Sustainable development of KGHM Polska Mied SA

KGHM Polska Mied S.A. 59-301 LubinM.Skodowska-Curie St.48 Poland

Sustainable development of KGHM Polska Mied SA

KGHM Polska Mied SA is one of the largest Polish exporters, one of the largest and most significant enterprises in the Polish economy, a company which is stable and worthy of investor trust, from the financial point of view as well as in the realization of its strategy.

Sustainable development of KGHM Polska Mied SA

discovery in 1957 by Jan Wyykowski of a copper ore deposit in the vicinity of Lubin and Sieroszowice, in south-western Poland, mining of this copper deposit on an industrial scale began in 1968

Sustainable development of KGHM Polska Mied SA

On 12 September 1991 KGHM was transformed into a state-owned, joint stock company under the name KGHM Polska Mied S.A. In July 1997 the shares of the company debuted on the Warsaw Stock Exchange, while its GDRs (Global Depositary Receipts) appeared simultaneously on the London Stock Exchange

Sustainable development of KGHM Polska Mied SA

At March 1st, 2002 the largest shareholders of KGHM were: the Polish State Treasury, which owned 44.28% of the share capital, the owners of Global Depositary Receipts (GDRs), who owned 14.67% of the shares , PKO Bank Polski S.A., which held 5.38% of the shares.

Sustainable development of KGHM Polska Mied SAIn the multi-divisional company KGHM Polska Mied S.A. is a Head Office and 10 Divisions: 3 mining divisions (ZG "Lubin", ZG "Rudna", ZG "Polkowice-Sieroszowice"), 3 copper smelter/refineries (HM "Legnica", HM "Gogw", HM "Cedynia"), an Ore Enrichment Plants Division, a Hydrotechnical Division, an Emergency Mine/Smelter Rescue Services Division, the newest division - established in 2001 - the Central Data Processing Center

Structure of KGHM

Sustainable development of KGHM Polska Mied SAThe activities of the Company comprise: metals ore mining, the production of copper, precious metals, other non-ferrous metals and salt, the casting of light and non-ferrous metals, management of metallic wastes and scraps and of industrial wastes, wholesale sales based on direct or contractual payments, financial holding associations, geological-exploratory activities, engineering and technical services for industry, mining and transport enterprises, environmental protection, the generation and distribution of electrical energy and of steam and hot water, the generation of gas, and the distribution of gaseous fuels through a supply network, and professional emergency rescue services.

Sustainable development of KGHM Polska Mied SAThe main processes of the technological line are as follows: Mining (ore, in average ,2% of copper ; 30 80 ppm of silver) Ore enrichment (copper concentrates up to 30% of copper), Smelting and refining (anode copper,appx.99%), Electrolytic refining (catode copper,99.99%), Casting, Rolling, Recovery of precious metals (Ag,Au,Pt/Pd slime,Se), By-products (sulphuric acid,copper sulphate,nickel sulphate,crude lead,rock salt).

Sustainable development of KGHM Polska Mied SAThe core business of the Company is mainly limited to : Copper ore mining, and Production of copper, precious metals and other non-ferrous metals;

Sustainable development of KGHM Polska Mied SAThe main processes of the technological line are as follows: Mining (ore, in average ,2% of copper ; 30 80 ppm of silver) Ore enrichment (copper concentrates up to 30% of copper), Smelting and refining (anode copper,appx.99%), Electrolytic refining (catode copper,99.99%), Casting, Rolling, Recovery of precious metals (Ag,Au,Pt/Pd slime,Se), By-products (sulphuric acid,copper sulphate,nickel sulphate,crude lead,rock salt).

Sustainable development of KGHM Polska Mied SAInformation on the source of raw materials for KGHM Polska Mied S.A.:sedimentary type deposit covering the area of over 550 square kilometers of the foresudetic monocline ,accumulation of sulphides in the Rotliegendes sandstones, copper shales and in Zechstein carbonaceous rocks (dolomites and limestones),the thickness of the deposit zone is variable and changes from 0.4 do 26 meters ,On the deposit area over 110 ore minerals have been found ,the basic are copper ore minerals but there is also a numerous group of silver, lead, cobalt, nickel, molybdenum, zinc, iron and precious metals minerals.

