Company’s Budget for 2010

Sunday, 31 January, 2010
Report no. 6/2010

The Management Board of KGHM Polska Miedź S.A. announces that the Supervisory Board of the Company at its meeting on 1 February 2010 approved the Company’s Budget for 2010 as presented by the Management Board. The basis for preparation of the Budget were the anticipated results for 2009 and the assumptions contained in specific operating plans. 

The accepted Budget assumes the achievement in 2010 of revenues from sales in the amount of PLN 11 736 million and profit for the period of PLN 2 898 million. 
Important assumptions of the forecast: 
1. Macroeconomic factors: 

  • average annual electrolytic copper price of 6 700 USD/t, 
  • average annual metallic silver price of 17.00 USD/troz, 
  • average annual exchange rate of 2.70 USD/PLN. 

2. Internal factors: 

  • electrolytic copper production of 512 thousand t, including 84 thousand t from external copper-bearing materials, 
  • metallic silver production of 1 100 t, 
  • total unit cost of electrolytic copper production of 12 548 PLN/t, 
  • capital expenditure of PLN 1 633 million, 
  • equity investments of PLN 1 635 million. 

The expected increase in electrolytic copper production in 2010 is mainly due to an increase in production from internal concentrates (utilisation of concentrate inventories created during the maintenance halt in the Głogów smelter in 2009) and due to initiatives undertaken with respect to realisation of the “Effectiveness” project. 
The change in the level of the planned total unit copper production cost in 2010 results mainly from: an increase in labour costs, higher depreciation, the utilisation of internal semi-products inventories, alongside an unfavourable valuation of anode slimes. 
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, and 
  • additional revenues from new production. 

The main elements in planned equity investments are: 

  • the acquisition of a foreign mining entity, in order to expand the resource base of KGHM Polska Miedź S.A., 
  • the acquisition of investment certificates of Close-end Funds, managed by KGHM Towarzystwo Funduszy Inwestycyjnych S.A., and 
  • investments within the KGHM Polska Miedź S.A. Group. 

With respect to the “Effectiveness” project, which has been in effect since 2009 and is aimed at reducing the unit copper production cost, over 70 programs are planned in all operating areas of the Company. The potential for improving effectiveness/reducing costs has been estimated at over PLN 700 million on an average annual basis after the implementation of all programs. The first effects from realisation of this project are expected in 2010. 

Realisation of this forecast will be monitored by the Company on an on-going basis. Evaluation of realisation of this forecast will be made quarterly. Should there occur significant deviation from the amounts forecasted, the Company will perform an adjustment to the forecast and will publish it in the form of a current report. 

Legal basis: § 5 sec. 1 point 25 of the Decree of the Minister of Finance dated 19 February 2009 regarding current and periodic information published by issuers of securities and conditions for recognising as equivalent information required by the laws of a non-member state (Journal of Laws from 2009 No. 33, item 259 with subsequent amendments)