Approval by the Supervisory Board of the Budget for 2009

Monday, 23 February, 2009
Report no. 9/2009

The Management Board of KGHM Polska Miedź S.A. announces that the Supervisory Board of the Company at its meeting on 23 February 2009 approved the Company’s Budget for 2009 as presented by the Management Board.

The basis for preparation of the Budget were the preliminary results for 2008 and the assumptions contained in specific operating plans.

The accepted Budget assumes the achievement in 2009 of revenues from sales in the amount of PLN 7 048 million and net profit of PLN 488 million.

Important assumptions of the forecast:
1. Macroeconomic factors:
- average annual electrolytic copper price of 3 200 USD/t,
- average annual metallic silver price of 10.00 USD/troz (322 USD/kg),
- average annual exchange rate of 2.90 PLN/USD
2. Internal factors:
- electrolytic copper production of 512 thousand t, including 98 thousand t from external copper-bearing materials,
- metallic silver production of 1 125 t,
- total unit cost of electrolytic copper production of 10 466 PLN/t,
- capital expenditure of PLN 1 235 million,
- equity investments of PLN 939 million.

The macroeconomic assumptions used result from the assumed weakness in the metals market, alongside cautious assumptions with respect to the PLN exchange rate.

The expected decrease in electrolytic copper production is mainly due to planned maintenance halt in Głogów smelter and lower volume of external copper-bearing materials.

The decrease in the level of total planned unit copper production cost in 2009 (10 466 PLN/t Cu) results mainly from:
- the lower value of external copper-bearing materials,
- a decrease in costs of materials used in production,
alongside an increase in the price of electricity, a greater amount of mine preparation work and a decrease in the volume of electrolytic copper production by 3%.

The investment program assumed in the Budget is aimed at realisation of the following goals:
- replacing worn-out assets and maintaining production over the long term from domestic resources (the technical infrastructure of new mining regions),
- improving productivity through realisation of projects resulting in reducing core business costs,
- additional revenues from new production.

The main element in planned equity investments is the acquisition of a foreign mine, in order to expand the resource base of KGHM Polska Miedź S.A., along with investments in the power sector.

In addition, the Budget for 2009 includes undertaking of ad hoc actions aimed at reducing costs and increasing productivity. The Budget assumes the realisation of programs, begun in 2008, for reducing costs and increasing productivity in the main operating areas of the Company and Group. One of these is the program to centralise purchasing throughout the Group, which it is cautiously expected should in 2009 bring about savings on the order of at least PLN 200 million.

Due to the assumptions of the investment program and the anticipated global economic weakness, the Budget for 2009 assumes leaving all the profit for 2008 in the Company. During the period whilst economic conditions were positive, KGHM Polska Miedź S.A. paid an above-average dividend to its shareholders – jointly PLN 7.2 billion for the years 2005-2007, in accordance with the practice that extraordinary profits during the peak phase of the raw materials cycle are allocated to shareholders in the form of progressive dividends.

The final decision respecting the appropriation of profit of KGHM Polska Miedź S.A. for financial year 2008 will be made by the Ordinary General Shareholders’ Meeting of KGHM Polska Miedź S.A.

Legal basis: art. 56 sec.1 point 1 of the Act dated 29 July 2005 on public offerings and conditions governing the introduction of financial instruments to organised trading, and on public companies (Journal of Laws No. 184, item 1539 with subsequent amendments)