporate governance code.
Under the UK Corporate Governance Code, the Remuneration Committee is responsible for the appointment of
remuneration consultants in respect of executive director pay. The views of the external consultant should be
independent in evaluating the external recommendations of third parties and obtaining the views of executive directors
and senior management.
- There is no such provision in the Company’s corporate governance code.
85
The UK Corporate Governance Code sets out a detailed and long-term remuneration system, including the need for
long-term ownership of the Company's shares by its executive directors. There are also clarifications on the terms of
contracts concluded with Company directors.
- There are no such provisions in the Company's corporate governance code.
GENERAL MEETING OF SHAREHOLDERS
Samruk-Kazyna owns 85.08% of the Company’s outstanding shares, while 14.92% of the shares are in free float. Shareholders
operate in line with the competences stipulated by the Company Charter.
The key decisions taken by the General Meeting of Shareholders include:
Election and early removal of members to and from the Board of Directors of NAC Kazatomprom JSC;
Selection of an auditor for the consolidated and separate financial statements of NAC Kazatomprom, JSC;
Approval of the financial statements of NAC Kazatomprom, JSC;
Approval of dividends;
Approval of the Charter and Regulations governing the Board of Directors of NAC Kazatomprom, JSC and any
amendments thereto.
BOARD OF DIRECTORS
102-22
The Board of Directors is responsible for the general management of the Company’s activities. It directs the Company’s
strategy and policy and has the authority to make decisions on all aspects of the Company’s activities, except for those matters
expressly reserved for the General Meeting of Shareholders under JSC law, the law governing the Sovereign Wealth Fund,
other applicable laws and the Company’s charter. The Company’s Board of Directors operates in accordance with the principles
set out in the Charter, the corporate governance code and the regulations governing the Board of Directors. The powers of the
Board of Directors include, among other things:
Setting the Company’s priority business objectives and approving the Company’s strategy;
Approving the Company’s development strategy, development plans and budget;
Appointing the members of the Management Board, the Internal Audit Service, the Compliance Service and Corporate
Secretary;
Approving the terms for issuance of bonds and derivatives by the Company and the buyback of securities;
Making decisions on participation in the incorporation of other legal entities or ceasing participation in other legal
entities by way of transfer (or receipt) of some or all assets (other than where such action requires approval pursuant
to item (viii) of the General Shareholders’ Meeting);
Approving transactions or series of interrelated transactions resulting in the acquisition or divestment of assets with
the value of more than 10% of the total book value of the Company’s assets;
Making decisions on the conclusion of major transactions and related party transactions where the Company has
interest (other than transactions that fall under the responsibility of the General Meeting of Shareholders);
Approving purchases (divestments) by the Company of 10% or more of the shares in other legal entities;
Increases in the Company’s liabilities that are equal to 10% or more of its equity capital;
86
Resolving any issues within the competence of the General Meeting of Shareholders in relation to stakes or interests
of 10% or more that are owned by the Company;
Preliminary approval of updates or amendments to the Company Charter; and
Approving transactions with state authorities, government bodies, state-owned enterprises (i.e., legal entities in which
the state owns 50% or more of the voting power) or legal entities affiliated with any of them, excluding (a) transactions
with dependent legal entities and Company subsidiaries and (b) transactions documented using templated agreements,
the forms of which are established by applicable law. Approval of such transactions requires the approval of the
majority of independent directors.
Members of the Board of Directors are appointed by a resolution of the General Meeting of Shareholders. Members of the
Board of Directors are elected for a term of up to three years. Members may be re-elected for a further period of up to three
years where performance is satisfactory. Any term of appointment to the Board of Directors for a period longer than six
consecutive years is subject to special consideration. An independent director cannot be elected to the Board of Directors for
more than nine consecutive years, apart from exceptional cases. In such cases, elections should be held annually, with a detailed
explanation of the reasoning behind the nomination of said candidate to the Board of Directors. 102-24
Individuals who are nominated (or recommended) for appointment to the Board of Directors as a representative of shareholders,
or individuals who are neither a shareholder themselves nor appointed to represent the interests of shareholders, are eligible
for election to the Board of Directors. The Board of Directors must have not less than six members, of whom at least 30%
must be independent directors.
The Board of Directors operates in accordance with an annual workplan and meeting schedule based on the principles of
rationality and effectiveness, but meet at least six times a year. If required, the Board of Directors may consider issues not
included in the workplan.
COMPOSITION OF THE BOARD OF DIRECTORS
The Board of Directors comprises seven members, including three Independent Directors. A description of the criteria for
compliance with the standards of independence of members of the Board of Directors is set out in the Articles of Association
and the Regulations on the Board of Directors, posted on the Company’s website.
Jon Dudas, the Chairman of the Board of Directors of the Company, in March 2019 (after the publication of the annual financial
statements and the opening of the trading period for the Company's insiders) acquired 2,000 GDRs of the Company. Relevant
information has been disclosed and reported to the stock exchanges.
Other members of the Board of Directors of NAC Kazatomprom JSC hold no shares (equity interest) in the Company, its
affiliates, the Company's suppliers or its competitors.
The Company’s current Board of Directors was elected on 14 August 2018 for a three-year term and the terms of the current
members of the Company’s Board of Directors expire on 14 August 2021. The current Board of Directors has the following
members:
Table 71. Board of Directors
Name
Year of birth
Title
Member of the
Board since
Jon Dudas ................................................ 1959 Chairman of the Board of Directors (independent) ............... 2015
Neil Longfellow ...................................... 1958 Board Member (independent) ................................................ 2017
Russell Banham ....................................... 1954 Board Member (independent) ................................................ 2018
Alik Aidarbayev ...................................... 1963 Board Member....................................................................... 2018
Beybit Karymsakov ................................. 1962 Board Member....................................................................... 2018
Kanat Kudaibergen .................................. 1979 Board Member....................................................................... 2018
Galymzhan Pirmatov ............................... 1972 Board Member, Chief Executive Officer ............................... 2017
The business address of the directors is 17/12. YE-10 Street, Nur-Sultan, 010000, Kazakhstan.
Jon Dudas, Chairman, Independent Director. Mr. Dudas was born in 1959 and is a UK citizen. He is a registered professional
mining engineer, having graduated from the University of the Witwatersrand, South Africa, with a Bachelor’s degree in mining
87
engineering and a Master’s degree in mineral economics in 1984. Mr. Dudas also holds an MBA from Heriot-Watt University
in Edinburgh. Mr. Dudas began his working career at Rand Mines Ltd in 1984 and has held a variety of senior managerial
positions across a number of commodities and functions at companies such as Gencor Ltd and BHP Billiton, where he was
CEO of the Aluminium division. Since 2012, Mr. Dudas has been working as an independent corporate adviser to multinational
mining and professional service companies. An independent member of the Company’s Board of Directors since 2015,
Mr. Dudas was elected Chairman of the Board of Directors of Kazatomprom in August 2018.
Neil Longfellow, Independent Director. Mr. Longfellow was born in 1958 and is UK citizen. He is a chartered electrical
engineer and a Fellow of the Institute of Measurement and Control. Mr. Longfellow started his career in electrical engineering
in the UK. In 1991, he joined British Nuclear Fuels Limited, working at the Sellafield nuclear reprocessing plant in West
Cumbria, where he was Head of Reprocessing, before becoming Deputy Managing Director in 2007. In 2009, Mr. Longfellow
joined Westinghouse Electric Company as Managing Director of Springfields Fuels Limited and Vice President of the
European Fuel Business. In 2013, Mr. Longfellow joined Costain PLC as Director of Major Projects for the nuclear, oil and
gas sectors in the UK. Since 2015, Mr. Longfellow has been an independent consultant to the international nuclear sector.
Russell Banham, Independent Director. Mr. Banham was born in 1954 and is an Australian citizen. He has a Bachelor of
Commerce degree from the University of New South Wales, is a fellow of the Institute of Chartered Accountants Australia
and New Zealand, and a graduate of the Australian Institute of Company Directors. He began his career as an auditor in 1974
in the Australian operations of Andersen; he was admitted into the worldwide partnership in 1988 and worked until 2002.
From 2002 to 2007, Mr Banham was the Advisory Services Practice Leader of Ernst & Young in Brisbane, Australia. In 2007,
he was appointed as the Audit Function Leader and Executive Committee member of Deloitte CIS, based in Almaty,
Kazakhstan. In 2011–2014, Mr. Banham was Energy and Resources Industry Group Leader of Deloitte CIS, based in Moscow,
Russia. Since 2014, he has worked as an independent director on the boards of a number of international companies.
Alik Aidarbayev, Member. Mr. Aidarbayev was born in 1963 and is a citizen of the Republic of Kazakhstan. Mr. Aidarbayev
has a PhD in Engineering and is an honorary professor at Kanysh Satpayev National Technical University. He holds an MBA
from the Russian Presidential Academy of National Economy and Public Administration in Moscow. Mr. Aidarbayev has held
various management positions at Yuzhkazneftegaz, Kumkol-Lukoil (renamed Turgai Petroleum CJSC), Mangistaumunaigaz
JSC and NC KazMunaiGas JSC. He was General Director of KazMunaiGas Exploration & Production JSC from 2011 to 2013,
Governor of the Mangistau region from 2013 to 2017 and First Vice-Minister for Investment and Development of the Republic
of Kazakhstan in 2017–2018. Since April 2018, Mr. Aidarbayev served as Deputy Chairman of the Management Board of
Samruk-Kazyna JSC. Since November 2018 Mr. Aidarbayev has served as the Chairman of the Management Board of NC
KazMunayGas JSC
Beybit Karymsakov, Member. Mr. Karymsakov was born in 1962 and is a citizen of the Republic of Kazakhstan. He graduated
from the Almaty Institute of National Economy with a degree in the organisation of mechanised processing of economic
information and from Taraz State University with a law degree. Mr. Karymsakov has worked in the Tien-Shan cooperative as
an accountant and head of the Kordai district finance department. In 2003–2015, Mr. Karymsakov held a senior position with
the Almaty City tax authority. In August 2015, He was appointed Managing Director of National Company Astana EXPO-
2017 JSC. Currently, Mr. Karymsakov is the Managing Director for Economics and Finance at Samruk-Kazyna JSC. He was
elected as a member of the Board of Directors of Kazatomprom in April 2018.
Kanat Kudaibergen, Member. Mr. Kudaibergen was born in 1979 and is a citizen of the Republic of Kazakhstan.
Mr. Kudaibergen holds an MBA in International Management from the Geneva Business School and an MBA in Mining
Management from the NUST Moscow Institute of Steel and Alloys. Mr. Kudaibergen started his career in 2001 as a senior
prosecutor’s assistant at the Semirechenskaya transport prosecutor’s office. In 2007–2016, Mr. Kudaibergen held various
senior positions at Trading and Transportation Company LLP, including Lead Specialist of the Legal Department, Chief
Manager – Head of the Legal Department, Deputy General Director, First Deputy General Director and Chief Executive
Officer. In 2016–2018, he served as the General Director of Karatau LLP and Managing Director of Kazatomprom’s uranium
mining division. Since 23 April 2018, he has served as Chief Executive Officer of NMC Tau-Ken Samruk JSC.
Galymzhan Pirmatov, Member. For information on Mr. Pirmatov, please see the Management Board section.
88
CHANGES IN THE COMPOSITION OF THE BOARD OF DIRECTORS IN 2018
By the decision of the then sole shareholder, on 23 April 2018, the terms of Board Members Kuanysh Abdugaliyevich
Bektemirov and Mazhit Abdykalikovich Turmagambetov were ended ahead of time. Beybit Yerkimbayevich
Karymsakov and Ardak Makhmuduly Kasymbekov were appointed to the Board of Directors.
In June 2018, the term of the previous Board of Directors expired.
In August 2018, a new Board of Directors was appointed, with John Dudas as Chairman and Alik Serikovich
Aidarbayev, Beibit Yerkimbayevich Karymsakov, Kanat Zhakypuly Kudaibergen, Russell Banham, Neil Longfellow
and Galymzhan Olzhaevich Pirmatov as members.
ACTIVITY OF THE BOARD OF DIRECTORS
In 2018, the Board of Directors held 12 meetings (eight in person), at which 135 issues were considered. Fourteen internal and
planning documents were approved and decisions were made to conclude 20 interested-party transactions. Also in 2018, the
Board of Directors made important decisions to improve corporate governance, personnel policy, risk management and the
Company’s internal control systems as well as the Company’s strategy.
The following issues, among other things, were considered during the reporting year:
Preliminary consideration of annual financial statements;
Appointment of new Board of NAC Kazatomprom JSC;
Appointment of the heads of executive bodies of subsidiaries and affiliates;
Preliminary approval of the transfer of Kazatomprom’s stakes in the authorised capital of MAEK-Kazatomprom LLP
and Kazakhstan Nuclear Power Plants LLP to Samruk-Kazyna JSC;
Approval of the roadmap for implementing the Company’s environmental and social action plan;
Agreement on the placement of securities between NAC Kazatomprom JSC, Samruk-Kazyna JSC and the
underwriting banks;
Approval of the action plan to improve the corporate governance system of NAC Kazatomprom JSC for 2018;
Other reports, work plans, key Company indicators, development programmes, etc.
Members’ attendance, in person at Board of Directors meetings in 2018 averaged 92%. The following table shows the
individual, in-person attendance records of members of the Board of Directors.
