The Management Board of KGHM Polska Miedź S.A. hereby publishes information on the Technical-Economic Plan for the years 2007-2011 and the Budget for 2007 as approved by the Supervisory Board on 17 January 2007.
Company Budget for 2007
The accepted Budget assumes the achievement in 2007 of revenues from the sale of products, goods for resale and materials in the amount of PLN 10 647 mln and net profit of PLN 2 978 mln.
Important assumptions of the forecast:
1. Macroeconomic factors
- average annual electrolytic copper price of 5 700 USD/t,
- average annual metallic silver price of 12.00 USD/troz (386 USD/kg),
- average annual exchange rate of 2.95 PLN/USD
2. Internal factors:
- electrolytic copper production of 538 thousand t, including 73 thousand t from external copper-bearing materials,
- metallic silver production of 1 125 t,
- total unit cost of electrolytic copper production of 9 450 PLN/t, including 8 290 PLN/t from internal concentrates,
- expenditure for the purchase and construction of fixed assets of PLN 1 142 mln.
The above macroeconomic assumptions are based on expected relatively high metal prices and strong economic growth affecting Polish zloty exchange rate.
Lower than in previous years electrolytic copper production results mainly from lower ore production, lower copper content in the ore and lower production from external copper-bearing materials.
The total unit copper production cost in 2007 (9 450 PLN/t Cu) is affected mainly by:
- lower value of external copper-bearing materials,
- increase of labor costs – mainly due to changes in Collective Labor Agreement relating to annual bonus for net profit,
- increase of mine development works costs and amortization,
- lower electrolytic copper production volume.
The expenditure for the purchase and construction of fixed assets is aimed at realisation of strategic objectives including:
- to maintain production from internal concentrates at current levels mainly through technical development of new mining areas,
- to limit core business costs,
- to modernise production assets.
Additionally, the Company assumes to further increase its shares in Polkomtel S.A. from 19.61% to 26.39%.
The Technical-Economic Plan for the years 2007-2011
The 5-year plan is a long term projection to be verified with subsequent annual budgets.
The Plan provides for realization of the main directions and initiatives in Company development as set in the KGHM Polska Miedź S.A. Strategy approved by the Supervisory Board on 5 December 2006.
Basic assumptions to the Technical-Economic Plan for the years 2007-2011 are presented in the table below:
| J.m. | 2007 | 2008 | 2009 | 2010 | 2011 | |
|---|---|---|---|---|---|---|
| Średnioroczne notowania miedzi elektrolitycznej | USD/t | 5 700 | 5 200 | 4 000 | 3 500 | 3 200 |
| Średnioroczne notowania srebra metalicznego | USD/troz | 12 | 10 | 8 | 8 | 6 |
| Kurs walutowy | USD/PLN | 2,95 | 3 | 3 | 3 | 3 |
| Wolumen produkcji miedzi elektrolitycznej | tys. t | 538 | 539 | 539 | 539 | 539 |
| Wolumen produkcji srebra metalicznego | t | 1 125 | 1 130 | 1 120 | 1 160 | 1 170 |
| Nakłady na zakup i budowę środków trwałych | mln zł | 1 142 | 1 140 | 950 | 821 | 879 |
In the subsequent years of the Plan the Company expects reduction in operating costs, mainly due to:
- lower value of external copper-bearing materials,
- reduction of the scope of external services, including: repairs, mine development works (drilling).
With the above assumptions the Company expects to realise in the period covered by the Plan positive financial results at a level enabling the Company to carry out capital expenditure program and to pay out dividends to shareholders.
The dividend policy as incorporated into the Plan takes into account the practice used by mining companies worldwide that extraordinary profits resulting from strong commodity markets are paid out to shareholders as a progressive dividend.
The Management Board shall recommend dividend payments as follows:
| Zysk netto | Skala wypłaty dywidendy | MIN | MAX |
|---|---|---|---|
| do 700 | brak dywidendy | - | - |
| ponad 700 do 1 700 | 200 + 50% nadwyżki ponad 700 | 200 | 700 |
| ponad 1 700 do 3 700 | 700 + 60% nadwyżki ponad 1 700 | 700 | 1 900 |
| ponad 3 700 | 1 900 + 100% nadwyżki ponad 3 700 | 1 900 | nieograniczone |
The dividend policy is an element of counterbalancing the amount of dividends paid to shareholders and efficient investments of Company resources to increase shareholders’ value in future and allocation of resources for potential investments under review.
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 Nr 184, item 1539)