Geological cross-section Fig. 1. Geological cross-section of the Legnica Gogw Copper District

Sustainable development of KGHM Polska Mied SAIn 2001 KGHM produced :498 451 tonnes of copper (3.3% of world production, 7th place globally):electrolytic "four zeros copper(registered as "Grade A" by the LME),the more highly-processed wire rod ,1 163 tonnes (2nd place globally) - the silver being recognized as "Good Delivery - Silver" and traded both on the London Bulion Market as well as on the LME,

Sustainable development of KGHM Polska Mied SAThe Company has an independent commercial structure.Sales are carried out through: the Commercial Department, assisted by two subsidiary companies: KGHM Polish Copper LTD in London and KGHM Kupferhandel G.m.b.H. in Vienna (both are 100% owned by KGHM Polska Mied S.A.) and by a representative office in Prague.

Sustainable development of KGHM Polska Mied SAIn 2001 :62% of copper produced by the company was exported,the biggest foreign buyers were: Germany, France, China and Czech Republic ,copper represents around 76% of sales ,92% of silver was exported mainly to the Great Britain, Germany and Belgium, silver accounts for 18% of sales,remaining revenues come from the sale of gold, lead and other products .

Sustainable development of KGHM Polska Mied SAKGHM is a company which is continuously pursuing a program for growth and for cutting costs ,The deep restructurization of KGHM has enabled a reduction in employment from around 42 thousand persons in 1992 to 18,514 employees at the end of 2001 ,the restructurization has enabled the separation from the core business of those activities not directly connected with the production of copper into subsidiaries,the total unit copper production cost has been substantialy reduced ,This fall in the unit cost was impacted by increased effectiveness in the mining of the deposit, a systematic increase in production volume and by the rationalization of external costs, serious modernization not only by purchasing new technological lines but by extensive transformation of old post-soviet technologies into the modern ones.

Sustainable development of KGHM Polska Mied SAThe long term development program of KGHM anticipates :further expansion of copper production , the production of other metals,optimum exploitation of its production capacity from its own resources ,seeking new resources outside of Poland ,to form joint ventures with other companies in this sector,the possibility of independent action in other projects .

Sustainable development of KGHM Polska Mied SA The Company invests in areas which have the potential to represent "strategic substitutes", and which do not include metals production :in telecommunications (Polkomtel, Telefonia Dialog) , is actively engaged in the growth of the local region by exploiting the economic strength of the Company and by supporting local entrepreneurship.

Sustainable development of KGHM Polska Mied SAKGHM Polska Mied S.A. is not only a modern company in the sense of the technology which it employs, but also in its adherence to environmental protection standards, carried out the systematic activity on reducing the environmental impact of its activity, total expenditure in this regard reached over USD 130 mln,the impact of the copper industry with respect to emissions of hazardous substances, waste flows and tailings has been reduced to a level achieved in the most highly-developed countries,In 2001, in a prestigious competition hosted by the Minister of the Environment, KGHM was honored with the title Leader of Polish Ecology .

Sustainable development of KGHM Polska Mied SAIn all its activities KGHM has strong intellectual support form research centres :Non-ferrous Metals Institute in Gliwice ,branch institutes of Non-ferrous Metals Department of Mining and Metallurgical Academy in Krakw ,some institutes of universities in Pozna and Wrocaw ,foreign institutions from Finland (Outokumpu) and Canada (Dynatec).

Sustainable development of KGHM Polska Mied SAKGHM is an effective, innovative and communicative European enterprise, aimed at the realization of economic,social,research and development, and environmental goals, pursuant both to the mission and to the strategic growth of the Company,according to the principle of sustainable development.