89
Table 72. Attendance at meetings of the Board of Directors in 2018
Members of the Board of
Directors/Committee
Member attendance at meetings of the Board of Directors in 2018
8 F
ebru
ary
201
8
6 A
pri
l 2
01
8
24
Ap
ril
20
18
28
Ma
y 2
01
8
28
Ju
ne
201
8
15
Au
gu
st 2
018
29
Au
gu
st 2
018
26
Sep
tem
ber
20
18
19
Oct
ob
er 2
018
14
No
vem
ber
201
8
6 D
ecem
ber
20
18
26
Dec
emb
er 2
01
8
%
J. Dudas (Chair) + + + + + + + + + + + + 100
A.S. Aidarbayev
(appointed 14 August 2018) + - + + + - + 71
B.Y. Karymsakov
(appointed 23 April 2018)
+ + + + + + - + + + 90
K. Zh. Kudaibergen
(appointed 14 August 2018)
+ + + + + + + 100
R. Banham
(appointed 14 August 2018)
+ + + + + + + 100
N. Longfellow + + + + + + + + + + + + 100
G.O. Pirmatov + + + + + + + + + + + + 100
A.M. Kasymbekov
(appointed 23 April 2018,
member until 29 June 2018)
+ + + 100
A.U. Mamin
(member until 29 June 2018.)
+ + + + + 100
Z.F. Arslanova
(member until 29 June 2018)
+ + + + + 100
M.A. Turmagambetov
(member until 23 April 2018)
+ + 100
K.A. Bektemirov
(member until 23 April 2018)
+ - 50
90
ASSESSMENT OF THE ACTIVITY OF THE BOARD OF DIRECTORS
An independent assessment of the activity of the Board of Directors was conducted in 2018. Along with the analysis of
Kazatomprom’s corporate governance system undertaken by Samruk-Kazyna JSC in 2018, independent consultants evaluated
the effectiveness of the Board of Directors, the committees of the Board of Directors, the chairman and the individual members
of the Board of Directors, and the corporate secretary. The report on the result of the independent assessment Board of
Directors’ performance contains an analysis of activities for 2015, 2016 and 2017.
An indepen assessment of the activity of the Board of Directors is conducted once every three years. Self-assessment is
conducted on an annual basis. The results of the assessment can trigger changes to the individual professional development
plans of the Board members or provide a basis for recommendations regarding recruitment or replacement of directors.
102-28, 103-3
ENGAGEMENT OF INDEPENDENT DIRECTORS
The Company is guided by the requirements of the Law of the Republic of Kazakhstan on Joint Stock Companies, the
Company’s Articles of Association, and the Regulations on Selecting Independent Directors of Sovereign Wealth Fund
Samruk-Kazyna JSC, which define the procedure for recruitment and selection of candidates on a competitive basis to the
position of independent directors, as well as the rules for carrying out a preliminary qualification assessment of candidates by
the Nominations and Remunerations Committee. 102-24
In accordance with the Company's corporate governance code, the Board established the independence of the directors and
believes that John Dudas, Russell Banham and Neil Longfellow are independent in nature and in their decision-making. The
Board of Directors has determined that there are no relationships or circumstances that have or could have a significant impact
on the independent decisions of these directors.
COMMITTEES OF THE BOARD OF DIRECTORS
To create a platform for active discussion and detailed analysis of issues related to the management of the Company, four
committees – the Audit Committee, the Committee on Strategic Planning and Investment, the Nominations and Remunerations
Committee, and the Committee on the Environmental, Health and Safety – operate under the Board of Directors. 102-18
Committee activity is subject to relevant Company regulations, which stipulate that only independent directors may be
appointed to the Audit Committee, and that independent directors should constitute a majority on other committees.
Audit Committee
The Audit Committee was formed as a consulting and advisory body of the Board of Directors and oversees the Company’s
financial reporting , internal control and risk management systems. The Audit Committee also monitors the Company’s
compliance with the provisions of its internal corporate governance documents. The Audit Committee operates for the benefit
of the shareholders and works to assist the Board of Directors by:
(i) Establishing an efficient control system on the Company’s financial and economic activities (including
completeness and authenticity of financial statements);
(ii) Monitoring the reliability and efficiency of internal control and risk management, as well as the execution of
corporate governance documents;
(iii) Control over the independence of internal and external audits, as well as procedures for compliance with the laws
of the Republic of Kazakhstan;
(iv) Other matters as required by the Company Regulation on the Audit Committee of the Board of Directors.
The Audit Committee is accountable to the Board of Directors, in accordance with the authority granted to it by the Board of
Directors and the Company’s Regulation on the Audit Committee of the Board of Directors. The Company’s Audit Committee
includes the following members:
91
Table 73. Audit Committee members
Name
Year of birth
Other positions
Member of the
Committee since
Russell Banham ....................................................... 1954 Chairman of Committee, Independent Director .. 2018
Jon Dudas ................................................................ 1959 Member of the Committee, Chairman of the
Board of Directors, Independent Director .......... 2016
Neil Longfellow ...................................................... 1958 Member of Committee, Independent Director .... 2017
In 2018, the Audit Committee held 11 in-person meetings at which key issues of the Company’s business were discussed
including:
The interim and annual financial statements including reports from the Company’s external auditor;
Approval of the annual internal audit plan and review of the results of internal audit activities;
Reports on compliance programs;
The preparation of the Integrated Annual Report;
Review of the risk register, risk map and risk management activities.
The composition of and attendance data for the Audit Committee were as follows:
Table 74. Composition of and attendance at meetings of the Audit Committee in 2018
Committee members
Member attendance at meetings of the Audit Committee of the Board of Directors in 2018
23 J
an
uary
2018
5 F
eb
ru
ary
2018
28 F
eb
ru
ary 2
01
8
15 M
arch
20
18
19 M
arch
20
18
27 M
arch
20
18
18 A
pril
2018
31 M
ay
20
18
20 J
un
e 2
018
25 S
ep
tem
ber
201
8
21 N
ov
emb
er 2
01
8
%
R. Banham
(Committee Chair,
elected 15 August 2018)
+ + 100
J. Dudas + + + - - + + + + + + 82
N. Longfellow + + + + + + + + + + + 100
Z.F. Arslanova
(member until 29 June
2018)
+ + + + + + + + + 100
Strategic Planning and Investment Committee
The Strategic Planning and Investment Committee was formed as a consulting and advisory body to the Board of Directors. It
provides recommendations that shape the direction and priority of Company activities, drafts development strategy, plans
investment activity and determines the Company’s innovation strategy. The Strategic Planning and Investment Committee
operates for the benefit of Company shareholders and assists the Board of Directors by providing recommendations on:
(i) The development of Company strategy, the evaluation of the efficiency of measures to implement the strategy, the
means for achieving the goals of the strategy, internal Company documents related to the drafting of its strategy,
strategic decisions to increase efficiency from a short- and long-term perspective, strategic decisions on M&A
activities, and reorganisation procedures;
92
(ii) Internal documents regulating Company investment activity, investment projects within in the framework of the
Company’s strategy, changes in accounting standards and legislation that could affect Company development, and
approval of company’s development master plan;
(iii) Review and evaluation of investment and innovation initiatives at all stages of development.
The Strategic Planning and Investments Committee is accountable to the Board of Directors, in accordance with the authority
granted to it by the Board of Directors and the Company’s Regulation on the Strategic Planning and Investment Committee of
the Board of Directors. The Company’s Strategic Planning and Investment Committee includes the following members:
Table 75. Strategic Planning and Investment Committee
Name
Year of birth
Other positions
Member of the
Committee since
Jon Dudas .......................... 1959 Chairman of Committee, Chairman of the Board of Directors,
Independent Director ................................................................................ 2016
Russell Banham ................. 1954 Member of Committee Independent Director .......................................... 2018
Neil Longfellow ................ 1958 Member of Committee, Independent Director.......................................... 2017
In 2018, the Committee on Strategic Planning and Investment held eight in-person meetings at which key issues of the
Company’s business were discussed:
Preliminary consideration of documents to be proposed to the Board of Directors containing information on the
implementation of the Company’s development strategy, the status of large-scale investment projects and
achievement of target values of strategic key performance indicators (KPIs);
Preliminary consideration and approval of the action programme and activity plans for implementation of the
Company’s development strategy and an elaboration of the recommendations for achieving its goals;
A benchmarking analysis report on NAC Kazatomprom JSC with respect to other uranium mining companies;
Reports on the implementation of the Company’s development strategy for 2015-2025 and issues related to achieving
strategic KPIs in 2018.
The composition of and attendance data for the Committee on Strategic Planning and Investments were as follows:
Table 76. Composition of and attendance at meetings of the Committee on Strategic Planning and Investments in 2018
Committee members
Member attendance at meetings of the Committee on Strategic Planning and Investments of
the Board of Directors in 2018
19 J
an
uary
2018
27 M
arch
20
18
18 A
pril
2018
24 A
pril
2018
31 M
ay
20
18
20 J
un
e 2
018
25 S
ep
tem
ber
201
8
20 N
ov
emb
er 2
01
8
%
J. Dudas (Committee Chair) + + + + + + + + 100
Banham R.
(elected 15 August 2018) + + 100
N. Longfellow + + + + + + + + 100
Z.F. Arslanova
(member until 29 June 2018) + + + + + + 100
T.B. Yerzhanov
(member until 29 June 2018) + + + + + + 100
Nominations and Remunerations Committee
The Nominations and Remunerations Committee was formed as a consulting and advisory body to the Board of Directors. It
provides recommendations on the efficiency of the Company’s personnel policy and evaluates the goals and results of activities
93
of the Management Board and other employees appointed by the Board of Directors. The Nominations and Remunerations
Committee operates for the benefit of the shareholders and assists the Board of Directors by providing recommendations on:
(i) Attracting qualified specialists to the Board of Directors, the Management Board, the Company Secretary and other
positions filled or coordinated by the Board of Directors in accordance with a Board-approved list;
(ii) The formation of proposals for the Board of Directors on matters determining the remuneration of independent
directors, members of the Management Board, the Company Secretary, in accordance with the goals, objectives,
current status of the Company and the level of remuneration in similar companies, by type and scale of activity;
(iii) The Company’s personnel policy, the procedure for nominating members to the Board of Directors and Management
Board, policies on evaluating the activities of the members of the Board of Directors and the Management Board,
the Corporate Secretary, improving the qualifications of the members of the Board of Directors, and other matters
as decided by the Board of Directors.
The Nominations and Remunerations Committee is accountable to the Board of Directors, in accordance with the authority
granted to it by the Board of Directors and the Company’s Regulation on the Remuneration and Appointment of the Board of
Directors. The Company’s Nominations and Remunerations Committee includes the following members:
Table 77. Nominations and Remunerations Committee
Name
Year of birth
Other positions
Member of the
Committee since
Jon Dudas ........................... 1959 Chairman of Committee, Chairman of the Board of Directors,
Independent Director ................................................................................ 2016
Russell Banham .................. 1954 Member of Committee Independent Director .......................................... 2018
Neil Longfellow ................. 1958 Member of Committee, Independent Director.......................................... 2017
Nurlan Utenov .................... 1972 Committee expert (no voting power) ....................................................... 2018
In 2018, the Nominations and Remunerations Committee held 12 in-person meetings, at which key issues of the Company’s
business were discussed, including:
Consideration of key performance indicators of the executive officers of NAC Kazatomprom JSC;
Appointment of members of the Management Board of NAC Kazatomprom JSC;
Approval of the appointment of chief executive officers at certain subsidiaries and affiliates;
Plans for the succession of executive officers of NAC Kazatomprom JSC.
The composition of and attendance data for the Nominations and Remunerations Committee are as follows:
94
Table 78. Composition and attendance at meetings of the Nominations and Remunerations Committee in 2018
Committee
members
Member attendance at meetings of the Nominations and Remunerations Committee of the Board of
Directors in 2018
23 J
an
uary
2018
20 F
eb
ru
ary 2
01
8
27 M
arch
20
18
17 A
pril
2018
18 A
pril
2018
24 A
pril
2018
20 J
un
e 2
018
28 J
un
e 2
018
25 S
ep
tem
ber
201
8
17 O
cto
ber
201
8
26 O
cto
ber
201
8
20 1
1 2
018
%
J. Dudas
(Committee
Chair)
+ + + - + + + + + - + + 83
N. Longfellow + + + + + + + + + + + + 100
R. Banham
(elected 15
August 2018)
+ + + + 100
N.K. Utenov
(elected 15
August 2018)
+ + + + 100
Z.F. Arslanova
(member until
29 June 2018)
+ + + + + + + - 88
K.A.
Bektemirov
(member until 23
April 2018)
- - - - - 0
Committee on the Environmental, Health and Safety
The Committee on Environmental, Health and Safety was formed as a consulting and advisory body to the Board of Directors.
It provides recommendations on improving the management system in the field of industrial, ecological and radiation safety,
the efficiency of communication with subsidiaries for the coordination policy implementation related to labour and
environmental safety, and the approval of the Company’s programmes on sustainable development, including labour and
environmental safety.
The Committee on Environmental, Health and Safety operates for the benefit of the shareholders and assists the Board of
Directors by providing recommendations on development of integrated Company policy related to labour, environmental safety
and radiation safety, as a part of the Company’s sustainable development plan to minimise chemical and radiation impact,
ensure environmental and personnel safety, improve production safety and automate technological processes, in addition to a
preliminary review of social issues.
