1 Practical and Regulatory Aspects of Subsoil M&A in Kazakhstan Yerzhan Yessimkhanov GRATA Law Firm London, 2011

Main Issues Key facts to be confirmed in the process of due diligence of a subsoil company; Regulatory approvals to be obtained for transfer of a subsoil use right / shares in a subsoil user / shares in a controlling company. 2

Due Diligence Main asset – right to extract minerals (subsoil use right), based on contract with the state; Contract might be terminated by the state in case of any material violation by subsoil user; Due diligence shall confirm absence of any material violations / compliance with obligations. 3

Due Diligence (cont.) Obligations of Subsoil User: Execution of work program (program of exploration / production activities and investments); Environmental; Social; Historical costs; Procurement procedures; Reporting; Other. 4

Regulatory Aspects APPROVALS - waiver of state pre-emptive right; - anti-monopoly approval. 5

Regulatory Aspects (cont.) STATE PRE-EMPTIVE RIGHT applicable to subsoil use right transfer, ALL share transfers and “connected objects” transfers. Exceptions are very limited; Ministry of Oil and Gas (MOG) or Ministry of Industry and New Technologies (MINT); consequences: invalidity of transaction / termination of subsoil contract; time: 70 business days; effectiveness: 6 months. 6

Regulatory Aspects (cont.) ANTI-MONOPOLY APPROVAL applicable to transactions where aggregate assets of vendor and purchaser exceed approx. US$ 20 million; Agency on Protection of Competition (Anti-Monopoly Agency); Time – 1-2 months. 7

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