Approval of the "Strategy of KGHM Polska Miedź S.A. and the Group for the years 2007 – 2016" by the Supervisory Board of the Company

Tuesday, 05 December, 2006

The Management Board of KGHM Polska Miedź S.A. announces that on

5 December 2006 the Supervisory Board of KGHM Polska Miedź S.A. approved the „Strategy of KGHM Polska Miedź S.A. and the Group for the years 2007 – 2016” (Strategy).

It is based on the new mission of the Company:

„The effective processing of natural resources is the way to increase the value of the Company”

The Strategy is aimed at increasing the value of the Company, by maintaining its position as a global producer of copper and silver, as well as through development as respects the mining and processing of other non-ferrous metals. In addition, the Strategy foresees actions being taken as respects waste management and utilisation - particularly technical and industrial, the production of rock salt on an industrial scale and optimal utilisation of telecom assets.

  • This strategy will be carried out in three main areas:

1. Development and increased effectiveness of the core business

The actions of the Company in this area will be aimed at:

a. Increasing the resource base, including:

• Maintaining the current level of copper production from domestic resources by:

  • accessing and mining the Głogów Głęboki Przemysłowy deposit (full production capacity in 2013; forecast investment expenditures appx. PLN 1.8 bln , ore resources over 5 mln Mg Cu),
  • evaluating the possibility of mining the Radwanice – Gaworzyce deposit and eventual commencement of accessing of this deposit, and
  • exploration of other copper ore resources in Poland;

• The acquisition and mining of foreign deposits of copper and other non-ferrous metals by:

  • acquiring foreign mining assets. The Company remains interested in low-cost deposits of copper ore and of other non-ferrous metals. It is assumed that consortiums will be entered into with leaders in a given market;
  • commencing exploration operations. It is assumed that Joint Ventures will be formed with a foreign exploration company (as junior partner).

b. Improving management effectiveness by:

• Limiting core business costs and increasing the effectiveness of Group companies. In this area actions will be undertaken aimed at improving effectiveness by reducing costs at every stage of the production process, altering the model of mining and smelting management, centralising auxiliary activities, limiting the number of Group companies and increasing the effectiveness of Group companies operating on the KGHM market.

• Modernising production assets. This area mainly includes improving the processes of ore enrichment, concentrate hydrotransport, reducing environmental emissions at every stage of production, modernising smelter processes to maintain the capacity to produce high-quality copper, and tasks related to replacing the machinery park.

• Improving the process of management.

2. Diversification

In this area the activities of the Company will be aimed at:

a. Optimising utilisation of its telecom assets by:

• increasing the value of the telecom assets of KGHM (Polkomtel and Dialog) including a significant strengthening of the position of Dialog on the Polish telecom market.

It is assumed there will be a combination of organic growth and takeovers of profitable telecom companies. Dialog is in a position to finance these investments from internal and external funds.

• an increase in dividends received from telecom assets (Polkomtel and Dialog).

• increasing the level of liquidity of telecom assets (Polkomtel and Dialog) by creating optimum conditions for KGHM to exit from its telecom investments at an appropriate time and in an appropriate manner.

b. Gaining a significant position in the waste management and processing market by:

• managing and utilising the waste generated by KGHM,

• achieving an effective scale of operations in commercial waste management (new technology for the recovery of copper from waste and equity investments, employing the Company’s own recycling system based on smelting).

c. Commencing the industrial mining of rock salt associated with the copper ore, managing post-mining areas – to achieve this, actions will be undertaken to:

• achieve a leading position as a producer of rock salt in Poland,

• utilise underground spaces in the salt deposit for storage and warehousing of waste.

d. Examining the possibilities of investing and diversifying into new sectors - towards this end actions will be taken aimed at:

• developing current projects respecting the acquisition of non-ferrous metals and advanced hydrometallurgical technology,

• preparing and implementing a Technology Development Center as respects advanced technology, in particular in metallurgy and in waste processing,

• examining and implementing investment projects in new sectors.

3. Support of the development of KGHM

In this area the activities of the Company will be aimed at:

d. Continued implementation of corporate governance principles;

e. An increase in human resource management effectiveness and improvement in working conditions;

f. Implementation of a Responsible Business program which means above all an increase in activity by KGHM on behalf of the local community.

The realisation of the Strategy will allow reduction of the cost of producing copper from internal batches (concentrates) and preparation of the Company for any eventual fall in the price of copper by diversifying into and increasing sales of other raw materials, and by increasing the role of telecom assets in generating financial resources. It is assumed that over the long term the Company will generate a net profit ensuring the growth of the Company and the continuation of dividend payments to shareholders.

The Management Board will recommend a dividend payment of 30 % of net profit.

To improve the process of implementing and monitoring realisation of the approved Strategy, the Company will employ a Balanced Scorecard. This tool will enhance the process of strategic and operational decision-making by concentrating on those key factors which determine the value of the Company.

Legal basis: art. 56 sec. 1 point 1 of the Act dated 29 July 2005 on public offerings, conditions governing the introducing of financial instruments to organised trading, and public companies (Journal of Laws from 2005 Nr 184, item 1539)