The Committee on Environmental, Health and Safety is accountable to the Board of Directors, in accordance with the authority
granted to it by the Board of Directors and the Company’s Regulation on the Committee on Environmental, Health and Safety
of the Board of Directors. The Committee on Environmental, Health and Safety includes the following members:
Table 79. Committee on Environmental, Health and Safety
Name
Year of birth
Other positions
Member of the
Committee since
Neil Longfellow ................ 1958 Chairman of Committee, Independent Director ....................................... 2017
Jon Dudas .......................... 1959 Chairman of the Board of Directors, Independent Director ..................... 2016
Talgat Yerzhanov .............. 1984 Committee expert (no voting power) ....................................................... 2016
In 2018, the Committee on Environmental, Health and Safety held five in-person meetings at which key issues of the
Company’s business were discussed::
A report a corporate social accountability activities and the sustainable development of NAC Kazatomprom JSC;
95
A report on the provision of decent social and working conditions for Kazatomprom’s production personnel;
Reports on work carried out to prevent industrial accidents at NAC Kazatomprom JSC.
The composition of and attendance data for the Committee on Environmental, Health and Safety are as follows:
Table 80. Composition of and attendance at meetings of the Committee on Environmental, Health and Safety in 2018
Committee members
Member attendance at meetings of the Committee on Environmental, Health and Safety of
the Board of Directors in 2018
19
Jan
ua
ry 2
018
15
Ma
rch
20
18
31
Ma
y 2
018
25
Sep
tem
ber
20
18
20
No
vem
ber
201
8
%
N. Longfellow
(Committee Chair) + + + + + 100
J. Dudas + - + + + 80
Z.F. Arslanova
(member until 29 June 2018) + + + 100
T.B. Yerzhanov
(named committee expert on
15 August 2018)
+ + + + + 100
MANAGEMENT BOARD
The Management Board is the executive body of NAC Kazatomprom JSC.
The Management Board is responsible for the day-to-day management and administration of the Company and is controlled
by the Board of Directors and the General Meeting of Shareholders. Activity of the Management Board of Company is
determined by the principles described in the Charter, the Company’s corporate governance code and regulations governing
the Management Board. Among other things, the Management Board’s responsibilities include the following:
(i) Approving the Company’s internal operational guidelines;
(ii) Appointing heads of branch and representative office;
(iii) Developing and implementing the Company’s business strategy and budget;
(iv) Making executive business decisions; and
(v) Implementing resolutions adopted by the Board of Directors and the General Meeting of Shareholders.
Members of the Management Board may be representatives of shareholders, or Company employees who are not shareholder
representatives, and are appointed and dismissed by the Board of Directors. The quantitative composition and term of office
of the Management Board is determined by the Board of Directors. The Management Board should consist of not less than
five people.
96
COMPOSITION OF THE MANAGEMENT BOARD
By resolution of the Board of Directors of NAC Kazatomprom JSC dated 8 February 2018 (minutes of meeting No. 1/18), the
composition of the Management Board was set at six people, each with terms equal in length to the terms of the Management
Board of NAC Kazatomprom JSC. The Management Board of NAC Kazatomprom JSC was elected as follows:
Table 81. Management Board of NAC Kazatomprom JSC
Name
Year of birth
Title
Year when joined
the Group
Galymzhan Pirmatov ......... 1972 Chairman of the Management Board ....................................................... 2009
Marat Niyetbayev .............. 1956 Chief Director for Operations .................................................................. 1998
Baurzhan Ibrayev .............. 1958 Chief Director on Nuclear Fuel Cycle
and Atomic Energy .................................................................................. 2001
Meirzhan Yussupov ........... 1979 Chief Director for Economics and Finance.............................................. 2010
Riaz Rizvi .......................... 1972 Chief Strategy and Marketing Officer
(Chief Commercial Officer) .................................................................... 2017
Birzhan Duisembekov ....... 1971 Chief Business Support Director ............................................................. 2017
Galymzhan Pirmatov, Chairman of the Management Board. Mr. Pirmatov was born in 1972 and is a citizen of the Republic
of Kazakhstan. He has degrees from the Novosibirsk State University, the Kazakhstan Institute of Management of Economics
and Strategic Research (University of KIMEP), the Atkinson Graduate School of Management at Willamette University. His
previous roles include Financial Director of JV Altyn-Tas and Director for Investment at AIG Silk Road Capital Management.
In 2007, Mr. Pirmatov held the position of Managing director of Halyk Bank JSC. From 2007 to 2009 he was Vice-Minister
of Economy and Budget Planning of the Republic of Kazakhstan. From 2009 to 2011 - Vice-President for Economics and
Finance of NAC Kazatomprom JSC. From 2011 to 2015, he was President of Cameco Kazakhstan. Since December 2015,
Mr. Pirmatov has been Deputy Chairman of the National Bank of Kazakhstan. Mr. Pirmatov has served as the Chairman of
the Management Board of Kazatomprom since August 2017.
Marat Niyetbayev, Chief Director for Operations. Mr. Niyetbayev was born in 1956 and is a citizen of the Republic of
Kazakhstan. Mr. Niyetbayev graduated from the Kazakh Polytechnic Institute with a bachelor’s degree in the automation of
metallurgical production. He is a doctoral candidate in the field of technical sciences. Mr. Niyetbayev began his career at
Shymkent Lead Factory, starting as a fifth-grade smelter, rising to the position of General Director. Mr. Niyetbayev has held
managerial positions at various major organisations. Mr. Niyetbayev has worked for Kazatomprom for 21 years, holding the
positions of Mining Director of Kazatomprom and General Director of both Mining Company LLP and Ken Dala.kz JSC.
Mr. Niyetbayev has also worked as head of the Kazakhstan Branch of Eurasia Energy Holdings LTD and as Vice President
for Operations for Uranium One Inc.
Baurzhan Ibrayev, Chief Director of Nuclear Fuel Cycle and Atomic Energy. Mr. Ibrayev was born in 1958 and is a citizen
of the Republic of Kazakhstan. He graduated from the Kazakh State University (S.M. Kirov). He holds a doctorate in physical
and mathematical sciences and is National Academician of Natural Sciences of the Republic of Kazakhstan. Mr. Ibrayev started
his career in 1983 as a junior researcher at the Institute of Nuclear Physics at the Academy of Sciences of the Kazakh SSR. He
then worked as a senior lecturer, associate professor and head of the Department of Optics and Plasma-Physics at Kazakh
State University (Al-Farabi), latterly as Deputy Director of the Physics Department. In 1996, Mr. Ibrayev passed IAEA training
at the Berlin Centre for Neutron Research (operating in the BER-2 reactor) and, in 1999, he became a director at the Scientific
Research Institute of Experimental Theoretical Physics (SRI ETF). Since 2001, Mr. Ibrayev has headed up Kazatomprom’s
Company Mining Group No. 6, as well as its MAEK-Kazatomprom LLP, Mining Company LLP, Ken Dala.kz LLP and DP
Ortalyk LLP subsidiaries.
Meirzhan Yussupov, Chief Director for Economics and Finance. Mr. Yussupov was born in 1979 and is a citizen of the
Republic of Kazakhstan. He graduated from the Middle East Technical University with a degree in economics and
management, the London School of Economics with a Master of Science in Economic Development Management (Department
of Economics) and from Harvard University with a Master in Public Administration. Mr. Yussupov started his career as the
deputy director of the Marketing and Internal Audit Department at Turkuaz Group. From 2003 to 2006, he worked at Demir
Kazakhstan Bank JSC and held various positions at Samruk-Kazyna. In 2009–2010, Mr. Yussupov worked in public service,
as a Deputy Director of the Investment Policy Department of the Ministry of Economy and Budget Planning of the Republic
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of Kazakhstan. In 2010, he took up the position of Director of the Department of Corporate Finance and Treasury for
Kazatomprom. In 2015, Mr. Yussupov was appointed Chief Director of Economics and Finance at Kazatomprom.
Riaz El Hasan Sayed Rizvi, Chief Strategy and Marketing Officer (Chief Commercial Officer). Mr. Rizvi was born in 1972
and is a Dutch citizen. He holds a Bachelor of Science degree in business administration from Kings College, an MBA and
Doctorandus in Business Administration from Nijenrode University. Mr. Rizvi started his career as Country Director of
Uzbekistan in a multi-family office, then worked as Country Director for the Republic of Georgia and Project Officer for
Bosnia and Herzegovina for the Independent Bureau for Humanitarian Issues. From 1999 to 2001, Mr. Rizvi was Head of Coal
Origination for Enron Europe Limited. From 2001 to 2004, we held the position of Head of Origination for American Electric
Power and, from 2004 to 2009, he was Co-Head of the Constellation Energy Commodities Group. Between 2009 and 2016,
Mr. Rizvi served as CEO and Founder of NuCap Limited. Since March 2017, he has been Chief Strategy and Marketing
Director of Kazatomprom.
Birzhan Duisembekov, Chief Business Support Director. Mr. Duisembekov was born in 1971 and is a citizen of the Republic
of Kazakhstan. In 1993, he graduated from the Lenin Kazakh Polytechnic Institute in Almaty with a Bachelor’s degree and
mining engineer’s qualification in technology and the general mechanisation of underground development of mineral deposits.
In 2006, Mr. Duisembekov graduated from the Atyrau Oil and Gas Institute with a degree in economics. He began his career
as a level 3 miner in the mine area of Almatymetrostroy Trust. Mr. Duisembekov has held executive positions at Uzenmunaigaz
JSC, Embamunaigaz JSC, KazMunaiGas EP JSC, Kazyna Capital Management JSC, JV Kazgermunai LLP,
AktauNefteService LLP, Offshore Oil Company KazMunaiTeniz JSC, in Samruk-Kazyna JSC Group companies and in
Kazakhstan second-tier banks. Mr Duisembekov has worked for Kazatomprom since October 2017.
Beksultan Bekmuratov, Chief Transformation and IT Officer. Mr. Bekmuratov was born in 1986 and is a citizen of the
Republic of Kazakhstan. In 2009, he graduated in engineering from the Russian State University of Oil and Gas. From 2011
to 2013, Mr. Bekmuratov held the position of Health and Safety Adviser at Shell. From 2014 to 2018, Mr. Bekmuratov worked
as transformation project manager at Samruk-Kazyna. Since February 2018, Mr. Bekmuratov has been Chief Transformation
and IT Officer at Kazatomprom.
Table 82. Member attendance at meetings of the Management Board of NAC Kazatomprom JSC
Member Attendance
at meetings (no.)
% Membership
during the reporting period
G.O. Pirmatov 28 76 1 January – 31 December 2018
B. Zh. Duisembekov 30 81 8 February – 31 December 2018
B.M. Ibrayev 34 92 1 January – 31 December 2018
M.A. Nietbayev 30 81 8 February – 31 December 2018
R. Rizvi 27 73 1 January – 31 December 2018
M.B. Yussupov 35 95 1 January – 31 December 2018
According to the Regulations on the Management Board of NAC Kazatomprom JSC, approved by resolution of the Company's
Board of Directors No. 8/10 of 26 July 2010, the Management Board can make decisions in the following ways:
Voting in person (in presentia);
Absentee voting (in absentia); or
Combined voting.
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ACTIVITY OF THE MANAGEMENT BOARD IN 2018
During the reporting period, the Management Board held 37 meetings, at which 320 issues were considered. It made and signed
off on 822 decisions by way of 288 in-person and 534 absentee votes:
One hundred and twenty-two issues were submitted for consideration and approval of the Board of Directors of
NAC Kazatomprom JSC in 2018. These included the approval of internal and planning documents, the conclusion of
transactions in which the Company had an interest, decisions on the transfer of subsoil use rights, the acquisition or
divestment of shares in the authorised capital of other legal entities, the approval of annual financial statements and
the distribution of dividends. They also included Management Board reports on risk management, production safety,
the execution of measures to improve the corporate governance system and the implementation of large investment
projects, the conclusion of interested-party transactions (decisions on which were taken by the Board). Further
decisions included approval of the business plan implementation report and the business plans itself, amendments to
the Company’s subsoil use contracts, approval of key performance indicators for the Chairman and members of the
Board for 2018 and approval of the organisational structure of the Central Office, total number of employees, etc.
Decisions were taken on the conclusion of 110 transactions in which the Company had an interest, or in which the
Company acted as a representative or intermediary of its affiliates. Decisions on the conclusion of transactions in
which Kazatomprom had an interest were taken by the Board in accordance with (i) Article 21 of the Law of the
Republic of Kazakhstan on the National Wealth Fund, dated 1 February 2012, No. 550 IV, (ii) paragraph 1 of Article
71 of the Law of the Republic of Kazakhstan, dated 13 May 2003, No. 415-II, on joint stock companies, and (iii)
Clause 3 of the rules for concluding transactions between organisations belonging to Samruk-Kazyna Group, in
respect of which the Law of the Republic of Kazakhstan "On Joint-Stock Companies" establishes special conditions
approved by the decision of the Board of Directors of Samruk-Kazyna JSC on April 27 2009 №18;
Sixty transactions were considered, as a result of which NAC Kazatomprom JSC divested and/or acquired property
with a value of less than 10% of the total value of the Company’s assets. Its conclusions were made in accordance
with Clause 2 of Article 180 of the Law of the Republic of Kazakhstan on State Property.
Seventy-four decisions were taken on matters relating to the competence of the General Meeting of Shareholders
(participants) of a legal entity, the shares (shares in the authorised capital) of which belonged to the Company, where
NAC Kazatomprom JSC acted as the sole participant (DP ORTALYK, Kazatomprom-SaUran LLP, Institute of High
Technologies LLP, Korgan-Kazatomprom LLP, RU-6 LLP, Astana Solar LLP, Kazakhstan Solar Silicon LLP, MK
KazSilicon LLP, LLP KAP Technology, JSC TN KazakAtom AG, LLP MAEK-Kazatomprom, JSC KAES and LLP
SARECO).
