Summary of movements

Equity attributable to owners of the Company was $6,582 million at 31 December 2009, a decrease of $895 million compared to the balance as at 31 December 2008. Whilst the Group has been profitable for the year, the impact of the devaluation of the tenge has given rise to a non-cash foreign exchange loss within equity of $1,133 million primarily due to the retranslation on consolidation of the Group’s Kazakhstan based subsidiaries whose functional currency is the tenge.

A summary of capital employed is shown below:

$ million (unless otherwise stated)	2009	2008
Equity attributable to owners of the Company	6,582	7,477
Minority interests	13	20
Borrowings	1,650	2,200
Capital employed	8,245	9,697
Profit before finance items and taxation before special items1	860	1,553
ROCE (%)1	11	21

1. ¹ From continuing operations only.

ROCE decreased from 21% in 2008 to 11% in 2009 primarily due to the lower earnings within the Group and the impact of equity accounting for ENRC whereby equity accounted earnings for 2009 were $223 million while the investment had a carrying value in the consolidated balance sheet of $3,917 million at 31 December 2009.

ENRC

The Group’s 26% investment in ENRC is shown within investment in associate in the consolidated balance sheet and has a book value of $3,869 million at 31 December 2009 compared to $4,045 million at 31 December 2008, as the Group’s share of equity accounted earnings of $223 million for the year has been offset by $84 million of dividends received from ENRC in 2009 and the net share of losses of the associate recognised within equity of $310 million. Most of these losses relate to the non-cash foreign exchange loss arising on the devaluation of the tenge and the resulting impact on ENRC’s net assets. At 31 December 2009, the ENRC shareholding had a market value of $4,879 million based on the public price quotation on the London Stock Exchange.

Net debt

Net debt consists of cash and cash equivalents, current investments and borrowings. A summary of the net debt position of continuing operations is shown below:

$ million	2009	2008
Cash and cash equivalents	903	540
Current investments	58	32
Borrowings	(1,650)	(2,200)
Net debt1	(689)	(1,628)

1. ¹ Excludes MKM and Kazakhmys Power for 2009.

The Group’s net debt position (net of capitalised arrangement fees of $12 million) stood at $689 million at 31 December 2009 compared with $1,628 million at 31 December 2008. The reduction in net debt is primarily due to the receipt of $681 million in December 2009 prior to completion of the disposal of 50% of Ekibastuz GRES-1 LLP to Samruk in February 2010. The net debt of MKM and the Kazakhmys Power Division at 31 December 2009 was $115 million.

Whilst net debt levels initially increased at the beginning of 2009 as commodity prices remained depressed, in addition to the $681 million received from Samruk, the beneficial impact of stronger commodity prices seen during the second half of the year, tight working capital management, the curtailment in the capital expenditure programme and dividend receipts from ENRC had the effect of reducing the overall net debt position. Monthly repayments under the PXF of $44 million commenced in March 2009 with $438 million of capital being repaid during the year, thereby reducing the outstanding balance drawn under the PXF to $1,662 million at 31 December 2009. Repayments will continue until March 2013.

On 26 August 2008 the Group signed a $200 million revolving credit facility with a group of banks for general corporate purposes and to provide standby liquidity. On 30 March 2009 the facility was reduced to $150 million and extended to 31 March 2010. On 26 March 2010 the $150 million facility was extended for an additional year to March 2011. The facility has remained undrawn since its inception. A further one year revolving credit facility for $100 million was signed on 11 March 2010 with a maturity date in March 2011, thereby taking the total revolving credit facilities available to the Group to $250 million as at 29 March 2010.

In order to manage counterparty and liquidity risk, surplus funds within the Group are held predominantly in the UK and funds remaining in Kazakhstan are utilised mainly for working capital purposes. The funds within the UK are held within Western European and US financial institutions and their triple ‘A’ rated managed liquidity funds. At 31 December 2009, $776 million of cash and current investments were held in the UK, with $181 million being held in Kazakhstan.

The Group’s liquidity requirements are met by ensuring adequate working capital is available within Kazakhstan, surplus funds are repatriated to the UK on a timely basis and accessing the revolving credit facility if required.

Discontinued operations

As explained in the ‘Basis of preparation’, the Kazakhmys Power Division and MKM have been classified as being held for sale and as discontinued operations within the financial statements. As a result of this classification, the assets and liabilities of these divisions are separately shown within the consolidated balance sheet as single line items within current assets and current liabilities. Current assets includes $1,615 million in respect of assets classified as held for sale, which is primarily made up of $443 million of goodwill and $801 million of property, plant and equipment, which relates to Kazakhmys Power, inventories and trade receivables of $187 million and $121 million, respectively, within MKM, and cash of $42 million within Kazakhmys Power. Current liabilities include $460 million of liabilities directly associated with assets classified as held for sale, and is primarily made up of borrowings within MKM of $157 million, provisions within Kazakhmys Power of $109 million and a deferred tax liability of $110 million, of which $105 million relates to Kazakhmys Power.

Kazakhmys Power

As explained in ‘Discontinued operations’, following the announcement on 10 December 2009, the Group agreed to dispose 50% of Ekibastuz GRES-1 LLP, a wholly owned subsidiary within the Kazakhmys Power Division, to Samruk for a consideration of $681 million. Since the transaction did not complete until February 2010, when all necessary approvals had been received, at 31 December 2009, a liability of $681 million is included within trade and other payables as part of continuing operations.

In March 2009, the Group agreed the early completion of the management contract with AES, such that management of the Ekibastuz GRES-1 power plant and Maikuben West coal mine transferred to the Group during the second quarter of the year. The early completion agreement included an earnout of $80 million for the 2008 financial year which was paid in April 2009, and a payment of $102 million which was due for payment in January 2010. The $102 million payment was covered by a standby letter of credit to AES which had to be cash collateralised by 15 December 2009. In light of surplus funds being held by the Group, the letter of credit was cash collateralised early in October 2009, thereby extinguishing any remaining liabilities due to AES as a result of the acquisition of Kazakhmys Power in May 2008.

MKM

In June 2009, the MKM trade finance facility was refinanced with a syndicate of banks. The size of the facility was reduced from €230 million to €170 million, due to lower copper prices at the time of refinancing and more efficient management of inventory. The new trade finance facility is for a three year period with interest being payable on drawn balances at a rate of EURIBOR + 3.00%. The facility amortises over a 12 month period after June 2011 based on the drawn balance as at 31 May 2011. At 31 December 2009, borrowings under this facility were $157 million, up from $121 million at 31 December 2008 as a result of higher working capital requirements due to rising copper prices towards the end of the year.