Board decisions were made on 262 issues to determine the position of the Company as a shareholder in legal entities
in which NAC Kazatomprom JSC was not sole shareholder for the purposes of subsequent voting by authorised
representatives at General Meetings of Shareholders. These included the activities of APPAK LLP, Semizbay-U LLP,
Karatau LLP, JV Akbastau JSC, Zarechnoye JV JSC, KATKO JV LLP, Inkai JV LLP, Kyzylkum LLP , LLP JV
Khorasan-U, LLP JV UGHK, LLP Baiken-U, LLP S P Budenovskoye, JSC UMZ, JSC IUEC, JSC ECC, JSC JV
UKRTVS, LLP Uranenergo, JSC Volkovgeology, LLP SKZ-U, JSC Kaustik, LLP Trade and Transport Company,
Kazatomprom-Damu LLP, Kyzyltu LLP and JV Betpak Dala LLP.
Fifty-two internal documents were approved. These included the Company’s implementation plan and higher-level
roadmap for 2018‒2028 development strategy; the Group’s corporate tax policy, tax control regulations and tax risk
processes; the information technology strategy for 2018‒2028; an update of the business transformation programme
charter; data-management concepts; rules for candidate selection for heads of executive bodies of subsidiaries and
affiliates and the creation of a committee for the selection of candidates for heads of subsidiary and dependent
companies; instructions on the accounting of sulphuric acid for the preparation of reserves for uranium mining and
the determination of a unified method for the accounting of sulphuric acid for acidification; provisions for the
Investment Committee; and funding strategies for 2018-2028.
One hundred and forty-two decisions were taken on various issues, including an update of the limits on Group
balance-sheet and off-balance-sheet obligations to second-tier banks and a revised list of second-tier banks with which
deposits of free cash may be placed temporarily; approval of a list of managerial successors; approval of the Board’s
workplan for 2018; and the appointment of the Investment and Risk Management Committees.
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Table 83. Number of issues considered by the Management Board in 2017‒2018
Indicator 2018 2017 Change Number of in-person meetings 37 36 3% Number of issues considered at meetings in person
(including issues considered that were not on the agenda) 288 254 13%
Number of issues considered at meetings in absentia 534 582 -8%
MANAGEMENT BOARD COMMITTEES
The following are Management Board Committees aimed at enhancing the effectiveness of resolutions made by the
Management Board:
Risk Management Committee
The Risk Management Committee is a key working body that considers and makes suggestions on the Company’s risk
management.
The main functions of the Risk Management Committee are as follows:
1. The consideration and preliminary approval of drafts of internal and other documents on Company risk management
(including policy and rules);
2. The coordination of the interaction between structural subdivisions in relation to risk management;
3. The consideration and approval of Company risk appetite and level of risk tolerance;
4. The review and approval of limits for banks and the list of second-tier banks for temporary deposit of free funds (if
necessary);
5. The consideration and approval of the Company’s risk register, including consolidated action plans for risk
minimisation, and risk map;
6. The consideration and approval of key risk indicators;
7. The consideration and approval of risk matrices and controls;
8. The preparation of proposals on the organisation and maintenance of an effective risk management system;
9. The consideration and approval of risk owners on the basis of the risk register. 102-18
Investment Committee
The main purpose of the Investment Committee is to make recommendations and suggestions to improve the efficiency of the
investment activities of the Company, its subsidiaries and affiliates.
The main functions of the Investment Committee are as follows:
1. The approval of internal regulatory documents on investment activity;
2. To consider, implement and make recommendations in accordance with established procedures:
- on the investment initiatives of the Company, its subsidiaries and affiliates;
- on the acquisition or sale by the Company or its subsidiaries and affiliates of shareholdings in other legal entities,
the merger of subsidiaries and affiliates with third-party legal entities, and the creation of new legal entities for
the purpose of implementing investment projects;
- on organic growth projects;
- on M&A projects;
- on creating working groups for the implementation of investment projects; and
- on other issues as required by the company’s internal rules and practices.
3. The issuance of recommendations on Company investment initiatives to be submitted for consideration to Samruk-
Kazyna JSC. 102-18
Credit Committee
The main purpose of the Credit Committee is to implement the Company’s credit policy in accordance with the requirements
of Samruk-Kazyna JSC and to ensure the timely and qualitative adoption of resolutions on issues associated with the
Company’s granting of loans.
The main functions of the Credit Committee are as follows:
1. The consideration and preparation of recommendations on loan applications, including an analysis of expert estimates
of the actual and planned financial indicators on which approval is based, and the verification of mortgage security;
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2. The determination of the terms of the loans being granted, such as the amount, term, purpose, interest rate, security,
repayment schedule for principal and interest, etc.;
3. The consideration and decisions on the scheduled and unscheduled monitoring of credit activities;
4. The consideration and preparation of recommendations on decisions related to loan restructuring and problem loans;
5. Other questions related to credit activity of the Company. 102-18
Specialised Scientific and Technical Council
The Specialised Scientific and Technical Council (SSTC) is a key working body for implementing the Company’s strategic
approach to scientific, technical and innovative development.
The main functions of the SSTC are as follows:
1. The formation, updating and implementation of the strategic approach to Kazatomprom’s scientific, technical and
innovative development;
2. The application of scientific achievements and new technologies for the benefit of Kazatomprom, its subsidiaries and
affiliates;
3. The consideration and agreement of strategic plans for research and development and innovative work at
Kazatomprom, its subsidiaries and affiliates;
4. The updating and monitoring of the research, development and design work performed for Kazatomprom. 102-18
REMUNERATION OF DIRECTORS AND EXECUTIVES
In accordance with the Company’s charter, the remuneration of the members of the Board of Directors is determined by the
General Meeting of Shareholders, while the remuneration of the Chairman of the Management Board and the members of
Management Board is determined by the Board of Directors.
In accordance with the law of the Republic of Kazakhstan on joint stock companies, by decision of the Company’s General
Meeting of Shareholders, independent members of the Board of Directors shall be remunerated and reimbursed expenses
related to the execution of their functions.
The Company approved its rules of remuneration, bonuses and benefits for senior management on 28 June 2017 and these
set out the procedure and terms of payment.
Total remuneration for the Management Board members and independent members of the Board of Directors of NAC
Kazatomprom JSC in 2018 totalled to KZT 932,197,628 (before taxes).
STATEMENT OF RESPONSIBILITY OF MEMBERS OF THE BOARD OF DIRECTORS
AND THE MANAGEMENT BOARD
In accordance with the Company’s corporate governance code, the Board of Directors and the Management Board are
responsible for the accuracy of the Company’s annual report and financial statements.
According to the disclosure and transparency rules of the United Kingdom Financial Supervision Authority (Disclosure and
Transparency Rules of the Handbook of the Financial Conduct Authority), each member of the Board of Directors confirms,
based on the information he has, that:
The financial statements have been prepared in accordance with IFRS, provide a true and reliable reflection of the
assets, liabilities, financial condition, results of the financial and economic activities of the Company and
consolidated balance of the Company with its subsidiaries;
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The management report includes accurate data on the development and indicators of financial and economic
activities and the financial condition of the Company and its subsidiaries, as well as a description of the most
important risks and uncertainties that they face.
As of the date of preparation of this integrated report, none of the members of the Board of Directors or the Management Board
has, over the past five years:
had a criminal record for offenses related to fraud;
been a member of the administrative, managerial or supervisory bodies of any company or partner in any partnership
at the time or in anticipation of the bankruptcy process, property management due to insolvency or liquidation; or
been subject to official public charges or sanctions by a government organisation or regulatory body (including a
professional body) and has never been deprived of the right, upon a court order, to act as a member of the
administrative, management or supervisory bodies of a company or to participate in the management of a company
or doing her business.
EMPLOYMENT AGREEMENTS OF SENIOR MANAGEMENT
The company enters into fixed-term employment contracts with the Members of senior management for a fixed term. Under
such agreements, members of the Company's top management receive bonuses or other forms of remuneration in addition to
their regularly paid salary.
Each member of senior management signs an individual employment contract, the terms and conditions of which must fully
comply with Kazakhstan legislation, including the Labour Code. These conditions usually include a five-day, 40-hour week,
an eight-hour working day, an annual vacation of 30 calendar days, the Company's insurance against life and health hazards
arising from the performance of its duties, and medical insurance.
CONFLICTS OF INTEREST
The Code of Ethics and Compliance of the Company, approved by a decision of the Board of Directors, defines the grounds
for the occurrence of conflicts of interest, as well as procedures for their prevention. The Company’s regulations on the
resolution of corporate conflicts and conflicts of interest were approved by the Board of Directors on 10 March 2011. There
are no actual or potential conflicts of interest between the obligations of the Members of the Board of Directors or the
Management Board prior to joining the Company and the private interests or other duties of the Members.
The Code of Ethics and Compliance expressly prohibits the participation of members of the Board of Directors, the
Management Board, as well as other employees of the Company in actions that may lead to a conflict of interest.
A similar practice is being introduced in the subsidiaries of the Company.
The Company is taking measures to raise the awareness of members of the Board of Directors, the Management Board, and
other employees about the Company's policy for preventing conflicts of interest, including training, explanatory activities, and
periodic testing of knowledge of the principles of ethics.
The company requires its suppliers to join the Kazatomprom Code of Suppliers and Contractors, which includes provisions
for the prevention of conflicts of interest. An additional tool to minimize the risk of conflict of interest is the Anti-Corruption
Clause, which is included in the Company's procurement contracts.
102
INTERNAL AUDIT SYSTEM The Company has an Internal Audit Service, the independence of which is ensured by its functional subordination to the
Board of Directors. Functional subordination includes the appointment of Internal Audit Service employees, the
determination of remuneration, approval of policies/procedures for internal audit, the annual audit plan and financial budget.
The Internal Audit Service assesses and contributes to the improvement of the corporate governance, risk management and
control processes of the Group organisations using a systematic, consistent and risk-oriented approach.
It applies International Internal Audit Standards in its activities and complies with the Code of Ethics for Internal Auditors.
In 2018, Internal Audit Service did not encounter any cases of obstruction of audit or interference with the activities of the
Internal Audit Service by the Company’s executive body.
All employees of the Internal Audit Service confirm annually their independence from the audited entities included in the
annual audit plan approved by the Board of Directors.
Service performance results are regularly discussed and evaluated by the Audit Committee.
ORGANISATIONAL STRUCTURE OF THE COMPANY’S CORPORATE CENTRE
The Company comprises a Corporate Centre with a clear functional structure. As part of its transformation programme, the
Company plans to take a process management approach to its main activities in the future. KAP3
The organisational structure was formed by taking into account the target business processes necessary to implement the
strategic goals and objectives of the Group in all key areas of its activities. The best practices of comparable companies of in
the global uranium and nuclear industries were used, as were the legislative requirements of the Republic of Kazakhstan and
the requirements of shareholders.
CORPORATE ETHICS
The Company recognises that transparent business, including combating corruption, is a necessary factor in dealing with
stakeholders and building trustful internal corporate relationships. Thus, the social and economic environment in which the
Company operates is improved by increasing the reliability and integrity of transactions, preventing corruption and providing
reliable information for decision-making by stakeholders.
All employees of the Company are made familiar with the Code of Ethics and Compliance as a part of the hiring process, as
well as any amendments to the Code. To confirm their familiarisation with the Code, every employee signs a familiarisation
form. 102-16
Periodic testing of personnel is carried out to check their understanding of the provisions of the Code of Ethics and Compliance.
The Company is committed to high standards and principles of corporate ethics provided for by the Code of Ethics and
Compliance and commits to:
Using and improving policies and practices that help to prevent bribery, extortion and the facilitation of remuneration
and other corrupt practices, including the imposition of anti-corruption obligations on suppliers;
Counteracting the legalisation of illegally gained income;
Prevent conflicts of interest, including situations of joint employment of spouses and close relatives;
Prevent discrimination and other manifestations of ethical violations;
Ensuring compliance with the requirements of legislation, the Company charter, listing requirements, and the terms
of international treaties and to establishing sanctions for their violation;
Ensure occupational safety and respect the environment;
Raising the awareness of personnel about the importance of compliance with the requirements of the law, encouraging
employees to report incidents of violation of the Company's policies, rules and procedures;
103
Demonstrating that the level of remuneration of Company employees corresponds to the work performed and the
level of qualification;
Fulfilling in a timely manner its contractual obligations, including the payment of taxes and other payments to the
state budget;
Observing the principles of fair competition and using the criteria of ethical equality in the implementation of
procurement policies and the conclusion of contracts, including compliance audit of counterparties; and
Ensuring transparency, openness and objectivity of decisions. 102-16
During 2018 the company appointed Birzhan Duisembekov, a Management Board member, responsible for internal
communication of the approved ethics principles. The Code of Ethics and Compliance approved by Board of Direcors’
resolution # 8/18 of 29.06.2018 is available on the corporate website. Furthermore, the information regarding the ethics
principles has been circulated by management to all emplyees of the Group by e-mail. The Code of Ethics and Compliance
has also been communicated to the subsidiaries and affiliates in which Kazatomprom owns 50% or more of the share capital.
Trainings on compliance were conducted in December of 2018 for members of the Management Board and in January of 2019
for the departments most prone to the compliance risks.
The Company has a Regulation on the settlement of corporate conflicts and conflicts of interest, approved by a decision of the
Board of Directors, which determines the causes of corporate conflicts, conflicts of interests, procedures to prevent them, and
also regulates the activities of the Company's bodies as part of conflict resolution activities.
The company controls the circulation and use of insider information, notifies stock exchanges of transactions made by insiders,
helps to prevent insider transactions.
The company has a “hotline” for reporting ethics violations. The “hot line” is administered by an external supplier, which
ensures the independence of accepting appeals for consideration, and enables confidential information, including anonymity
of the appeal. The Company's actions aimed at preventing and suppressing violations of the laws of the Republic of Kazakhstan
or the Company's internal regulatory documents are governed by a number of documents, the main of which is the Confidential
Information Policy.
During 2018, 24 requests received via the hotline were considered.
The Company has an Anti-Corruption and Fraud Policy that defines the main activities of the Company and the general rules
of conduct for anti-corruption officials and employees. Each employee signs an obligation to comply with the rules of anti-
corruption legislation. 102-16
In the event of labour disputes and conflicts, certain issues are resolved in accordance with the labour legislation. Mediation is
also used to resolve labour disputes.
OFFICE OF THE OMBUDSMAN
Since 2011, the Board of Directors has appointed a Company's Ombudsman.
In accordance with the Code of the Ombudsman, the basic functions of the Ombudsman include:
Providing and coordinating explanations to officials and employees of the Company on issues related to the
requirements of the Code of Corporate Ethics and Compliance;
Consulting with officials and employees on the provisions of the Code of Corporate Ethics;
Collecting information on non-compliance with the provisions of the Code of Corporate Ethics, initiating procedures
to consider disputes over the violation of the provisions of the Code of Corporate Ethics and participating in their
settlement.
One of the duties of the Ombudsman is to submit to the Board of Directors an annual report on compliance with the
requirements of the Code of Corporate Ethics.
In 2018, the Ombudsman investigated 17 complaints in relation to social and labour disputes and unethical behaviour.
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On 8 February 2018, Bolat Abzhaparuly Zhylkyshiev, was appointed asOmbudsman of the Company by decision of the Board
of Directors of NAC Kazatomprom JSC (No. 1/18).
Mr Zhylkyshiev graduated from the Kazakh Institute of Chemical Technology with a degree in the Organisation and Planning
of Building Materials, specialising in mechanical engineering and construction materials.
He began his career as master of a brick factory, later becoming chief mechanic at Promstroimaterialy Trust, Shymkent.
He has subsequently worked as an instructor for the Dzerzhinsky District Party Committee, as Secretary of the Party Bureau
of the Shymkent oils and fats factory, as Deputy Chairman of the Symkent City Executive Committee, head of the Dzerzhinsk
regional administration of the city of Shymkent, the district administration of the rayon administration, akim of the city of
Chimkent, akim of the South Kazakhstan region, a vice-president of NAC Kazatomprom JSC, deputy of the Senate Parliament
of the Republic of Kazakhstan and as Advisor to the Chairman Board of NAC Kazatomprom, JSC.
RISK MANAGEMENT AND INTERNAL CONTROL
In 2010, the Company introduced a risk management system based on global best practices and the requirements of Samruk-
Kazyna JSC. 102-11
The company is guided by the following international standards and practices in the field of risk management and internal
control 102-12:
COSO internal control integrated model (2013)
A revised version of the 1992 document, COSO 2013 states that internal control is a process that depends on people at all
levels of the organisation (not just senior management) and should be aimed at achieving the Company's business goals.
COSO enterprise risk management integrated model (2004, amended in 2017) (includes an integrated model and
applied methods)
A conceptual model that focuses on various aspects of risk management, it considers internal control to be an essential
component of risk management in any enterprise.
Standard ISO 31000:2018 risk management – principles and guidelines (2018)
A guide that defines the principles and approaches to the risk-management process. The standard establishes the fundamental
principles and processes of risk management that apply to any type of organisation in the private or public sector.
Standard ISO 9001:2008 and ISO 9001:2015 quality management system
Standards that define approaches to quality management, including a process approach to managing risks that affect product
quality.
Regulatory documents on risk management and internal control of Samruk-Kazyna, JSC.
RISK MANAGEMENT
The Company's activities involve various risks and, therefore, an effective risk-management system is a fundamental element
of the Company's business and its development strategy. Accurate and timely identification, assessment, monitoring and
response to risks allow an effective decision-making process at all levels of management and ensure the achievement of the
Company’s strategic goals and key performance indicators.
The Risk management Department is responsible for the Company’s risk management. Key risk-management issues are first
reviewed, approved or agreed by the Risk Management Committee, under the supervision of the Management Board. Separate
structural units responsible for the organisation of risk management have been formed, or risk managers have been appointed
in the Company's subsidiaries and affiliates.
105
Figure 7. Structure of corporate risk management system
Detailed information on the structure, participants and responsibilities of members of the risk-management system is provided
in the Company’s risk management policy, which can be found on the corporate website.
Kazatomprom’s risk culture is created through the involvement of all key departments and stakeholders, as well as the effective
exchange of information in the risk-management process between the Board of Directors, the Management Board and the
Company's divisions.
Corporate training in risk management and internal control is organised for heads of department and other employees with risk
responsibility, in addition to an annual round-table discussion with employees responsible for enterprise risk management.
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MAIN RISKS AND OPTIMISATION MEASURES
All identified risks are divided into five main categories, in line with the methodology of the COSO enterprise risk management
integrated model: strategic, financial, operational, investment and legal.
The Company approves risk registers and maps of subsidiaries and affiliates on an annual basis. Kazatomprom’s risk map is
divided into zones of influence and likelihood.
According to the Company risk register for 2018, there were 27 risks:
Figure 8. Main risk map of the Company as of 31 December 2018, based on the results of residual risk assessment
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Table 83. Primary risks and risk management measures
Risk Name Activities
С-2
Unauthorised strikes by
employees and
demonstrations by the local
population at subsidiary and
affiliate locations
• Interaction with local executive bodies
• Monitoring of compliance with labour legislation
• Provision of awareness-rising for the population through mass media, press
conferences, public hearings
• Monitoring of compliance with the corporate action plan for providing
production staff with decent social and working conditions
О-1 Sales-price reduction for
uranium
• Monitoring of the global uranium market
• Contracts with the THK trading company for purchase of uranium products
• Creating a supply-demand model adapted to market conditions
О-4
Lack of implementation of
the uranium production
sales plan
• Uranium market research
• Long-term, short-term and medium-term contracts on finished production
merchandising (including the THK trading company)
• Careful selection of contractors, analysing and negotiating terms of contracts
• Monitoring of execution of contract terms by contractors.
О-6
Delayed implementation of
planned operational
transformation measures
• Identification and registration of project risks and development of
preventative measures for transformation programme projects
• Monitoring of the implementation of the transformation programme
О-7 Occupational injuries
• Meetings on development of the measures to prevent the recurrence of
accidents
• Scheduled inspections of entities for compliance with the provisions of
legislative and normative acts on labour protection, industrial safety
• Recording of potentially dangerous situations, analysis of root causes of
accidents
• Implementation of a “behavioural audit” process in Company’s entities
О-8
Lack of implementation of
the Company’s asset
restructuring plan
• Actively work with shareholders of reorganised enterprises (t a road map,
attracting consultants to conduct financial, economic, legal analysis, identify
risks; developing reorganisation models, risk-reduction measures; creating
and participating in working groups, conducting periodic online meetings
etc.)
F-2 Credit risk in relation to
counterparty banks
• Moving funds to financially reliable banks of the Republic of Kazakhstan;
• Redistribution of bank limits for Company enterprises
• Control over the temporary placement of monetary resources in the most
financially reliable banks of the Republic of Kazakhstan
I-5
Negative impact of
deviations from investing
activities
• Monitoring of compliance with consolidated investment
• Control over the timing of contracts performance and project implementation
plans
• Monitoring the implementation of the projects controlled by the Company
(medium-sized and major projects)
The Company conducts activities aimed at preventing risks and reducing the consequences of risks. Reports are issued
regularly on the implementation of preventive measures associated with the risk register.
Key risk indicators are identified for the weekly monitoring of primary risks. The Company’s ‘Situation Centre’ information
system plays a significant role in this regard, allowing management to see the status of all production, financial, administrative
and operational indicators.
108
Steps have been taken to limit risks. The level of risk appetite is determined annually and approved by the Board of Directors
to control exposure to potential negative financial consequences and possible reduction in the Company's enterprise value.
Tolerance levels are defined for all risks and limits are placed on second-tier banks.
Practices have been implemented for analysing and assessing the risks involved in investment projects, as well as other issues
brought to management’s attention.
Every quarter, the Risk-management Department reports to the Management Board and the Board of Directors on risks that
have occurred, the preventative and reactive measures undertaken to minimise risk, on projected risks and on the status of
financial risks.
INTERNAL CONTROL SYSTEM
The organisation of the Company’s internal control system includes the development of a management system capable of
reacting promptly to process risks, controlling both main and supplementary processes, as well as everyday operations.
The Company’s internal controls are aimed at preventing risks in three key areas of activity: the preparation of financial and
management reports, compliance with the requirements of legislation and internal regulations, and improvements in the
effectiveness of processes within the Company’s operating activities.
Kazatomprom’s internal control system is designed according to the COSO internal control integrated model and consists of
five interdependent components:
Control environment;
Risk assessment;
Control procedures;
Information and its transfer; and
Monitoring.
The guidelines for Kazatomprom’s internal control system are posted on the Company's website.
Within the internal control system framework, the Company carries out the following activities on a regular basis:
Operational efficiency testing of control procedures for the business processes of the Company's structural divisions;
Diagnostics of the development of the internal control system in subsidiaries and affiliates through self-assessment
by subsidiaries and affiliates, as well as through visits to subsidiaries and affiliates.
QUALITY MANAGEMENT SYSTEM
To improve production efficiency, competitiveness and export potential, as well as the quality of its products and services,
Kazatomprom regulates the activities of its subsidiaries and affiliates with regard to standardisation, metrology and quality
compliance (management of testing laboratories). Quality control of finished products is carried out by testing laboratories
certified in accordance with ST RK ISO/IEC 17025. The quality management of the products is based on the regulatory and
technical support for the production of each enterprise. In Kazatomprom’s subsidiaries and affiliates, quality management
systems have been introduced in line the ISO 9000 series of international standards.
Kazatomprom applies a corporate standardisation system. Currently, there are over 60 developed and approved corporate
standards, which include subsystems and sets of business standards.
109
INFORMATION ON TAXATION IN THE UNITED KINGDOM
This review is based on UK legislation and the practices of the UK Government's tax and customs administrations as of the
date of this document, each of which may vary, possibly taking retroactive effect. Unless otherwise indicated, this review
concerns only some of the effects of UK taxation on persons who are the absolute beneficial owners of shares or GDRs and
who (1) are UK residents for tax purposes; (2) are not residents for tax purposes in any other jurisdiction; and (3) do not have
a permanent establishment in the Republic of Kazakhstan with which the ownership of shares or GDRs is related (Holders
from the UK). In addition, this review (1) only considers tax implications for Holders from the United Kingdom who own
shares and GDRs as fixed capital, and do not consider tax implications that may be relevant to certain other categories of
Holders from the United Kingdom, such as dealers; (2) it is assumed that the UK holder does not directly or indirectly control
10 percent or more of the company's voting shares; (3) it is assumed that the holder of the GDR has a beneficial right to basic
shares and dividends on such shares; and (4) does not consider tax implications for UK Holders, which are insurance
companies, investment companies, charities, or retirement funds. This review is a general guide, and it is not intended and
should not be considered by specific Holders from the UK as legal and tax advice. Accordingly, investors should consult with
their tax advisors on the overall tax implications, including the implications of acquiring, owning and disposing of shares or
GDRs in accordance with UK law and the practice of the UK Government's tax and customs fees in their particular case.
INCOME TAX FROM THE SOURCE OF PAYMENT
Assuming that income from the GDR does not have a source in the UK, such income should not be taxed at the source of
payment to the UK. Payment of dividends on shares will not be taxed at the UK source of payment.
TAXATION OF DIVIDENDS
A holder from the UK receiving a dividend on shares or GDRs may be required to pay UK income or corporate tax (depending
on the case) on the gross amount of the dividend paid before deducting Kazakhstan taxes at the source of payment, taking into
account the existence of any amount in Kazakhstan tax at the source of payment. A UK holder who is a resident individual in
the UK will pay UK income tax on a dividend paid on shares or GDRs, which is subject to actual exemption from taxation on
the first GBP 5,000 of all dividends (“zero dividend rate”) received for the relevant tax year, including dividends received from
any other investment in shares for the same tax year. A UK holder is a resident individual who is not resident in the UK and is
entitled to and select UK taxation based on the transfer of funds (and, where necessary, paying the transfer fee), will pay UK
income tax on the dividend paid on shares or GDRs, to the extent that the dividend is transferred or deemed to be transferred
to the UK. A holder from the UK who is a UK resident company for tax purposes should not be subject to corporate tax on
dividends paid on shares or GDRs, except in cases where certain rules against tax evasion apply to him.
TAXATION UPON ALIENATION OR DEEMED ALIENATION
Disposal of UK Holder’s shares in stocks or GDRs may result in taxable income or allowable deduction for taxation of taxable
income in the UK, depending on the position of the Holder from the UK and subject to tax exemption. A holder from the
United Kingdom who is a resident individual and resides in the United Kingdom will be required to pay a UK capital gains
tax on taxable income when disposing of a share in shares or GDRs. A holder from the UK who is a non-UK resident individual
who is eligible for and selects taxation in the UK based on a transfer of funds (and, where necessary, paying a transfer fee)
will pay UK capital gains tax to the extent, in which taxable income derived from the alienation of a share in shares or GDRs,
is transferred or deemed to be transferred to the UK. In particular, transactions with GDRs on the London Stock Exchange
may lead to a transfer of profits, which, accordingly, will be subject to UK capital gains tax. An individual is a holder of shares
or GDRs who ceases to be a resident or does not reside in the UK for tax purposes for less than five years and alienates such
shares or GDRs for such a period. despite the fact that during the alienation he was not a resident and did not live in the UK.
A UK holder who is a legal entity will pay a UK corporate tax on any taxable income from the sale of shares or GDRs.
ACTION OF KAZAKHSTAN TAXES AT THE SOURCE OF PAYMENT
Payment of dividends on shares and GDRs is subject to Kazakhstani tax at the source of payment. A holder from the UK, a
resident individual, should have the right to offset Kazakhstani tax withheld from such payments at the source of payment
against UK income tax, in accordance with the procedure for calculating the amount of offset in the UK. UK shareholders,
who are UK resident companies, usually do not pay corporate tax on dividends paid and will, thus, usually not be able to
require it to be deducted from any Kazakhstani taxes at the source.
STAMP DUTIES AND STAMP DUTIES EQUIVALENT TAX (SDET)
Assuming that the document formalizing the transaction or containing an agreement on the transfer of one or more shares or
GDRs (i) has not been signed in the UK or (ii) does not concern any property located in the UK or an act committed or
committed in the UK (which may include participation in payments to bank accounts in the UK), such a document should not
110
be subject to stamp duty on the declared value. Even if a document formalizing a transaction or containing an agreement on
the transfer of one or more shares or GDRs, (i) is signed in the UK and/or (ii) concerns any property located in the UK, or an
action committed or committed in the UK, then in practice there should be no need to pay stamp duty on the declared value of
such a document in the UK, if such a document is not required for any purpose in the UK. If the need arises to pay stamp duty
on the declared value in the UK, then it may be necessary to pay interest and penalties. Since GDRs refer to securities whose
value is not expressed in pounds sterling, the stamp duty on the “document to bearer” should not be paid either for the issue of
GDRs or for the transfer of securities that are transferred through GDRs. Assuming that shares (i) are not registered in the
registry located in the UK, or (ii) are not combined with shares issued by a UK-registered company, the share transfer
agreement or GDRs should not be subject to EGOS.
EXTERNAL AUDIT
For 2017-2019, the external auditor of NAC Kazatomprom JSC is PricewaterhouseCoopers LLP. Based on the decision of the
Board of Samruk-Kazyna NWF JSC, dated 12 May 2017, NAC Kazatomprom, JSC and PricewaterhouseCoopers LLP entered
into a contract on the procurement of audit services for the audit of financial statements under IFRS for 2017, 2018 and 2019.
PricewaterhouseCoopers LLP also served as auditor of the company during the period 2014‒2016.
On 19 February 2019 a meeting of the Board of Directors of the Company was held, which approved the Policy of NAC
Kazatomprom JSC on engagement of audit firms. The updated Policy has been amended in terms of the rotation of the lead
audit partner, providing that, subject to Audit Committee approval, after five consecutive years the lead audit partner may
serve for an additional two years (that person may serve no more than seven years in total). In the case of such a decision, the
NAC Kazatomprom JSC will disclose this fact to Shareholders in its relevant public releases together with the reasons.
The amount of payment for audit services of PricewaterhouseCoopers LLP under the above contract is KZT 542,080,000 (five
hundred forty two million eighty thousand), including VAT.
In accordance with contract No. 664/NAK-17, dated 3 October 2017, during October 2017, PricewaterhouseCoopers LLP
provided services in relation to conducting a performance management (CIMA P1) seminar for employees of NAC
Kazatomprom JSC for a total of KZT 830,480 (eight hundred thirty thousand four hundred eighty), including VAT.
Before the Auditor is engaged by the Company to provide services that may affect the independence of the Auditor, prior
approval of the Audit Committee is required. For any such potential services, the Audit firm is required to provide to NAC
Kazatomprom JSC its rationale explaining why obtaining an approval will not jeopardize the independence of the Auditor. In
accordance with the Company's Policy in the area of engagement of audit firms, the total fees for non-audit services provided
to the Group is limited to no more than 70% of the average of the fees paid for the last three consecutive financial years for
audit services to the Group. Decisions taken by the Audit Committee on non-audit services provided by audit firm, hereof shall
be submitted to the Board of Directors of NAC Kazatomprom JSC for information.
The non-audit services received from the Auditor may entail a threat of conflict of interest where the actual or perceived loss
of independence of the Auditor can only be reduced to an acceptable level by the Company's refusal to receive such services
from an audit firm or the Company's refusal to receive the services of an audit firm for the audit of its financial statements.
For details on full circumstances for non-audit services, see clause 9.4 of Policy on engagement of audit firms.
https://kazatomprom.kz/en/page/dokumenti
111
ABOUT THIS REPORT
102-50, 102-51, 102-52, 102-54
¹ The 2017 integrated report of Kazatomprom was not made public due to LSE restrictions on disclosure during the Company's IPO in 2018. The integrated report of Kazatomprom
for 2016 was published in August 2017. 102-51
Discloses basic data in
accordance with the laws of
the Republic of Kazakhstan,
internal requirements and
regulations of the Company
and international practices
of corporate governance.
Prepared in accordance
with the “basic”
application of the GRI
Sustainability Reporting
Standards
Eighth Integrated Annual
Report of NAC
Kazatomprom JSC since
20111
Includes data for the
period between 1 January
2018 and 31 December
2018, inclusive, as well as
previous periods and
forecasts in order to reflect
the dynamic of change in
the indicators
112
PRINCIPLES FOR DEFINING REPORT CONTENT AND SUBJECT LIMITATIONS
102-46
When drawing up this Report, the Company was guided by the following principles for defining the Report’s content, as
recommended by GRI Standards (Global Reporting Initiative):
Interaction with stakeholders
Stakeholders’ opinions served as a basis for defining essential subjects to be disclosed in the Report. Detailed
information is provided later in this section.
Sustainability context
This Report discloses the Company’s activities in the broad context of development and impact on society. Issues of
the Company’s economic, environmental and social responsibility are considered in detail. The Report is in line with
a ‘basic’ application of GRI Sustainability Reporting Standards.
Materiality
In this Report, the Company discloses information on subjects that have a significant influence on stakeholders and
which significantly impact economies, environment and society. The list of essential subjects and procedures for their
definition are provided later in this section.
Completeness
The Company has made every effort to fully disclose information on the results of its activities, to reflect clearly
Boundary of topics of the Report and separate subjects (where applicable) and indicated the reporting period. The
Report includes financial and non-financial data on all subsidiaries and affiliates of the Company. 102-45
Financial indicators have been expressed in the national currency of the Republic of Kazakhstan, KZT (tenge), and
correspond to the audited consolidated financial statements (in accordance with IFRS standards), a full version of
which is provided in Appendix and on Kazatomprom’s website. 102-7
The Report reflects financial and non-financial activities of Kazatomprom that are connected with projects both in its
country of residence, the Republic of Kazakhstan, and abroad.
Non-financial indicators are mainly disclosed with respect to the subsidiaries and affiliates in which the Company’s
interest is 50% or more. 102-45
The following principles “Interaction with Stakeholders” and “Materiality” were used mainly at the stage of determining the
content of the report and its structure. The principles of the “Sustainability Context” and “Completeness” were applied at the
stage of collecting data on relevant topics and presenting information.
No paraphrases or other wordings different to the wordings used in previous reports are present in this Report. 102-48
113
ESSENTIAL SUBJECTS
The Company has analysed all of the subjects proposed by the GRI Sustainability Reporting Standards and also the
industry sector recommendations (Sector Disclosure Guidelines for Mining and Metals Sectors GRI). Opinions of
stakeholders have also been analysed and expert appraisals of the Company’s economic, environmental and social
impact have been taken into consideration.
In 2017, representatives of the Company and its key stakeholders were asked to evaluate both GRI topics and
Company-specific topics for materiality. According to the results of the survey, a materiality matrix was compiled.
When developing the concept of the Report for 2018, the matrix was updated by the Company's working group for
the preparation of this Integrated Report.
Materiality has been defined according to a subject’s influence on stakeholders and the Company's economic,
environmental or social impact within this subject.102-46
In addition to the subjects proposed by the GRI Sustainability Reporting Standards, the Company has included
additional subjects that required mandatory disclosure, regardless of stakeholder opinion. Such subjects and
indicators are indicated as KAP1, KAP2, KAP3 and KAP4 in this Report.
Indicators Additionally Provided by the Company:
- КАP 1: Place in the Nuclear Fuel Cycle
Description of the Group's participation in the stages of the nuclear fuel cycle. These steps include the production
of uranium and uranium treatment to dioxide powder, production of nuclear fuel components, uranium reconversion
as well as access to enrichment. In addition, the Group is currently building a nuclear fuel plant — fuel assemblies
used by nuclear power plants.
- КАP 2: Global uranium markets
The key factor affecting the financial results of the Group is the uranium products sales price. The indicator reveals
the main trends in the uranium market.
- КАP 3: Business transformation
This indicator describes activities within the Company's Transformation Programme.
- КАP 4: Development of mineral resources base
The indicator reveals the growth of mineral reserves, reflecting the results of the survey works.
The full list of the subjects considered, as well as selected essential subjects, is as follows:
Economic
201. Economic performance
202. Market presence
203. Indirect economic impacts
204. Procurement practices
205. Anti-corruption
206. Anti-competitive behaviour
Environmental
301. Materials
302. Energy
303. Water
304. Biodiversity
305. Emissions
306. Effluents and waste
307. Environmental compliance
308. Supplier environmental assessment
Social
401. Employment
114
402. Labour/management relations
403. Occupational health and safety
404. Training and education
405. Diversity and equal opportunities
406. Non-discrimination
407. Freedom of association and collective bargaining
408. Child labour
409. Forced or compulsory labour
410. Security practices
411. Rights of indigenous peoples
412. Human rights assessment
413. Local communities
414. Supplier social assessment
415. Public policy
416. Customer health and safety
417. Marketing and labelling
418. Customer privacy
419. Socioeconomic compliance
KAP – Subjects and indicators additionally provided by the company
52. Place in the nuclear fuel cycle (NFC)
53. Global uranium markets
54. Business transformation
55. Development of raw material base
Results related to the definition of materiality of subjects are presented in the diagram below: 102-47
Figure 9. Selected essential subjects
115
All of the essential subjects listed are important for the Company (within the organisation) and for stakeholders
(outside the organisation). Impacts of the reporting entity are provided in this report.103-1
The list of stakeholders and the means of interaction with them are presented in a separate section of this Report.
STANDARDS AND GUIDELINES
This Report discloses basic data in accordance with the laws of the Republic of Kazakhstan, the Company’s internal
regulations and practices, and international practices of corporate governance. When drawing up the Report we
considered the following:
Law of the Republic of Kazakhstan No.415-II, dated 13 May 2003, on joint stock companies;
Rules for the publication of a depositary of financial statements, stock-market information on corporate
events, financial statements and audit reports, lists of affiliated persons of joint stock companies, as well as
information on the total amount of remuneration of the members of executive bodies at year end on Internet
resources, as approved by Decree of the Management of the National Bank of the Republic of Kazakhstan
No.26, dated 28 January 2016;
GRI Sustainability Reporting Standards;
Information Disclosure Rules of Joint-Stock Company National Atomic Company Kazatomprom
(approved by decision of the Management Board No. 155, dated 26 May 2016);
Corporate Governance Code of Sovereign Wealth Fund Samruk-Kazyna Joint Stock Company, as approved
by the Resolution of the Government of the Republic of Kazakhstan No.1403, dated 5 November 2012, as
amended by the Decree of the Government of the Republic of Kazakhstan No.239, dated 15 April 2015.
116
EXTERNAL VERIFICATION
Kazatomprom has engaged a third party on a competitive basis to confirm the compliance of information presented
in this Report with GRI Standards. The Company cooperates with the organisation that verifies the Report on a
contractual basis. External conclusions with respect to information on sustainable development for compliance with
the requirements of GRI Standards are given in the Annex to this Report. Prior to publication, the Report is to be
approved by the Board of Directors of NAC Kazatomprom JSC. 102-56
Conclusion on the results of an independent assurance of 2018 public integrated annual report of
National Atomic Company Kazatomprom JSC provide by Nexia Pacioli Limited Liability Company
(Nexia Pacioli LLC)
The conclusion beneficiaries
The conclusion is prepared for the National Atomic Company Kazatomprom JSC management.
Assurance subject
Information of 2018 public integrated annual report of National Atomic Company Kazatomprom JSC.
Criteria
The requirements of the Global Reporting Initiative Sustainability Reporting Standards (GRI Standards) to the
“Baseline” application.
Responsibilities of the parties
National Atomic Company Kazatomprom JSC management is responsible for preparing and presenting the public
integrated annual report in compliance with all related procedures and requirements, and specifically the
requirements to internal control system.
Nexia Pacioli LLC is responsible for assuring 2018 public integrated annual report exclusively to National Atomic
Company Kazatomprom JSC in terms of the agreed engagement and shall not undertake any responsibility to any
third parties.
Assurance standards and level
The assurance is performed in accordance with the International Standard on Assurance Engagements ISAE 3000
(revised) “Assurance Engagements other than Audits or Reviews of Historical Financial Information” (ISAE 3000).
The assurance provides reasonable verification regarding 2018 public integrated annual report of National Atomic
Company Kazatomprom JSC.
Limitations
Only 2018 data were assured. The assurance did not cover forward-looking statements, statements expressing
opinions, beliefs and intentions.
On-site audit procedures were limited to visits to the National Atomic Company Kazatomprom JSC headquarters in
Nur-Sultan, Republic of Kazakhstan.
The assurance was performed solely in relation to the Russian version of 2018 public integrated annual report in
Word format.
We did not have any opportunity to certify the fact that the final version of public integrated annual report including
all annexes was publicly available due to the preceding signing of this conclusion.
Methodology
We have undertaken the following actions in assurance process:
selective interviewing of the National Atomic Company Kazatomprom JSC top management, as well as
specialists involved in the preparation of the public integrated annual report of National Atomic Company
Kazatomprom JSC;
analysis of documentation, including internal regulatory documents related to the economic, social and
environmental areas of corporate social responsibility and sustainable development;
sampling verification of documents, data and processes used to prepare the public integrated annual report;
examination of the information on the National Atomic Company Kazatomprom JSC activities, including
in the field of sustainable development, posted on the website www.kazatomprom.kz;
selective examination of mass media information about the National Atomic Company Kazatomprom JSC;
assessment of compliance with GRI 101 (2016) standard in terms of requirements to the principles of
determining the report content and ensuring its quality;
117
assessment of compliance with GRI 103 (2016) standard in terms of requirements to management
approaches information disclosure;
assessment of compliance with GRI 102 (2016), 201 (2016), 202 (2016), 203 (2016), 204 (2016), 302
(2016), 303 (2018), 305 (2016), 306 (2016), 307 (2016), 401 (2016), 402 (2016), 403 (2016), 404 (2016),
405 (2016) standards in terms of requirements to reporting elements stated in the GRI Index, as well as
thematic requirements to management approaches information disclosure.
Findings
On the basis of the procedures implemented and the evidence obtained, in our opinion, during the preparation
of 2018 public integrated annual report, National Atomic Company Kazatomprom JSC in all significant respects
complied with the requirements of the GRI Sustainable Development Reporting Standards (GRI Standards) to the
“Baseline” application.
Significant circumstances
Without changing our opinion, we should note the presence of inherent limitations specific to assurance associated
with the selective verification. As a result, it is conceivable that unfair actions, mistakes or violations may remain
undetected.
Recommendations
It is advisable to disclose indicators in the context of target values and plans for the future.
To increase the degree of disclosure of indicators for which the GRI indicators requirements are not taken into
account in full.
Taking into account the global scope of the National Atomic Company Kazatomprom JSC, we recommend
considering possible inclusion of provisions supporting additional international guidelines in the field of responsible
business, such as the UN Global Compact and the UN Sustainable Development Goals until 2030 when preparing
subsequent public annual reports.
Independence and competence statement
Nexia Pacioli LLC is an independent audit and consulting company which complies with independence and other
ethical requirements provided in the Rules of Independence for Auditors and Audit Companies and Code of
Professional Ethics for auditors in the Russian Federation based on the fundamental principles of honesty,
objectivity, professional competence and due care, confidentiality and professional conduct. The company fulfills
the requirements of the International Standard on Quality Control 1 “Quality control in audit organizations
performing audit and reviews of financial statements, other assurance and related services engagements". Thus,
Nexia Pacioli LLC maintains a comprehensive quality control system, which is approved by the documented policies
and procedures on compliance with ethical requirements, professional standards and applicable legislative and
regulatory requirements. Nexia Pacioli LLC is a member of the Self-regulatory organization of auditors
“Commonwealth” Association, included in the Register of auditors and audit organizations of the said self-
regulatory organization of auditors on October 28, 2016 under the primary registration number 11606052374. The
team of specialists who audited the Public Annual Report of the National Atomic Company Kazatomprom JSC
involved competent employees of Nexia Pacioli LLC who had undergone special training on GRI Guidelines,
AA1000 series standards, ISO 26000:2010 standard, having many years of experience in providing consulting
services in the field of public non-financial reporting, assurances in accordance with ISAE 3000. The Lead Auditor
has a unified auditor qualification certificate, the team includes the specialist having current CSAP certificate from
Accountability organization.
CEO
April ____, 2019
S. Romanova
118
INFORMATION FOR SHAREHOLDERS
Website
Information about the Company, including a description of activities, press releases, annual and interim
reports, is available on the corporate website: www.kazatomprom.kz.
Shareholder requests
Shareholders of the Company may send requests re absentee voting, dividends, notification of changes in
personal data and other similar issues to the registrar/depositary of the Company:
Holders of ordinary shares: Central Securities Depository, JSC, Almaty, 28, Samal-1 micro-
district; +7 (727) 355 47 61
Holders of Global Depositary Receipts (GDRs): Citibank, NA at: 388 Greenwich Street, New
York, NY 10013, United States, tel: + 1-212-816-6622 / + 1-917-533-7887.
Diagram 10. Number of shares issued and outstanding (million units)
(1) Shares of the Company and global depositary receipts circulating on the Astana International
Exchange (AIX), and global depositary receipts on the London Stock Exchange (LSE). One GDR
corresponds to one ordinary share.
119
CONTACT INFORMATION
National Atomic Company Kazatomprom Joint Stock Company – 102-3, 102-5
17/12, E-10 Str., Nur-Sultan, Republic of Kazakhstan
Tel: +7 7172 55-13-98
Fax: +7 7172 55-13-99
e-mail: [email protected]
Website: www.kazatomprom.kz
If you have questions, comments and proposals concerning this Report, or if you would like to get a printed version,
please contact the following employees of NAC Kazatomprom JSC: 102-53
Public Relations
Torgyn Mukayeva
Tel: +7 7172 45 81 69
E-mail: [email protected]
Giles Reed (Powerscourt – London)
Tel.: + 44 20 3328 9381
E-mail: [email protected]
Investor Relations (requests from institutional investors)
Cory Cos
Tel: +7 7172 45 81 69
E-mail: [email protected]
Corporate secretary
Maira Tnymbergenova
Tel.: +7 7172 45 81 63
E-mail: [email protected]
Auditors
PricewaterhouseCoopers, LLP
34, Al-Farabi av., build. A, floor 4
А25D5F6, Almaty, Kazakhstan
Tel: +7 727 330 3200
www.pwc.com/kz
Depository bank
Citibank, N.A.
388 Greenwich Street, New York,
NY 10013, USA,
Tel: +1-212-816-6622/+1-917-533-7887
120
ANNEXES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
102-45
Full version of consolidated financial statements with notes is available ate Company’s website at:
https://www.kazatomprom.kz/en/investors/finansovaya_otchetnost/page-1
121
These consolidated financial statements were approved by management on 5 March 2019:
Consolidated Income Statement
In millions of Kazakhstani Tenge
Note
For the year ended 31
December 2018
For the year ended 31
December 2017
(restated)
Revenue 9 436,632 277,046
Cost of sales 10 (313,817) (209,934)
Gross profit 122,815 67,112
Distribution expenses 11 (10,530) (4,316)
General and administrative expenses 12 (34,805) (30,194)
Reversal of impairment losses on non-financial assets 13 15,128 526
Impairment losses on non-financial assets 13 (5,848) (24,210)
Net impairment losses on financial assets 13 (3,770) (3,728)
Loss from disposal of subsidiary 46 (511) -
Net foreign exchange gain/(loss) 15 7,250 (805)
Net gain from business combinations 45 313,517 -
Other income 14 1,242 114,907
Other expenses 15 (5,849) (6,278)
Finance income 17 3,949 5,815
Finance costs 17 (12,672) (8,933)
Share of results of associates 25 22,786 22,007
Share of results of joint ventures 26 (4,743) 22,107
Profit before tax 407,959 154,010
Income tax expense 18 (28,797) (17,287)
Profit from continuing operations 379,162 136,723 Profit from discontinued operations 46 1,104 2,431
PROFIT FOR THE YEAR 380,266 139,154
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
Exchange differences arising on translation of entities with foreign
functional currency (21,118) 383 Items that will not be reclassified to profit or loss:
Net gain from investments in equity securities at fair value through other
comprehensive income 14,509 -
Remeasurements of post-employment benefit obligations 23 113
Share in other comprehensive loss of equity method investments 5 (189)
Other comprehensive (loss)/income for the year (6,581) 307
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 373,685 139,461
Profit for the year attributable to:
- Owners of the Company 372,176 138,527
- Non-controlling interest 8,090 627
Profit for the year 380,266 139,154
Total comprehensive income attributable to:
- Owners of the Company 365,664 138,837
- Non-controlling interest 8,021 624
Total comprehensive income for the year 373,685 139,461
Earnings per share from continuing operations attributable to the
owners of the Company, basic and diluted (rounded to Tenge) 19 1,431 525
Earnings per share attributable to the owners of the Company, basic
and diluted (rounded to Tenge) 19 1,435 534
122
Balance sheet In millions of Kazakhstani Tenge Note 31 December 2018 31 December 2017
ASSETS
Non-current assets
Intangible assets 20 69,314 8,009
Property, plant and equipment 21 171,352 122,175
Mine development assets 22 118,302 43,530
Mineral rights 23 363,373 2,004
Exploration and evaluation assets 24 23,609 5,608
Investments in associates 25 88,866 101,746
Investments in joint ventures 26 40,442 74,818
Other investments 27 619 1,726
Accounts receivable 28 13 140
Deferred tax assets 18 7,552 6,836
Term deposits 31 13 -
Financial derivative asset 9 1,369 -
Loans to related parties 32 13,245 20,302
Other non-current assets 29 20,847 24,125
918,916 411,019
Current assets
Accounts receivable 28 94,477 58,085
Prepaid income tax 4,366 5,493
VAT recoverable 29,799 24,182
Inventories 30 170,261 169,675
Term deposits 31 205 8,472
Loans to related parties 32 10,373 -
Cash and cash equivalents 33 128,819 239,936
Other current assets 29 18,322 18,396
456,622 524,239
Assets of disposal groups classified as held for sale 47 5,578 2,774
462,200 527,013
TOTAL ASSETS 1,381,116 938,032
EQUITY
Share capital 34 37,051 37,051
Additional paid-in capital 4,420 4,785
Reserves 21 (2,229)
Retained earnings 789,563 586,998
Equity attributable to shareholders of the Company 831,055 626,605
Non-controlling interest 131,955 14,571
TOTAL EQUITY 963,010 641,176
LIABILITIES
Non-current liabilities
Loans and borrowings 35 16,270 38,910
Finance lease liabilities 350 294
Accounts payable 37 777 582
Provisions 36 32,885 22,688
Deferred tax liabilities 18 77,670 4,443
Employee benefits 954 1,247
Other non-current liabilities 38 5,825 7,711
134,731 75,875
Current liabilities
Loans and borrowings 35 183,420 82,374
Finance lease liabilities 129 125
Provisions 36 187 189
Accounts payable 37 51,534 112,642
Other tax and compulsory payments liabilities 10,711 4,168
Employee benefits 147 173
Income tax liabilities 977 5,618
Other current liabilities 38 30,319 14,349
277,424 219,638
Liabilities of disposal groups classified as held for sale 47 5,951 1,343
TOTAL LIABILITIES 418,106 296,856
TOTAL EQUITY AND LIABILITIES 1,381,116 938,032
123
Consolidated Statement of Cash Flow
In millions of Kazakhstani Tenge
Note For the year ended 31
December 2018
For the year ended 31
December 2017
OPERATING ACTIVITIES
Cash receipts from customers 556,151 435,199
VAT refund 23,403 18,849
Interest received 2,003 3,025 Payments to suppliers (442,030) (373,006)
Payments to employees (45,856) (43,213)
Cash flows from operating activities 93,671 40,854
Income tax paid (28,642) (13,069) Interest paid (6,702) (4,430)
Net cash from operating activities 58,327 23,355
INVESTING ACTIVITIES
Acquisition of property, plant and equipment (23,578) (14,913) Proceeds from disposal of property, plant and equipment 76 749
Advance paid for property, plant and equipment (881) (5,461)
Acquisition of intangible assets (2,606) (628) Acquisition of mine development assets (23,917) (12,011)
Acquisition of exploration and evaluation assets (8,215) (2,775)
Proceeds from exercise of put option 14 - 173,719 Cash and cash equivalents of disposed subsidiary (1,218) -
Proceeds from disposal of subsidiary 46 17,942 2
Placement of term deposits and restricted cash (8,525) (12,095) Redemption of term deposits and restricted cash 8,666 55,216
Repayment of loans to related parties - 8
Acquisition of interest in controlled entities net of cash acquired (2,852) (91) Acquisition of interest in associates and joint ventures (8,415) (2,687)
Dividends received from associates, joint ventures and other
investments
12,773 36,486 Other 471 56
Net cash (used in)/from investing activities (40,279) 215,575
FINANCING ACTIVITIES
Proceeds from loans and borrowings 35 100,547 52,793
Proceeds from bonds issued 35 70,000 - Repayment of loans and borrowings 35 (147,734) (61,410)
Dividends paid to the controlling shareholder 34 (161,661) (65,849)
Dividends paid to non-controlling interest (273) (19) Other (151) (396)
Net cash used in financing activities (139,272) (74,881)
Net (decrease)/increase in cash and cash equivalents (121,245) 164,049
Cash and cash equivalents at the beginning of the year 239,936 75,052 Effect of exchange rate fluctuations on cash and cash equivalents 10,128 835
Change in impairment provision for cash and cash equivalents (21) -
Cash and cash equivalents at the end of the year 33 128,819 239,936
These consolidated financial statements were approved by management on 5 March 2019:
124
Consolidated Statement of Changes in Shareholder’s Equity
Attributable to the shareholders of the Company
In millions of
Kazakhstani Tenge
Share
capital Reserves
Retained
earnings
Additional
paid-in capital Total
Non-controlling
interest
Total
equity
Balance at
1 January 2017 36,785 18,061 495,732 4,785 555,363 12,467 567,830
Profit for the year - - 138,527 - 138,527 627 139,154
Foreign currency translation difference - 386 - - 386 (3) 383
Remeasurements of post-
employment benefit obligations - - 113 - 113 - 113
Share of other comprehensive loss
in equity method investments - - (189) - (189) - (189)
Total comprehensive income for
the year - 386 138,451 - 138,837 624 139,461
Dividends declared - - (65,849) - (65,849) (205) (66,054)
Contribution to share capital 266 - - - 266 - 266
Change in non-controlling interest - - (2,012) - (2,012) 1,685 (327)
Transfers between reserves - (20,676) 20,676 - - - -
Balance at
31 December 2017 37,051 (2,229) 586,998 4,785 626,605 14,571 641,176
Adoption of IFRS 9 (Note 5) - 2,701 (1,889) - 812 (21) 791
Adjusted balance at 1 January
2018 37,051 472 585,109 4,785 627,417 14,550 641,967
Profit for the year - - 372,176 - 372,176 8,090 380,266
Net gain from investments in equity
securities at FVOCI (Note 45) - 14,509 - - 14,509 - 14,509
Foreign currency translation
difference - (451) (20,676) - (21,127) 9 (21,118)
Remeasurements of post-employment benefit obligations - - 15 - 15 8 23
Share of other comprehensive loss
in equity method investments - - 91 - 91 (86) 5
Total comprehensive income for
the year - 14,058 351,606 - 365,664 8,021 373,685
Dividends declared (Note 34) - - (161,661) - (161,661) (635) (162,296)
Contribution to share capital - - - (365) (365) - (365)
Transfer of revaluation reserve on
investments in equity securities at
FVOCI to retained earnings upon
disposal - (14,509) 14,509 - - - - Business combinations (Note 45) - - - - - 110,019 110,019
Balance at
31 December 2018 37,051 21 789,563 4,420 831,055 131,955 963,010
These consolidated financial statements were approved by management on 5 March 2019:
Yussupov M.B.
Chief Financial Officer
Kozha-Akhmet D.A.
Financial Controller
Kaliyeva Z.G. Chief Accountant
125
INDEX OF GRI-COMPLIANT STANDARDS IN THIS REPORT
GENERAL DISCLOSURES
102-55
GRI index Indicator Report sections/Comments Report
page
External
verification
GRI 101 (2016): FOUNDATION
GRI 102 (2016): GENERAL DISCLOSURES
ORGANISATION PROFILE
102-1 Name of the organization About the Company 22
102-2 Activities, brands, products, and
services
Company's activity profile 20
102-3 Location of headquarters Contact information 125
102-4 Location of operations Geography and target
markets
18
102-5 Ownership and legal form Company's background
17
102-6 Markets served Geography and target
markets
27
102-7 Scale of the organization Company's asset profile 5, 22, 112
102-8 Information on employees and other
workers
Company in figures/
social accountability
58, 59, 60
102-9 Supply chain Nuclear fuel cycle 27, 28
102-10 Significant changes to the
organization and its supply chain
Company's asset profile 22, 27
102-11 Precautionary Principle or approach Risk management and
internal controls/
sustainable economic
development
52, 104
102-12 External initiatives Membership of associations
and compliance with
international rules
29, 66,
104
102-13 Membership of associations Membership of associations
and compliance with
international rules
29
STRATEGY
102-14 Statement from senior decision-
maker
Statement of the Chairman
of the Board of Directors/
Statement of the Chairman
of the Management Board
8, 9
ETHICS AND INTEGRITY
102-16 Values, principles, standards, and
norms of behavior
Corporate governance and
ethics
Corporate ethics
103
GOVERNANCE
102-18 Governance structure Corporate governance and
ethics
Structure of corporate
governance
81, 90, 99
102-22 Composition of the highest
governance body and its committees
Board of Directors
85
102-24 Nominating and selecting the highest
governance body
Board of Directors
(except for the factors of
professional qualifications
and experience in the field of
economic, environmental and
social issues)
86, 90
102-28 Evaluating the highest governance
body’s performance
Evaluation of the Board of
Directors
90
STAKEHOLDER ENGAGEMENT
102-40 List of stakeholder groups Interaction with stakeholders 77
102-41 Collective bargaining agreements Social accountability 60, 63
126
102-42 Identifying and selecting stakeholders Interaction with stakeholders 76
102-43 Approach to stakeholder engagement Interaction with stakeholders 77, 80
102-44 Key topics and concerns raised Interaction with stakeholders 77, 80
ACCOUNTING PRACTICES
102-45 Entities included in the consolidated
financial statements
Principles for defining
Report content and the
aspect limitations
112, 120
102-46 Defining report content and topic
Boundaries
Material aspects and their
determination
112, 113
102-47 List of material topics Material aspects and their
determination
114
102-48 Restatements of information No paraphrases or other
wordings different to the
wordings used in previous
reports are present in this
Report
112
102-49 Changes in reporting Changes in Group’s asset
structure
32
GENERAL INFORMATION ABOUT THE REPORT
102-50 Reporting period About this Report 111
102-51 Date of most recent report About this Report 111
102-52 Reporting cycle About this Report 111
102-53 Contact point for questions regarding
the report
Contact Information 119
102-54 Claims of reporting in accordance
with the GRI Standards
About this Report 111
102-55 GRI content index Annexes 125
102-56 External assurance External verification 116
127
SPECIFIC DISCLOSURES 102-55
GRI index
category
Indicator Report sections/Comments Report
page
External
Verificatio
n
ECONOMIC
GRI 103 (2016): MANAGEMENT APPROACH
103-1 Explanation of the material topic
and its Boundary
Principles for defining report content and
topic boundaries 115
103-2 The management approach and
its components
Sustainable economic development 29, 58
103-3 Evaluation of the management
approach
Evaluation of the Board of Directors 75, 90
GRI 201 (2016): ECONOMIC PERFORMANCE
201-1 Direct economic value generated
and distributed
Sustainable economic development 54
Industry-
specific
additions to the
general
standard
element of
reporting
Please specify the countries,
which are actual or potential
members of the Extractive
Industries Transparency
Initiative (EITI), in which the
Company operates
Sustainable economic development 54
GRI 202 (2016): MARKET PRESENCE
202-1 Ratios of standard entry level
wage by gender compared to
local minimum wage
Social policy
Remuneration system
64
GRI 203 (2016): INDIRECT ECONOMIC IMPACTS
203-1 Infrastructure investments and
services supported
Economic impacts in the areas where the
Company operates
55
GRI 204 (2016): PROCUREMENT PRACTICES
204-1 Proportion of spending on local
suppliers
Procurement practices 57
ENVIRONMENT
GRI 103 (2016): MANAGEMENT APPROACH
103-1 Explanation of the material topic
and its Boundary
Principles for defining report content and
topic boundaries 115
103-2 The management approach and
its components
Environmental responsibility 66
103-3 Evaluation of the management
approach
Evaluation of the Board of Directors 75, 90
GRI 302 (2016): ENERGY
Guidelines for
DMA-b
specific to the
Subjects
Please specify if the organisation
is bound by any national,
regional or industry-specific
standards, regulations or rules
related to energy. Give examples
of such rules and regulations.
Energy efficiency 69
302-1 Energy consumption within the
organisation
Use of resources and energy efficiency 69
GRI 303 (2018): WATER AND EFFLUENTS
303-1 Interactions with water as a
shared resource
Water resources
(As part of the implementation of the ESAP
Roadmap, it is planned to carry out a
number of activities, including on interaction
with stakeholders, to conduct an audit on
environmental communications in
accordance with the international standard
ISO 14063 “Environmental
Communications”)
70
303-2 Management of water discharge-
related impacts
Water resources 29, 58,
65
128
303-3 Water withdrawal Water resources
(Kazatomprom does not take water from
"sensitive water bodies")
71
303-5 Water consumption Water resources
(The Company only starts implementing this
standard "Water and Effluents (2018)" and
the calculation of water consumption does
not fully comply with the standard yet)
70
GRI 305 (2016): EMISSIONS
305-1 Direct (Scope 1) GHG emissions Direct greenhouse gas emissions
The calculation of indicators for the base
year in the Company does not apply.
Source of emission factor data:
1. http://zhasyldamu.kz/npa/parnikovye-
gazy/kadastr-istochnikov-vybrosov-i-
pogloshchenij-parnikovykh-gazov.html
2. http://adilet.zan.kz/rus/docs/V1700015396
69
GRI 306 (2016): EFFLUENTS AND WASTE
306-2 Waste by type and disposal
method
Waste Monitoring and Disposal 68
GRI 307 (2016): ENVIRONMENTAL COMPLIANCE
307-1 Non-compliance with
environmental laws and
regulations
Expenses on environment protection
purposes
67
SOCIAL
GRI 103 (2016): MANAGEMENT APPROACH 103-1 Explanation of the material topic
and its Boundary
Principles for defining report content and
topic boundaries 115
103-2 The management approach and
its components
Social responsibility 58
103-3 Evaluation of the management
approach
Evaluation of the Board of Directors 75, 90
GRI 401 (2016): EMPLOYMENT
401-2 Benefits provided to full-time
employees that are not provided
to temporary or part-time
employees
Social accountability
Social policy,
payments and benefits
63
GRI 402 (2016): LABOR/MANAGEMENT RELATIONS
402-1 Minimum notice periods
regarding operational changes
Social politics 63
GRI 403 (2018): OCCUPATIONAL HEALTH AND SAFETY
403-1 Occupational health and safety
management system
Occupational health and safety 65
403-7 Prevention and mitigation of
occupational health and safety
impacts directly linked by
business relationships
Occupational health and safety 66
403-9 Work-related injuries Occupational health and safety 66
GRI 404 (2016): TRAINING AND EDUCATION
404-1 Average hours of training per
year per employee
Social responsibility
Company staff
62
404-2 Programs for upgrading
employee skills and transition
assistance programs
Social accountability
Company staff
61, 63
GRI 405 (2016): DIVERSITY AND EQUAL OPPORTUNITY
405-1 Diversity of governance bodies
and employees
Social accountability
Company staff
59
405-2 Ratio of basic salary and
remuneration of women to men
Social accountability wage system 64
KAZATOMPROM INDICATORS
129
КАP1 Place in the nuclear fuel cycle
(NFC)
Business model 10,
113
КАP2 Global uranium markets Global uranium market 26,
113
КАP3 Business transformation Business transformation 15,
102,
113
КАP4 Development of mineral
resources base
Mineral assets and Capital expenditures
review
25, 39,
113
130
GLOSSARY
Term Definition
CAPEX Capital expenditures, financial investment, appraisal and exploration work
CO2 Carbon dioxide
COSO Internal control – integrated model
EBIT Earnings before interest and taxes
EBITDA Earnings before interest, taxes, depreciation and amortisation
EBITDA
margin
Ratio, expressed as a percentage, of the earnings before interest, taxes, depreciation and amortisation
to the sales proceeds, based on NAC Kazatomprom JSC methods
EDF Électricité de France
EPP Separative work units
ERP Enterprise resource planning
EVA Economic Value Added is an estimate of an enterprise's economic profit after all taxes and payment of
the entire capital invested in the enterprise
GRI Global Reporting Initiative
ISO International Organization for Standardization
ISO 14001 International standard Environmental management systems – Requirements with guidance for use
MM Ore mining and metallurgic sector
OHSAS
18001
International standard Occupational Health and Safety Management Systems – Requirements
TREO Total Rare Earth Oxide
U3O8 Triuranium Octoxide
UF6 Uranium hexafluoride
UO2 Uranium dioxide
UO3 Uranium trioxide
NPP Nuclear Power Plant
BWRT Bolotov's wind rotor turbine
RD Railway district
SA Subsidiaries and affiliates
DOSEP Department for Occupational Safety and Environment Protection
PE Producing enterprise
HRD Human Resources Department
CJSC Closed Joint Stock Company
TUO Triuranium Octoxide
IS Information security
IRESCO Irtysh Rare Earths Company
IT Information technologies
ST
RKISO/IEC
17025
State Standard of the Republic of Kazakhstan
General Requirements for the Competence of Testing and Calibration Laboratories
KazNTU Satpayev Kazakh National University
KazNU Al-Farabi Kazakh National University
KPI Key performance indicator
IAEA International Atomic Energy Agency
MAEC Mangistau Atomic Energy Combine
Local content
Percentage of the cost of labour of citizens of the Republic of Kazakhstan engaged in fulfilment of a
purchase contract in the total payroll budget of the contract, and/or percentage of the cost of a share
(shares) of local origin determined in a product (products) in accordance with the substantial
transformation or finished production criteria by residents of the Republic of Kazakhstan in the total
cost of the product (products) under the relevant purchase contract.
MID RK Ministry of Investments and Development of the Republic of Kazakhstan
MC Metallurgical Combine
ME RK Ministry of Energy of the Republic of Kazakhstan
STC Scientific and Technical Council
SB (BD) Supervisory Board (Board of Directors)
LLC Limited Liability Company
LLP Limited Liability Partnership
GMS General Meeting of Shareholders
131
OHS Occupational health and industrial safety
GWP Global warming potential
ISL In-situ leaching
RK Republic of Kazakhstan
RF Russian Federation
REM Rare and rare-earth metals
JV Joint venture
OSMS Occupational safety management system
RMS Risk management system
FA Fuel assemblies
HPI Heat pump installations
LLP Limited liability partnership
GWS Goods, works, services
TTC Trade and transport company
UMP Ulba Metallurgical Plant
CRL Central research laboratory
CRME Central research methodical expedition
UEC Uranium Enrichment Centre
SMCC South Mining Chemical Company
SKR South Kazakhstan region
NFC Nuclear fuel cycle